Lawsuit against insurers still alive
I-Fans,
As reported in the Pulitzer-winning Times-Pic and elsewhere, U.S. District Stanwood Duval Jr.(1) of New Orleans federal court declined to dismiss a lawsuit that claims insurers should pay for damage caused by water — both the kind that rises up (aka “flood”), as well as the kind that falls down (aka “rain”). The defendant is Allstate.
The judge said that some policy language is “ambiguous.” That means insurers lose because in insurance law, the tie goes to the policyholder on the principle that insurers wrote the policy and have the advantage (along with many others). Lawyers, I trust, will help us understand “contracts of adhesion,” which I understand to be the take-or-leave-it kind. Under that principle, if you write the contract and do a poor job, you’re stuck with it.
As the Times-Pic points out, this ruling contrasts with one in August by U.S. District Judge L.T. Senter in the Southern District of Mississippi, who found in the Scruggs(2) case that a policy didn’t cover flood from storm surges. The Times story, however, says the La. ruling centers on man-made problems, meaning broken levees, as opposed to a surge, which is a “nat cat,” as we insurance lovers say.
Louisiana Lawyer Supreme points out that the Louisiana ruling comes earlier in the civil proceedings and is based on pleadings alone, not on any factual findings. That differs from the situaiton in Missisippi, where the judge ruled after making findings of fact favorable to insurers (on that narrow point) in a bench trial. I figure the Mississippi ruling is firmer.
Both La. and Miss. are in the Fifth Circuit, which I suppose will sort this out.
What do I think? I hate this entire argument. Let’s see, we are jamming courts to parse whether water arrived via a wind-torn roof, a “surge,” which, let’s face it , doesn’t happen without a tropical depression (”hurricane”), an Army Corps of Engineers miscalculation, some badly written flood maps or something else.
I don’t care if it came through a straw. Are we covering storms, or what? Who benefits, exactly, from chopping up a storm risk into separate perils? I frankly don’t see how this helps policyholders or taxpayers. Insurers? Seems like it. Lawyers? Definitely. (Sorry, AKO[3]; Love you guys, but this stuff is ridiculous.)
Maybe insurance folks can help us understand here, but I don’t see the benefit.
Yes, insurers must protect their solvency and, sure, their shareholders, too. And of course it can be done. Stay tuned.
(1) Great name.
(2) Pascagoula trial lawyer, Richard Scruggs, famous for tobacco cases among many others.
(3) Anderson Kill and Olick, leading bad-faith firm.
Thanks also to Cool Texan.
Private note to Foxy Oregonian: Mighty quiet out there.
November 29th, 2006 at 12:18 pm
Well, it is a bit of a relief to see that the ambiguity scales well as the scope broadens. It has a strange attraction fostered by the way figures lost in the complex landscape of insurance are echoed in the ones now present.
Anyhow, I was at the dentist just yesterday. I really like my dentist, he used to be a civil engineer and he replaces the decay in my mouth with gold. After a long-overdue meeting, I was settling matters with his receptionist. She suggested that I contact my insurance provider (insurance provider, funny term, am I their money provider?) and find out how much they will cover on my next filling. I didn’t see the use: Many years ago I had to have eight wisdom teeth removed (four extra teeth in that mouth!). I called my same-as-now ‘provider’ to see the extent of my coverage, and was told that my inquiry could be answered, but not on the phone, I had to write a letter. I wrote the letter and later got one back telling me that those kinds of questions, ones about how much coverage is available for a procedure suggested by a professional in their field, was not something they could tell me anything about. They could have used the phone for that line of bs.
November 29th, 2006 at 1:02 pm
My insurance carrier sent a letter after the Mississippi ruling that states what is not covered. It was a generic letter. It had this line in it: wind-driven rain. Now being a concerned home-owner, I called my insurance agent and asked her if that meant that if the roof on my house was blown off or damaged due to any type of winds and the rain came in, does that mine the damages will not be covered? She answered reassurdely no. I’m going to scan that letter and post it. Maybe some lawyer or insurance gurus will be able to make heads or tails out of it.
November 29th, 2006 at 1:09 pm
Mike a. Thanks again. The customer/vendor relationship in insurance is unlike any I’ve come across.
November 29th, 2006 at 1:10 pm
Seawitch. Thank you.
Most homeowners’ policies cover that kind of water. Your policy should say so, although it may be hard to read.