Monday, January 15, 2007

Katrina Case a Victory for all Consumers

Big Business loves to blame individual victims for "frivilous" lawsuits clogging the courts.
Panera Bread's lawsuit contending that a burrito is really a sandwich remind us that it's more often big business that is responsible for clogging our courts with frivolity.

One of the outrages following Hurricane Katrina (atop the failure of the federal government to plan, prepare for, and execute a response to the long-awaited storm) was that consumers were forced to go to court to collect from their own insurance companies. Insurers claimed that Hurricane Katrina was in fact a Flood Katrina, and floods were not covered by their policy.

On Thursday, consumers scored a major victory against State Farm Insurance, when a federal judge ordered $223,292 in economic damages and a jury ordered $2.5 million in punative damages to a Mississippi couple whose home was wiped out by the storm. Of course, the normally litigation-hating insurance company is planning on dragging out the case and delaying justice by filing an appeal. Still, the case could have implications for thousands of other State Farm policyholders wiped out by Katrina:

The Broussards' case isn't directly involved in recent settlement talks between State Farm Fire & Casualty Co., Mississippi Attorney General Jim Hood and policyholders' lawyers.

People with direct knowledge of the settlement talks told the Associated Press this week that State Farm, Mississippi's largest home insurer, is considering paying hundreds of millions of dollars to settle more than 600 lawsuits and resolve thousands of other disputed claims.

Richard "Dickie" Scruggs, an attorney who represents 639 State Farm policyholders in the settlement talks, said he doesn't know how the judge's ruling on Thursday will affect the negotiations.

Randy Maniloff, a Philadelphia-based lawyer who represents insurers and has closely followed the Katrina litigation, said Senter's ruling is a "huge verdict" for homeowners even if the jury didn't award punitive damages.

"That settlement is looking awfully good for State Farm now," he added.

Hood, a Democrat, called the refusal of insurers to pay claims, and efforts to coerce policyholders into signing forms stating damages were caused by flooding (or their payments will be withheld) "contrary to public policy" and "unconscionable." In addition to State Farm Fire and Casualty Co., Hood has also named Nationwide Mutual Insurance Co. and Allstate Property and Casualty Insurance Co. in the suit. That's right, the "Good Hands" people.

The case is the most recent reminder for consumers everywhere that the insurance industry's long-running p.r. campaign against plaintiffs' attorneys is built on a foundation of sand, mud and muck. Insurance companies are the ultimate "fair weather friends"; they love us as long as we're paying our premiums, but when we come to collect on our coverage, they're nowhere to be found.

Meanwhile, recent cases like the Vioxx-caused death of a triathelete and aerobics instructor remind us that trial lawyers are easy to hate until you need one.

13 comments:

Anonymous,  12:42 PM  

A jury deciding a case against an insurance company?

Sure -- That's fair. Insurance companies are really popular. They always get a fair shake. Juries don't have any biases there.

And $2.5 million in punitives?

This lawsuit is Example A for why we need tort reform.

Rich Miller 1:05 PM  

Skeeter, without taking a position on the topic at hand, is it your position that juries be barred from making any decisions in cases filed by or against classes, groups, etc. that claim to be unpopular with the populous at large? That's an awful big list.

Anonymous,  1:31 PM  

With regard to the insurnance company:

Typically judges decide on contract interpretations. That's the general rule most places. In most states, it is thought that juries are very good at deciding between alternate testimony as to events (for example how fast a car was going in a civil trial) but juries are not very good at looking at detailed contracts to determine the interpretation.

In Illinois, those matters are almost always decided by the judge alone. I have a real problem with a jury trying to sort through a lengthy insurance policy to determine its intent.

This of course is aggravated by the fact that most juries believe that insurance companies should pay, whether or not the loss is covered. That is why in a civil trial there is always a motion to prevent any mention of insurance. As soon as a jury finds out that there is insurance money, the defendant/insurance company will lose.

Insurance companies are unique in that they are not just unpopular, but the common perception is that they should always pay. Doctors or cops or tobacco companies may not be popular, but no jury will look at a defendant doctor or cop and decide that it is the job of the doctor or cop to pay because it is the business of the doctor or cop to pay losses.

The bottom line: I have a real problem with a jury being asked to provide a verdict on the interpretation of an insurance policy. I don't see how it can end up with a fair result. The punatives hear show what the jury was thinking.

Anonymous,  3:21 PM  

Maybe if insurance companies stopped screwing people for profit, they would be a little less unpopular.

Yellow Dog Democrat 3:38 PM  

Skeeter -

1. This trial was in Mississippi, not Illinois.

2. It was in a federal court, which tends to favor insurance companies, not a state court.

3. The federal judge ordered the insurance company to pay economic damages because he found they failed to live up to their policy, so in fact, the judge did settle the contract issues.

4. The punative damages of $2.5 million awarded by the jury were only 10 times the economic damages.

5. In 2006 State Farm reported $59 billion in earnings. So these punative damages -- which are intended to deter future bad behavior -- amounted to .00423% of State Farm's earnings for 2006. That's equivalent to fining someone who makes $60,000 a year a whopping $2.54. I think portraying that as excessive is, well, excessive.

