Hurricane Ike Insurance Dispute Information

No Attorney’s Fees for Derry Man After Insurance Dispute

Published on: November 11, 2011 | By Berniard Law Firm

When one is successful on a claim against an insurance company the payment of the claim is expected to be prompt. Any delay in payment could result in the court imposing a penalty against the insurance company. In most, if not all, cases this penalty takes the form of court costs and attorney’s fees. But if an insurance company challenges a policy claim in court, and then loses, does that time when payment was refused constitute delay? The answer to this question is ‘it depends.’

In Louisiana Bag Co. v. Audubon Indemnity Co., the court held that if an insurer errs in interpreting its own insurance contract, then the insurance company will be held liable for the delay in payment resulting from the trial. This delay justifies the incurrence of penalties for attorney’s fees. If, however, the policy dispute revolves around facts rather than contract interpretation, then the “timely payment” provision is stayed during the trial. This was the situation of Maxley v. Universal Casualty Co. where Maxley’s car insurance policy through Casualty covered loss from both theft and fire. When Maxley’s car was stolen and set on fire, he filed for his claim. However, Maxley had left his car unlocked with the key in it. The policy through Casualty had an exception that nullified any claim if there was no evidence of forcible entry. The issue went to court with Casualty claiming it owed nothing under the policy because the theft was not through a forcible entry, and Maxley contesting payment was due under the fire provision of the policy rather than the theft. Maxley, in essence, argued that the exclusion provision for no evidence of forced entry was irrelevant because his car would have been recovered if it had not been for the fire.

The court found for Maxley, who then sought attorney’s fees for Casualty’s failure to make timely payment. The Third Court of Appeal upheld the denial of Maxley’s claim, stating that Maxley’s reliance on Louisiana Bag was misplaced. While Louisiana Bag relied on policy interpretation, Maxley’s case relied on a true disputation of the facts. It would be senseless to require the insurance company to pay the claim only to the have the claim payment rescinded if the facts were found in favor of the insurance company. This finding upholds efficiency in the industry as it is easier to withhold payment until truly due than it is to always make payment, then try to recoup it if made erroneously.

Insurance Company Taken to Task for Poor Handling Claims

Published on: November 3, 2011 | By Berniard Law Firm

It is well settled under Louisiana law that insurers owe a duty of “good faith and fair dealing” to their customers. Each insurance company is required to adjust claims in a fair and prompt manner and to make reasonable efforts to settle claims when possible. La. R.S. 22:1973 establishes that damages may be awarded against an insurance company that fails to meet this duty. One category of wrongdoing includes:

“Failing to pay the amount of any claim due any person insured by the contract within sixty days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause.”

The statute also permits a wronged insured to collect penalties from the insurer “in an amount not to exceed two times the damages sustained or five thousand dollars, whichever is greater.” The purpose of this law is to discourage insurers from failing to live up to the promises they make to their customers in their insurance policies and for which the customers pay premiums.

On October 27, 2004, Carl Guidry and his granddaughter were driving in Guidry’s pickup truck. They were rear-ended by Amber Guidry (no relation) and Guidry’s truck was knocked forward. Guidry suffered from neck and back pain following the accident. Two weeks later, on November 11, 2004, Guidry and his granddaughter were again rear-ended while driving in Guidry’s truck, this time by an SUV driven by Evelyn Smith. Guidry experienced further neck and back pain, as well as shoulder pain, after the second collision. Guidry sued both Amber Guidry and Evelyn Smith, and also sued his own uninsured/underinsured motorist (UM) carrier, Progressive. Guidry settled with Amber Guidry’s insurance carrier in the first accident for the policy limits of $10,000. At trial, the jury found that Guidry did not suffer damages in the first accident, but found that he did suffer damages in the second accident; they jury awarded Guidry medical expenses in the amount of $19,860 and general damages of $10,000. The jury also found that Progressive had been “arbitrary and capricious” in handling Guidry’s claims for general damages and medical expenses from both accidents; specifically, Progressive never tendered any money to Guidry for either claim. Accordingly, it awarded Guidry $50,000 for Progressive’s breach of duty and $10,000 in attorney fees. Then the trial judge awarded Guidry $100,000 in statutory penalties against Progressive.

