To understand the significance of the Mississippi Supreme Court’s decision in Corban v. USAA, it is necessary to consider the financial devastation and unnecessary insurance coverage litigation caused by the absence of it during the four years from the date Hurricane Katrina hit Mississippi’s gulf coast.
Merlin’s lead grabbed my attention as did his page one footnote referencing SLABBED:
The obliterated structures have been termed by those in Mississippi’s gulf coast “slabbed,” as there was literally nothing but a slab left where homes and businesses once stood. Slabbed is also the name of a blog that has chronicled the reconstruction efforts and struggles with the insurance industry along the way. For more on this topic and stories behind the Katrina litigation, see http://www.slabbed.org.
Since Merlin’s blog provides what he calls the “Reader’s Digest version” of his article for the Mississippi Law Journal, SLABBED moves from his lead to the references to Bossier v State Farm and Robohm v State Farm in his Conclusion: (emphasis added)
While the Corban decision made it clear that insurers cannot use the ACC and wind/water protocol to evade their burdens under an all-risk policy, State Farm’s trial motions show that it is still using both to deny claims. One month after Corban was released, State Farm tried to shirk its obligations with a tortured interpretation of the opinion. In a trial brief submitted in Bossier v. State Farm, State Farm argued:
State Farm anticipates that Plaintiff at trial may attempt to satisfy his burden of proof merely by pointing to the totality of damage to his house at the conclusion of Hurricane Katrina. Yet, such an approach by Plaintiff would be insufficient under Corban to satisfy his burden of proving accidental direct physical loss under the policy. Under Corban, proving “damage” is not the same as proving that a “loss” occurred, and the Mississippi Supreme Court in Corban criticized courts and parties that have “conflated the terms ‘loss’ and ‘damage.’” “The policy does not cover or exclude ‘damage,’ but rather covers or excludes ‘loss,’ and it is to ‘loss’ that the deductible is applied.” In an event like Hurricane Katrina, there are different forces, “at different times, causing different damage, resulting in separate losses.” Thus, the term “loss” “should not” refer to the “totality of the damage.” Indeed, the Mississippi Supreme Court in Corban rejected the view “that loss is not determined until the hurricane is over.” Rather, there may be “‘many losses because property can consist of many elements.’” Therefore, under Corban, Plaintiff cannot discharge his burden of proving an accidental direct physical loss merely by pointing to the totality of the damage to his house at the conclusion of Hurricane Katrina. Similar to the insurance policy at issue in Corban, Plaintiff’s homeowners policy insures for “accidental direct physical loss,” not damage. Plaintiff’s theory in this case is that he sustained a loss (or losses) to his house before storm surge flooding arrived. Applying his theory to the Corban framework, Plaintiff must prove by a preponderance of the evidence that this pre-surge loss (or losses) actually occurred. It is immaterial to Plaintiff’s initial burden whether any other loss occurred later because each loss comes into being (if at all) at the moment it happens.
More recently, in Robohm v. State Farm, State Farm filed a motion for summary judgment, arguing “Plaintiffs cannot offer expert testimony that their house was rendered uninhabitable by wind, rather than flooding. Where there is a dispute as to whether wind or water damaged a structure, expert testimony is required to prove causation.” State Farm further argued, “This claim also fails because it is at odds with Mississippi Supreme Court precedent establishing that the water damage exclusion in the applicable policy unambiguously excludes damage from storm surge and that the anti-concurrent causation clause excludes damage caused by wind and flood acting concurrently.”
It is clear that State Farm policyholders still face an uphill battle. As explained above, State Farm’s argument is completely at odds with the history, purpose, and bargain of the all-risk policy and Corban itself. This shows that the true problem at the heart of the Katrina litigation remains. Insurers are using their vast resources to evade their responsibilities under the policies they wrote. The individual policyholder who has lost everything in a catastrophe is not a formidable opponent for an insurer. Most often, the policyholder is in a state of financial and emotional crisis.
Policyholders have a right to expect that the insurance they purchased, often for tens of thousands of dollars over the years, will provide the benefits they bought. Before Corban, the Fifth Circuit held that insurers had an arguable basis to deny claims and shift their burden of proof based on the ACC or wind/water protocol. I believe the Court would be hard-pressed to reach the same conclusion now.
Chip does an excellent job recounting “the history, purpose and bargain of the all-risk policy and Corban itself” and the full article is well worth a read. His powerful conclusion, however, is a must read:
In the end, Corban was a victory for policyholders, but a hollow victory because it came far too late for most Katrina victims to benefit from it. During the four years from the time Katrina obliterated the gulf coast to the date Corban was released, those who lost everything were further victimized by insurers that manipulated words or phrases in complex and difficult to understand policies to wrongfully deny and underpay millions in claims. Homes and businesses were lost and lives changed; there is no way to calculate the true devastation…
In time the Coast will be rebuilt and renewed; but, it will never recover what was lost.