Because of the unprecedented disruption caused by MMA, many find themselves stuck in a confusing process that even grizzled legal veterans don’t fully understand.
METAIRIE, La. — Hurricane Ida was a harrowing experience for Darlene and Jason Pagani.
They and their teenage daughter rode out the storm in their Metairie living room, only to have a massive oak tree fall through their roof just a few feet away from where they huddled on the couch.
“It was really intense,” Darlene added. “It was really, really scary.”
Rain poured through the ceiling in sheets. The tree trunk, already impaling the ceilings of several rooms, threatened to roll and cause even more damage. The Paganis ran through the wet darkness for an interior bathroom.
“You just kind of felt like, ‘Am I going to live?’ Almost, you know, ‘Is the whole house coming down?’” Jason recalled.
That acute fear soon turned to chronic frustration. As soon as the storm passed, they embarked on a two-year struggle – which continues to this day – trying to collect their insurance proceeds and fix their home.
Insurance Woes led them to MMA
First, their insurance company, Southern Fidelity, folded before it paid to cover all the repairs.
The Paganis got money to put on a new roof, but the interior ceilings still have gaping holes. Southern Fidelity’s collapse also meant the insurer stopped paying for a temporary trailer for the family to live in, so the Paganis had to move back into a barely livable house with no central heat or air.
The Paganis hired a Texas law firm called McClenny Moseley and Associates to help them press for their insurance money.
Jason had received a few of the mass mailers, online ads and text messages MMA used to sign up 15,000 Louisiana storm victims as clients in 2021, the Houston-based firm’s first year operating in the state.
But this March, state and federal courts stopped all MMA cases and banned it from handling any claims in Louisiana, accusing the firm and its lawyers of running a massive fraud scheme.
Federal judges, the Louisiana Supreme Court and the state’s insurance commissioner ruled MMA’s lawyers violated several rules of professional conduct.
Court records show the firm claimed to represent hundreds of homeowners who had never actually hired them, some of whom had never even heard of MMA.
Sued the wrong companies
Court records also show MMA filed dozens of lawsuits against the wrong insurance companies and collected insurance checks that were still “just sitting,” so the clients who needed them to make repairs couldn’t get them.
The courts punished the firm and disbarred its Louisiana managing partner, William Huye, in March.
But WWL-TV got an exclusive secret recording of MMA’s owner, Zach Moseley, explaining his plans to keep employing Huye and keep working their clients’ cases, collecting fees in the background, behind the courts’ back.
Aug. 29, 2023, marks two years since Ida, the legal deadline for people with insured property damage to file lawsuits against their insurance carriers.
How to handle the claims
Because of the unprecedented disruption caused by MMA, the Paganis find themselves stuck in a confusing process that even grizzled legal veterans don’t fully understand.
The biggest confusion for insurance companies is how to handle claims from MMA’s former clients.
Typically, insurers won’t speak directly to claimants once they hire an attorney, unless they receive a formal “drop letter” from the lawyer stating the firm is no longer representing those claimants.
When Huye was suspended from practicing law in March, he sent letters to MMA’s clients informing them the firm was working on setting up new counsel for them.
Insurers said those didn’t count as “drop letters.” MMA continued, as recently as last week, to send the Paganis and other families text messages and emails and attached contracts for them to sign electronically to hire law firms that were hand-picked by MMA – Lafayette-based LaBorde Earles and Houston-based Daly & Black.
MMA owner Zach Moseley testified in federal court in Lake Charles in April that MMA had fee-sharing agreements with those firms, but LaBorde Earles’ owner Digger Earles responded with testimony of his own that no such agreement existed.
A source who worked in MMA’s New Orleans office confirmed to WWL-TV that letters on LaBorde Earles letterhead had been sent to clients by MMA staff.
Last week, U.S. Magistrate Judge Michael North called leading insurance company lawyers into federal court in New Orleans to try to figure out the MMA mess.
