Hurricane insurance bad faith lawsuits see dramatic surge
The bad faith hurricane insurance lawsuits have primarily been targeting major property insurance carriers.
There has been a striking upswing in hurricane insurance lawsuits targeting major property insurance carriers in Louisiana Western and Eastern District Courts. The surge comes ahead of the two-year anniversary of Hurricane Laura, a highly destructive Category 4 storm that hit the Pelican State in late August 2020.
On August 23, 2022, more than 100 cases were initiated against Fortune 500 insurance firms, including 66 against State Farm. The volume of cases filed on that date was over 1,000% higher than the typical daily average. Monitoring over the last few days has indicated that this trend will continue until the end of the month, after which many claims stemming from Hurricane Laura may become time-barred.
While the 112 claims filed on August 23 were filed against six major insurance carriers, they were mostly filed by the same law firm, McClenney Moseley & Associates, and mostly involved a similar set of facts and accusations.
According to the complaints, the majority of the cases stem from damages caused by first, Hurricane Laura, and 43 days later, Hurricane Delta, which was equally catastrophic and caused extensive additional damage to properties. While Delta was not quite as intense as Laura, the storm caused even more destruction to homeowners attempting to recover from one of the most powerful storms in the state’s history. The damage from Delta was arguably different from other hurricane damages as residents had not yet had the opportunity to mitigate damages.
Following the hurricanes, plaintiffs gave timely notice of and reported covered damages, losses, and claims to the insurers. The insurers conducted inspections of the properties. The inspections that the insurers performed of the plaintiffs’ properties and the corresponding adjustments of the covered losses were deficient, resulting in an estimate of damages that grossly misrepresented the nature, scope, and extent of the covered damages to the properties.
The complaints allege that the defendant insurers continued to unfairly and improperly delay action and deny payments owed under the policies, resulting in contract breaches and statutory violations and penalties under Louisiana Revised Statute § 22:1892, which requires insurers to “pay the amount of any claim due any insured within thirty days after receipt of satisfactory proof of loss from the insured,” And further, to “make a written offer to settle any property damage claim . . . within thirty days after receipt of satisfactory proofs of loss of that claim.”
Specifically, the complaints allege that the defendants breached statutory obligations by failing to pay the full amounts owed under the policies within 30 days of receiving satisfactory proof of the losses, and failing to make a written offer to settle the claims within 30 days of receiving satisfactory proof of the losses.
Additionally, state law imposes a general duty of “good faith and fair dealing” on property insurers issuing policies in the state, specifically requiring “an affirmative duty to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured.” The duty also includes an obligation not to misrepresent pertinent facts and an obligation to pay the full amount of any claim due to an insured within 60 days after receipt of satisfactory proof of loss.
The complaints allege that defendants are liable for all amounts owed under the policies that remain unpaid, plus an additional statutory penalty of “two times the damages sustained or five thousand dollars, whichever is greater.”If found in favor of the plaintiffs, these demands could amount to millions of dollars of liability for State Farm and other high-level insurers implicated in the suits; and the lawsuits continue to roll in at a shocking rate, and are expected to continue until the end of the month.
On August 24, 255 additional lawsuits were filed in Louisiana Western and Eastern District Courts on similar fact patterns.
Insurance Coverage Law Center editor’s note: Industry experts speculate that these claims may be surging now due to La. R.S. 22:868(B) which states in part that:
“No insurance contract delivered . . . in this state and covering subjects located, resident, or to be performed in this state, or any health and accident policy insuring a resident of this state regardless of where made or delivered, shall contain any condition, stipulation, or agreement limiting right of action against the insurer to a period of less than twenty-four months next after the inception of the loss when the claim is a first-party claim.”
Since August 27 marks the two-year anniversary of the landfall of Hurricane Laura, this is the last chance for some of these lawsuits to be filed as the statute of limitations runs from the date of the property loss and in the cases above, the initial property losses suffered from Hurricane Laura are the main subject of the suits.
The duty of “good faith and fair dealing” is one of the first principles taught to new insurance company adjusters; insureds and claimants must be dealt with fairly, and no company wants to be accused of, let alone be found guilty of, bad faith. Insurers take such claims seriously.
This is not the first time State Farm has been sued related to hurricane claims. The company was sued in 2006 regarding Hurricane Katrina losses and it was claimed that the company improperly attributed wind claims that it should have paid to storm surge, which would be paid by the federal government.
This trend was surfaced by our fantastic team at Law.com Radar, a source for high-speed legal news and litigation updates personalized to your practice. Law.com Radar publishes daily updates on just-filed federal cases like this one. Click here to get started and be the first to know about new suits in your region, practice area or client sector.
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