Results matching “katrina”

Lawless Mississippi kills its economy - PointOfLaw Forum

The attack on Mississippi's insurers over Katrina is already having consequences. Unable to be confident that the state will be willing to fairly enforce contracts as written (Oct. 11, 2005; Oct. 16, 2006), insurers are simply not issuing new ones. The town of Long Beach is finding that businesses are unable to reopen because of the lack of insurance. Insurance isn't the only reason the town's largest employer, Oreck Corporation, has picked up stakes and moved to Tennessee, taking with it 500 jobs and $300,000/year in property taxes, but it's been a contributing, and perhaps the deciding, factor. The legislature's response has been to make things worse: criticize the businesses who have left, and seek to further regulate the price of insurance, despite thousands of years of evidence that limiting the price will reduce the amount supplied and lead to shortages. (Leslie Eaton, "Vacuum Maker Hailed as Savior Quits Gulf Town", New York Times, Jan. 15) (via Rossmiller).

More on Broussard v. State Farm - PointOfLaw Forum

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.

We don't (alas) have a general "loser pays" rule in American tort law. But if you're a corporation, especially an insurer, and you are a defendant, and you lose a tort suit, sometimes we have a "loser REALLY pays" rule. In this Mississippi case (here's the Baltimore Sun summary), State Farm used its "flood exclusion" clause to refuse to pay for a home lost in Hurricane Katrina. The federal judge (taking this issue from the jury, interestingly) found State Farm liable (the issue in these cases is often whether a house was lost due to wind or to water -- a fine issue often involving conflicting expert testimony). State Farm had its experts, and though I have not read the trial transcript (and so am a bit tentative here) it's pretty hard to see how $2.5 million in punitives (right at the multiplier limit established by the Supreme Court in another case involving State Farm) are merited when a bona fide defense can be made.

In the Broussard case, plaintiffs said a tornado (covered by the policy) had destroyed their home before the floods of Katrina (not covered) hit. State Farm disagreed. [Note that the policy excludes combinations of water and wind, though Judge Senter has found that clause ambiguous (Sep. 7 and links therein).]

The plaintiff's attorney, in his closing argument Thursday, said State Farm had breached their contract "in a bad way" by denying the Broussards' claim. State Farm "acted like a chiseler," he said, adding, "The pocketbook is what they listen to."

Is a corporation supposed to minimize income? Is an insurer supposed to maximize future premium increases?

Earlier POL Katrina coverage.

State Farm may settle Scruggs-Hood Katrina suits - PointOfLaw Forum

Nice little insurance company you've got here, be a shame if anything happened to it because you did something stupid like trying to hold to the terms of your contract.

Mississippi loses an insurer - PointOfLaw Forum

I've previously written on the problems bound to be caused by the Scruggs Katrina litigation in Mississippi, the chickens are coming home to roost; State Farm, which apparently has lost confidence that Mississippi courts will enforce insurance contracts in hurricane territory, will stop insuring for wind damage and may leave the Gulf Coast counties entirely. (AP/Insurance Journal, "State Farm to Begin Excluding Wind Coverage in Miss.", Dec. 18). Earlier Katrina coverage.

Scales on New Orleans Katrina insurance cases - PointOfLaw Forum

Adam Scales of Washington & Lee Law—no reflexive insurance company defender, to be sure—has a piece in Findlaw today finding Judge Duval's opinion (Dec. 1; Nov. 30) "actually succeeds in transforming the caricature of judicial activism into reality. Left to stand, it represents a high-water mark in creative insurance interpretation, which New Orleans residents will be free to ponder as insurers withdraw from a market they are judicially forbidden from defining. Within days of the ruling, St. Paul Travelers announced it was getting out of the commercial insurance business in New Orleans. Travelers has stated this move is unrelated to Judge Duval's opinion, and perhaps this is correct. However, insurers will not fail to see that uninsured natural catastrophes become privately insured judicial catastrophes in New Orleans."

The Katrina Canal Cases - PointOfLaw Forum

A Federal judge in the Eastern District of Louisiana held that cases against certain insurers could proceed to trial for whether the plaintiffs' homeowners insurers are responsible for flooding resulting from the New Orleans levee breaches.  A basic issue is what the policies' flood exclusion actually excludes. The court made a distinction between flooding caused by a natural event (hurricane--presumably covered) and one from a man made event (levee breach --not covered). 

David Rossmiller makes interesting points.  In addition to commenting on the length of the 85 page opinion, he notes that

[i]n a reach of logic that is difficult to swallow, the court then categorizes the New Orleans flooding as caused by human negligence -- the collapse of canal and levee walls due to human design or construction faults -- rather than by Hurricane Katrina.  One could also say the flooding was caused by people building a city below sea level, but is that sound logic or mere reductionist technique? 

