Hurricane Torts Will Be In Courts Forever

With lawsuits over contested Hurricane Katrina insurance claims continuing to rumble into federal court, the attorney for an insurance trade group said today that the prospect of such litigation is endless.

“This is going to go on for years and years,” said Robert Hurns, a counsel for the Property Casualty Insurers Association of America (PCI).

Mr. Hurns made his comments in the wake of a prospective class action being filed against 15 insurers in a U.S. District Court in Louisiana, and a federal judge in Mississippi ruling that State Farm policy language on hurricane coverage was unclear.

He predicted the decision will greatly ramp up the cost for both sides in hurricane claim cases.

A key dispute in much of the litigation is whether wind-driven water or storm surge constitutes flood damage that is excluded from coverage in most policies.

Judge L.T. Senter Jr. in Gulfport, Miss.–who had previously ruled in favor of the flood exclusion in a case involving Allstate–ruled last Friday in a State Farm case that if the plaintiffs can prove hurricane-driven wind and rain destroyed their homes, losses will be covered, “even if flood damage, which is not covered, subsequently or simultaneously occurred.”

Meanwhile, two days before Judge Senter's decision, a prospective class action was filed in U.S. District Court in New Orleans against 15 insurers after Judge Stanwood Duval–who has been handling homeowner suits–announced a plan to consolidate such actions.

Anderson Kill & Olick–one of the law firms on the suit that presently has 29 named plaintiffs–called the case the most “comprehensive and far-reaching litigation” to arise from Hurricane Katrina.

Ultimately the case could involve many owners of the 160,000 homes that were totaled in three Parishes, Anderson Kill said.

The complaint argues that the all-risk policies sold to homeowners failed to exclude damage from the collapse of poorly constructed levees, and that insurers improperly equated wind-driven storm surge and levee collapse with excluded flood damage.

Insurer representatives, it was alleged, failed to advise policyholders about the availability of excess flood insurance, and the suit charged that insurers had adjusters deny claims arbitrarily by pointing to any nearby high watermark to invoke a flood exclusion.

Judge Senter's decision denied a State Farm motion to dismiss a case brought by John and Claire Tuepker, whose home in Long Beach, Miss. was destroyed. Mr. Hurns noted that the judge had not explained his basis for finding that the policy's hurricane protection language was “ambiguous.”

“On appeal, it's likely [that finding] would be overturned,” Mr. Hurns said.

He said the case will now have an issue of fact for the jury to decide–namely, what caused the damage. This, said Mr. Hurns, will lead both sides to react with “a parade of experts” to testify that the damage was the result of hurricane or flood.

“If they go to trial, it will be costly because both sides will have to retain these experts,” he said.

What is going on now in the courts, he said, are the “first steps in a long litigious road.”