By: RYAN MYERS, The Enterprise
07/15/2007
Updated 07/28/2007 11:06:04 PM CDT
Out-of-court Settlements are the Order of the Day for Victims of Hurricane Rita
When insurance adjusters looked at Neil Lindley's Taylor Landing home after Hurricane Rita, they decided the damage was from before the storm and refused to pay his policy claim.
Lindley, who finished home repairs - including a new roof - the week before Rita hit, disagreed with this conclusion and in September 2006 sued his insurer, Farmers Insurance Exchange.
Last week, Lindley, an adjunct Lamar University professor, reached a settlement with his insurer.
Like every Texas homeowner who has sued his or her insurer over Rita damages, Lindley's case never went to trial.
Disputes in Louisiana and Mississippi over Hurricane Katrina damage have gone to trial in spades. But different types of damage and a distinct Texas legal climate put Rita lawsuits on a different track.
Most Hurricane Katrina homeowner insurance lawsuits stem from coverage disputes, chiefly whether wind or water caused a home's damage.
Rita, however, caused very little flooding, and there are few lawsuits over whether a policy covers the hurricane's wind damage.
Instead, disputes abound about damage value and whether the hurricane actually caused those damages.
"Those are easier for us to prove than the debate between whether the wind or the water got the house first when nobody was around," said Lindley's attorney, Steve Mostyn.
Insurance claims for Hurricane Rita-related damages reached $2.27 billion in Texas by March 2007, with 220,641 residents filing claims, according to the Insurance Council of Texas.
The Rita situation makes for more complex pre-trial wrangling, delaying potential trials and increasing chances insurers will settle out of court, said Rod Borland, Texas Office of Public Insurance Counsel executive director.
"With these Rita cases there is not just a clear-cut legal argument that you want to make in front of a judge and say, 'Is it covered or isn't it, your honor?'" Borland said. "So you're going to end up having a bevy of mediators, engineers and whatever the case may be come in and tell you how much they think the damage is."
Settling a disagreement over the amount an insurance company owes is easier than resolving a dispute about whether the insurer owes at all, said Hart Green, a Beaumont plaintiffs' attorney who has filed about 45 Rita cases.
"Once they say, 'We owe you some more money,' they know they've got a little bit of an issue they have to deal with," said Green, who has settled 13 of his cases and noted he wouldn't be surprised if all of his cases were resolved without a trial.
Busy Southeast Texas dockets also are responsible for 21 months passing since Hurricane Rita without an insurance trial.
"There is just more litigation in this area," said Beaumont plaintiff attorney John Morgan. "So when the Rita cases are filed, they are competing to be tried with a lot more lawsuits than you would get in Mississippi or and Louisiana."
But Morgan points to politics as another force limiting trials, arguing policyholders are at a disadvantage when cases are tried.
"Within the past couple of years, the Legislature has revamped the Texas insurance code and the deceptive trade practices act, and the case law has changed to make it much more favorable to the insurance companies and more anti-consumer," Morgan said.
Insurers paint a different picture, where quick response and professional claim-handling minimized the need for policyholders to sue.
"That's the difference between Hurricane Rita and Texas and all the other states that have had hurricanes," said Mark Hanna, spokesman for the industry-sponsored Insurance Council of Texas. "The insurance companies did a pretty good job when it came to dealing with Rita claims."
The lack of trials doesn't necessarily limit a homeowner's ability to get what they deserve, said Ryan Scott, a Beaumont attorney who has settled about 20 percent of the 40 Rita insurance cases he's filed.
"My clients make the call if a settlement is accepted or not," Scott said, "I make a recommendation if I think an offer is fair or in the ballpark of fair, but the call to accept or reject is theirs."
Eventually, a few Rita insurance cases will go to trial. And their outcomes will influence remaining settlements.
Morgan figures four or five of the 80 or so Rita homeowner insurance cases he's filed are likely to go to court. About 40 percent of the 80 have already settled.
"I suspect that most of the remainder will settle by the end of this year, and there will be about maybe five or six lawsuits where everyone is dug in, and I'm just going to have to wait for trial settings and then I'll try the case," Morgan said.
The first such trial in Texas is scheduled to begin Aug. 27 in Beaumont before 58th State District Judge Bob Wortham.
Brought by Beaumont couple Hugh and Sharon Stovall and Houston attorney Steve Mostyn against State Farm, a jury was picked for the trial in April but dismissed when an attorney required medical attention.
The Stovalls allege State Farm refused to pay for certain damages covered in their policy and undervalued other damages.
The couple spent seven months with three adjustors before filing suit, according to court documents.
"Now if the insurance companies come in and win some of these cases, the settlements will speed up because lots of lawyers will be telling their clients 'We're not going to win these cases, take what you can get, let's go home," said Michael Sean Quinn, an Austin property claims attorney who has represented insurers and policyholders.
"But if a plaintiff wins one of these cases with bad faith damages and several million dollars change hands, that will slow settlements down where the lawyers have confidence that they too can accomplish that," said Quinn, who also testifies as an expert witness in insurance cases.
A plaintiff win "would speed up cases where the insurance company will say 'We ought to increase this a little bit because maybe we can get a few more people to take these settlements because we're going to lose some of these cases.'" Quinn said.