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State Farm's loss is storm victims' gain

For homeowners along the Mississippi Gulf Coast whose homes were devastated by Hurricane Katrina, Thursday was a very good day.

For more than a year, insurance companies have been unfairly shortchanging these homeowners by refusing to pay for damage that was caused by a combination of wind and flooding. Private insurers are typically responsible for a home's wind damage but not damage caused by flooding. Insurers claim that policies with "concurrent cause" language don't cover damage that could have been caused by a combination of insured and noninsured factors.

Some insurers have refused to pay claims if there is any damage to the home that can be attributed to flooding. This pinched reading of insurance coverage has led to thousands of lawsuits, including one by Norman and Genevieve Broussard, which was decided on Thursday in a federal district court in Gulfport, Miss.

The Broussards sued State Farm insurance after it refused to pay when their Biloxi home was destroyed by Katrina's winds and subsequent storm surge from the Gulf of Mexico. The Broussards said that a tornado had pushed their home off its foundation and broke it apart and that the floodwaters had simply moved around the debris.

State Farm claimed that the damage to the home primarily was caused by the storm surge but admitted that some of damage was attributable to wind. Still, it paid the Broussards nothing on their $223,000 policy.

U.S. District Judge L.T. Senter Jr. found State Farm's position so legally wanting that he took the case out of the hands of the jury and ruled against the company before handing the case back to the jury for a determination on punitive damages. The judge said that there was no legal basis for the insurer refusing to pay the homeowners' claim.

Senter also put the burden on the insurance company to provide detailed proof to bolster its assertion that water and not wind caused the damage. Since State Farm failed to make that showing, Senter awarded the Broussards the limits of their policy. A few hours later a jury unanimously awarded the Broussards $2.5-million in punitive damages.

It is unclear how or if this case will have implications for Florida's already difficult insurance environment. If the ruling stands - and State Farm already has said it will be appealed - private insurers might be even less likely to return to writing policies along our state's coastline.

Nonetheless, the judge's ruling is a fair one. Insurance companies should be required to make scientifically valid assessments about the causes of storm damage before a homeowner is denied coverage. The burden of proof should be squarely on the company. Otherwise, any hurricane accompanied by a flooding event would provide a loophole to insurers to deny worthy claims.

[Last modified January 16, 2007, 00:59:02]