The opinion also relies more on dictionary definitions than law or common sense.  For example,  no insurer offers flood insurance in anything resembling a standard homeowners policy.  All insurer's attempt to exclude it.  Were consumers really misled given that the Federal Flood Insurance Program has been around since 1968 and there probably hasn’t been a significant private market flood claim payout since 1968?  The court used the so-called reasonable consumer expectations argument to rule that when the term is ambiguous, one should look to cover the loss consistent with the reasonable policyholder’s expectation.  This is the wrong standard when the judge could take notice of the presence of the exclusion in just about every insurance policy written in the last forty years and that the Federal program was deigned to cover these types of risks.

The opinion can be found here.  Rossmiller and Grace have additional commentary. Also see extended commentary in the comments on the the bigger issue of how we pay for these losses at Marginal Revolution.

Please also see Ted Frank's earlier post which I missed in all of the excitement.

Katrina insurance litigation lives in Louisiana - PointOfLaw Forum

Posted to the AEI Liability Project Documents in the News page: Judge Duval's opinion in the federal Louisiana Katrina litigation, holding that language in insurance contracts stating that the policy does not cover "loss caused directly or indirectly by water damage" doesn't necessarily mean as a matter of Louisiana law that the insurers aren't liable for loss caused by water damage because the flood of New Orleans might not necessarily be a "flood" because of the insurance contract's failure to explicitly define that term to include manmade events, and the plaintiffs might be able to prove that the flood was manmade, rather than natural. Are you appalled yet? Earlier Katrina coverage.

"Ex-Pelosi chief of staff: Dems to target big business" - PointOfLaw Forum

Don't expect the sweetness-and-reason, we're-all-pro-business atmosphere to last long, warns her former chief of staff, now with King & Spalding. That goes "especially when it comes to drug prices, oil company profits and post-Hurricane Katrina insurance rates." The entertainment industry may fare better (or it may not).

Fascinatingly, WashingtonPost.com's "Think Tank Town" column, for what I believe is the first time in its history, gave up its space for a lobbyist, Jon Haber of ATLA, to "respond" to a column—my column—written by a think tank fellow. That would be an interesting choice in and of itself if the response were actually a response, but it's not: it's a collection of ad hominems and insults and non sequiturs. Let's match up one set:

Insurers can breathe easier over Katrina lawsuits - PointOfLaw Columns

By Walter Olson

London Times Online, 08-30-06

When Hurricane Katrina struck, some feared (and others hoped) that modern America�s worst natural disaster would give our ever-busy lawsuit industry a way to expropriate the worldwide insurance business. A year later, the results of the first coverage trial are now in and those in the insurance business can exhale a bit.

Last week, a federal court in Mississippi ruled on the first lawsuit brought by victims of the hurricane against their insurer. Paul and Julie Leonard sued Nationwide Mutual Insurance in October last year, claiming they were fully covered for the estimated $158,000 (�83,114) wind and water damage to their home, despite the insurance company's contention that their policy excluded damage caused by flooding. The judge dismissed the claim for water damage and awarded $1,228 (�645) for wind damage. Both sides claimed victory.

It is clear that insurers are legitimately on the hook for tens of billions of dollars in Katrina havoc. Equally clear (you'd think) is that the storm�s ruinous flooding was not their responsibility, since the exclusion of flood damage is a long-established aspect of homeowners' coverage.

The hurricane waters had scarcely receded when two of the best-known figures in the Mississippi legal establishment � Jim Hood, the state�s elected Attorney-General, and his ally Dickie Scruggs, who has grown rich in tobacco and asbestos � appeared before TV cameras to announce they were suing to get the exclusions voided. Never mind that insurers were at pains to avoid underwriting the risks of water, never collected premiums for them and never set aside reserves against them. Flooded-out homeowners were in luck after all. As Thomas Knapp, the writer, observed at the time, finger-pointing had given way naturally to pocket-picking.

Wouldn't rewriting of policies after the fact bust some otherwise solvent insurers? Mr Scruggs � a key political figure in his state � shed no tears, saying in one interview he would "rather see an insurance company go broke" than his friends and neighbors. In another, he noted the role of international reinsurance and suggested that his legal actions would provide a way to fob off the cost of Gulf rebuilding on "Swiss gentlemen". (Veterans of the Lloyd�s near-wreck, following liberal insurance coverage rulings in US asbestos litigation, are right to detect an echo.)

By conventional insurance-law standards, the Hood-Scruggs theories were lame in the extreme. The exclusion has withstood earlier court challenges, prevails in all 50 states and was approved by Mississippi�s own regulators. It is also well known to consumers. (Federally sponsored flood insurance is sold under a separate program; most homeowners in Mississippi and elsewhere had not elected to buy it.)

