WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on June 25 denied an insurer's petition for a writ of certiorari challenging the Louisiana Supreme Court's finding that every member of a class of more than 18,000 insureds was entitled to recover the maximum $5,000 civil penalty based on the insurer's purported failure to comply with its statutory duty to timely initiate loss adjustment of the class members' Hurricanes Katrina and Rita claims (Louisiana Citizens Property Insurance Corp. v. Geraldine Oubre, et al., No. 11-1252, U.S. Sup.).
On Nov. 18, 2005, Geraldine Oubre and Linda Gentry filed a class action lawsuit against Louisiana Citizens Property Insurance Corp. (LCPIC), d/b/a Louisiana Citizens Fair Plan in the 24th Judicial District Court for the Parish of Jefferson, La. They alleged that the insurer 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 and sought statutory penalties under Section 22:1220.
On March 26, 2009, the trial court rendered a $92.9 million amended judgment against the insurer. The insurer appealed three of the trial court's summary judgment rulings in the Louisiana Fifth Circuit Court of Appeal, which found Nov. 10, 2010, that the trial court erred in finding that LCPIC's 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 the insurer.
The plaintiffs appealed to the Louisiana Supreme Court. On Dec. 16, a majority of that court reinstated the trial court's $92.9 million judgment against LCPIC. The majority found that Section 22:1220(C) caps the penalties at $5,000 when damages are not proven. LCPIC moved for a rehearing, which the majority denied Jan. 20.
On April 18, LCPIC filed a petition for a writ of certiorari in the U.S. Supreme Court, challenging the Louisiana Supreme Court's Dec. 16 and Jan. 20 rulings.
LCPIC argued that the Louisiana high court upheld the $92.9 million class action judgment "even though neither the class as a whole, nor any individual class member, had presented evidence attempting to justify imposition of the maximum civil penalty and Citizens had not been afforded an opportunity to present evidence regarding the appropriate penalty to be awarded to any member of the class."
In the petition, LCPIC presented the question of "[w]hether the Due Process Clause prohibits a state court from relieving class members of their burden to prove a fundamental element of their individual claims - here, the size of the civil penalty to which each class member was entitled - and from depriving a defendant of its right to assert individualized defenses to that element of liability."
An opposition was filed May 21. One June 4, LCPIC filed its reply.
The petition was distributed for a June 21 conference. Four days later, the U.S. high court denied the petition.
Theodore B. Olson, Matthew D. McGill and Amir C. Tayrani of Gibson Dunn & Crutcher in Washington; Richard T. Simmons Jr., John E. Unsworth Jr. and Darren A. Patin of Hailey, McNamara, Hall, Larmann & Papale in Metairie, La.; James A. Babst of Wegmann & Babst in New Orleans; and Joshua S. Lipshutz of Gibson, Dunn & Crutcher in San Francisco represent LCPIC.
Robert S. Peck of the Center for Constitutional Litigation in Washington represents the respondents.
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