Katrina Victims Claim Victory in State Supreme Court

File Photo

Unable to prove whether wind or water destroyed their homes, many policy holders settled claims for fractions of their home values.

by Adam Lynch
October 9, 2009

The Mississippi Supreme Court ruled on a two-year-old court case related to Hurricane Katrina yesterday, opining that insurance companies could not refuse coverage for wind damage on the Long Beach home of Margaret and Magruder Corban, even if the same section was later destroyed by water damage not covered in the insurance policy.

In 2006, the Corbans learned that United Services Automobile Association would not pay out on their homeowner's insurance policy to cover the lower section of their multi-story home. The company attributed all damage on the first floor to flooding and wave wash—water damage—not covered by the policy. USAA attributed none of the first-floor damage to wind, limiting the Corban's payment to replacement of the roof and some paint repair on the main house, the roof of a cottage on the property, and for power washing and a "repair allowance" on a nearby gazebo and potting shed.

The Corbans hired experts who disputed the company's assessment, contending that wind destroyed the home and the other structures before the arrival of the storm surge.

The Supreme Court decided that the lower court did not err in ruling that storm surge should be included in the insurance policy's water damage exclusion, but the justices said the circuit court did err in applying the storm-surge clause in the Corban case, so long as a jury could determine that wind damage occurred before the storm surge arrived. The Supreme Court then remanded the decision back to the lower for a future jury decision.

"[The lower court decision] ... is affirmed in part and reversed in part, and this case is remanded for further proceedings consistent with this opinion. Moreover, as there are questions of fact for jury resolution, we set forth the burden of proof borne by each party under (listed) coverages," the court concluded.

Yesterday's decision puts the burden of proof on the insurance company to show when water caused the damage, relieving them from liability, instead of the Corbans having to prove it did not, an impossibility when what's left is a slab.

Mississippi Attorney General Jim Hood has represented Mississippi Katrina victims like the Corbans against insurance companies who have attempted to pull coverage over the wind versus water dispute.

Hood argued in his 2006 lawsuit against State Farm that the company had "unlawfully put the burden of proving wind damage over water damage upon the policyholders, when it should rightfully have been the company's burden to prove their own argument."

The decision comes too late for many Katrina victims unable to pursue suits against their insurance companies.

"The Corban victory is 'bittersweet' because thousands of Gulf Coast residents whose homes were destroyed by Katrina have been forced by economic circumstances to settle their insurance claims over the past four years under an erroneous interpretation of the law," wrote Richard "Flip" Phillips, the Corban's attorney, in a release. "Thousands of honest, hard-working homeowners, who prudently purchased all risk homeowners policies, have settled their claims for fractions of the amounts due under the contracts of insurance. This opinion is of tremendous importance, however, to victims of future disasters both in Mississippi and throughout the nation. Today's opinion by a unanimous, 9-0, court is based on solid precedent and application of long established rules of insurance contract construction that apply in every state. It is impossible to overstate the significance of today's opinion by the Mississippi Supreme Court.

Officials with USAA could not be immediately reached for comment. However USAA spokesman Paul Berry told The Sun Herald that the company is "pleased" with the court's ruling.

"The court confirmed USAA's approach to handling Katrina claims in Mississippi is correct," Berry told the paper. "Although other insurers may have taken different approaches, USAA has always paid for damage solely caused by wind. We are also pleased the court confirmed USAA's position, and decades of insurance law, that damage caused by storm surge is not covered."

posted by justjess on 10/12/09 at 08:42 AM