Treading Water – claims handling in Texas following Hurricane Ike

While the National Insurance Law Forum waited a bit longer than most to ask Hurricane Ike Insurance Litigation: Will it be as bad as Katrina?,  the November 17, 2007 post also suggested the answer.

It didn’t take long for the first bad faith suits arising from Hurricane Ike to be filed in Texas. Last week, the first two Ike bad faith lawsuits that I am aware of were filed in Galveston and Ft. Bend Counties…These are first of several thousand Ike lawsuits expected to be filed across Southeast Texas over the next several years…

The big question being asked by carriers across the country is whether Hurricane Ike will generate the type and volume of litigation generated by Hurricane Katrina. In the three years since Hurricane Katrina, it has been estimated that between 27,000 and 30,000 hurricane insurance suits were filed in southern Louisiana alone. Of the 12,565 suits filed in federal court, only slightly more than half — 7,837 — cases, have gone to judgment or settled.

The seventh edition of the Hurricane Ike Insurance Newsbrief (January 26, 2009) quotes the Texas Department of Insurance reporting that in the three months after Hurricane Ike… over 730,000 insurance claims have been filed and the number continues to rise.

From the policyholder’s perspective, the numbers indicate a mixed blessing.  The longer it takes for a case to get to court the more likely it is that new case law will replace Leonard and other of the 5th Circuit’s poorly reasoned opinions on Katrina litigation.  Chip Merlin’s post on the 5th’s decision in Leonard, Fifth Circuit got it wrong,  points out where the Court’s reasoning failed.

In their rationale…the 5th Circuit provides a less than stellar (okay really absurd) example of non-coverage that virtually all insurance companies issuing an all-risk policy would heretofore pay. After finding that the anti-concurrent causation language was not ambiguous, Judge Edith Jones went too far and provided the following:

If, for example, a policyholder’s roof is blown off in a storm, and rain enters through the opening, the damage is covered. Only if storm-surge flooding – an excluded peril – then inundates the same area that the rain damaged is the ensuing loss excluded because the loss was caused concurrently or in sequence by the action of a covered and an excluded peril…

Where did that come from? Virtually every adjuster and claims manager I have ever deposed with that similar hypothetical situation in a Katrina loss has said coverage would be granted under the all-risk policy for the full amount of the loss…From a practical standpoint, where is there going to be any coverage if the flood policy has the typical exclusions regarding pre-existing loss or “roof leaks or wind-driven rain” as found in the National Flood Policy?

That seems to be one of the big questions in Texas following Ike, according to Thousands waiting for windstorm payments, the article from the Galveston County Daily. h/t Dimechimes.

The Texas Windstorm Insurance Association has received 90,656 reported losses and paid $905 million in claims from the Sept. 13 storm. But 10,500 claims are unresolved either because they involve very large and complicated commercial cases or are mired in the murky question of whether wind or storm surge caused the damage…

Throw in a vast number of claims, battles about whether entire roofs or just a few shingles need replacing, the work of a few inexperienced adjusters, some policyholders who want something they don’t have coming, unsubstantiated reports of tornadoes and you have a process bound to bog down, officials say.

Let’s look first at what the article called “roof rage”.

One of the most common windstorm insurance disputes involves roof damage. “They’re not paying enough money,” roofer Michael J. Leonpacher said.

About 20 percent of Leonpacher’s clients have big problems with their roofs and their insurance, he said. Leonpacher accuses the windstorm pool of changing the rules as it goes along.

“Last year, significant wind lift of shingles was considered damaged shingles; this year’s it’s not,” he said. “The goal post has been moved.” But the pool hasn’t changed rules…[windstorm association manager Jim]…Oliver said.  Buildings are assessed case by case, and each case is different, Oliver said.

In most cases, shingles lifted by hurricane winds will settle back in place, Oliver said. If shingles are cracked or split, the pool will pay to replace them on an insured property, he said. Almost every shingle in areas hit by Hurricane Ike was lifted by wind, Oliver said.

“We can’t replace every single roof in Chambers, Galveston and Jefferson counties,” Oliver said.  Unless the shingles are damaged, they don’t need replacing, Oliver said. “You’d be surprised by how many we see — the shingles they claim are raised. There’s no real good evidence that they need to be replaced.” If an entire roof needs to be replaced, the windstorm pool will pay for it, Oliver said.

