NU Online News Service

A $2.8 million verdict against Allstate by a federal jury in NewOrleans in a Hurricane Katrina damage case will create major woesfor the insurance industry in Louisiana, experts said today.

Robert Hartwig, president and chief economist of the InsuranceInformation Institute, predicted that the verdict--which included$1.5 million in punitive damages--means "trial lawyers will readthis as open season on insurers."

Randy Maniloff, a Philadelphia attorney who tracks and haswritten commentary on hurricane damage cases, forecast that"settlement demands will now go up because people will see this andsay they can get a punitive award."

The jury in U.S. District Court for the Eastern District ofLouisiana made the finding in favor of Robert and Merryl Weiss,whose home on the North Side of Lake Pontchartrain in Slidell, La.,was demolished by the 2005 hurricane.

Their verdict followed testimony that an initial survey of thehome attributed its destruction to wind damage but the final reportfor Allstate said it was storm surge.

The couple had already received $350,000 under a federal floodinsurance policy, but sued Allstate for wind damage. Allstate saidit plans to appeal.

Mr. Maniloff said he expected Allstate to take the position thatthe jury's decision "is an aberration and does not reflect whatfuture verdicts will bring." However, he added, "you have toquestion if an insurance company can get an unbiased verdict inLouisiana."

The attorney also noted that there will be an issue now withhomeowners receiving payment under a federal flood policy and"turning around and saying 'it was wind [damage].' Essentially theyare saying there were two causes for the same loss. Clearly that isgoing to be an issue because there are so many flood policies."

Mr. Hartwig took note of what occurred after a Mississippifederal jury in January brought in a $2.7 million verdict againstState Farm--of which $2.5 million was punitive damages.

Even though the verdict was reduced, it "precipitated a chain ofevents," said Mr. Hartwig, culminating with State Farm indicatingit would not write new policies in Mississippi.

"It bodes ill for Louisiana," said Mr. Hartwig. He added thateven if the verdict is reduced, if there are more cases like Weiss,"it likely will signal the doom of the home insurance market in thesouthern part of the state."

Another possible effect, he said, is that Citizens--the state'sproperty insurer of last resort--"might see an acceleration of itsmarket share."

For insurers, "the decision could lead to an interminable levelof uncertainty," he said