Judge Senter denies motion to dismiss in Buchanan v. State Farm Katrina case

Actually, it was a motion to dismiss or join the U.S. Small Business Administration as a party, and Senter denied both.  Here’s a pdf of his memorandum decision.  About six months after Hurricane Katrina, the plaintiffs, Mark and Deborah Buchanan, got a disaster loan from the Small Business Administration, secured by a trust deed on their property.  As part of the deal, the Buchanans assigned the proceeds of any recovery under their homeowners policy, which is required under federal law to avoid the use of emergency funds to duplicate compensation a borrower might receive. State Farm contended the assignment made the SBA the real party in interest. Judge Senter said no.  He drew a distinction between assignment rights under an insurance contract, which cannot be done without running afoul of a policy’s anti-assignment language, and assignment of the rights to proceeds under the contract. 

One thing about Judge Senter, he says what he thinks: he said he was "at a loss to understand" how the insurer could contend the plaintiffs no longer qualified as the real parties in interest.  State Farm, according to this story by Dow Jones NewsWires, said its intent was merely to clarify to whom any money would be owed so duplicate payments could be avoided.

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One Response to Judge Senter denies motion to dismiss in Buchanan v. State Farm Katrina case

  1. Brian Martin

    It should be noted that the SBA agreement only applies to any insurance proceeds for the structure and contents for which the loan would be duplicative. SBA does not get any additional living expenses, punitive damages, or any other insurance funds that would not duplicate the loan.
    State Farm’s lawyers cannot possibly believe their own argument. The homeowner is still the party with interest in the claim. Even if the money must repay the SBA loan, that still is to the benefit of the homeowner, not SBA.
    SBA gets its money either way. The homeowner either owes a debt or has the debt repaid for him. Since when is that not sufficient interest in the claim?