Progressive appealed the penalty award to the Third Circuit. The court upheld the award after a review of Progressive’s handling of Guidry’s claims. Progressive admitted receiving proper notice of Guidry’s accidents in September, 2006 but disputed that Guidry could establish the amount of his damages. The general rule for UM carriers is that if the insured can show that “he was not at fault, that the other driver was uninsured or underinsured, and that he was in fact damaged,” the UM insurer cannot avoid liability just because the insured is unable to prove the exact extent of his general damages. Instead, the insurer “must tender the reasonable amount due as a sign of its good faith and its willingness to comply with the duties imposed upon it under the insurance policy.” See McDill v. Utica Mut. Ins. Co. The tendered amount would not be to settle the case, but to show good faith. Once the good-faith tender is made, the insurer must take “substantive and affirmative steps” evaluate the claim. In this case, Progressive opened its claim file in September, 2006 but did not depose Guidry’s treating physician and orthopedist until June, 2008–nearly two years later. It failed to pay Guidy any money towards the $3,500 in costs to repair his truck. Also, Progressive failed to tender any of the medical payment coverage ($5,000 per accident) included in Guidry’s policy, even though it ample evidence that injuries had resulted from the second accident. Guidry finally had shoulder surgery some four years after the second accident to relieve his debilitating pain, which was paid for by Medicare. Thus, the court concluded that “the jury was not unreasonable in finding that Progressive breached its duty to Mr. Guidry by failing to pay the amount of any claim within sixty days and by failing in its duty to timely investigate the accidents.”

What should have been a simple resolution for Mr. Guidry turned into a four-year-long nightmare of shoulder pain because his insurance carrier mishandled and delayed the payment he was entitled to receive under his policy. This case shows the value of an experienced accident attorney who can advocate on behalf of an injured victim.

U.S. 5th Circuit Court of Appeals Clarifies Retroactive Renewal of Flood Insurance

Published on: October 3, 2011 | By Berniard Law Firm

Those living in low-lying areas and near rivers often seek, and often obtain, flood insurance. Many of the policies granted come from insurance providers that have opted into the National Flood Insurance Program (NFIP). Under this program, property owners are issued flood insurance through the Federal Emergency Management Agency (FEMA). The federal government, in an effort to expand the NFIP, created the Write Your Own program. These policies provide identical coverage as regular NFIP insurance, except they are administered through local insurance companies. These insurance companies increase community awareness of the NFIP in return for expenses related to claims written and processed. FEMA retains all responsibility for claim losses.

These policies, like any other insurance policy, are only active for the policy period. However, once the policy period has expired, FEMA and Write Your Own insurers typically extend a grace period of thirty days. This means that if the policy holder pays a renewal premium within thirty days of the policy’s expiration, the renewal will be retroactive, essentially covering the gap between the policy expiration and the payment of the premium. If the policy holder fails to pay the renewal premium before the grace period ends, then the policy terminates at its original expiration date and no grace period claims can be processed under it.

This retroactive policy renewal was the issue in Campo v. Allstate Insurance Company. Here, Campo’s flood insurance expired and Allstate sent him notice of the expiration along with the option of retroactive renewal. During this grace period Campo’s property was damaged by Hurricane Katrina. Due to the excessive number of claims arising from Katrina, FEMA increased NFIP grace periods from thirty days to ninety. Campo contacted Allstate and procured an insurance check to cover his living expenses. No further discussion of policy renewal took place. Campo’s ninety day grace period expired without any renewal premium payment. Therefore, when Campo filed his insurance claim it was denied as the policy was not retroactively renewed to cover the damage caused during the grace period. Campo sued Allstate claiming that Allstate had negligently misrepresented the status of his policy.

