[StBernard] La. eyes State Farm case

[Westley Annis]

Donelon to ask insurer for same treatment as Miss. 
 
Thursday, January 25, 2007 
 
By Rebecca Mowbray
 
Insurance Commissioner Jim Donelon will press State Farm Fire & Casualty Co.
to settle with disgruntled policyholders in Louisiana, now that the nation's
largest residential insurer has reached a settlement on Hurricane Katrina
claims in Mississippi. 
 
"I certainly can't imagine how State Farm would not treat its policyholders
in our state the way it treated its customers in Mississippi," Donelon said.
"I would take action to make sure that they treat our policyholders the same
way they did in Mississippi." 
 
On Tuesday, State Farm reached agreement with Mississippi officials to pay
at least $130 million to settle a class action lawsuit by 640 homeowners in
that state. The settlement also required Mississippi Attorney General Jim
Hood to drop a criminal investigation into the company's claims- settling
practices. 
 
On Wednesday, Donelon spoke with Alabama Insurance Commissioner Walter Bell,
who is president of the National Association of Insurance Commissioners.
They plan to work together to encourage State Farm to use Mississippi as a
blueprint for settling claims in other Gulf Coast states affected by
Katrina. 
 
Donelon expected to speak with State Farm's regional counsel shortly about
the major points of the settlement and said he would instruct the Louisiana
Department of Insurance's executive counsel to act on behalf of Louisiana
policyholders. 
 
State Farm is the largest residential insurer in Louisiana with about 32
percent of the market. 
 
While Louisiana has some special issues created by the levee breaches, many
questions about whether damage was caused by storm wind or floodwater are
the same in the two states. 
 
Two weeks ago, for example, a Mississippi judge found in favor of a Biloxi
couple who sued State Farm, saying that the company couldn't just dismiss a
claim because there was a mix of flood and wind damage. The company couldn't
deny a claim unless it could prove that flooding caused the damage, the
judge ruled; the company needed to properly adjust the claim and consider
the possibility that a tornado blew away the house before storm surge
scattered its pieces. 
 
That type of issue would be the same in Louisiana, Donelon said. 
 
However, there could be some limitations. When U.S. District Court Judge
Stanwood Duval Jr. ruled in November that water from a levee breach is not a
flood, and therefore homeowners insurers could be held responsible for the
damage, his decision affected many major insurers but not State Farm because
of the way its policies are worded. 
 
Flooding is not a covered peril on standard homeowners insurance policies.
Flood coverage is on a separate policy that must be purchased through the
National Flood Insurance Program. 
 
Donelon said he believes that Katrina litigation has moved more quickly in
Mississippi because there aren't as many claims to settle in that state. 
 
 
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