There is good news and bad news for thousands of homeowners along the Mississippi Gulf Coast who have filed lawsuits against insurance companies over failure to pay claims after Hurricane Katrina. Recently U.S. District Court Judge L.T. Senter Jr. delayed six trials over insurance damage that were set to start in early 2007. But he also indicated that he would be willing to consider consolidating some of the cases in the future.
More than 1,000 lawsuits have been filed in federal court over the wind vs. flood insurance debate. Many homeowners have filed lawsuits claiming they should have been paid for wind damages, but were denied claims by insurance companies who attributed the damage to flooding, not wind. Flood damages are not covered by a regular homeowner’s insurance policy and, instead, flood insurance must be purchased separately from the federal government’s National Flood Insurance Program.
If each case were tried individually, it could create a major logjam in the federal court, and possibly would be many years before all the cases could come to trial. Plaintiff lawyers recently objected to a U.S. magistrate judge’s order that more than 600 individually joined plaintiffs might require severance (separate trials).
The magistrate concluded that the plaintiffs should be required to file separate complaints corresponding to individual parcels of damaged property.
Judge Senter said that the plaintiffs’ argument for joining the cases together is simplistic: the common occurrences of Hurricane Katrina, the damage it wrought and the denial of insurance coverage.
“They make the broad claim that the Court and the parties will realistically only be able to try 10 to 15 cases a year if severance occurs,” Senter wrote in an order filed in the case of Dr. Wesley McFarland, et. al. vs. State Farm & Casualty Company and unknown defendants. “…this court is convinced that through various means it is construing and administering the Federal Rules of Civil Procedure to secure the just, speedy and inexpensive determination of every action. For example, the Court recently concluded a successful pilot mediation program, and is embarking on an expanded next round.”
Senter said that aside from the obvious benefit of reaching agreed settlements in a promising number of cases, some common issues are being identified, including but not limited to the interaction between flood policies and homeowner policies that cover property at a single location.
That same issue, which has not been formally presented to the Court, may apply to certain plaintiffs named in this action.
The Court said there are choices for managing potentially difficult or protracted actions that may involve complex issues, multiple parties, difficult legal questions or unusual proof problems.
The order issued in late October said: “Lumping a large number of plaintiffs who are not similarly situated (but for Hurricane Katrina, some kind of damage and at least one common insurance carrier) in one case is not the appropriate answer; neither is objecting to some kind of consolidation. With real cooperation from all counsel (which the Court expects) and not just efforts to goad or oppose petitions for their own sake (which is truly counter-productive) common questions of law or fact which may exist in separate cases are surely identifiable, although the Court will not venture a guess as to any of them for fear of limiting substantive analysis or fact-based imagination.”
The recent order covered lawsuits filed by the Scruggs Katrina Group, which wanted to consolidate into three trials their lawsuits on behalf of 691 policyholders from State Farm, 310 policyholders from Allstate and 244 policyholders from Nationwide.
State Farm asked that the trial for Wesley McFarland v. State Farm be delayed from the original date of January 29, 2007, after the lawsuit was amended to accuse State Farm of a companywide scheme to defraud policyholders. State Farm has denied the charge.
In other recent action regarding the Katrina insurance lawsuits, Mississippi Attorney General (AG) Jim Hood has filed court action asking that a civil lawsuit filed in Alabama against two State Farm whistle-blowers be suspended until the AG’s Office completes a criminal investigation into the way insurance companies have handled post-Katrina insurance claims.
Two sisters from Ocean Springs, Cori and Kerri Rigsby, have been sued by their former employer based in Alabama, E.A. Renfroe & Co., to stop releasing confidential information and return paperwork belonging to their previous employer.
The sisters, who worked as insurance adjusters for the company that had contracts with State Farm and other insurers, have alleged that a State Farm manager ordered engineering reports changed to minimize or deny policyholder claims.
State Farm has denied the allegation, and says it only used engineering reports in less than 2% of cases in Mississippi. The sisters gave company documents to the AG’s office. State Farm has said the Rigsbys agreed to keep company records confidential.
The AG’s office has said the civil case should be suspended because it would interfere with a criminal investigation.
In another disaster insurance case in Oklahoma decided in May of this year, a jury found that State Farm acted with malice and “recklessly disregarded” dealing fairly with policyholders when it used Renfroe as a claims adjuster after a 1999 tornado. An estimated 11,000 State Farm policyholders could be affected by the court judgment regarding claims from the massive tornado.
A federal grand jury in Jackson has ordered a transcript of the Oklahoma court case that resulted in $13 million in damages against State Farm.
Contact MBJ contributing writer Becky Gillette at firstname.lastname@example.org.