Mississippi Attorney General Jim Hood is attempting to leverage recent State Farm claim settlement activity in order to force the hand of other insurers who are facing criticism in the way they handled homeowners' claims stemming from Hurricane Katrina.
State Farm last week agreed to settle more than 600 disputed homeowners' claims in Mississippi after a verdict in Broussard v. State Farm found that there was insufficient evidence presented by the company to prove the loss was due to flooding only. The decision forced the company to pay the Broussards more than $220,000 for policy coverage and $2.5 million in compensatory and punitive damages.
According to a release from his office, Hood stated that although he viewed the class settlement as imperfect, he believed State Farm did the right thing in agreeing to settle litigation, and that it should set an example for other insurance companies to follow. Hood's statement also said that insurance companies made a mistake by not directly using the term "storm surge" in its policies, which he said contributes up to 80 percent of home damage for coastal properties.
"I respectfully request all policyholders and stockholders of Allstate, Nationwide, Mississippi Farm Bureau, and USAA to contact their insurers and ask them to be fair to our Mississippi Katrina victims," he said. "These companies should show the nation that they in fact are 'Good Hands People,' 'On Our Side,' 'Helping You,' and 'Know What It Means to Serve.' We do not need more litigation; we need reconciliation."
The pointed criticism drew a point-by-point defense from USAA in the form of a press release.
The company argued that storm surge is considered a flood by the U.S. government, and has been substantiated by past court rulings and verdicts. It noted that the National Flood Insurance Program, a government-sponsored program that supplies coverage for flooding, came into existence because of the flood exclusion found in most homeowners' policies.
USAA also defended its claim practices, noting that it does not handle its claims in the same manner as State Farm. It pointed out that State Farm reportedly denied claims if any part of the damage to a residence was deemed due to flooding. USAA said that its policy of paying for wind damage even if flood damage is present differentiates itself from alleged activity by State Farm.
In any case, it appears unlikely that the company will heed Hood's calls for settlement.
"USAA is proud of our service to [our] members who were affected by Hurricane Katrina," said the company, in a release. "[We] believe fairness requires that USAA continue to handle claims responsibly and to continue to work with members until the last Hurricane Katrina claim is closed. And, that is exactly what USAA intends to do."
Interested in more legal news and in-depth articles? Head over to Claims' legal channel for more information.
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