Will Katrina Set The Lawsuit Trend?

The well-publicized wave of lawsuits in the wake of Hurricane Katrina does not mean there will be increased litigation when the next big windstorm catastrophe hits the United States, in the opinion of one legal expert.

"For the most part, people would like to avoid having an attorney," suggested Patrick Long, president of DRI, the Voice of the Defense Bar, in comments on the two-year anniversary of Katrina's Louisiana landfall.

However, Randy Maniloff, another attorney active in insurer defense litigation, said he thought the Katrina example meant that policyholders "will automatically try to get around otherwise applicable policy provisions."

Mr. Long, with Long Williamson & Delis in Santa Ana, Calif.--as well as a Judge Pro Tem for Los Angeles and Orange County Superior Courts--said he thought policyholders would only be interested in pursuing legal cases "if they feel they are not being dealt with in a fair manner."

On the other hand, he noted that disputes over how much damage is attributable to a covered wind loss, or harm from flooding that is excluded from coverage, will continue because factually that may be difficult to determine--"it's always a potential issue."

Mr. Long said he expects that the insurance industry will do something different to avoid the kind of negative publicity and criticism that followed Katrina.

"It's hard to know if they can react any faster, but they are cognizant of public relations issues and they will react," he said.

Mr. Long speculated that, to the extent that some insurers' policy definitions and terminology has been found to be ambiguous, "I would think they will tighten up the policies."

On the public relations front, Mr. Long said he thought there was little an insurer like State Farm could do to avoid the troubles they encountered when they rejected home damage claims by Mississippi congressmen.

"I think insurance companies like to be consistent. I don't think anyone wants to be accused of favoritism or trying to curry favor. They have to be consistent in the way they interpret policies," he said.

Mr. Maniloff, with the White and Williams law firm's Philadelphia office, said he thought the lesson to come out of Katrina has been that policyholders whose claims are denied can find ways to challenge policies.

"When Katrina first hit, it was a foregone conclusion that the flood exclusion would apply," he said. "That was ultimately chipped away and creative ways were found to get around or at least to minimize its effect."

The same reaction can occur again, he said, when you have an event where "there are so many eyes looking at it and so much is riding on it, there will be an effort to get the same result."

No matter what language insurers put in policies, there will be people looking for ways to challenge, he added.

Initially after flooding in New Orleans, "no one was giving anyone a chance of getting around the flood exclusion, and ultimately policyholders made strides in that area--particularly in Mississippi," said Mr. Maniloff.

Perhaps the only way to avoid an unsympathetic courtroom environment is to write a check, he noted, so "it will be the same old question next time around--'Do we fight this or settle it?'"