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. Continue reading “Treading Water – claims handling in Texas following Hurricane Ike”