Henry and June and the Topic of State Farm’s Cancerous Claims Handling: A Kuehn v State Farm Update (Updated)

Far from the claims handling equivalent of this literary masterpiece, the case of Kuehn v State Farm has more twists, turns and legal perversions than Anaïs Nin’s book on the writing of that literary masterpiece.  We’ve presented this case on Slabbed in part to highlight the bad faith methods State Farm, with the help of the Mississippi Department of Insurance, utilized to  adjust their slab claims on the coast after Katrina. Kuehn was also of interest because it gave us a chance to also highlight the type of lawyer State Farm uses to abuse the process in the proverbial “hired gun lawyer” in this case Oxford Mississippi based lawyers Scot Spragins and Lucky Tucker. On Monday of this week Nowdy profiled the fine mess the dufuses found themselves in after the plaintiff’s lawyer Earl Denham made them his beetchlaurel and hardy. Anita Lee covered the evidentiary hearing and frankly it doesn’t look good for Spragins or Tucker as State Farm had to take one for the team to save their hides (from being DQ’d as counsel) in the process laying bare their sleazy claims practices and the type of lawyer that will do anything (and I mean anything) to get on State Farm’s legal gravy train.

State Farm Fire & Casualty Co. argued in federal court Wednesday that the company should not have to pay policyholders $174,811.80 for Katrina damage attributed to wind because an umpire and two appraisers who set the amount strayed into determining the cause of loss.

State Farm policies give policyholders the option of appraisal when “the amount of the loss” is in dispute. Under Mississippi law, U.S. District Court Judge L.T. Senter Jr. has already ruled, appraisal is not meant to decide liability. State Farm polices cover wind damage, but loss from water is covered by federal flood insurance.

However, attorneys for policyholders Henry and June Kuehn of Ocean Springs presented evidence that only wind damage was considered during the appraisal process.

As provided under the policy, each side selected an appraiser and an umpire was appointed to resolve any disputes.

State Farm’s appraiser, John Minor, testified that only those damages above the water line were included in the appraisal award. The water line reached 2 feet onto the second floor of the Kuehn home.

Minor said a State Farm attorney who had offered confusing advice during the appraisal process was not happy with the result.

“I got chewed out,” Minor said.

He said he handled the Kuehn appraisal in the same way he did others for State Farm, but the attorney, Lawrence J. “Lucky” Tucker Jr., seemed to want the Kuehn appraisal handled differently.

The Kuehns tried to avoid a lawsuit by opting for appraisal. When State Farm refused to participate, the couple filed suit in Chancery Court to force the insurer to the table. State Farm removed the case to federal court in July 2006, but Senter returned it to Chancery Court in January 2007. A Chancery Court judge granted the appraisal request in April 2007.

The appraisers and umpire concluded the appraisal in February 2008, but State Farm did not pay the award. The Kuehns filed the current federal case on Katrina’s third anniversary, the deadline for lawsuits.

Senter will determine whether the appraisal award should be upheld. If it is, he must then decide whether the Kuehns could be entitled to punitive damages. If Senter decides the appraisal was not valid, the case could proceed to trial as a wind vs. water dispute.

This case is not very hard to call, especially given longstanding case law in this area. Properly conducted appraisals are practically bullet proof legally and from the sound of this story State Farm presented no evidence to the contrary. The topic of appraisal and the determination of causation as Anita correctly identified is the important legal issue though it appears moot in this case. I predict punis in this case and they are indeed very well deserved though there is a real possibility the Farm will pay up big in advance to prevent further embarrassment.

Update: I neglected to publish this order from Judge Senter where he takes State Farm’s counsel to task for arguing legal points without presenting any evidence in support of their assertions.

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