Wednesday, April 9, 2008

WTF News: Insurers Don't Have to Pay for Katrina Flood Damage

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Insurers Racking Up the Wins in Katrina-Homeowner Litigation
Posted by Ashby Jones
It’s been a very good couple of days for property insurers who’ve been litigating over Hurricane Katrina coverage.

Today, the Louisiana Supreme Court ruled that Lafayette Insurance is not obligated to pay for water damage from the failure of New Orleans area levees. The ruling reportedly could affect thousands of homeowners. Here’s the story, from the AP and a copy of the opinion.

In November, a Louisiana appellate court concluded Lafayette’s homeowner policy failed to exclude all forms of flooding because its language was ambiguous. But, good news for Lafayette, the Louisiana Supreme Court disagreed.

A jury and state judge had awarded the plaintiff property owner a total of $870,652, but the Supreme Court reduced that to $247,001 for wind damage, lost rent, penalties and other costs.

Meanwhile, yesterday, the Fifth Circuit reversed a $1 million punitive damages verdict against State Farm and sent the case back to federal court for a jury to determine how much the company owes policyholders. Here’s a copy of the opinion, courtesy of the Insurance Coverage Blog. Here’s a story from the Biloxi Sun-Herald’s Anita Lee, whose work we got to know well during L’Affaire Scruggs.

The backstory on the Broussard case, as it’s known: policyholders Norman and Genevieve Broussard lost their Biloxi home during Hurricane Katrina. After State Farm denied coverage, the couple sued. At trial, district judge L.T. Senter ruled that the case should not go to a jury, saying that State Farm had entered insufficient evidence that the policy excluded water damage. He granted a judgment for the plaintiffs. A jury later granted the Broussards $2.5 million in punitive damages, an amount Senter reduced to $1 million.

Yesterday’s ruling reverses all that. The appeals court called Senter’s decision “clear error,” saying State Farm did offer the jury “sufficient evidence” to consider. Further, the Fifth Circuit held that State Farm was not malicious or grossly negligent in adjusting the Broussards’ claim, and wiped away the punitives award. The case will head back to the jury on what type of damage the house sustained.

Arguing the case for State Farm: Clarke Holland.

Please note. The homeowner is not a guppie-yuppie. The homeowner, Joseph Sher, is a 92-year-old Holocaust survivor, owned and lived in a five-unit apartment complex that took on four feet of water after the levees broke on Aug. 29, 2005.

Please note: This is an apartment complex. Which means Sher is suffering--and so are five other families who may have been renting those units.

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