Federal Judge Rejects Allstate Request to Dismiss Miss. Hurricane Lawsuit

March 27, 2006

A federal judge in Gulfport, Miss. has refused to throw out a lawsuit that a couple filed against Allstate Insurance Co. after the insurer refused to cover damage to their home from Hurricane Katrina.

The lawsuit, filed by Elmer and Alexa Buente of Gulfport, is one of many spawned by a fierce debate over whether Gulf Coast homes were destroyed by the Aug. 29 hurricane’s wind or water.

U.S. District Judge L.T. Senter Jr., said the question of how much damage to the couple’s home was caused by wind and water is a “fact-specific” inquiry that must be decided at trial.

“I cannot say that there is no set of facts the plaintiffs may establish in support of their claim that would entitle them to relief,” wrote Senter, who sits in Mississippi.

Richard “Dickie” Scruggs, a high-profile attorney who represents the Buentes, said the ruling is a “huge victory” for all Allstate policyholders whose post-Katrina claims were denied.

“This was their kill shot,” Scruggs said of Allstate’s motion to dismiss the case. “They asked for the case to be thrown out. Instead, it was rejected right back in the faces.”

Allstate spokesman Michael Siemienas said the judge indicated “there are factual issues still to be explored.”
However, the company “is pleased that the judge ruled, ‘The exclusions found in the policy for water damage and for damages attributable to flooding are valid and enforceable policy provisions,'” Siemienas added, quoting from the 11-page ruling.

The Buentes, who bought their Gulfport home in June 2005, claim the Allstate agent who sold them their policy told them they didn’t need to purchase “flood coverage” because they didn’t live in a flood plain.

Allstate paid the couple $2,600 for damage caused by wind, but the Buentes say their home sustained up to $100,000 in damage. Allstate argues that its policies do not cover damage from “storm surge,” or wind-driven water.

Allstate, based in Northbrook, Ill., is the second-largest U.S. personal-lines insurer behind State Farm.

Scruggs’ legal team is suing four other insurance companies: Metropolitan, State Farm, Nationwide and United Services Automobile Association.

Scruggs said Friday’s ruling could be “precedential and highly influential” to the other cases.

“This is exactly what we were trying to get accomplished,” he said.
In an interview with The Associated Press last week, Scruggs said he’s gathering evidence that companies are pressuring engineers to alter their conclusions on storm damage so claims can be denied.

Scruggs said a whistleblower, a “highly placed insider” at a major insurance company has given him copies of “coerced and altered engineering reports” that companies tried to keep “under lock and key.”

Mississippi Attorney General Jim Hood also is suing insurance companies for denying Katrina claims. Hood has said he also is investigating insurance companies for their “fraudulent” handling of claims.

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