News - Insurance

Wednesday, Nov. 04, 2009

Judge: State Farm should settle case

GULFPORT — U.S. District Judge L.T. Senter Jr. cautioned State Farm attorneys Wednesday that the company should consider settling out of court with a Biloxi policyholder who had just finished presenting evidence that he should be paid policy limits of $650,000 on his Hurricane Katrina claim.

Senter dismissed the jury, then heard State Farm’s argument that the policyholder’s case was so weak the judge should dismiss it without rebuttal from the insurance company. Senter rejected the motion, then suggested State Farm consider making an offer to policyholder Reginald “Ed” Bossier that would end the trial.

Senter said the record so far includes “some pretty tough stuff” pertaining to the insurance company. “See what you can come up with,” Senter told the attorneys, “and everybody can come out of this with a degree of honor.”

Otherwise, Senter said, he might allow a second phase of trial in which the jury would consider whether State Farm handled the insurance claim in bad faith, entitling Bossier to punitive damages. Senter acknowledged, however, that he has heard only half the case and could change his mind. The case could move to a punitive damages phase only if the jury first decides Bossier’s claim was underpaid.

In suggesting a settlement, Senter pointed out that he has handled about 2,400 Katrina cases. Most have settled without trial.

Insurance companies are required to thoroughly investigate policyholder claims and promptly pay what is owed. Bossier’s attorney, Judy Guice, has presented evidence that the insurance company offered Bossier only $2,300 for a home that was gutted, with a heavily damaged ceiling, insulation hanging in the attic, roof and siding damage and an exterior wall stripped above the roof line.

A forensic engineer testified that he measured the water line on interior Sheetrock at 3.5 feet, but State Farm contends the water line was closer to 8 feet.

The company argues tidal surge, covered by federal flood rather than private insurance policies, caused most of the Bossier’s damage.

State Farm waited four years to compensate the Bossiers for an outbuilding that, according to an eyewitness, was gone after the roaring sound of a tornado passed and before the tide rose. The payment came as the case headed toward trial. Also, the company erred in calculating what was owed for roof and siding damage, correcting the $13,000 mistake with a check in January 2008.

Guice also presented evidence that the company trained adjusters to deny claims involving both wind and water unless independent wind damage could be found to “separate portions” of the property, language that is not included in the policy.

State Farm attorney Ben Mullen said the Mississippi Supreme Court only recently clarified that insurance companies bear the burden to prove water caused a loss before payment is denied.

Senter corrected him, saying, “That’s been the law since 1910, counsel.”