Countering Oliver’s contention that shingles will settle back in place and don’t need replacing unless they’re damaged is

Like many low-income homeowners, Dolores Hedger has struggled for years to patch up her house in a low-lying East End neighborhood that seems to flood with every major storm…

Hurricane Ike, though, proved too much for this incremental approach. The roof of Hedger’s house succumbed to Ike’s winds, causing leaks that damaged floors and walls. Mold has begun to creep in.

Hedger, 59, sought repair funds from the Federal Emergency Management Agency. But the agency has denied assistance to her and many others because inspectors judged that their homes were in poor condition before the disaster.

“They said they couldn’t tell what was damaged before and after,” said Hedger’s daughter, Yvonne Renne.

FEMA spokesman David Riedman said the agency declines to provide repair funds to correct pre-existing problems that weren’t made significantly worse by a disaster.

For example, when viewing a damaged roof with missing or crumbling shingles, the inspector typically questions the applicant to determine whether shingles were missing before the disaster. In some cases, he said, experienced inspectors can identify areas that were overdue for repairs.

But in practice, hurricane victims and their advocates say, assistance often is denied even in cases where winds or storm surge aggravated old problems or created new ones, such as water leaking into the home. And some inspections are so cursory, they say, that the inspector couldn’t have accurately determined whether damage was old or new…

FEMA officials said they couldn’t determine how many applicants seeking help after Ike had been denied based on deferred maintenance, which is not a separate category in the agency’s computerized system for evaluating requests…However, attorneys representing low-income residents whose homes were damaged by Hurricane Dolly in July said deferred maintenance appears to have been a frequent factor in FEMA’s refusals of repair funds to roughly half of the Rio Grande Valley residents who requested them.

Their lawsuit contends that FEMA’s standards for determining who qualifies for repair funds have been explained to the public in only vague terms and that the agency uses hidden rules, such as the deferred maintenance policy, to discriminate against the poor.

FEMA’s deferred maintenance policy wasn’t an issue – perhaps because Katrina destroyed so much of the regions low-income housing. However, we do seem to have a growing problem with the Agency’s NFIP rules – judges in both Mississippi and Louisiana who clearly don’t understand the rules and appear to give more weight to the arguments made by insurance defense attorneys.

This lack of command of the knowledge base is most evident in causation disputes although Judge Senter’s decision in Dickinson v Nationwide did level the playing field.

Judge Senter [decided]… an anti-concurrent cause provision did not apply to the facts because the wind and water damage were separate losses caused by separate, single forces.  Anti-concurrent cause language is relevant only where multiple forces cause the exact same loss, and where those forces meet the criteria of acting concurrently or sequentially within the strict meaning of those terms of art.  Anything else is merely single-force damage.

Unfortunately, few get to play as so many cases are gutted by rulings on motions Plaintiff’s need to take their case before a jury – and many of those that aren’t gutted are settled to prevent a ruling on some of the major issues, or so it appears.  We’ll take a look at a sample of both types of cases where NFIP rules have been a factor in Treading Water, Part 2, and end Part1 with a quick look at the wind v water issues emerging in Texas.

About 3,000 windstorm pool claims were for total losses. Nothing was left of the insured dwelling but slabs or sticks…

One bone of contention between some policyholders and the windstorm pool is whether tornadoes or storm surge flattened houses on Bolivar Peninsula, Oliver said.

Pool officials consulted with the National Oceanographic and Atmospheric Administration and other federal meteorological resources, but could find no evidence that tornadoes caused the mass destruction on the peninsula, Oliver said.

Without a property left to assess, the windstorm pool is forced to rely on complicated computer modeling — based on information experts collected on houses still standing — to decide how much damage was caused by wind.

In cases in which the house no longer exists, some delays can be blamed on lack of photographs or video showing what the house looked like and contained.

Some policyholders lost those photographs and videos in the storm.

“And that’s what’s taking so long,” Oliver said.

It likely won’t take as long for someone in Texas to go to court with the truckload of expert witness qualified to explain the faulty reasoning in the windstorm association’s reasoning.

3 thoughts on “Treading Water – claims handling in Texas following Hurricane Ike”

  1. Hello! My name is Connor Brown and I am a resident of the College Park area in Gulfport. I wanted to jot a quick note to let you know I thoroughly enjoy reading Slabbed and hope you will continue to voice your opinions on issues affecting Gulfport residents.

    On Tuesday, I will file as a candidate for Gulfport City Council, Ward 5. Check our campaign out online at

    Many thanks,
    Connor Brown

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