As Harvey dumps trillions of gallons of water on Houston, leaving homes and belongings permanently destroyed, we’re sorry to report that our neighbors and communities may be facing another disaster—a flurry of insurance companies that refuse to honor their policies. Dan Karr, the founder of a company that creates reports on insurance providers, believes that the aftermath of Hurricane Harvey will soon mirror the aftermath of Superstorm Sandy and Hurricane Katrina.
The Ghost of Katrina Continues to Haunt the Gulf
In 2006, hundreds of destitute homeowners on the Gulf Coast filed lawsuits against insurance companies who denied claims after Katrina. The core issue was whether or not a client’s home was destroyed by floodwaters or by wind.
If it was a flood, then the homeowner would need to file a claim under National Flood Insurance Protection, which is underwritten by FEMA. For most homeowners, their coverage under NFIP is fairly modest (or nonexistent). State Farm, one of the insurance companies sued by policyholders after Katrina, only covered wind damage in a hurricane—and thus refused to offer relief for damages that seemed to be caused by storm surges or floods.
Even worse, “anti-concurrent causation” clauses state that if a home was damaged by both flooding and wind, the insurer doesn’t have to cover a single cent of it. In other words, the insurance company says they’ll only cover your home’s damages if only wind caused the damage. Courts applied these clauses inconsistently after Katrina—some enforcing the clause, others ruling around it.
The ambiguity remained in place. Today, lawyers are still uncertain about whether a court will honor or bar the clause.
Proven History of Insurance Bad Faith
As reported by NPR, two former State Farm adjusters came forward to aid a plaintiff’s case against the insurance company. They had compelling documents that suggested that State Farm had willfully and knowingly denied valid claims—the bedrock of a bad faith lawsuit. State Farm was found guilty of defrauding the U.S. government by changing damage reports to say that a homeowner’s damages were caused by flooding rather than the wind.
After Katrina, State Farm changed damage reports to avoid paying homeowners the money they needed to rebuild. If you remember a blog we published earlier this week, State Farm is among the top three insurers who currently insure homes and commercial properties in Hurricane Harvey’s damage radius.
Policyholders Left on the Hook after Superstorm Sandy
The same flood vs. wind damage debate ignited for homeowners in New York and New Jersey. After Superstorm Sandy, insurance companies refused to provide financial relief for damage caused by flooding. At best, homeowners received payment that didn’t come near providing for their needs. In many cases, claims were refused outright.
In Bannon v. Allstate Insurance Company, a plaintiff’s claim alleged that the insurance adjuster admitted that the damages listed in the claim were caused by wind from Superstorm Sandy. In addition, the insurance company sent an engineer to inspect the site after coverage was denied. After Allstate requested dismissal of the case, the Court denied a total dismissal, stating that the facts brought by the case were enough to justify a trial.
It’s a matter of record that State Farm created two damage reports—the factual one, and the one they use to deny coverage. It may be that it’s an industry-wide practice.
For the record, Allstate is also among the top 3 property insurers in Houston.
What Can Be Done for You
Homeowners in the Northeast and the Gulf Coast believed combining NFIP coverage with private coverage would help them recoup their losses from a disaster like Katrina or Sandy. State Farm, Allstate, and other insurers robbed them of the money they needed—sometimes through unethical and illegal means. It’s entirely possible that Hurricane Harvey will create a similar situation.
Policyholders are facing an uphill battle. Thanks to HB 1774, it’s going to be more difficult to get insurance companies to pay claims in a timely manner—and the law goes into effect this Friday. If you want your Hurricane Harvey case to have the strongest possible chance in court, your lawyer needs to file your claim by this Thursday, August 31st. Arnold & Itkin LLP is more than happy to help you with a bad faith insurance claim if the insurance company refuses to honor your policy.
However, as Dan Karr notes, the larger problem is a lack of accountability and transparency in the insurance industry. If there’s no way to know if an insurance company has honored or denied claims in the past, how can consumers make an informed decision about their insurance coverage? If there’s a standard for reviewing claims, what good does it do if no one holds insurance companies to the standard? His solution is simple: complain. Specifically, Karr urges consumers to file formal complaints about their insurance companies, which can then be reviewed by government regulators.
For help with your insurance claim following Hurricane Harvey, call (888) 493-1629 or schedule a free appointment with our short online form. We want to help you rebuild.