I love you man, but don't get all dogmatic on me. The insurance companies are compounding the tragedy of Katrina by failing to live up to their obligations. A hurricane is a hurricane, and when a hurricane blows a wall of water into your house, it's hurricane damage, just as if the hurricane had blown a tree into your house. It's sure as heck not a flood.

Anonymous,  4:02 PM  

YDD:

1. I understand that this was Mississippi. Nonetheless, the method for interpreting an insurance policy should be similar no matter what state you are operating in.

2. Federal courts may be generally more favorable to defendants, but I have not seen them as more favorable overall to insurers. In Chicago there is a big difference, but that is rare.

3. With regard to the decision: The jury made the decision as to the amount of punatives. You may be right on the decision on the merits (my understanding was that the judge was going to have the jury decide that, which on its face seems absolutely ridiculous).

4. How do you not get a random result on punatives? It is like the death penalty -- you just can't get a fair result. Is each claim now worth $2.5 million? How does that $2.5 million relate to anything, other than the fact that people in Mississippi don't like insurers (and I believe that was pretty well established before this case).

I have to tell you that when I looked a that policy, I thought there was a real issue. It was by no means clear cut. What is clear cut is that jurors always want the insurer to pay, no matter whether the policy provides coverage or not.

Anonymous,  4:03 PM  

The last post was by Skeeter. Sorry for not attaching the name.

Anonymous,  4:15 PM  

Jaded said...
Maybe if insurance companies stopped screwing people for profit, they would be a little less unpopular.

3:21 PM


Sounds like a juror in an insurance caes.

That person is Exhibit A in why juries should not decide these matter.

Unknown 4:18 PM  

The only part about the Constitution the conservatives like is the Right to bear arms. The rest of it they want to change. The part of a jury of your piers….

On Martin Luther King Day we have Trent Lott to remind us about Tort Reform:

Sometimes an issue doesn’t hit home until one’s home is hit. That appears to be the case for new Republican Senate Whip Senator Trent Lott (R-Miss.). The Senator’s Mississippi beachfront home was destroyed by Hurricane Katrina last year, and he’s been fighting with State Farm, his home insurance company, ever since. State Farm has refused to pay for damage to Lott’s house, so Lott has joined legions of other Katrina victims who are in the same boat. He has sued his insurance company.

SENATOR TRENT LOTT ON TORT REFORM:
"You know, obviously we should [enact tort reform]...Someday it will happen, and the sooner the better." - 1/24/01
"The Democrats seem to think that the answer is a lawsuit. Sue everybody." - 7/20/01
"It's sue, sue, sue... That's not the answer."- 8/4/01
"I'm among many Mississippi citizens who believe tort reform is needed."- 5/8/02
"If their answer to everything is more lawsuits, then yes, that's a problem, because I certainly don't support that." - 8/2/02
Senator Lott found out about how insurance companies treat their customers the hard way. When his $400,000 beach house in Mississippi was wiped out in Hurricane Katrina, he presented his claim to State Farm. When State Farm denied the claim, Senator Lott decided that “…sue, sue, sue” in fact WAS the answer.

Anonymous,  4:28 PM  

Skeeter,
I'll tell you what I am. I'm someone who sees record profits from insurance companies and then sees them refuse to pay claims in a hurricane ravaged area.

Most people who buy policies don't have a slew of overpaid attorneys to review their policy for all the contingenies and nuances that the company will use as soon as a claim is made. They just buy an insurance policy against hurricane damage to their most valuable possession and expect that when one of the worst hurricanes in U.S. history causes torrential rainfall and coastal flooding, their house will be covered by their policy. Man how dare they expect that.

If that makes me Exhibit A then so be it, but I won't lose any sleep over it.

Anonymous,  4:38 PM  

Jaded:

You summed it up exactly. I couldn't have done it any better.

You couldn't care less what the contract says. You just don't like insurance companies and think they should pay every loss.


In response to Milton:

You ought to read the rest of that document. You took about two words and missed all the ones about "preserved" and "common law."

Anonymous,  5:12 PM  

Jaded said...

"Skeeter,
I'll tell you what I am. I'm someone who sees record profits from insurance companies"

In response:

What in the world do the profits have to do with anything?

Are you some sort of Communist who wants to redistribute wealth?

I thought our courts were supposed to decide based upon applying the law to the facts. The idea is that rich and poor get the same fair shake.

Not when Jaded is involved though. Record profits? You lose.

JBP 8:44 PM  

"In 2006 State Farm reported $59 billion in earnings" defied basic accounting (and arithmetic).

State Farm is a business. Money comes in, money goes out. State Farm made $3.2 Billion in profit on $160 Billion in assets, or approximately 2% return.

Put another way, if State Farm dumped the Insurance business altogether, and just became an investment bank..they could have returned %4.75 to their shareholders at no risk. And in the meantime, they would not have to put up with YDD, Trent Lott, and a slew of miserable customers trying to get flood insurance that they did not pay for.

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