Crucial to the two men�s strategy, as Mr Hood acknowledged, was to steer the coverage wrangle into the courts of state-level judges � judges elected by hometown voters ("Judge Fleecem: fighting on your side" might be a typical campaign slogan) and who commonly rely for re-election funds on lawyers like Mr Scruggs who practice in their courts. Well aware of these dangers, insurer-defendants won a key victory by instead getting the cases into federal court. Federal judges are appointed not elected, and tend to keep a firmer hold on their courtrooms.

So while Mr Scruggs and Mr Hood were reveling in uncritical coverage in the national press, their actual chances of success were ebbing. Senior District Judge L.T. Senter, Jr., repeatedly ruled the flood exclusion "valid and enforceable". In the Leonard trial, the judge also ruled that it made no difference whether or not an insurance agent had advised a policyholder (whose home was in a seemingly low-risk area) against buying the separate flood insurance. Mr Scruggs claimed partial victory because Judge Senter ruled ambiguous (and to be construed against the insurer) some language limiting coverage of damage done by wind and water in combination. But the upshot was that he awarded the Leonard's only $1,228 of the $158,000 sought.

Major coverage issues remain to be resolved (and appealed), but at least we can take note at this point that America is not Zimbabwe or Bolivia. As Dickie Scruggs said before the Leonard ruling, "If you win it, it's a huge win. If you lose it, you spin it the best way you can."

Walter Olson edits Overlawyered.com and PointOfLaw.com and is a senior fellow at the Manhattan Institute.

The Wall Street Journal [subscription needed] relates yet a defeat for Richard Scruggs, who had attempted to consolidate thousands of homeowner suits against insurers, despite different policy language and different damage in each case.

Each homeowner can of course file suit himself, but it is likely that many marginally plausible suits will not be filed at all.

Dickie Scruggs is unhappy about that whole due-process thing that requires individual cases to be tried as individual cases. (Michael Kunzelman, "Judge: Katrina insurance suits must be separate", AP/Clarion-Ledger, Sep. 9). (h/t S.B.)

Another view of Leonard v. Nationwide - PointOfLaw Forum

Attorney Randy Maniloff points us to his analysis of Katrina insurance litigation in the September 12 Mealey's Litigation Report. Maniloff (who generously quotes us) notes that Judge Senter's analysis of anti-concurrent causation language contradicts that of the Mississippi state courts in Boteler v. State Farm Casualty Insurance Company, 876 So. 2d 1067 (Miss. Ct. App. 2004), and has more to say about Judge Senter's opinion in the Guice class action that was overshadowed by his Leonard decision. More on Leonard from me Aug. 24 (AEI) and Aug. 17; from Walter, Aug. 18 and Aug. 16 (as well as in the Wall Street Journal); and Martin, Aug. 17.

New Times column -- Katrina verdict - PointOfLaw Forum

My new column at the Times (U.K.) Online is on last week's Mississippi Katrina insurance verdict. (Walter Olson, "Insurers can breathe easier over Katrina lawsuits", Aug. 30). Concluding paragraph:

Major coverage issues remain to be resolved (and appealed), but at least we can take note at this point that America is not Zimbabwe or Bolivia. As Dickie Scruggs said before the Leonard ruling, "If you win it, it's a huge win. If you lose it, you spin it the best way you can."

Also, I was a guest last evening (6:30 p.m. Eastern) on Marc Bernier's high-rated radio show, "The Talk of Florida" to discuss the article (cross-posted from Overlawyered).

Ted fact-checks a lawn-mower lawsuit - PointOfLaw Forum

Ted thought a newspaper's coverage of a lawn mower lawsuit against Wal-Mart seemed a little one-sided. So he wrote the reporter a note of inquiry and, on getting an unsatisfactory response, started digging.

The results -- and the reporter's reaction upon being fact-checked -- aren't exactly flattering to the MSM's reputation.

Also, Ted's recent guest column for the Business & Media Institute on press coverage of the first Katrina insurance trial appeared yesterday as an article at National Review Online.

New Orleans radio - PointOfLaw Forum

I was a guest this morning on Shane Warner's radio show on New Orleans' WIST, discussing Judge Senter's latest ruling in Katrina insurance coverage litigation. For more on that subject, see my posts here and here, Ted's and Martin's posts, and my WSJ piece here.

Judge Senter on Katrina, cont'd - PointOfLaw Forum

I'm not sure I really intended my first post on this, which reacted to initial news reports, to commit myself to an upbeat, cheery posture (or its reverse). At the time, I hadn't yet read the actual opinion.

