5th hands Kodrin a polyester purse – stands up to water! (Kodrin v State Farm)

We’ll talk about the sow’s ear later, let’s take a look at this purse –the 5th Circuit’s decision on State Farm’s appeal of Kodrin.  If you like the way poly handles water, it should suit you better than silk.

We affirm the jury’s finding of coverage and its award of damages for the loss of the Kodrins’ home and its contents under the homeowner’s policy. We vacate that portion of the court’s judgment awarding penalties, damages, and attorneys’ fees under R.S. 22:1220 and 22:658 resulting from the jury’s finding of bad faith. We therefore remand this case to the district court with instructions to enter a revised judgment consistent with this opinion.

First, take a look at the construction – the issues State Farm appealed:

State Farm raises a number of issues on appeal, each of which falls into either of two general claims of error: (1) The district court improperly instructed the jury, and (2) the Kodrins failed to offer legally sufficient evidence for a jury to find that State Farm acted in bad faith.

Now, a little background before we go further.

When Judy and Michael Kodrin returned to their Port Sulphur, Louisiana, home following Hurricane Katrina in 2005, they found nothing but a concrete slab and debris…

The Kodrins’ insurer, Defendant-Appellant State Farm Fire and Casualty Co. (“State Farm”), denied coverage on their Katrina-related claim, asserting that the damage was excluded from coverage under the policy because it was caused by flooding rather than wind.

The Kodrins filed suit in August 2006 claiming, inter alia, (1) breach of contract; (2) bad faith under Louisiana Revised Statute…for failure to adjust claims fairly and promptly and for failure to make reasonable efforts to settle the claims; and (3) arbitrary and capricious failure to make payment in violation of Louisiana Revised Statute… State Farm removed the case to the Federal District Court for the Eastern District of Louisiana on the basis of diversity of citizenship. Following a two-day trial in November 2007, a jury found that wind was the cause of the damage to the home and its contents.

What makes the Kodrin’s slab different from the ones that line the Coast of Mississippi is their case reached a jury – which may have a lot to do with the fact that so many of ours don’t.

State Farm contends that the jury instructions on the question of wind  damage were erroneous because the district court failed to instruct the jury that (1) the Kodrins could recover only if their damage was caused exclusively by wind, and (2) the Kodrins had the burden of proving that the damage to the contents of their home was caused by wind…

The Kodrins’ homeowner’s policy insured their home and its contents against wind damage, but did not provide coverage for damage caused by flooding. Policies of this sort are common and have been much-litigated in the wake of Hurricane Katrina and other recent storms. We have held that a homeowner may recover under such a policy only when wind is the exclusive cause of the damage. The Kodrins insist that Louisiana courts do not read the provision so restrictively; rather, that they hold that coverage under a homeowner’s policy is available if flooding is not the “proximate or efficient cause” of the damage.

The Court’s recognition of the tension between the relevant case law of this circuit and that of the Louisiana intermediate courts is certain to oil a lot of conversation.  However, the transition removing this case from the controversy was smooth as silk (or good quality polyester)

[I]n this case, we view the distinction as being of little import. First, the divergent interpretations of this court and the Louisiana courts matter mainly when two forces, such as flood and wind, act together to cause damage. Here, there is no role for such a middle ground: Neither party maintained that wind and flood acted in some combination, only that one or the other caused all the damage.

As a result, the jury’s only options were 100 percent wind or 100 percent flood. It was not presented with facts on which to determine that some combination of the two forces caused the damage, and it was not asked to decide on such a basis…

We are satisfied that the jury instruction correctly and unambiguously recited the law applicable in this case: If flood caused the damage “then State Farm is not liable.” Again, neither State Farm nor the Kodrins contended at  trial that a combination of wind and flood destroyed the Kodrins’ home.

Kodrin is the only case I can think of with a juror’s opinion on record –  one well worth repeating, although included in an earlier SLABBED post on Kodrin.

“Since we were not allowed to read or listen to news, I was curious what had been reported the last couple of days and when I came upon this blog and this statement: the Kodrins have agreed, by accepting the flood money that at least that amount of damage to the home was due to uncovered flood.

This infuriated me since this was exactly why they did not want to file a flood insurance claim (which is paid by the government, not the insurance companies). It proved after the fact that State Farm was trying to get away with not paying on the wind policy that this couple has paid to them religiously since 1993 and it was brought out by the plaintiffs’ attorney in the trial that State Farm ’encouraged’ their claims reps to write flood claims rather than wind claims in the area of Port Sulphur.

We decided that it is very possible and probable that when the water topped the levee, the wind had already damaged their home an hour prior. We decided to give them the maximum…Had State Farm simply honored their agreement with the Kodrins back in 2005, they would have saved a lot of trouble and expense.

Agreed, I find nothing more infruiating than raising the receipt of “flood money” as a defense –  appropriately enough, it leads to the discussion of the “sow’s ear” of the Kodrin decision.

The only evidence that the Kodrins offered to demonstrate that this denial was in bad faith is the fact of the denial itself and their expert’s testimony that wind actually caused the damage to the home. This is evidence that State Farm was wrong about the cause of damage, but without more, it is not evidence of bad faith.

An insurer cannot be held to have acted in bad faith simply because it eventually turned out to be wrong about the cause of the damage.

Perhaps not, but, this is 2009 and Katrina was a 2005 event.  At some point, the Court will be required to the “slow learners” and whether they should be allowed to be in the insurance business if what appears to be “bad faith” is “ignorance”.

State Farm  called the doctor,
State Farm called the nurse.
State Farm called the lady
With the alligator purse.

“Wind,” said the doctor.
“Water,” said the nurse.
“but not both” said the lady
With the alligator purse.

Out went the doctor.
Out went the nurse.
Out went Judge Edith
with her alligator purse.

Silk it is not; but, the polyester purse handed Kodrin is far better than the alligator purse tossed to Leonard.