State Farm fined $2.5 mil in punitive damages in Katrina suit

Hoo-ray! The insurance company lost the Katrina damages case!

http://news.yahoo.com/s/usatoday/20070125/cm_usatoday/crazyquiltinsurancesystemdelayskatrinarecovery

"Seventeen months after Katrina surged through coastal Mississippi, miles of waterfront are barren, and thousands of residents have been victimized twice. First by the hurricane. And then by a war over insurance.

The point of contention? Whether homes were destroyed by Katrina's brutal winds or its surging waters. As absurd as it may sound, private homeowners' policies typically cover wind damage, but not flood damage, even if the water was driven by hurricane-force winds.

Tuesday, some of the litigants called a truce. State Farm, the USA's largest home insurer, agreed to settle hundreds of homeowner lawsuits and reopen 35,000 previous insurance settlements, fronting $130 million to pay off claims.

That will help some people make decisions about whether, where and how to rebuild. But it doesn't apply to other insurers or other states - even neighboring Louisiana, where uncertainty over insurance claims has bogged down the rebuilding of storm-ravaged New Orleans. And it doesn't resolve the exasperating wind-or-water argument.

The flood exclusion has been standard in insurance policies since the late 1960s, when the federal flood insurance program was created. Homeowners in coastal areas are encouraged to carry that insurance, and the flood exclusion in their homeowners' policies usually is plainly spelled out.

But when houses are torn from their foundations, as in Katrina, the precise cause can be difficult to pinpoint, inviting dispute, delaying recovery and leaving people stranded in uncertainty - not to mention living in FEMA trailers. When there's reasonable doubt, insurers should bear the burden of proof and resolve claims in the homeowners' favor. On Jan. 11, a federal judge and jury in Mississippi drove home that point. The judge ordered State Farm to pay more than $230,000, the full policy limit, for a home lost to Katrina. Then, the jury slapped State Farm with $2.5 million in punitive damages."

Sorry... I can't celebrate with you...

If someone doesn't have the proper coverage, then they shouldn't be rewarded at the expense of others. This WILL come out of other policy holder's pockets by an increase in their rates.

If you cannot afford the proper coverage, then you shouldn't live where this can and most likely will occur.

I have home owner's insurance... I do not have flood or earthquake insurance (Californians... arent' we lucky?). I understand if the levee breaks and my home floods I'm not covered. I understand if an earthquake runs through my property I'll lose everthing... MY choice. I have no right to go after my home owner's policy and sue.

Why should these folks be the exclusion at our expense?

For the sake of argument I will speak up on this one. We live in Biloxi, Mississippi and we were living here when the hurricane hit, not by choice but because this is where the Air Force stationed my husband. From what I've learned by talking to homeowners in this area, many people were told they would not need flood insurance, especially if they did not live in a flood zone. I think we all make mistakes, and since the insurance companies were far more knowledgeable when it came to these policies it should have been their duty to inform their customers. Although it seems we are re-building faster here than Louisiana, this place is still a mess. Many people are unable to rebuild until they receive insurance money.

:twocents:

When I read the title, I thought State Farm was getting $2.5 million!
I'm glad the courts told them to pay up. I've seen enough Datelines/Primetimes/48 Hours to know State Farm wasn't even processing some claims. Their adjustors were told to 'deny, deny, deny'

It wasn't because these people didn't have insurance, they did. They had home owners, which covers wind damage from any source. State Farm was fighting them by saying that all the damage was done by water, which they don't cover under home owners insurance so they shouldn't have to pay for ANY damage.

Granted some of the damage could have been caused by water....but seriously 100+ mile an hour wind did the majority of it. A house can be swept away by water, but it's easier for it to get swept away if wind has blown it to bits.

In 1979 we were living in Mobile when Frederick hit. We had a house that was 4 blocks from the gulf. The hurricane only had 12 feet storm surge but had winds of over 145 mile an hour. Our house was gone...just gone. The foundation was there and that's it. The wind knocked it down, the water took it away. That's exactly what happened to many of the homes in Mississippi and Alabama with Katrina.

I'm glad that State Farm is forced to pay. Some of these people have paid the same premiums that the rest of us have for nigh on to 30 years. Yet when they needed it, State Farm did a big ol F U!

My husband has realtives on the NC coast. When Hazel hit they lost most of their home and the attached store. The insurance adjuster came by weeks later and was surveying the damage. He was telling them how it was water and not wind and they would not cover. Apparantly there was a thunderstorm in the area and a tornado was spawned, they had to run for cover and the rest of the house and business were taken care of by the tornado. After they came out of cover the great aunt looked at the insurance guy and just said "Well you can't tell me that was water damage"

Probably a mix of both....

I am sure that some claims were legitimately water caused.....others were wind damaged. No winners around on this one.

Cal

BhamMama, clean out your PM box, it is FULL UP.

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