The upside of not getting a post on the Landry decision written as breaking news on Wednesday is not having to write a retraction later saying it wasn’t that clear-cut after all.
There’s no question in my mind that policy holders are not entitled to payment for loss that wasn’t covered by the policy they purchased. Consequently, after reading Rebecca Mowbray’s prelude to the decision, it seemed like the issue before the Court was fairly simple. The story published on-line after midnight Tuesday night and shortly after noon on Wednesday, Mowbray reported the Court had sided with the defendant, Louisiana Citizens Property Insurance Corporation and remanded the case to the trial court to be tried on the facts.
Mowbray published a more in-depth report about the ruling on Thursday and revealed the issue before the court was far from simple.
The high-profile case of Mark and Barbara Landry v. Louisiana Citizens, the first hurricane insurance case to hit the state Supreme Court, centered on a controversial statute known as the valued policy law, which requires insurers to pay the limits of the policy if a home is obliterated.
The 108-year-old law affixes the value of an insurance policy, so insurance companies cannot say the home is worth one amount when they calculate what to charge for the coverage, but then say it is worth a lower amount if they have to pay a claim if the house is destroyed.
In a narrow ruling, the state’s high court said the statute allows insurers to set a “different method” for computing losses. Because Citizens did so in its application for insurance coverage, the valued policy law does not apply to the Landry case, in which the home was destroyed by a combination of wind and flooding.
Once the court determined that Citizens had properly opted out of the valued policy law, it declined to address many of the key issues created by the 2005 storms.
IMO, you can’t properly opt out of the law and then sell a policy under the guise of a full value replacement policy – one that requires the insurer must pay the full value of the policy if the property is a total loss because of a covered loss.
Sop has chided my argument that hurricanes are not windstorms – a mantle I picked up from Promise – as a matter of semantics. It’s much more than semantics, however, when someone sells hurricane coverage and only covers a windstorm.
Courts are examining the language of policies in an attempt to determine what was actually covered and what was not. However, the devil is not in the details. The devil is in calling a product something its not and selling it as if it were – and that’s not semantics, it’s you know what – and as long as the courts ignore it their decisions are like nailing jello to a tree.
Tony’s comment is better understood in the context of this post.
Tony, since bellesouth beat me to the welcome on the Rigsby thread, so I’ll add my welcome here and note that Sop will join the discussion when he returns.
We wouldn’t have all this litigation if the multi peril events that make up a Huurricane were covered under one policy. However they are not at present and thus I agree with Nowdy’s and Judge Senter’s logic on why named peril policies should pay.
You’re right, Sop, the solution to all of this is multi peril coverage. I noted our friend CLS made a good case for HR3121 from the Landry decision.
Meanwhile there are countless folks who are left without the resources to rebuilt who honestly thought the hurricane coverage and/or full value policies they bought would provide the coverage they needed.
The courts need to be correcting that problem IMO, not side stepping those very real issues and focusing narrowly like they did in Landry.
I’m reminded of supsalemgr’s concerns about state-funded coverage – when I look at the LA law and the exception Citizen’s lawfully used to sell policies that didn’t cover what folks thought they were buying.
“There
nowdoucit,
The courts shouldn’t be the vehicles for solving the problem you see. The solution, you say, is multi-peril coverage. Ok, well it seems to me that the insurance commissioners and elected representatives (governors/legislators) are the ones who need to get that done. Having courts re-write insurance policies to say what you want them to say isn’t a good solution.
Thank you Rob for your observations. As we delve into these issues I am struck by the complexities involved in these seemingly straight forward concepts. In the case of NFIP I’m beginning to think we may have outsmarted ourselves.
Somewhere along the line we need to simplify policy language and provide protection for insurers that such simplified language will not be misconstrued in a court room. That may be an impossible task as I’ve learned the complex language generally derives from the crucible of the courtroom.
One thing that encourages me is that solutions are finally being put on the table and that is progress over one year ago.
sop
Rob, if you’ve followed the links in my post, you’ll see that the legislation defines the covered loss in a full value policy as only the peril of fire.
However, the insurance industry packages loss by fire in a group of covered perils and actually covers all of the named perils in the group in a full value policy.
Citizens, on the other hand, had a statutory escape that appears to apply on to them.
What that does IMO is create a situation where consumers shopping for coverage could get quotes for a full value policy from Citizens and other companies and unknowingly end up without the coverage they believed they purchased.
Again, just my IMO the Court should have overturned the law that gave Citizens an out. Instead, the Court cited the industry practice as the basis for not limiting the definition of full value to fire.
So, my opinion stands as does my belief the Court failed in its duty to protect consumers from bait-and-switch.