In a blow to hundreds of Mississippi homeowners whose insurance claims were denied after Hurricane Katrina, a federal judge has ruled that policyholders suing their insurers must file their lawsuits individually instead of in mass actions.
Richard “Dickie” Scruggs, a prominent attorney who represents hundreds of policyholders with lawsuits against their insurers, said the judge’s ruling could force many of his clients to wait years for their cases to be tried. They may be better off pursuing their claims in state court, he added.
“It does seem to indicate that the federal courts are not going to respond in an effective manner to this disaster,” Scruggs said Friday.
U.S. Magistrate Judge Robert Walker ruled Wednesday that allowing hundreds of policyholders to consolidate their cases against several major insurers would amount to a “quasi class-action lawsuit but without regard for the rigid requirements for class certification.”
“In a superficial sense, the hurricane was a common occurrence; however, the storm was vastly different in its effect depending on the specific geographic location of each particular home,” Walker wrote in a five-page ruling.
“Although Plaintiffs each held basically the same standard homeowner’s policy,” he added, “each insurance contract is a separate transaction.”
Thousands of lawsuits were filed in the wake of Katrina by angry policyholders who said insurance companies offered them far too little to cover their losses. Insurers say their standard policies cover damage from wind but not from water, including storm surge.
Scruggs had asked Walker to consolidate his clients’ cases against State Farm Fire & Casualty Co., Nationwide Mutual Insurance Co. and Allstate Property and Casualty Insurance Co. into a joint trial against each insurer.
“I think the judge is optimistic if he thinks the likes of State Farm are going to care whether they get eight to 10 adverse judgments a year, in any amount,” said the Oxford-based lawyer, whose own home in Pascagoula was destroyed by Katrina.
Although Walker ruled that each claim on a storm-damaged property must be severed into separate lawsuits, with separate complaints, the judge didn’t rule out the possibility that the cases could be consolidated before they are tried.
“The Court will continue to explore this avenue in an attempt to streamline the litigation process,” he wrote.
State Farm spokesman Fraser Engerman said the Bloomington, Ill.-based company is pleased with Walker’s decision.
“Judge Walker rightly points out that each case should be heard on its own unique merits, because storm damage affects each property differently,” Engerman said.
Scruggs estimates that the fees for filing hundreds of individual cases would cost his clients a total of $500,000.
“It’s a real blow for the families down there,” the lawyer added, “especially if they have to pay $350 apiece — people who have lost everything — just to wait in line in federal court.”
Scruggs said his legal team is weighing its options, including refiling the cases in state court.
“The game isn’t over,” he said. “We’re going to do something else. I’m not sure what.”
The first of the Katrina lawsuits was tried here in July. U.S. District Judge L.T. Senter Jr. ruled in that case that a Pascagoula couple, Paul and Julie Leonard, cannot collect damages from Katrina’s storm surge because Nationwide’s policies do not cover wind-driven water damage.
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