Key Federal Katrina Ruling Favoring Homeowners Surprises Industry

January 12, 2007

  • January 12, 2007 at 7:29 am
    boonedoggle says:
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    The case appeared to represent a legitimate dispute as to facts; therefore I would question the basis for a punitive damage jury instruction.

    The real issue is the greed of insurers aggressively marketing homeowners policies in high hurricane risk areas, then texting the contracts with complex language and a lot of cute exclusions. Argument can certainly be made that the policies failed to meet the reasonable expectation test for the purchasers.

    The obvious solution for any insurer still dumb enough to remain in the coastal states is to write an \”all risk\” policy and include adequate load for hurricane, flood, storm surge or whatever. Approprite deductibles could provide further mechanism to properly price the risk.

    Admittedly, the required premium might be say 10% of the maximum probable loss, but in this manner let the market place decide if private insurance is the appropriate mechanism tohandle hurricane coastal risk.

    Perhaps the more simplistic answer is for insurers to abandon their market share greed and follow Allstate\’s lead and not write business within 50 or 100 miles of the coast. Sure, this might create some inconvenience for those who prefer time payments, mortgages and mortgage clause
    style of purchasing houses, but again let market forces dictate the solution

  • January 12, 2007 at 7:48 am
    Smart Insurer says:
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    Insurers knew about the features of the US judicial system well. They chose to work out smart policy wordings and sold it big to get market shares, premium etc. Now they are complaining about the judgement, legal fees and negative publicity.
    We should go back to basic
    1. to sue the lawyers who gave wrong advice on wordings and gave us the false hope of winning the arguement on wind vs water etc.
    2. grow our business in a fair way. Either don\’t give the wind/water cover on coastal areas or assess it properly, charge for it and manage it. Don\’t rely too much on wordings and your lawyers.
    3. let the market force to sell your good products. Don\’t force the market to buy your bad products

  • January 12, 2007 at 9:13 am
    Robert T Blessing says:
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    Posted On: January 12, 2007, 1:11 pm CST
    Posted By: Not Surprised
    Comment:
    Wow, How can anyone be surprised at this. We all knew with our current system that the lawyers would eventually win. Hey look on the bright side. As agents we will all make a whole lot more money as the property rate go through the roof. Lawyers are an agents best friend.
    Without them insurance premium would be so cheap we could not make a good living.
    ************************************
    Looks like State Farm should have had a lawyer too so their apparently all wet position on this case did not get blown away by the facts.

  • January 12, 2007 at 10:06 am
    Gulf visitor says:
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    The problem arises when the house is destroyed by a 20 foot storm surge and the homeowner wants the carrier to pay for the entire loss under their wind coverage. When its all said and done, I think this will be overturned.

    The State\’s Department of Insurance approved the policy and language. I think folks need to pay attention to the photos, videos, news reports when they show New Orleans and the Gulf cities. Many, many roofs were intact when people were being rescued from rooftops and during the helicopter rides by the state & feds.

  • January 12, 2007 at 11:26 am
    St. Fine Print says:
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    Well stated. I could not have said it any
    better.

    I\’m waiting to see which one of these companies will sue first, over policy manuscripts the lawyers provided to them. Do you think the lawyers ever heard \”if it\’s not excluded, then it must be covered\”?

    Also was it Market Share or greed that made the companies apparently forget that the law of large numbers does not apply to a heavy concentration of property exposures in one area.

    Stupid is as stupid does.

  • January 13, 2007 at 12:42 pm
    Clarity Missing says:
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    The insurance industry may want to believe the typical anti-concurrent causation clause is clear in its meaning, but it isn\’t. And that\’s a problem.

    Say the clause in use is that “We do not cover loss to any property resulting directly or indirectly from any of the following. Such a loss is excluded even if another peril or event contributed concurrently or in any sequence to cause the loss.”

    This says that flood damage is excluded, even if some other peril also caused damage. What it does *not* say is that damage from the *other* peril is also excluded.

    If it can be demonstrated factually that, as the homeowners in this case claimed, their home was blown off its foundation by wind, and then blown apart by wind, before the storm surge hit, then what the anti-concurrent causation clause says is that the damage from flooding is excluded.

    Nowhere does it actually say that the damage from wind is excluded. And of course it\’s a contract of adhesion, so if it can be interpreted two ways, it must be interpreted in favor of the policy holder, not the company.

    That\’s what the judge cited in awarding actual damages — State Farm did not demonstrate that the damage was all flood damage, and therefore excluded. If it was wind damage, it was not excluded by the anti-concurrent causation clause. Quoting the New York Times on this:

    [Begin Quote]
    Judge Senter agreed in a ruling that the insurers were not obligated to pay for flood damage. But he said that when both wind and water damaged or destroyed a house, it was the burden of the insurance company to prove how much of the loss was because of water and pay for any wind damage.

    A clerk for Judge Senter said in a telephone interview from Gulfport that experts for State Farm acknowledged in court documents that some damage to the Broussard’s home had come from wind. But, he said, “they did not offer evidence during trial” showing how much of the damage was from water and how much from wind, as Judge Senter had required.

    Ultimately, he said, the judge ruled that State Farm was liable for all the damage because the insurer had not provided enough evidence “the jury could use to segregate” the wind from the water damage.
    [End Quote]

  • January 13, 2007 at 12:52 pm
    Punitive Damages says:
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    Why punitive damages?

    The judge left that up to the jury, after directing a verdict on the actual damages.

    The language of the contract clearly requires the insurer to pay for wind damage, and State Farm admitted in court that there was wind damage, but they didn\’t pay the insureds anything for those wind damages, saying it was all excluded as flood damage.

    Why punitive damages? Because the company\’s own version of the facts shows they failed to honor the contract.

  • January 13, 2007 at 1:32 am
    Katrina Survivor says:
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    Why can\’t you people see
    What We Are Fighting For?

    We Paid for Flood.
    We read the policy too.
    Flood paid 100%
    Denied $0 blaming wind
    The Problem is…
    The Insurance Industry Denied All Wind Damage.
    They Lied & Tried to use their power to stop the investigation.

    Katrina winds 200 MPS
    blew the covers off the industry…
    They Lied, They Cheated & now they must pay.

    This is not about water!!!!!
    FLOOD was paid.

    State Farm blamed the water before anyone could get to see their damaged home.

    Are you too stupid to see what they have done to their own people?

    A category 5 : blew the roof off of the superdome a, blew high rise windows out of hotels & casinos from LA to MS?

    How can you anyone say Katrina did not do wind damage?
    Helen Keller could see the damage.

  • January 12, 2007 at 1:37 am
    Florida Resident says:
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    Lady Justice is not only blind. It seems she is deaf and stupid as well.

  • January 13, 2007 at 1:42 am
    Homeowner USA says:
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    Because the Industry wants to collect ALL premiums for hurricanes
    but CHOKE US WITH DEDUCTIBLES
    THEN they do not pay for water or wind.

    Now, they are… comming out to say,
    they will no longer cover wind damages.
    When did they cover anything?
    What do we need them for?

    Justice was done and we\’ve just begun to fight.

    We have the truth on our side.
    This is why State Farm could not provide enough evidence to prove water or wind damage.

    They lied, they got caught and now they must pay and this is called the American Way!



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