The only way to succeed on a claim of negligent misrepresentation by an insurance company is to show that the insurance company had a legal duty to supply correct information, that that duty was breached, and that damages resulted from justifiable reliance on that misrepresentation. In most cases, as in Campo’s, the third prong of this test is the most difficult to satisfy. The reasoning behind this is simple: policy holders have access to correct information through the policy contract that they possess. Thus, courts may find damages flowed from an unjustified reliance on the misstatement because the policy itself is clear.

Yet, under this test, Campo succeeded on his damages claim in district court. The U.S. Court of Appeals for the 5th Circuit, on the other hand, reversed in favor of Allstate. The reasoning behind this decision is that Campo was fully aware that he was required to pay a premium in order to obtain the retroactive renewal of his policy. In conversations with Allstate, Campo failed to discuss the renewal, and, in addition, the check provided by Allstate during the grace period was not a promise that it would pay Campo’s claim. In short, the court viewed Campo as being responsible for knowing the terms of the insurance policy he held. Insurance policy holders have access to the terms of their policy and are therefore in a position to familiarize themselves with relevant provisions.

Since much of Louisiana is prone to flooding, it is important to protect yourself by obtaining flood insurance. However, once a policy is issued, be sure to read through the terms and know the conditions of renewal. When a policy expires, it is the policy holder’s responsibility to take action for renewal.

Insurance disputes such as these are complex and best left to an experienced practicing attorney.

Fifth Circuit Court of Appeals Looks to Louisiana State Law to Guide Resoltion of Insurance Coverage Dispute in Workplace Injury Case

Published on: September 7, 2011 | By Berniard Law Firm

Previously on the Insurance Dispute blog, we have reviewed cases where the court analyzied various policy provisions that are intended to limit the scope of the insurer’s coverage. One recent example was a clause in a hazard insurance policy that limited the insurer’s responsibility for certain economic damages that resulted from a covered loss. Coverage limitations are common features in other types of policies, as well. For instance, a workers compensation insurance policy will typically include provisions that define the type of injuries that fall under the policy and specify the timeframe in which claims must be made. The recent case of Continental Holdings, Inc. v. Liberty Mutual Insurance Co. offers an example of a court’s analysis of such a provision. Continental Holdings purchased a Workers Compensation/Employers’ Liability Policy from Liberty Mutual on October 1, 1964. The policy’s term ended on July 1, 1973. It covered two kinds of work-related injuries: bodily injury “by accident,” and bodily injury “by disease.” The policy specifically excluded coverage for claims of “bodily injury by disease unless prior to thirty-six months after the end of the policy period written claim is made or suit is brought against the insured for damages because of such injury or death resulting therefrom.” In 2009, a group of former employees, certified as a class, sued Continental for hearing loss caused by their long-term exposure to industrial noise while working for the company. In their complaint, the employees alleged that the hearing loss “was painless, and occurred gradually over a long period of time as a result of their continuous long term exposure to hazardous industrial noise at [Continental’s] facility.” Continental filed suit against Liberty Mutual seeking indemnity for the employees’ claims in the hearing loss suit, arguing that the policy purchased in 1964 covered the workers’ hearing loss. Liberty Mutual filed a motion for summary judgment asserting that it was not required to indemnify Continental because noise-induced hearing-loss was not an “accident” and therefore was subject to the 36-month exclusion under the policy. The district court granted Liberty Mutual’s motion, and Continental appealed.