The portion of the ruling that is hardest to comprehend is surely the part knocking out Nationwide's clause excluding coverage, not as unconscionable but rather as supposedly ambiguous. The plaintiff's lawyers had identified a (seemingly poorly drafted) passage elsewhere in Nationwide's policy which, read in a strained way, might seem to disclaim the same coverage for conventional wind damage that was being promised by the rest of the language in the policy. Note that Nationwide itself was not advancing or endorsing this (harsh if not fraudulent) interpretation, which meant nobody was. And yet by seizing on this supposed ambiguity -- between the exclusion Nationwide actually had made, and the super-duper-exclusion it had not intended to make -- Judge Senter came up with the remedy of disallowing both exclusions. It is as if, finding a letter which looked very much like "T" but could strainedly be read as "Z", the judge decided that plaintiffs would be permitted to read it as "D".

I had to remind myself that courts have a long tradition of seizing on supposedly ambiguous language in insurance policies and construing it against the insurer, often in creative and even acrobatic ways. (Insurance Coverage Blog has a discussion of the ambiguity issue here.) The logic, I gather, is that since the insurers devise the policies they can go back next time, perhaps several hundred million dollars later, and try to draft language that will be more judge-resistant. Of course Nationwide can also be expected to raise the issue on appeal.

The Real Wind v. Water Debate - PointOfLaw Forum

Ted has taken a more pessimistic view of the recent Katrina case ruling in Leonard v. NationwideWalter and David Rossmiller both have taken a more optimistic view.  I think there is some room for optimism too.  While the judge threw out the anti-concurrent causation language as being vague, Judge Senter did hold in his rulings of law that ...

Under applicable Mississippi law, in a situation such as this, where the insured property sustains damage from both  wind (a covered loss) and water (an excluded loss), the insured may recover that portion of the loss which he can prove to have been caused by wind. Grace v. Lititz Mutual Insurance Co. 257 So.2d 217 (Miss.1972). Nationwide is not responsible for that portion of the damage it can prove was caused by water. To the extent property is damaged by wind, and is thereafter also damaged by water, the insured can recover that portion of the loss which he can prove to have been caused by wind, but the insurer is not responsible for any additional loss it can prove to have been later caused by water. Lititz Mutual Insurance Co. v. Boatner, 254 So.2d 765 (Miss.1971).

Thus, if the insurer or the insured can make a case for coverage based on evidence of the source of loss, I don’t think one has to worry about the concurrent causation issue as much.  Under Mierzwa (a recent Florida case) which said that if two causes were established (wind and flood) and one was excluded (flood), the insurer was responsible for the policy limits even if flood was the major cause of the homes destruction.  Judge Senter doesn’t come out and reject this, but he does assert that Mississippi law does not require the payment of the value of the policy in a case where there are two causes and the major amount of damage was caused by an excluded loss. 

It doesn’t appear that this valued policy issue was brought before the court. However, it seems like a reasonable conclusion from the opinion the valued policy notion is not as broad as Florida’s as each party must prove its version of the loss based on what caused the damage and whether the cause was covered by the policy.

 

Today's Wall Street Journal has a front-pager on Tuesday's decision in the first bench trial, as well as an editorial on the subject. I'm not as sanguine as Wally or David Rossmiller about the Senter opinion.

First, and most importantly, by failing to give credit to the anti-concurrent cause clause in the Nationwide policy, Senter is insuring that Scruggs can force an expensive trial in almost every case, creating settlement value where none is appropriate.

Second, while Judge Senter was willing to weigh the evidence impartially in a bench trial, one questions whether a jury is going to be as sympathetic to the facts in a cases involving thousands of neighbors against faceless insurance companies. The Leonards found an expert willing to testify that $47,000 in damage was caused by wind. Such experts may have more weight with more sympathetic finders of fact.

Third, though Senter did not find that the insurance agent misled the Leonard family, a clever plaintiffs' attorney is going to notice that this was so because the Leonards made several critical concessions in testimony. I'm not saying that future plaintiffs' attorneys are going to coach their clients to lie; but they're certainly going to let their clients know that admitting that they didn't ask their insurance agent for the reasoning behind certain statements or that they read their insurance policy will have consequences. "Will no one rid me of this insurance policy?" I won't be surprised if there's suddenly a rash of plaintiffs who follow the roadmap left for them in this case, and it remains unclear under what circumstances federal judges are going to completely undo insurance contracts on fraud claims.

So while Rossmiller is correct that this week's a decision is a sure loss for the Leonard family, who got less than one percent of the $130,000 they sought, Scruggs isn't completely spinning when he suggests he's happy with the opinion. Insurers still have a lot to fear in Mississippi.

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