Lawyers Dispute Impact Of Hurricane Katrina Claims

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. But others fear suits prompted by the record catastrophe set a dangerous precedent.

“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 last week on the two-year anniversary of Katrina's Louisiana landfall.

Randy Maniloff, another attorney active in insurer defense litigation, on the other hand, said he thought the Katrina example meant 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.”

However, 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,” he said.

Mr. Long said he expects 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 some insurers' policy definitions and terminology have 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, such as Republican Sen. Trent Lott and Rep. Gene Taylor, a Democrat.

“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.

However, Mr. Maniloff, with the White and Williams law firm in Philadelphia, 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 added, 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 it, he added.

Initially after the 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,” noted Mr. Maniloff.

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

Meanwhile, attorneys in New Orleans were marking the second anniversary of Hurricane Katrina's 2005 arrival by filing last-minute lawsuits against insurers.

At U.S. District Court in The Big Easy, an official said there had been a noticeable increase in volume. “We have pretty heavy filings today compared to normal days, but we're not overwhelmed and expect it will be steady throughout the day,” said Loretta G. Whyte, the clerk of the court on Poydras Street.

The deadline for such suits–normally one year under Louisiana law–was pushed back to the storm's Aug. 29 anniversary by the legislature.

In advance of the deadline, local attorneys advertised heavily, warning insureds their time for bringing an action was running out.

James Williams, with the Metairie, La., law firm of Gauthier, Houghtaling & Williams–which, he noted, is representing about 800 home- and businessowners–said the firm had been doing a lot of advertising, including television commercials about the deadline, as well as holding an information seminar for businesses.

The firm, he noted, had been chosen by State Attorney General Charles C. Foti Jr. to represent him and serve as protector for citizens in hurricane cases.

Mr. Williams said the firm has seen a tremendous increase in the volume of Katrina suits, with 300 coming in last year and 500 this year that it has accepted–noting that “we turn the majority of people contacting us away.”

Most of the firm's lawsuits are being filed at Orleans Parish Civil District Court, where the number of cases “is intense,” said Mr. Williams, adding he had witnessed lines that that were far bigger than at federal court.

Ninety-nine percent of Katrina claims have been settled, according to the Insurance Information Institute, but critics of that number say it includes cases where insurers have rejected a claim or issued an offer, but does not indicate that 99 percent have agreed with the carrier's determination.