More than 200 attorneys jammed into U.S. District Judge Ivan Lamelle’s courtroom, looking for some direction. Lawyers took every seat in the gallery and jury box and stood along the walls and in the aisles, where one of them fainted during the hearing.
North said 1,200-1,500 former MMA clients had hired new attorneys for their Ida claims so far, but insurers said they were concerned that MMA would come back at them, seeking a portion of any settlement money.
Stuck in limbo
North told them it was time to act as if MMA doesn’t exist in Louisiana.
“Insurers have been insisting they cannot communicate with new counsel until they get a drop letter from MMA,” North said. “We tested it, we waited. It’s not going to happen. The firm has been non-responsive. So, they’re not coming.”
He said 3,000 Ida cases had already been filed and 86 percent of them were settled, but 450 of them were stuck because MMA was the plaintiffs’ law firm of record. He warned that hundreds or maybe thousands more claimants who were represented by MMA could still file more lawsuits before Aug. 29.
North told insurers who already paid settlement checks to claimants represented by MMA to cancel those checks if they hadn’t yet been cashed and reissue them directly to the property owners.
He urged the insurers to work directly with former MMA clients to settle claims where no lawsuit has been filed yet.
“Try to determine whether or not it is a real claim, whether the homeowner ever intended to make this claim and proceed from there,” North said. “The folks put in this situation by this law firm have enough problems and fighting over this is not serving anyone’s purposes. The problems created by this firm are unprecedented. I don’t think any of us have seen anything quite like this, on this scale.”
And then there is another complicating factor, faced by the Paganis and many others. There are 40,000 storm victims whose insurer folded and now must rely on LIGA, the Louisiana Insurance Guaranty Association, to pay their claim.
LIGA is a state agency that steps in for insolvent insurers, like the FDIC does for failed banks.
LIGA says it is handling 1,300 claims from people, including the Paganis, who both lost their insurance company and got stuck with MMA as their attorney. The Paganis just hired Metairie-based attorney Sal Brocato to take over their case.
He was on a court-approved list of attorneys who said they were interested in taking over MMA’s cases. Brocato told the Paganis he would handle their claim at a reduced contingency fee of 20%, but he said untangling MMA’s mess won’t be easy, and time to file a lawsuit is running out.
“The state of Louisiana does not care whether or not they lost their insurance company (or) they don’t have an attorney that is eligible to practice,” Brocato said. “If they don’t file suit on August 29th, they will lose all their rights.”
If the Paganis were dealing with a private insurer, they could sue for penalties on top of their damage by showing the insurer disputed or delayed payment in bad faith.
But such penalties are not available from LIGA, meaning they can only collect their remaining repair costs and would have to pay Brocato out of those proceeds.
Before North’s hearing last week, LIGA’s adjuster wouldn’t talk to Darlene Pagani about her claim because, officially, MMA was still her lawyer if she didn’t have a drop letter.
But after hearing from North, LIGA’s attorney, Ben Chapman, said the magistrate judge’s comments would “unclog a lot of the logjam and kind of take off the handcuffs.”
Chapman said hiring a lawyer isn’t necessary, at least if LIGA has your claim.
“LIGA is not an insurance company. We’re not in it for the money,” he said. “My entire job is to pay the claim as quickly and expeditiously and with as little loss to the policyholders I can possibly manage and anything I can do to streamline that process we’re going to do.”
But Brocato said LIGA sometimes fights even harder than private insurers to deny or dispute claims.
“They’re not going to be sympathetic,” he said. “At the end of the day, they step in place of the insurance company, and you still have to prove your claim. So, that leaves the Paganis with one option: to hire an attorney and file suit.”
Jason Pagani said he’s hoping against hope they finally found someone who won’t leave them in the lurch.
“You got to trust somebody because if you don’t trust somebody, then you just…might as well not do nothing,” he said.
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Clinton Mora is a reporter for Trending Insurance News. He has previously worked for the Forbes. As a contributor to Trending Insurance News, Clinton covers emerging a wide range of property and casualty insurance related stories.