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Katrina Cases Signal a Warning to Victims of Missouri’s Ice Storms

Thousands of Missouri residents have suffered damages as a result of the snow and ice storms this winter. Recent estimates are that this season’s inclement weather has caused losses in excess of $100 million to Missouri’s residential property. This estimate does not even include the damage to personal property. Although not on scale with the destruction inflicted to the Gulf Coast by the hurricanes of 2005, Missouri’s winter of 2006-2007, at the halfway point, already appears to be one of the state’s costliest seasons in terms of property and casualty loss.

A recent case involving the victims of Hurricane Katrina indicates that Missouri residents may need to be persistent in order to recover their losses from their homeowner’s insurance policy.

The residents in Mississippi were treated to an especially egregious example of how insurance claims are handled. There, State Farm Mutual Automobile Insurance Company initially denied thousands of Hurricane Katrina damage claims -- totaling more than $2 billion -- based upon a rather dubious technicality. State Farm took the position that its homeowner’s insurance policy covered damages caused by wind, but not from the storm’s wind-driven surge of water. However, the Mississippi Attorney General later initiated criminal investigations into the allegation that State Farm fraudulently denied claims by pressuring engineering firms to find that the damage was caused by the surge of water and not the wind.

In the first jury trial on this issue, a Mississippi couple on January 11, 2007, was awarded $2.7 million on their claim, signaling that the homeowner’s would prevail where doubt existed as to whether the damage was caused by wind or water. The lesson learned in Mississippi is one that is well known among trial attorneys: if an ambiguity exists in an insurance policy, the insured will receive the benefit of the doubt. As of the end of January 2007, State Farm was attempting to forge a settlement agreement with the State of Mississippi that could cost the insurer as much as $500 million. It remains to be seen whether the court will approve of the settlement or demand more remuneration from State Farm.

After suffering weather-related damages, a homeowner should study the provisions of the homeowner’s insurance policy, before repairing the residence or replacing any property. Too often, however, an insured’s “claim” is concluded through the following informal process:

1. Homeowner sustains injury and reports damage to insurance company’s agent or claims department;

2. After the homeowner answers a series of carefully-scripted questions, the insurance representative indicates that he/she will check the homeowner’s insurance policy and report back to the homeowner;

3. The insurance representative later calls the homeowner and indicates that the damage is not covered under the policy, but quotes the homeowner on an offer to purchase an endorsement or rider that would cover such a claim in the future;

4. The homeowner decides not to file a formal claim, repairs and/or replaces at his/her own expense and considers whether to purchase the extra coverage;

5. The insurance company closes its claim file and actually may make some money off the deal if the homeowner decides to remit the increased premium payment for the endorsement/rider.

Few homeowners ever take the next step and consult with an attorney to conduct an independent review of the insurance policy. However, by challenging the insurance company, an attorney sometimes can salvage an adequate recovery and help avoid a catastrophic result for a homeowner. The Katrina cases should put many Missouri residents on alert that, in order to bounce back from the winter of 2006-2007, they may need to take a closer look at their homeowner’s policies.