Louisiana homeowners will avoid an emergency assessment through a deal where Louisiana Citizens Property Insurance Corp. will pay $6 million toward a class action judgment.

Courtesy: FEMA

Earlier this year, a Louisiana judge ordered Citizens to pay $95 million to 18,573 policyholders in the state whose claims from damage by Hurricane Katrina and Rita were not adjusted in accordance with a statutory deadline. Citizens had until Aug. 25 to pay the $95 million judgment or post a $95 million bond to preserve the company’s right to appeal the judgment, according to the Louisiana Department of Insurance.

Either action would have depleted the state-sponsored insurer of last resort’s cash on hand, the department said, leading to a suspension of paying claims and commissions, just as the state reaches the peak of hurricane season. Either course of action also would have necessitated a $95 million assessment to be paid by all property insurers doing business in the state, the department said.

Insurers could then recoup the full amount of that assessment from their policyholders.

Louisiana Commissioner of Insurance Jim Donelon said that a judge has allowed Citizens to pay $6 million to a group of class action attorneys while the insurer appeals the judgment.

The decision, by Judge Henry Sullivan of the 24th Judicial District Court in Gretna, La., lets Citizens move forward with its appeal with no assessment to insurance companies or policyholders.

The insurance department said Citizens will get the $6 million credited against any judgment or settlement eventually reached in the case and would have had to pay that amount or more to purchase a commercial appeal bond.