WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on Jan. 31 denied an insurer's motion to stay pending the filing and disposition of a petition for a writ of certiorari of a $92.9 million judgment that was reinstated against it in a class action lawsuit arising from hurricanes Katrina and Rita (Louisiana Citizens v. Oubre, et al., No. 11A717, U.S. Sup.).
On Nov. 18, 2005, Geraldine Oubre and Linda Gentry filed a class action lawsuit against
Louisiana Citizens Fair Plan in the 24th Judicial District Court for the Parish of Jefferson, La. They alleged that Citizens failed to comply with its statutory duty under Louisiana Revised Statutes 22:658(A)(3) to timely initiate loss adjustment stemming from hurricanes Katrina and Rita. The plaintiffs sought statutory penalties under Louisiana Revised Statutes 22:1220.
On March 26, 2009, the trial court rendered a $92.9 million amended judgment against Citizens.
Citizens appealed three of the trial court's summary judgment rulings in the Fifth Circuit Court of Appeal for the Parish of Jefferson. Judges Susan M. Chehardy, Walter J. Rothschild and Fredericka Homberg Wicker comprised the appeals panel, which found Nov. 10, 2010, that the trial court erred in finding that Citizens' conduct was not a question of material fact.
The panel also found that the trial court erred in concluding that $5,000 represented the minimum bad faith penalty pursuant to the statutory provisions, reversing and remanding the three summary judgment rulings against Citizens.
The Louisiana Supreme Court on April 8 granted the plaintiffs' writ application.
On Dec. 16, a majority of the Louisiana high court reinstated the trial court's $92.9 judgment against Citizens.
In reversing the appeals court, the majority found that a factual determination of whether an insurer acted in bad faith is not a requirement to assessing penalties under Louisiana Revised Statutes Annotated Section 22:2658(A)(3).
The majority further found that Louisiana Revised Statutes Section 22:1220(C) caps the penalties at $5,000 when damages are not proven.
"As no genuine issue of material fact exists regarding whether Citizens timely initiated loss adjustment and because damages were not proven, we find the District Court did not err in granting summary judgment and in awarding each individual plaintiff five thousand dollars in statutory penalties, subject to a credit in Citizens' favor for those plaintiffs who executed binding releases or opted out of the class," the majority said.
Citizens moved for a rehearing, which the majority denied Jan. 20. Justices Jeffrey P. Victory, Greg G. Guidry and John L. Weimer, who dissented from the Dec. 16 majority opinion, said they would grant the rehearing.
On Jan. 30, the insurer filed an application for a stay in the U.S. Supreme Court pending the filing and disposition of a petition for a writ of certiorari.
Justice Antonin Scalia denied the stay on Jan. 31.
Theodore B. Olson of Gibson Dunn & Crutcher in Washington represents Citizens.
Robert E. Arceneaux of Metairie, La., represents the insureds.
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