Have Insurance Companies Learned the Lessons of Katrina?

The financial cost of super storm Sandy is likely to exceed that of Katrina; has the insurance industry learned lessons from the devastating 2005 hurricane?

In the wake of the insurance industry’s poor handling of claims from Hurricane Katrina, several insurance companies faced multiple attempts at class actions, and several mass tort lawsuits. There were several issues that the plaintiffs sought redress for, but one of the main issues was the denial of claims in bad faith. Insurance companies were allegedly intentionally denying claims that should have been paid out. The industry ended up spending millions of dollars to litigate, and eventually settle, many bad-faith claims.  The financial cost of super storm Sandy is likely to exceed that of Katrina; has the insurance industry learned their lesson?

Slow to Start the Claims Process

One of the biggest defeats the insurance industry had was in a case out of Louisiana entitled, Oubre v. Louisiana Citizens Fair Plan. 79 So. 3d 987 (La. 2011). The Court found that insurance companies had too few adjusters and that the processing of many claims was not started as quickly as the law required once the claim is filed. The Court found that a claimant did not need to show the company had acted in bad faith, only that the company had missed the deadline. A penalty of $5,000 per claim that was not started within the legal time frame was assessed. This resulted in damages of over $100 million. There are already reports that adjusters are taking too long to evaluate storm damage in coastal areas and owners are being required to begin clean up to avoid environmental impact before the property has been assessed by an adjuster.

What Caused the Damage? What Kind of Property Was Damaged?

A lot of ink has been spilt on how insurance companies determine in damage was caused by wind or flood. Wind damage is universally covered, while flood damage is generally only covered by specific flood policies. In the aftermath of a large storm such as Sandy, it can be much more difficult to tell the cause of the damage. Insurance companies have every incentive to fond as much damage from flooding as possible.

Another hotbed issue is going to be what kind of property was damaged. Some policies may treat personal residences, vacation homes, and business property very differently. There are likely to be long fights over if a home was a vacation home and used primarily by the owners, of the dwelling was really the main asset in a rental business the owner was running. The damages a successful claim will get may hinge on how the property is categorized. Insurance companies seem to already be denying large numbers of claims based on this issue. This issue also affects builders and contractors. Litigation from Katrina was extensive in the area of contractor rights, and Sandy will also likely yield several lawsuits.

Insurance policies are complicated. Insurance companies have every incentive to pay out as little as possible to claimants. If you suffered damages from Sandy and need assistance in assessing your Hurricane Sandy insurance policy, or believe the insurance companies are trying to avoid paying their full and fair obligations, the lawyers at Slater Slater Schulman LLP are available to assist you.  Time may be limited.  A consultation with our insurance lawyers is free.   Call us at (800) 251-6990 or fill out the form on this page, and an insurance attorney will get back to you shortly.

Leave a Reply


Anti-Spam Protection by WP-SpamFree

Follow Us on:

Contact Us

Privacy Policy

Please click here to view our privacy policy.