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The Gulf Coast region’s courts have been inundated with a wide range of Hurricane Katrina- and Rita-related lawsuits, and are likely to see a surge in July as the one-year statute of limitations nears for negligence claims. Robert P. Hartwig, senior vice president and chief economist for the Insurance Information Institute, a group funded by the insurance industry, said that the insurers have paid more than 90% of the estimated 1.75 million insurance claims filed. But disputes over homeowners who allegedly have not received the full value of their policies have triggered at least 10 class actions-one state and nine federal suits-against insurers. And those who don’t sue are not walking away satisfied. Russ M. Herman, a senior partner at the New Orleans plaintiffs’ practice Herman, Herman, Katz & Cotlar, pointed out that dire economic straits have forced “a large number of folks to accept de minimus payments of 30% to 40% of what their claims are worth” to get their lives back on track, rather than to fight for what they think they are due. “People are either making loans to rebuild or leaving the state and going to live elsewhere with relatives or others because they just can’t get the kind of financing they need to make a new start,” Herman said, noting that there are about 200,000 insurance claims pending. Herman said he expects “a flood of claims in July, because most lawyers are advising clients that they need to file within the one-year statute of limitations for negligence claims to be on the safe side.” A key bone of contention in the insurance litigation arises from exclusions written into homeowners’ policies. Insurers say that the exclusions limit amounts that can be paid on claims depending on whether property damage was caused by high winds or flooding. For instance, the industry says that someone with a homeowner policy that covers wind damage and has a flood-coverage exclusion-and no separate flood policy-is entitled to recover only the percentage of the insured amount damaged by wind. Thus, if that homeowner’s dwelling sustained 30% wind damage and 70% flood damage, he or she is entitled only to 30% of the homeowner’s policy limit, Hartwig said. Herman and other plaintiffs’ lawyers claim that insurers have rejected many homeowners’ claims unfairly by asserting that they did not have flood coverage and all their property damage was caused by the high water-despite clear evidence that “there were 200 tornadoes between New Orleans and Biloxi [Miss.].” But another group of plaintiffs’ lawyers has filed one state and nine federal class actions against 10 insurers, asserting that homeowner policyholders who suffered total losses are entitled to their full policy limits under Louisiana’s Valued Policy Law. Chauvin v. State Farm Fire and Casualty Co., No. 05-6454 (E.D. La.). This statute says that if a policyholder paid a premium on the basis of an insurer’s valuation of the property, that policyholder is entitled to recover the full policy limit if one of the covered perils caused a total loss, said Andrea S. Lestelle of Lestelle & Lestelle in Metairie, La., who represents plaintiffs in these actions. A ‘red herring’? Lestelle rejects the insurance industry’s contention that policyholders and their lawyers are looking for “enrichment or windfall” rather than indemnification. “A covered property qualifies if the insurer placed a valuation on it. You pay a premium based on that valuation. There’s no unjust enrichment. Just pay us what we paid the premium on,” Lestelle said. Hartwig called the Louisiana Valued Policy Law “a red herring” based on a Florida state appellate decision that should have no bearing on Louisiana law. After that opinion was issued, the Florida Legislature “closed the loophole” in the law, he said. Richard G. Luedke, a spokesman for State Farm Mutual Automobile Insurance Co. of Bloomington, Ill., Louisiana’s largest insurer, said that the company is paying its policyholders what it owes them under its contracts. He added, “We do not believe that the Louisiana Valued Policy Law should be interpreted as providing coverage for the excluded perils.” A similar array of litigation is pending in southern Mississippi, led by an action filed by Mississippi Attorney General Jim Hood. The suit seeks declaratory and injunctive relief to prevent five homeowner insurance company defendants from denying claims based on allegedly “ambiguous and/or invalid exclusion for loss caused by flood or water damage.” A federal judge in Jackson remanded this case to state court. Hood v. Mississippi Farm Bureau Insurance, No. G2005-1642R11 (Hinds Co., Miss., Ch. Ct.).

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