Road Home slows insurance claim payoffs

Richard Barker reached a $60,000 settlement for wind damage on a home near Six Flags on Dec. 12, but his eastern New Orleans client hasn't seen a dime of the insurance money five months later because the Road Home hasn't signed off on the paperwork.

Hundreds of homeowner insurance settlements are on hold because of a bottleneck at the Road Home program, and more are piling up every day, plaintiffs and defense attorneys say, because of the state's diligent checks to make sure that people aren't being overpaid and insurance companies aren't being subsidized.

"You can leave a voice mail once a day, and you're never going to get a return call. This is just an exercise in futility," said Barker, who plans to approach a judge with the insurance defense attorney on the case to see whether they can route around the grant program so the company can cut a check and close the claim.

As lawyers across the city grow exasperated, Soren Gisleson, head of the insurance section at the Louisiana Association for Justice, said several plaintiffs attorneys will meet with Louisiana Recovery Authority Executive Director Paul Rainwater and Office of Community Development Executive Counsel Dan Rees today to look for a way to break the logjam on insurance settlements.

"The problem is there's no time limit for Road Home to respond to the request," Gisleson said. "It's killing the homeowners. It's delaying all settlement checks."

Careful reviews required

Federal law requires Louisiana to make sure there is no duplication of benefits between Road Home grants and insurance payments. Although only additional insurance payments on structures are deducted from Road Home rebuilding grants, the program requires grant recipients to provide detailed information on any additional payments on structural damage, lost contents and displaced living expenses and send it to the state for a signature. If overpayments are discovered, the grant program must be repaid.

Recovery authority spokeswoman Christina Stephens said the state needs to review all of that information to watch for suspicious classifications of damage, such as putting everything on contents and living expenses to avoid having a grant reduced.

"They want to look at how the settlements are structured and to look at what funds are included in the settlement," Stephens said. "Sometimes we'll have questions for the insurance companies and questions for the homeowner."

The state Office of Community Development has six people working on the issue, two of them full time, and ICF International, the company that runs the Road Home program, has two people on insurance issues, one of them full time, Stephens said.

They have approved about 450 insurance settlements, and another 420 are pending, but the program is getting 10 to 15 new settlement approval requests a day as the pace of litigation settlements increases. "Our goal is to turn them around as quickly as possible," Stephens said.

Homeowners wait

The bottleneck is creating the unusual situation in which the grant program that was supposed to help homeowners is preventing them from collecting insurance coverage they paid for, in some cases even though the insurance settlement is worth more than the Road Home grant.

Barker's colleague, David Bernberg, has another eastern New Orleans case in which the Road Home gave his client a $600 grant, but won't sign off her insurance settlement of $55,000 in contents and $18,000 in additional living expenses.

While that type of case might set off a red flag with the recovery authority, from the plaintiffs attorney perspective, the settlement should just be waved through because there's no new money for structural damage that should affect the Road Home grant. "This poor lady can't get paid," Barker said.

While some note that every delay allows insurance companies to keep settlement money in their bank accounts, companies say they're eager to clear out Katrina claims.

"We've had some significant delays with getting settlements into the hands of our customers," said Phil Supple, a spokesman for State Farm, Louisiana's largest residential insurer. "I understand that they are woefully understaffed. We would be supportive of any efforts by the Road Home to resolve these issues to get settlements into the hands of policyholders."

Seeking a solution

To get around the Road Home inertia, some insurance companies have allowed homeowners to sign affidavits agreeing that they're responsible for repaying the Road Home if they collected too much money on their grants. In other cases, plaintiffs and defense attorneys are filing joint motions in court asking judges to declare that after, say, 30 days, the settlement can proceed without the Road Home's signature and the program will have to pursue any overpayments individually. Another idea has been to haul the Road Home into court for an answer and allow settlements to proceed if the program doesn't send anyone.

When plaintiffs attorneys meet with the recovery authority today, Gisleson said, they will ask the Road Home to allow homeowners to cash checks if the program hasn't flagged a problem in 30 days or accept settlements that have been approved by a third party such as a magistrate judge or a licensed mediator.

"We're talking about thousands and thousands of people" as settlements are reached, Gisleson said.