Flurry of Rita-related Lawsuits Filed in Southeast Texas

October 2, 2007

The second anniversary of Hurricane Rita has brought a flood of lawsuits in southeast Texas and raised questions about the deadline for filing such petitions.

“It’s getting serious,” Jefferson County District Clerk Lolita Ramos said last week amid the rush to file suits. Local attorneys have filed about 300 property-insurance lawsuits related to the storm in the past two weeks.

Most cases involve policyholders who claim their insurers have shortchanged them on storm damage. Many property owners also allege their insurance company used deceptive trade practices or violated the state insurance code.

At the same time, a dispute has emerged over the deadline for filing the lawsuits.

State law provides a four-year statute of limitations for filing contract disputes, but most homeowner policies give property owners two years and a day to file a lawsuit.

Whether the two-year time period began at the date of the storm, or when policyholders began negotiating with their insurance company, has developed as a point of contention.

Rita landed in Sabine Pass on Sept. 24, 2005, packing 120 mph winds that flattened the coastal hamlet before splaying into East Texas and lashing western parts of Louisiana. At least nine were killed after the storm roared ashore and thousands of homes were destroyed.

The Texas Department of Insurance interprets the deadline as “two years and a day from the cause of action,” said Ben Gonzalez, spokesman for the regulatory agency.

“The cause of action would be when the insurance company either made a denial or chose not to act or made a settlement that was lower than what the person was hoping to get,” Gonzalez said. “That’s the stipulation we look for when approving policies.”

But Allstate Insurance Co., which quit writing windstorm coverage in Texas coastal counties last year, ties the deadline to the date of the storm.

“Our policies intend the deadline to be interpreted as two years and a day from the cause of loss,” said Allstate spokesman Joe McCormick. “That’s a reasonable amount of time for things to be settled.”

Until the past couple of weeks, lawsuits had been trickling in at a rate of a few a week for over a year. The attorneys filing the lawsuits say the vast majority will settle without seeing a jury, as hundreds already have. The first trials could occur in November.

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