USAA’s admission of Claims Dumping in Corban ripples across the media

This story at the Insurance and Financial Advisor is too good to let lie. (Big H/T to Editilla at the Ladder) I think we’re fixing to find out if the people at the National Underwriter wield pom poms or if they are real journalists. Bob Graham has the story:

An insurance company admitted to shifting its costs to the federal National Flood Insurance Program in the first wind versus water damage case from Hurricane Katrina to reach Mississippi’s high court.

Insurance company USAA made the admission in oral arguments before the Mississippi Supreme Court June 9 in a heavily watched case about whether carriers bear the burden of proof to decide the extent of property damage caused by wind and if carriers can void a homeowner’s wind coverage because of prior water damage.

A lower court had asked the state’s high court to interpret the “anti-concurrent causation” clause in homeowners’ policies as a precursor to it addressing a policyholder’s request for coverage from USAA.

The high court’s ruling is critical in establishing how insurance companies that wrote policies in Mississippi – and possibly other states — eventually handle claims resulting from the August 2005 hurricane.

Hurricane Katrina sent hurricane force winds into the Gulf Coast region for up to four hours prior to flooding, and that distinction, say homeowners, prohibits the carrier from voiding the wind coverage.

The hurricane dropped up to 10 inches of rain along Mississippi’s coastal areas, with at least four inches of rain falling within 24 hours in the rest of the state.

USAA argues in court papers that it should not have to pay any wind damage claims because properties also suffered water damage.

Rep. Gene Taylor (D-Miss.) said USAA’s admission and the ongoing legal dispute validates the need for passage of the Multiple Peril Insurance Act, which would allow homeowners to buy a single policy from the NFIP that would cover wind and flood damage. The bill was part of the Flood Insurance Reform and Modernization Act died in Congress last year.

“Asking the court to sanctify the company’s decision not to live up to its fiduciary responsibility to the federal taxpayers and homeowners is outrageous,” said Taylor in a statement. “This act eliminates all opportunities for insurance companies to continue to betray coastal American homeowners and taxpayers.”

The NFIP is financed through homeowner policyholder premiums, which are subsidized with federal tax dollars. In the aftermath of Hurricane Katrina, the NFIP ran a $17.5 billion deficit while the property-casualty industry had $108 billion in profits in 2005 and 2006, according to Taylor.

5 thoughts on “USAA’s admission of Claims Dumping in Corban ripples across the media”

  1. In the aftermath of Hurricane Katrina, the NFIP ran a $17.5 billion deficit while the property-casualty industry had $108 billion in profits in 2005 and 2006, according to Taylor.

    In the aftermath of Hurricane Katrina, the NFIP ran a $17.5 billion deficit while the property-casualty industry had $108 billion in profits in 2005 and 2006, according to Taylor.

    In the aftermath of Hurricane Katrina, the NFIP ran a $17.5 billion deficit while the property-casualty industry had $108 billion in profits in 2005 and 2006, according to Taylor.

    In the aftermath of Hurricane Katrina, the NFIP ran a $17.5 billion deficit while the property-casualty industry had $108 billion in profits in 2005 and 2006, according to Taylor.

  2. Rick’s comment makes me feel as if the problem will not be resolved until every member of Congress takes remedial math.

    Gene Taylor must be the only member of Congress who can add and subtract!

  3. Our prestigous federal courts here in La. are as much to blame as the insurance companies. I have been screaming for 4 years that if you want to deter the fraud there is one simple answer: DON’T GIVE A FLOOD CREDIT/OFFSET. Make the h/o insurer PROVE EXACTLY WHAT DAMAGE FLOOD CAUSED.

    Our esteemed federal judiciary, not state as they have gotten it right, have seen fit to rubber stamp the W.Y.O insurance companies handling of flood claims by giving them credit for fraudulently paid flood proceeds.

    The answer is SIMPLE: PAY WHAT YOU OWE UNDER THE TERMS OF THE POLICY!

  4. I recommend the video of the oral arguments. USAA’s attorney tries to make their position seem reasonable by acknowledging some burden of proof in the oral arguments though he did not acknowledge that burden in motions and USAA has not applied that burden in practice. Nationwide’s attorney then clumsily stated ACC the way most companies actually applied it and the Justices jump all over him.
    USAA says it has the burden to prove that flooding contributed to the damage in order to exclude coverage, and presents a hypothetical case in which neither the wind nor the flood applied enough pressure independently to break a window, but the combination did so. Under that scenario, USAA says it would not pay and flood would pay. That would be billing NFIP 100% for damage that was partially caused by wind.
    What USAA’s attorney did not say was just how ridiculous it is to suggest that anyone could now just how many psi the wind and the water were putting on the window at the time it broke. In most cases we don’t know exactly how or when any damage occurred, and we especially do not know exactly at what second each window, wall, door, roof was breached and what was the exact force on it at the time. The whole argument is absurd. USAA also insists that they can always distinguish the wind damage from the flood damage, which also is an absurd statement.
    The so called proof that USAA is offering in this case, as with other insurers in other cases, is recent expert testimony that was bought three years after Katrina as the case got nearer to coming before a jury. The adjusters that paid policy limits on the flood policy and pennies on the wind policy did not estimate the maximum psi of the wind before the arrival of the flooding or do any determination of “proof” that flooding was all or part responsible for the loss. USAA, as with others, saw that there had been some flooding and paid out NFIP limits. Note that in every insurance case, when the companies are forced by the courts to prove that flooding was responsible, they are not presenting any determination of “proof” that happened in 2005 when the flood claim was paid and the wind claim was not paid. What experts offer is not proof. Experts try to propose plausible scenarios by cherry-picking the available evidence and ignoring the evidence to the contrary. They don’t know much and they don’t prove much. I am amazed that insurance companies and their lawyers do not see from the jury cases that when they pretend to prove that wind caused no damage, they forfeit any credibility they had.
    Please watch the Nationwide attorney’s disastrous argument. He went up their to defend the 5th Circuit’s idiotic Leonard decision, which is what USAA asked for originally in motions but had the good sense not to defend in oral arguments. One justice asked Nationwide whether ACC would exclude coverage in a case where a home was 95% destroyed by wind before any flooding. The response was that if Nationwide could prove that the flooding was strong and high enough to have destroyed the home anyway, then the wind coverage was excluded. According to him, it does not matter what actually caused the damage. If the subsequent flooding would have caused it, the damage is covered by NFIP and not Nationwide. Unfortunately, no one was there representing federal taxpayers to ask him why NFIP should pay for a house that was destroyed by wind.

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