Katrina Insurance Coverage Ruling
An important development in the "wind versus water" dispute over insurance coverage:A jury awarded $2.5 million in punitive damages against State Farm Fire and Casualty Co. for a Mississippi couple for denying their Hurricane Katrina claim. The decision could benefit hundreds of other homeowners challenging insurers for refusing to cover billions of dollars in storm damage.
State Farm said it will likely appeal.
Earlier Thursday, U.S. District Judge L.T. Senter Jr. had taken part of the case out of jurors' hands before they awarded punitive damages to State Farm policyholders Norman and Genevieve Broussard of Biloxi.
The case may have broader implications, given the judge's allocation of the burden of proof:
The Broussards sued State Farm for refusing to pay for any damage to their home, which Katrina reduced to a slab. The couple wanted State Farm to pay for the full insured value of their home plus $5 million in punitive damages. The Broussards claimed a tornado during the hurricane destroyed their home. State Farm blamed all the damage on Katrina's storm surge.
State Farm and other insurers say their homeowner policies cover damage from wind but not from water, and that the policies exclude damage that could have been caused by a combination of both, even if hurricane-force winds preceded a storm's rising water.
Senter, however, ruled that State Farm couldn't prove that Katrina's storm surge was responsible for all of the damage to the Broussards' home. The judge also said the testimony failed to establish how much damage was caused by wind and how much resulted from storm surge.
Thanks to Kofi Inkabi, a Cal engineering grad student and member of the CCRM team, for bringing this to my attention.
1 Comments:
Predictably, the insurance companies are now raising the specter of being unable to insure in such an unpredictable market, and hinting at leaving the Gulf Coast. Yet insurers still posted profits after Katrina (probably from denying so many water-related claims!), and many have already refused to write or renew policies in the area, even before the State Farm ruling. For the policies remaining in effect, premiums have soared.
The insurance industry likes to use bluster about "risk" and "bad markets" but I don't see it as having suffered despite the most costly natural disaster in our country's history.
The more serious implication is that the high costs or outright unavailability of insurance will prohibit homeowners and businesses from rebuilding or staying on the Gulf Coast. As is, Mississippi's wind pool (coverage of last resort) has gone from approx. $1.8 billion to $6 billion in coverage now, and homeowner premiums were threatened to rise as much as 397% (the state agreed to bring that down to 90%, after federal money helped shore up the pool).
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