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Katrina Citizens Losing Insurance Cases On Appeal

Posted by Jane Akre
Friday, September 05, 2008 12:14 PM EST
Category: On The Road, Major Medical, Protecting Your Family
Tags: Insurance Companies, Hurricanes, Hurricane Katrina, Homeowner's Coverage, Flood Damage, Wind Damage, Insurers, Big Insurance

Katrina residents are still in litigation and many are losing their claims to big insurance

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IMAGE SOURCE:  Wikimedia Commons/ trailers St. Bernard Parish/ author: Infrogmation

 

It’s been three years since Hurricane Katrina hit the New Orleans area, devastating homeowners, many of who remain homeless today. 

Estimates were that up to 30,000 hurricane insurance suits were filed in court in New Orleans after insurers dug in and refused to pay on Katrina, the most expensive insurance disaster on record.  

At first it appeared that the homeowners would win in court, and recover not only their insurance claims, but also bad-faith penalties.

But an investigation by the Times-Picayune newspaper shows that on appeal, Big Insurance is winning most of the time. 

That means monetary judgments are not going to the people who need them the most, the people who were hurt by Hurricanes Katrina and Hurricane Rita.

"For a policyholder in the trial court on factual issues, it's an almost wholesale slaughter," said Soren Gisleson, head of the insurance section at the Louisiana Association for Justice, an association of plaintiff attorneys tells the paper. "At the appellate level, where you're dealing strictly with legal issues, it's exactly the opposite situation. They have not gone in favor of the homeowners." 

Initially when cases were filed, the homeowner almost always won after telling jurors tales of battling insurers.

Thousands of cases went forward and many hinged on the argument over hurricane wind damage which is covered by a homeowner’s insurance policy, versus damage caused by a flood. The argument used successfully by insurers was that rising water is covered separately by flood insurance, and if you don’t have any, you have no coverage. 

The main legal question that had the courts side with industry over flood exclusions, centered on the question of whether homeowners are covered when the flood damage was caused by a breach of a man-made levee, therefore a man-made flood.

In August of 2007, the 5th U.S. Circuit Court of Appeals said a flood was a flood and let the insurance companies off the hook.

Insurers had been afraid of a century-old state law that allowed homeowners to collect if their home was destroyed by two causes of damage, even if one wasn’t covered. 

But a state appeals court modified an earlier ruling that raised that claim. Then in June, the Louisiana Supreme Court delivered the final blow, ruling in favor of Louisiana Citizens Property Insurance Corp.

One legal observer tells the paper that the fact that each claim can be interpreted differently gave the insurance companies the advantage. 

About 13,000 cases have been filed in federal court, a preferred venue for insurers outside of Louisiana. Half of those have gone to judgment or settlement.

The paper found it was difficult to determine how much people have collected because insurers do not have to report their claim payouts. Documents on confidential settlements have been sealed from public view by the court.

But Loyola insurance law professor Mitchell Crusto said the most important point is that three years after the storm, thousands of people are still stuck in litigation, waiting for proper payment for their storm damage. 

"Under these circumstances, litigation is not very effective in getting citizens back to where they need to be," he said. "We almost need more mediation strategies, and processes by which insurance companies are encouraged or forced to get things resolved." 

A state run mediation program helped more than 12,000 settle their claims.  

An American Association of Justice report found some insurers pay more often than others. Allstate was at the top of the list of difficult companies.  #


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