NEW ORLEANS – Fewer than three hundred suits against Lafayette Insurance over Hurricane Katrina payments will turn into a class action with thousands of potential claims if the Louisiana Supreme Court approves.
Robert Murphy of New Orleans wants the Justices to affirm St. Bernard Parish District Judge Manuel Fernandez, who certified a class of homeowners in eight parishes.
"In federal court the last several years class actions have not been looked on very well, but in Louisiana things have been different," Murphy said at oral argument on Sept. 8.
He said Louisiana's legislature and courts recognize the benefits of class actions.
"The state has been open minded about allowing class actions to proceed in a proper manner," he said.
Fifth Circuit appeals judges in Gretna upheld Fernandez last year.
Murphy alleges Lafayette improperly adjusted claims in St. Bernard, Orleans, Jefferson, Plaquemines, St. Tammany, St. Charles, Tangipahoa and Terrebonne parishes.
He doesn't represent all Lafayette policyholders with Katrina claims, but he will if the Justices approve class action.
The National Association of Mutual Casualty Insurers has argued as friend of the court that Fernandez wrested control of ongoing suits from absent class members.
"Unless those individual class members affirmatively opt out of the class, they will be unable to fully litigate their cases to their respective strengths," Adrianne Baumgartner of New Orleans wrote for the association.
"Rather, their cases will, at least in part, be centrally managed by other attorneys who have significant financial incentives to settle this class action on terms favorable to themselves," she wrote.
"This judicially endorsed power grab serves class counsel well, but it is detrimental to the many class members whose cases currently await adjudication," she wrote.
At oral argument, Lafayette lawyer Howard Kaplan of Metairie told the Justices every Katrina adjusting class action in federal court was dismissed.
He said individual issues would predominate over class issues.
Justice John Weimer asked if that would be true if no one received an appropriate level of payment.
"That is not the factual testimony," Kaplan said.
Justice Bernette Johnson asked if there were blanket denials.
Kaplan said plaintiffs alleged blanket denial of claims for
additional living expenses, but he said there are payments in the record in all eight parishes.
Justice Jeannette Knoll asked if adjusters used pre-Katrina prices.
Kaplan said every adjustment was based on facts known at the time.
Knoll asked why use of pre-Katrina prices wasn't a narrow issue, and she said failure to include overhead was pretty well defined.
"You have to determine if payment was fair as a whole," Kaplan said.
He said there would be millions of line items to look at.
Justice Greg Guidry asked if he conceded that Lafayette denied whole categories.
Kaplan said no, and he argued that Murphy's experts hadn't done any pricing in 25 years, didn't see properties, and didn't talk to homeowners.
Murphy said his expert looked at 36 claims and found pre-Katrina pricing in every one.
He said Lafayette's expert couldn't tell the judge that it paid a penny on civil authority claims, which arise when government orders homeowners to leave their homes.
Weimer said they paid $157,000 in St. Bernard.
Murphy said, "They can't allocate that."
Guidry said, "That's different from saying nothing was paid."
Murphy said evidence at trial would show nothing was paid.
Knoll asked if it was possible to determine it from the records.
Murphy said, "We think they can."
He said a forensics person would access their files.
"It's embedded in the system," Murphy said.
He said the judge found his experts satisfactory.
Murphy waved toward his opponents and said, "They want this to be federal court."
"In Louisiana state court, Louisiana rules apply," he said.
He said without a class action, 7,000 homeowners wouldn't be able to pursue claims.
"They breached their contract to each one of these people," he said.
Weimer said three percent of the 7,000 ended in litigation.
"Not all seven thousand would have claims," he said.
Guidry asked how many suits remained open, and Murphy said he didn't know.
Guidry said the record showed fewer than 300.
Murphy said those who couldn't otherwise proceed would pursue claims.
"A significant number of the 7,000 will step forward prior to trial," he said.
The Justices took it under advisement.