Thursday, May 31, 2007
Yara Zakharia, Esq.
State Farm Fire and Casualty Co. struck an agreement with the Louisiana Department of Insurance to reopen and reconsider slab or foundation-only claims filed by insurance policyholders in Louisiana whose residences were destroyed by hurricanes Rita or Katrina, that left behind only the foundation of their homes. The claimants in question are 350 State Farm customers in Louisiana. The Bloomington, Illinois insurer is offering to reevaluate their claims to determine if the hurricane's wind caused any damage.
Thus far, State Farm has settled almost 300,000 claims arising out of Katrina and Rita. Its present accord with James Donelon, Louisiana's Insurance Commissioner, is modeled after a larger compromise that the insurer negotiated earlier this year in Mississippi.
State Farm and a number of other insurance companies state that their policies insure against wind damage but not rising water, such as storm surge, caused by a hurricane. Hundreds of policyholders in Mississippi and Louisiana have filed suit against the insurers, claiming that they overlooked wind damage.
In March of this year, approximately 35,000 State Farm customers in southern Mississippi were allowed to reopen their wind damage claims for potential reimbursement and were paid a minimum of $50 million. The insurer has not set forth a minimum amount for the 350 Louisiana claims. However, Donelon anticipates that each State Farm customer will receive thousands of dollars. “Louisiana claimants are being treated the same as Mississippi claimants,” he said. State Farm spokesman Jeff McCollum stated that “This will help people answer their remaining questions, move on with their lives and rebuild Louisiana”.
To be eligible for reimbursement, Louisiana State Farm policyholders must have foundation-only claims arising out of a storm surge incident. Individuals with a home that are only insured against floods and those holding a wind exclusion policy cannot benefit from the deal. Qualifying individuals are those who 1) took part in the Louisiana Department of Insurance mediation, irrespective of whether or not a settlement was reached and 2) have a lawsuit pending against State Farm for Rita or Katrina damage. Claimants who have settled their suit do not qualify for compensation.
After completing its reassessment of the claims, State Farm may extend a settlement offer based on the new data gathered and conditions consented to by the insurer and the Louisiana Department of Insurance. The insurance company will calculate the settlement amount on the basis of wind-related losses, excluding losses caused by storm surge or flood. The Louisiana claimants can opt out at any point during the process. The current Louisiana settlement process is completely voluntary. Until the policyholders tender their acceptance to the insurer's offer, they have not waived any of their legal rights. Furthermore, they can ask to participate in the mediation process set in motion by the Louisiana Insurance Department.
Approximately 50% of the 350 claims originate out of Cameron Parish, Texas where Rita made landfall shortly after Katrina. McCollum stated that fewer than 1% of the Katrina and Rita claims filed by the State Farm policyholders in Louisiana are still in dispute. He added that the insurer is working on yet another settlement with approximately 150 State Farm customers in Cameron Parish who had filed a lawsuit over damage inflicted by Rita.
