The complaint in this case, Hohan v. State Farm, is one that was filed just before Louisiana’s statute of limitations expired late last month. This case presents an interesting allegation: under a federal flood policy adjusted by the insurer through the Write Your Own program, State Farm paid Hohan some $86,000 while his neighbor received in excess of $162,000, although Hohan and his neighbor own adjoining halves of a double townhouse unit. Allegations are merely that — sometimes they turn out to be true, sometimes they turn out to be partially true, sometimes they turn out to be strangers to the actual facts. But what’s more interesting is the theory pleaded:
Pursuant to a directive issued by the director of the National Flood Insurance Program State Farm failed to treat the Plaintiff in the same manner as all other residents of the same geographic area, when it failed to tender the Plaintiff’s policy limits.
The complaint makes a claim for bad faith damages under Louisiana statutes. I haven’t seen this particular theory before, whether the damage payment was correct or not is one thing, but if your damage is different from someone else’s, is an insurer really required to pay you the same amount merely because that’s what your neighbor received?
I saw this Mike Kunzelman story recently about another case before the Fourth Circuit Court of Appeal in Louisiana. Like the U.S. Fifth Circuit in In Re Katrina Canal Breaches Litigation, the Louisiana Court of Appeals is considering a lower court ruling that said a flood exclusion was ambiguous in the context of man-caused flooding as opposed to "natural" flooding. Here’s an excerpt of the story:
Sher, who lived in one of the five units at his apartment complex, rode out the storm at home and blames much of the damage to his property on water from levee failures in Katrina’s aftermath.
Lafayette [Insurance Co.] paid Sher about $2,700 for wind damage, but he estimates his home sustained a total of $223,488 in damage that should be covered.
In March, a jury awarded Sher $369,077 for property damage and lost rent, plus $184,538 in penalties. Giarrusso also ordered Lafayette to pay $258,728 in attorney fees.
Lafayette says its policies cover damage from wind but not flood water. Water from a levee breach is clearly excluded from coverage, whether it’s a man-made event or an act of God, the company argues.
"No non-flood policy has ever been called on to cover flood damage,” Lafayette attorney Howard Kaplan told a five-judge panel of the 4th Circuit, which didn’t immediately rule on the company’s appeal.
Sher’s attorneys argue that water damage from a man-made event, such as a levee breach, aren’t specifically excluded from coverage under the company’s policies. The U.S. Army Corps of Engineers has conceded that the city’s levees were poorly designed and constructed.
James Garner, one of Sher’s attorneys, said Lafayette could have written policy language that specifically excluded damage from a levee breach from coverage, but didn’t. "They wrote the contract,” he said. "It’s their job to make it clear.”
Sher’s lawyers cite a ruling last November in New Orleans by U.S. District Judge Stanwood Duval Jr., who sided with policyholders against several insurance companies and ruled that policy language excluding flood damage from coverage was ambiguous. But the 5th Circuit overturned Duval’s decision and ruled that water from a levee failure is a "flood” and is unambiguously excluded from coverage.
Lafayette attorney Ralph Hubbard said the issues raised in the federal appeal are virtually identical to those in Sher’s case.
"While you have your own road to follow, the 5th Circuit has given you a road map that will show you the right way,” Hubbard told the 4th Circuit panel.
The Fifth Circuit’s opinion in Canal Breaches was probably the best of the court’s recent Katrina decisions, but even in that case, as I noted at the time, the court misunderstood when a cause is independent of another cause. (Scroll down to the sixth paragraph).