The U.S. Court of Appeals for the Fifth Circuit relied on Louisiana law to guide its analysis. At the time the policy was taken out, the Louisiana Worker’s Compensation Act (“LWCA”) was in effect and was incorporated by reference in the policy. The LWCA included the following definition of “accident”: “an unexpected or unforeseen event happening suddenly or violently with or without human fault and producing at the time objective symptoms of an injury.” Continental asserted that the industrial noise the workers were exposed to created an “objective injury” and therefore fell under Louisiana’s then-existing statutory definition of “accident.” It backed up its position with the affidavit of Dr. Robert Dobie, which explained that noise-induced hearing loss can be measured at the moment a noise is heard through an audiogram test. The court noted, however, that “the vast majority of Louisiana cases,” including one that held “gradual hearing loss resulting from occupational noise exposure … cannot meet the definition of an ‘accident’ under any version of the LWCA,” reach[es] a contrary conclusion.” The court observed that the Continental workers did not claim that a single event caused their hearing loss. Nor did they experience any symptoms during the period of time that the Liberty Mutual policy was in effect. These facts were contrary to the court’s own prior holding that Louisiana’s definition of “accident” requires “at least … some identifiable event or incident within the policy term where the employee can demonstrate a palpable injury.” By way of example, the court recalled a case that involved “a sudden, acute, and identifiable injury during the period of employment.” The employee-plaintiff complained of ear pain immediately after exposure to noise, requested and was denied a transfer, and then over the course of a few months experienced nearly total deafness. The court concluded, therefore, that the gradual, noise-induced hearing loss that the Continental workers suffered was “not an ‘accident’ under the LWCA.” Therefore, the court affirmed the district court’s finding that the workers’ injuries must be classified as “bodily injury by disease,” thus triggering the 36-month exclusion.

It is important to note that the Fifth Circuit’s decision did not necessarily create a negative outcome for the workers themselves. Indeed, their suit (filed in state court) was merely put on hold until the conclusion of this action, which only served to determine that Liberty Mutual would not be responsible for any damages due the workers if they ultimately prevailed against Continental.

Court Declines Statutory Penalties in New Orleans Insurance Case

Published on: August 30, 2011 | By Berniard Law Firm

In a prior post, we examined the case of Berk-Cohen Associates, L.L.C. v. Landmark American Insurance Company, which concerned a dispute over an insurer’s coverage of lost revenue suffered by the Forest Isle Apartments complex in New Orleans in the aftermath of Hurricane Katrina. The district court found that the lost revenue experienced by the apartment’s owner, Berk-Cohen, was covered under the policy issued by Landmark. Based on this finding, it assessed Landmark penalties and attorney’s fees for its misinterpretation of its policy and refusal to pay Berk-Cohen for the lost revenue that it deemed covered under the policy. Landmark appealed the assessment (along with the district court’s finding on the coverage issue); although the Court of Appeals for the Fifth Circuit affirmed the district court’s holding as to insurance coverage, it reversed on the issue of the penalty.

Under Louisiana law, an insurance company generally has 30 days after receiving a demand letter and written proof of loss to pay a claim. A court can assess a penalty against an insurer that fails to pay within 30 days “when such failure is found to be arbitrary, capricious, or without probable cause.” La. Rev. Stat. Ann. § 22:1892(B)(1). The penalty is calculated as 50 percent of difference between the amount actually paid and the amount due. Attorney’s fees and costs can also be part of the assessment. No penalty is available “when there is a reasonable and legitimate question as to the extent and causation of a claim.” In the case of Louisiana Bag Co. v. Audubon Indemnity Co., the Louisiana Supreme Court assessed penalties against an insurer that failed to pay the uncontested portion of a claim and refused coverage for a loss that was clearly included in the policy. The court found that “no reasonable uncertainty existed as to the insurer’s obligation to pay,” and so its position was “arbitrary and without probable cause.”

The Fifth Circuit concluded, however, that the Forest Isle Apartments case was unlike the situation in Louisiana Bag. “The scope of the flood exclusion,” reasoned the court, “with its reference to all damage ’caused directly or indirectly’ by flooding, is susceptible to different interpretations.” Landmark, therefore, was “neither arbitrary nor capricious” in refusing to pay Berk-Cohen for lost revenue based on the favorable business conditions brought on by hurricane flooding. The court also found it important that Landmark had already paid out more than $20 million on undisputed portions of Berk-Cohen’s claims. In light of this, Landmark’s dispute over the lost revenue claim could reasonably be considered a “good-faith error” in interpreting the policy. In addition, the court noted that under Louisiana jurisprudence, an unfavorable judgment does not necessarily call for the statutory penalty. Thus, the court reversed the district court’s assessment of penalties against Landmark.

