State Farm, homeowners settle Katrina case in Mississippi state court

State Farm and homeowners Ray and Marie Van Meerten, in what is said to be the first Katrina case in Mississippi state court to go to trial, settled last week before a jury verdict was returned.  As usual, terms were undisclosed.  This case featured an interesting bit of testimony by a State Farm claims adjuster.  Read this excerpt from an excellent story by Anita Lee of the Sun Herald:

A great fuss has been made over State Farm’s wind-water protocol and whether the company circulated it through the ranks to wrongly deny or minimize Hurricane Katrina claims.

But one catastrophe team leader, who managed adjusters for the company, said she’d never heard of the protocol, much less seen it.

Circuit Judge Steve Simpson questioned team leader Sharon L. Collins out of the jury’s presence to make sure, but she stuck to her statement. Collins said she deployed short term to the Coast after Katrina and worked here as a team leader for 60 days.

The protocol says when wind acts concurrently with flooding to cause damage, there is no coverage under State Farm policies. "In this storm, they didn’t act at the same time," Collins said. "I’ve never had claims where they acted concurrently."

She was asked if wind-driven rain soaked a couch and it was flooded, would the loss be covered. "Yeah," she said, "I guess it could be."

She was later shown a State Farm operations guide that said if an excluded peril, in this case water, caused or simply contributed to the loss – regardless of the sequence of events – "coverage will not apply to any portion of the loss."

"I don’t remember reading this before," said Collins. "I don’t have these memorized. I learned to look for coverage, so if I could prove there was wind damage to the couch, I would pay for it."

Although the central point of this excerpt is that Collins said he hadn’t heard of the fabled State Farm wind-water protocol, frequently cited by policyholder attorneys as evidence of the insurer’s determination to deny even legitimate wind claims, I found the last four paragraphs more interesting.  This is exactly what I’ve been saying for many months — in almost every Katrina case, anti-concurrent cause language is not implicated because wind and water acted as separate causes of distinct damage.  Therefore I don’t see any contradiction between the State Farm operations guide cited and Collins’ testimony — the State Farm anti-concurrent language says that flood damage will not be covered regardless of whether it occurred concurrently or in sequence with covered damage.  It does not say that covered damage will not be covered regardless of whether it occurred concurrently or in sequence with uncovered damage.

The example of the couch, then, is entirely right, as was Collins assessment of adjusting the damage.  Merely because flood later damaged property that had been damaged previously by a covered force does not mean the prior damage and the wind loss failed to happen. 

The trouble many people have in understanding anti-concurrent language is more because of its name than the actual theory behind it — it sounds as if it concerns things that take place close in time or at the same time, but this is not necessarily so.  Take one of the landmark cases on concurrent cause theory, Partridge v. State Farm, California Supreme Court, 1973.  In that case, two negligent acts — filing a gun mechanism to create a hair trigger and careless driving over bumpy ground — combined to cause the gun to go off and shoot a passenger.  The acts themselves took place a considerable span of time apart.  However, the harm that occurred would not have happened unless each act took place.  Those truly are concurrent causes, in that they combined to create one harm.  Say rain inundates a couch, effectively ruining it, then two seconds later flood comes along and covers it.  If you could prove what happened, the rain and flood are not concurrent causes of the couch’s damage.  It was already destroyed by a covered cause when the flood came along.  Say the couch was only 50 percent ruined by the rain.  That 50 percent was not caused concurrently by flood and is covered. The other 50 percent is not.

The "in sequence" language also is a hang-up to many, but in the couch example, the damage is not sequential as that term is used in this context.  Sequential causes are where one cause starts another in motion, like dominoes: for example, a lightning strike causes an earth slide.  The causal relationship is dependent — one thing leads to another.  In the couch example, the rain did not cause the flood.

If you want to read more, here is a story by Lee about the settlement of the case, and here is a story from earlier in the week about the trial


Filed under First Party Insurance

2 Responses to State Farm, homeowners settle Katrina case in Mississippi state court

  1. Daughter for Justice

    David a point that is always overlooked when discussing State Farms Wind-water Protocol is that the document switched the burden of proof from the insurer to the insured. State farm said it would pay for damage if the evidence was discernable. Testimony during trial in Broussard , State Farm’s spokesmen Terry Blalock was asked, what is State Farms definition of discernable? his answer was an EYE WITTNESS to the damage. That answers why all evidence that was given to State Farm by the Broussards after the storm was ignored. Is it not disturbing to know State Farm asked their insured to produce a type of evidence they themselves could not produce in denying the claim? Thanks again David for keeping Katrina litigation information coming.

  2. I’m not sure this protocol really amounts to switching burdens of proof. If you know a flood came along that would have destroyed anything in its path, saying the insured is entitled in every circumstance to a presumption that wind damage caused the destruction is a stretch, in my opinion. To me it’s more of an issue of the quality of the proof — if you assert a flood exclusion, you have to show proof that the likelihood is that X percent of the destruction was caused by flood. To overcome that likelihood, the insured can offer other proof that shows X percentage of the damage was in fact caused by wind. I can see your point if there was a firestorm sweeping a city, for example, and then the insurance company denies coverage, saying the insured’s building actually burned down because the insured torched it, instead of taking a chance that the firestorm might miss it. There, you would have an example where the most likely explanation and the majority of the proof points to the covered cause of loss, and you would need a great deal of proof to overcome that.
    I don’t want to discount your point, but I don’t get very wrapped up in this issue of who has the burden of proof in insurance cases. There is something to this, but as an attorney I don’t want to focus on it at the cost of losing sight of finding my own proof. The insurance company’s burden of proving an exclusion is probably more significant as just a legal question — is it worded unambiguously, and does it expressly exclude the harm or liability. When it just comes down to facts, where the facts fall, as opposed to a question of legal interpretation of policy language, I don’t place a lot of credence on burdens of proof. As I say, they exist, but in a civil case, the burden is only more likely than not, or 50.0000001 percent, so I wouldn’t bet the ranch on being saved by the other side’s burden.