A prior post addressed Dickerson v. Lexington Ins. Co., 2008 U.S. App. LEXIS 26504 (5th Cir. Dec. 22, 2008), wherein the Fifth Circuit reversed its trend by issuing a Katrina-related decision in favor of the policy-holder. The Fifth Circuit recently upheld another decision in favor of policy-holders after Hurricane Katrina destroyed their home. See Grilletta v. Lexington Ins. Co., 2009 U.S. App. LEXIS 276 (5th Cir. Jan. 8, 2009).
The insured's policy covered damage from wind but excluded "water damage." On November 13, 2005, Lexington's adjuster determined the damage was wind related and not caused by flood. Consequently, he recommended Lexington pay the policy limits of $400,000 for the dwelling.
Lexington took no action until January 26, 2006, when it hired an engineering company to do a damage causation analysis. The engineering company, in turn, hired a meteorologist who determined the storm surge was the proximate cause of the destruction, not wind. Thereafter, Lexington paid only $191,674 for damage to the dwelling.
Plaintiffs sued. Plaintiffs' expert, an engineer, asserted that either a tornado or high winds destroyed the house, and that there was a small storm surge of ten to twelve feet. On the other hand, Lexington's experts, the meteorologist and an engineer, stated there was no evidence of a tornado or winds strong enough to destroy the house. Instead, a storm surge of at least fifteen feet caused the destruction. The trial court determined Lexington had not met its burden to demonstrate the water damage exclusion applied. Therefore, the court ruled the full $400,000 payment for loss of the house was appropriate.
The Fifth Circuit affirmed. Lexington's experts conceded that a tornado or high winds could have damaged the house. The district court did not find conclusive Lexington's meteorological data suggesting water was the proximate cause of the damage. Given the battle of experts, the trial court was free to choose among the competing explanations in rendering its decision.
The Fifth Circuit also affirmed an award of statutory penalties for arbitrarily failing to pay a claim within thirty days. After receiving the first adjuster's report concluding that the wind caused the damage, Lexington took no action for over sixty days.
Hawaii's Unfair Claim Settlement Practices Act lists as an unfair practice the failure to offer payment within thirty days of affirmation of liability if the amount of the claim has been determined and it is not in dispute, Haw. Rev. Stat. 431:13-103 (a)(11)(F), but there is no statutory penalty for such delay.