Supreme Court of Louisiana Rules on Hurricane Katrina Insurance Policies’ Anti-Assignment Clauses

Published on: August 26, 2011 | By Berniard Law Firm

In insurance, an assignment is the transfer of legal rights under an insurance policy to another party. The legality of assignments became a major issue in the aftermath of hurricanes Katrina and Rita. During this period, the federal government, in an effort to aid rebuilding efforts, issued money through the Road Home program to homeowners who held underinsured properties. In exchange, these homeowners were required to assign their rights to insurance claims under their policies to the the state of Louisiana. The purpose of this assignment was to prevent homeowners from fraudulently receiving duplicate payments. However, the program incentivized insurance companies to estimate damages too low, which in turn forced homeowners to take the higher amount offered through the Road Home program.

The shortfall created within the Road Home program forced the state of Louisiana to bring suit against insurance companies through the policy rights assigned to the state by homeowners. In essence, the state sought to recoup actual insurance claim damages that the homeowners were rightfully owed had they not opted into the Road Home program. Though most, if not all, of the homeowner insurance policy contracts contained an anti-assignment clause, the state maintained that it had the right to post-loss assignment. Therefore, it is critical to distinguish between a pre-loss assignment and a post-loss assignment.

A pre-loss assignment occurs when one transfers a legal right under an insurance policy to another before the injury or loss occurs. An example of a type of pre-loss assignment is found in cases when life insurance is assigned to a bank as collateral for a loan. Here, the assignment has occurred before the loss, in this case the death of the original policy holder, and any benefits that accrue at the time of death are used to repay the bank first. These types of assignments typically require consent from the insurer, but are usually barred by anti-assignment clauses.

A post-loss assignment, on the other hand, is the transfer of a legal right under an insurance policy to another party after the injury or loss occurs. Post-loss assignments frequently give the third party transferee the ability to file a claim against the insurance company for any loss accrued by the original policy holder. Many insurance companies try to block such assignments through broad anti-assignment clauses found in policy contracts. Such clauses were found in most Katrina and Rita policies, and insurance companies pointed to these sections in an attempt to avoid paying actual damage costs homeowners thought they rightfully assigned to the state.

While national jurisprudence holds that pre-loss anti-assignment clauses are valid in favor of contract law and public policy, anti-assignment clauses related to post-loss assignments are held to be invalid. The reasoning behind this difference primarily lies with public policy considerations. A pre-loss assignment, for example, may increase the risk beyond the point that the insurance company had originally contracted for and with a party the insurance company had not originally contracted with. A post-loss assignment, on the other hand, simply assigns an accrued right to payment after a loss has already occurred. There is no change in risk as the loss has already occurred, and since payment is to be made it matters none to whom the payment is made.
The Supreme Court of Louisiana holds that such public policy concerns are better suited for the legislature. However, the Court does state that clauses prohibiting post-loss assignment must be written in clear and unambiguous language. If the language in the policy contract is unclear, then, in accordance with laws regarding contracts of adhesion, the language will be construed against the insurance company and in favor of the insured. If you have entered into a contract with an insurance company and are looking to assign your rights under the policy to a third party, turn to the language in the contract itself. Though there is not specific set of words or test used to determine “clear and unambiguous,” your own judgment is a good starting point in determining whether or not you have the right to assignment.

Though your own judgment is an excellent place to start, insurance law is very complicated and is best suited for a practicing attorney.

Hurricane Damage at New Orleans Apartment Leads to Dispute Over Insurance Coverage Calculation

Published on: August 22, 2011 | By Berniard Law Firm

Insurance policies routinely include provisions that are intended to limit the scope of the insurer’s coverage in the event of a claim by the policyholder. For instance, most homeowner’s insurance policies exclude coverage for fire damage that results from the policyholder’s deliberate arson. Commercial premises insurance policies, which commonly also include coverage for loss of business income, can carry similar limitations. The recent case of Berk-Cohen Associates, L.L.C. v. Landmark American Insurance Company in the U.S. Court of Appeals for the Fifth Circuit provides an instructive example of how insurance policies are “construed using the general rules of interpretation of contracts” by the courts.

