A judge erred when he ruled before trial that USAA insurance company did not act in bad faith in adjusting a Hurricane Katrina claim filed by policyholders Paul and Sylvia Minor of Ocean Springs, the state Court of Appeals has ruled.
The court returned the case to Jackson County Circuit Court for further proceedings to determine if USAA owes the Minors attorneys’ fees, court costs or punitive damages, which are designed to punish a party acting in bad faith. USAA could appeal the decision to the state Supreme Court.
A specially appointed judge, Richard Todd Bennett, presided over the case.
Corban Gunn, attorney for the Minors, said this is USAA’s last Hurricane Katrina case and, possibly, one of the last of hundreds of Katrina cases filed in wind vs. water disputes between insurance companies and policyholders.
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The jury in the Minor case found in 2013 that USAA should pay $1.56 million for wind damage to the house and contents, a verdict the appellate court upheld. The money is owed to the estate of Sylvia Minor, who passed away in 2009. Her husband Paul Minor was not named as a plaintiff in the case.
The Minors owned a landmark home in Ocean Springs that contained antique rugs, fine art, specialty marble and expensive jewelry. They also had a wine cellar.
USSA did its own appraisals of the house and contents in 1994 and 2001 because, Gunn said, it was considered a “high-value property.”
The Appeals Court pointed out that USAA failed to use its own information to resolve the claim in a timely manner.
The house had what the court’s decision described as “unique floor-to-ceiling glass doors and windows that are 360 degrees around the house.” An engineering report USAA ordered on the property concluded wind damaged all the window systems.
The engineer’s “confidential” conclusion said USAA could owe for replacement of all windows, also creating the possibility that the company would have to cover contents damaged by openings in the house that the wind created. The policy excluded coverage for water damage.
The appellate decision notes the confidential memo was not entered into USAA’s information management system. The adjuster, Teri Bergstrom, included a note on the memo that said: “If we’re paying for all the windows it would open up contents in all the rooms with windows. You may want to discuss this with your team leader.”
The decision also said, “Bergstrom’s final words were, ‘You know he won’t be happy w/that.’
USAA waited until May 2013, three months before trial, to make a payment of $67,864.23 for contents, the decision says.
The appellate court ruled in USAA’s favor on actual value vs. replacement costs. The justices said USAA did not owe the Minors replacement cost for the damage because the home was not rebuilt.