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More on Broussard v. State Farm



Following up on Michael's post:

"It sets a horrendous precedent in terms of these cases when you're talking about a policy sold in Mississippi providing wind coverage, but that has to pay several hundred thousand in water damages and several million in punitive damages," said Robert Hartwig, chief economist for the Insurance Information Institute.

Hartwig noted that the policy wording is approved by regulators, and warned that such rulings could hurt the homeowners' insurance market, and ultimately policyholders, not only in Mississippi but also in other coastal communities.

"It creates a situation whereby hundreds of millions in losses could be paid by insurers who have collected not a cent for this type of loss," Hartwig said. "If insurers have never collected any money to cover floods, but they're on the hook, then these sorts of situations will have to be imbedded into rates, and that'll have negative consequences for the cost of insurance."

(Becky Yerak, "Katrina loss for State Farm", Chicago Tribune, Jan. 12). I've been waiting to see the opinion before I comment on this case, but, as David Rossmiller notes, Judge Senter has not publicly released it yet. Rossmiller has done some impressive detective work on the Broussard docket, however, and his comprehensive post, with links to the briefs, is highly recommended: "One measure of how surprised State Farm was by yesterday's directed verdict by Judge Senter and, later, by the jury's $2.5 million punitive damages award is this: the official docket for the case shows that on December 12, 2006 State Farm made an offer of judgment for $20,000."

Update: Still no written opinion, but now Rossmiller links to the oral opinion. I find the logic less than compelling, but perhaps Judge Senter will fill in the gaps later. The problem arises from Senter's earlier ruling striking down the concurrent cause clause, which was designed precisely to avoid this sort of battle-of-the-experts litigation. I earlier noted that Dickie Scruggs had good reason to be happy with that Judge Senter opinion in the Leonard case, which had been portrayed in the press as an insurance victory.

 

 


Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

 

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