Berk-Cohen Associates, L.L.C., as the owner of the Forest Isle Apartments in New Orleans, maintained an insurance policy to cover the complex with the Landmark American Insurance Company. The policy covered property damage but specifically did not cover losses at Forest Isle “caused directly or indirectly by Flood.” In the case of a covered cause of loss, such as wind damage or fire, the policy insured Berk-Cohen against both the property damage and the resulting lost business income. However, the scope of the income protection excluded any income that would have been earned directly as a consequence of any “favorable business conditions caused by the impact of the Covered Cause of Loss on customers or on other businesses.” In other words, Berk-Cohen could not profit by a widespread calamity that was also the source of a property damage claims. Forest Isle suffered a series of misfortunes, including a tornado, a vehicle strike, and–most significant–damage from Hurricane Katrina. Following the hurricane, Landmark compensated Berk-Cohen for damages caused by wind but not flood. Concerning Berk-Cohen’s claim for lost business income, Landmark argued that it was not responsible for the increased rents that resulted from the extensive flooding around the city because flood damage was excluded from the policy. Accordingly, Landmark “declined to increase its calculation of lost business income to the extent that any foregone income arose from flooding.” Berk-Cohen initiated litigation and, following a bench trial, the district court held that, notwithstanding the flood damage exclusion in the policy, Landmark should have considered the business conditions attributable to flooding in other buildings when computing the business income that Berk-Cohen lost as a result of the wind damage to Forest Isle. On appeal, the Fifth Circuit upheld the district court’s opinion. It noted that the “Covered Cause of Loss” that gave rise to Berk-Choen’s property damage claim was wind. Consequently, the policy language prohibited Berk-Cohen from recovering for lost business income as a result of wind damage suffered by customers or other competing businesses. But, “any increase in customers’ demand or reduction in competitors’ supply due to flooding at other properties is a permissible factor in calculating lost business income.” (Emphasis supplied.) The court refused to permit Landmark to exclude coverage for flood damage by the policy language while at the same time invoking the same source of damage to reduce Berk-Cohen’s business income recovery. To do so would “extend[] the flood exclusion beyond its function,” since the policy specifically permits the income calculation to consider “favorable business conditions.” Accordingly, the court “decline[d] to use a limitation on coverage”–that is, flooding–“to alter the calculation of damages for a covered loss”–the lost income. The Fifth Circuit concluded that the “policy … excludes coverage for flood damages at the Forest Isle property. The flood exclusion does not, however, prevent Berk-Cohen from recovering lost business income due to the favorable business conditions arising from flood damage to other buildings.”

This case demonstrates that applying the “normal cannons of contract interpretation” can work to the benefit of the insured. As with any contract, the insurance company is bound by the plain meaning of the policy language, even if it means that excluding coverage for one claim will open the door to liability for another. The lesson here is that a knowledgeable and experienced attorney is invaluable to anyone who is involved in a dispute over insurance coverage.

Louisiana Supreme Court Settles Circuit Dispute Over Insurance Policy Renewal Issue

Published on: July 6, 2011 | By Berniard Law Firm

In a prior post, we reviewed the Johnson v. Louisiana Farm Bureau Casualty Insurance Co. case. The case concerned the undelivered notice from Farm Bureau to Janice Johnson that the company would not renew her homeowner’s insurance policy. The case centered around the state law that requires notice of the intent not to renew:

“An insurer that has issued a policy of homeowner’s insurance shall not fail to renew the policy unless it has mailed or delivered to the named insured, at the address shown in the policy, written notice of its intention not to renew. The notice of nonrenewal shall be mailed or delivered at least thirty days before the expiration date of the policy.” La. R.S. 22:1335, formerly La.R.S. 22:636.6.

