Attorneys Big Winners In Road Home Lawsuit

Over 18,000 Louisiana homeowners — and maybe 10,000 more — are in line to receive $5,000 each because they didn’t get their Hurricane Katrina insurance claims settled fast enough in 2005. Meanwhile, over 50,000 homeowners, who admitted they didn’t live up to their Road Home obligations after the same hurricane, aren’t going to be penalized.

Size it up anyway you want, but something isn’t right here. Where’s the justice?

Let’s look closer at these two related events.

The first issue involves Citizens Property Insurance Corp., a statebacked company that sells home and commercial property insurance to owners who can’t buy coverage on the open market. A state law says Citizens has to begin working on a customer’s damage claim within 30 days after a catastrophe or the property owner qualifies for a reward of up to $5,000.

Jefferson and Orleans Parish citizens filed lawsuits after Katrina claiming Citizens didn’t respond fast enough. It just so happens that the Citizens office in Jefferson Parish was flooded during the hurricane and sealed off afterwards, according to state Insurance Commissioner Jim Donelon. The commissioner said all insurance companies were overwhelmed by Katrina and weren’t able to respond within 30 days. However, only Citizens is affected by the $5,000 penalty.

A state district judge in Jefferson Parish agreed the 18,000 policyholders were entitled to receive $5,000 each. However, the judge’s ruling was overturned by the 5th Circuit Court of Appeal. The case then went to the state Supreme Court that in a 4-3 vote reinstated the original judge’s ruling.

Donelon minced no words when he reacted to the decision. He said it enriched the “politically connected” plaintiffs’ lawyers at the expense of policyholders, according to a report in the Times-Picayune. Those policyholders and taxpayers could end up having to pay over $100 million in penalties and interest because Citizens is a state-backed company.

Fred Herman, one of the attorneys representing those 18,000 people, has since come down hard on Donelon for his remarks. He told Gannett News he found it offensive that Donelon chooses to “chastise the judiciary when the outcome did not favor his position.” Herman said Citizens could have settled the case for $50 million, “but Donelon sat on his hands and didn’t take it to the (Citizens) board. Ultimately, the policyholders suffer.”

You can’t blame Citizens for not settling its case for $50 million when Donelon and its board believed they could win the case. Why just hand over $50 million without a whimper?

OK, why should the rest of us care about this situation that affects primarily the southeastern part of the state? It’s because the people all over the state who buy insurance from Citizens and other companies and the taxpayers of Louisiana will end up having to pay that $100 million if the ruling stands. That money is needed in the event of another catastrophic event.

Citizens is expected to ask the Supreme Court to reconsider its decision in hopes one of the four justices who voted to award the damages will switch sides.

Everyone who buys property insurance in Louisiana had to pay special assessments after Hurricane Katrina to help Citizens pay its damage claims. They could get their money back from the state, but that money comes from taxpayers.

Justice John Weimer, one of the three dissenters, made the most sense of anyone who has commented on the case. Weimer said penalties should only result when people suing prove the insurer acted in bad faith — in an arbitrary and capricious manner or without probable cause. That doesn’t appear to be the case here.

If Citizens has to pay for not following state law, why do people who got Road Home money to rebuild not have to pay the money back if they haven’t done it? It’s because the state has no plans to take any of the federal money back. And maybe that’s why — it’s federal, not state money.

These two events are a good example of how we often live by a double standard. The major difference here is the presence of attorneys who represent those 18,000 people in the Citizens case. Those who didn’t live up to their Road Home grants don’t need attorneys, at least not yet, because the state has decided to let them off the hook.

Donelon said the attorneys in the Citizens case could get up to 40 percent of that $100 million while their clients get only $5,000 each. Herman disagrees, saying legal fees would be between 20 and 40 percent. It’s a nice piece of change in either case.

How do you suppose those 18,000 policyholders knew about the state law that will give them $5,000 each? Did they hear about it from an attorney? However it happened, it is obvious the lawyers are the only ones who are going to make big bucks from this decision. Legislators refused to repeal it once, but this is a law they need to get off the books as quickly as possible.

Jim Beam, the retired editor of the Lake Charles American Press, has covered people and politics for more than ÿve decades. Contact him at 494-4025 or [email protected].

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