In the Johnson case, the Third Circuit interpreted the “mailing or delivery” requirement to mean that the notice must actually be received by the homeowner. During the trial, the jury found that Farm Bureau had properly mailed the notice. But Johnson’s testimony that she always opened every piece of mail she received (except for bank statements) convinced the jury that she had not, in fact, received Farm Bureau’s letter. Since the Third Circuit regarded the conclusion about delivery to be a matter of “the credibility of the witnesses,” and could not find “manifest error in the jury’s credibility determination nor in their determination that the notice of non-renewal was not delivered,” it affirmed the trial court’s award of damages to Johnson.

Farm Bureau appealed this decision, which so happened to contrast directly with a recent decision from the Fourth Circuit. The Fourth Circuit case, which featured very similar facts, reached the following conclusion:

“[t]he mailing of a notice of nonrenewal to the insured’s address, as listed on the policy, at least thirty days before the expiration of the policy satisfies the burden placed upon the insurer.” Collins v. State Farm (La.App. 4 Cir. 1/26/11).

The Louisiana Supreme Court sided with the Fourth Circuit, finding that “the key is that the statute requires only mailing, not proof of receipt.” Because “the plain language of the statute requires only that such notice be mailed,” in the court’s view “any evidence of non-delivery is relevant only as far as it is evidence of non-mailing or improper mailing.” The court determined that the jury’s fact-finding duty extended no farther than determining that Farm Bureau had properly mailed the notice, which was “all that [Farm Bureau] was required to do under [the statute] in order to give notice of nonrenewal of [Johnson’s] insurance policy.” Accordingly, the Supreme Court reversed the Third Circuit and declared that “Farm Bureau did not provide homeowner’s coverage to [Johnson] at the time of the loss.” As a result, Johnson was denied the $296,500 payment she expected from Farm Bureau.

The purpose of the nonrenewal notice is to provide an insured homeowner sufficient time to obtain new insurance with another company before the existing policy expires. While the law placed a specific burden on insurance companies to send such a notice, customers in Louisiana are now clearly warned that the failed delivery of a properly mailed notice will not obligate an insurer to extend coverage, even if the consequences are catastrophic to the homeowner.

Insurance Policies and How They Affect Recovery After a Hurricane or Disaster

Published on: July 1, 2011 | By Berniard Law Firm

Nearly six years after Hurricane Katrina struck, Louisiana residents are still dealing with the traumatic and costly effects of the storm. The American Red Cross estimates that approximately 275,000 Louisiana homes were destroyed by the storm and thousands more were damaged. Even those homeowners with insurance can find the recovery of damages to be a difficult and definitely expensive process. This financial burden, regardless of the supposed
Many homeowners filing claims for damages were in for a nasty surprise: the “Named Storm Deductible.” Under Louisiana law, insurance companies can implement deductibles of as much as 5% of the value of the insured property for damage caused by “named storms,” including tropical storms and hurricanes such as Hurricane Gustav or Hurricane Katrina. Frequently these provisions have not appeared on the original policies, but were added during a policy renewal, meaning homeowners are unaware of its existence or don’t understand its implications.

Under a Named Storm Deductible of 5%, for example, damage caused to a home with an insured value of $100,000 would cost the homeowners a deductible of $5,000, rather than the standard $500 or $1,000 deductible ordinarily applied to such losses. Litigation arguing against and interpreting these deductibles can be complicated and frustrating.

Homeowners Mary Williams, Michael Manint, and Susan Manint ran into this problem firsthand when recovering from damage caused to their homes by Hurricane Katrina. While their policy from Republic Fire and Casualty Insurance Company includes a Named Storm Deductible of five percent (5%), it does not specifically designate what the 5% is to be taken from: the damage amount or the dwelling coverage limit. One year, when renewing their homeowners insurance, Republic sent them an Important Policyholder Notice explaining the application of the Named Storm Deductible. The Notice included an example of the Named Storm Deductible which showed that the deductible would be 5% of the dwelling coverage limit. This distinction, however, did not actually appear within the provisions of their policies.

After Hurricane Katrina struck Louisiana, Republic determined that Ms. Williams and the Manints would have to pay deductibles of $7,320 and $4,445, respectively, which were 5% of their dwelling coverage limits. Both homeowners, however, had expected to have to pay only 5% of the covered loss, which would have amounted to costs under $1,000.

Both homeowners filed suit against Republic, asserting that the company had miscalculated the Named Storm Deductible. They argued this on the theory that the Important Policyholder Notice, which showed that the 5% was to be taken from the dwelling coverage limit, could not be considered when interpreting the Named Storm Deductible. The district court however, disagreed and ruled in favor of Republic, confirming that the deductible had been calculated correctly.

On appeal, the court affirmed the district court’s ruling. Under Louisiana law, because the Important Policyholder Notice was physically attached to the renewal policies, it was made a part of them as well. This meant that the Notice’s interpretation showing that the 5% was to be taken from the dwelling coverage limit was part of the policy and thus enforceable against the homeowners.

If you find yourself in a similar predicament, consulting with a legal expert may be your best chance in receiving the justice you deserve.

Dispute Over Hurricane Katrina Home Repair Shows Role of Appraisal Process in Insurance Settlements.

Published on: June 18, 2011 | By Berniard Law Firm

If a homeowner insures his home and then suffers damage to the structure, the process of making a claim and being paid for the loss can be long and frustrating. Frequently, the insurance company will arrive at its value of the loss and attempt to persuade the homeowner to accept that value, even if it doesn’t reflect the homeowner’s actual costs of repair. In such a case, the homeowner should check his policy for an “appraisal clause.” This provision provides for an alternative method for setting the value of the property damage. An appraisal procedure requires the homeowner to obtain an independent appraiser to survey the damage and assign a value to the loss. Similarly, the insurance company must hire an independent appraiser to perform the same analysis. The two appraisers must petition the court for the appointment of an umpire who will then oversee the negotiation of the settlement based on the two appraisals. Once any two of the parties–the appraisers and/or the umpire–agree as to the value of the loss, the matter is settled.

In Louisiana, like other states, flood insurance policies are underwritten through the National Flood Insurance Program (NFIP) and administered by the Federal Emergency Management Agency (FEMA). The NFIP authorizes private insurance companies to issue policies and handle the claim settlement process. Claims are actually paid by the federal government. FEMA requires that all NFIP flood insurance policies include an appraisal clause.

After their was heavily damaged by flood in Hurricane Katrina, William and Cynthia Dwyer filed a claim with their flood insurer, Fidelity National Property and Casualty Insurance Company. The Fidelity policy was issued through the NFIP. The Dwyers disagreed with Fidelity’s offer of settlement and took the dispute to the District Court for the Eastern District of Louisiana. The court entered judgment for the Dwyers, and on appeal by Fidelity, the Fifth Circuit Court of Appeals vacated the judgment and ordered the parties to submit to the appraisal process as outlined in the policy. The Dwyers and Fidelity sought appointment of an umpire, who then submitted to the district court an appraisal that included the amount of actual damage to the Dwyer home as well as a “mark-up for overhead and profit” intended to cover the cost of a general contractor to make the repairs. Fidelity accepted the umpire’s figure on damages but objected to the addition of the mark-up because the Dwyers had already sold the house and would not have any role in the repair itself. The Fifth Circuit agreed with Fidelity that “the award of overhead and profit was erroneous” and noted that “Fidelity told the district court that absent the improper award of overhead and profit, it agreed with the umpire’s appraisal.” Thus, determining that Fidelity and the umpire were in agreement on the amount of the loss, the court entered judgment ordering Fidelity to pay the Dwyers $1,552.51. This amount represented the umpire’s appraisal amount less the erroneous overhead and profit, the policy deductible, and the amount Fidelity had already paid out to the Dwyers.

The appraisal process seeks to take the potentially emotional settlement of an insurance claim out of the hands of the homeowner and the insurance company and leave the decision to disinterested, expert third parties who have no connection to the outcome. Although the process is generally more cost-effective and expedient than litigation, a homeowner should consult with an experienced attorney to ensure the procedure is properly followed and his rights are protected.