'Mired In Mud'

Gannett's ace Tallahasee reporter today favors the Pensacola News Journal with a good-news story headlined 'Insurers Starting to Settle Claims'.

That would be Hurricane Ivan claims. She writes:

"USAA [Casualty Co.] is among a small number of insurance companies to quietly settle 2004 hurricane cases under Florida's disputed valued-policy law, paying not only policy limits to homeowners but legal fees to their lawyers.

"The settlements fly in the face of what insurers argue publicly -- that wind-storm premiums don't insure against water damage, therefore they don't need to rebuild hurricane-totaled homes if storm surge played any part in the loss."

However, St. John notes, Florida Citizens Property -- the wind insurer for most Pensacola Beach homeowners and other hard-to-sell barrier island policies -- and other companies are continuing the "battle to overturn lower court rulings requiring it pay for homes destroyed by wind and surge."

Solid numbers are hard to come by, particularly from private insurance companies, but St. John reports "Citizens Property Insurance has 351 cases in wind-versus-flood disputes with $68 million in claims. State Farm Florida has 264 such cases."

The most curious aspect of all this is that there's a second "state-controlled insurer" that is approaching the wind-versus-water dispute quite differently:

"The Florida Insurance Guaranty Association is paying policy limits on the wind-flood cases among 10,235 hurricane claims it inherited from the insolvent American Superior Insurance Co.

"FIGA cites the very same court rulings that Citizens contests.

"'It's the current case law,' said Lea Harrigan, director of claims."

This is not a trend, however. Florida's largest insurers are continuing to give customers the legal system's equivalent of Chinese water torture -- or, should we now say the Abu Ghraib treatment?

"What once promised to be fast-track litigation against Citizens now is mired in legal mud as plaintiffs attorneys from Pensacola contest its designation as a Tallahassee-based class action.

"Other would-be class actions against Nationwide, Allstate Floridian and State Farm Florida have been pulled by the insurance companies into federal court, no further along than when they were filed months ago."

If there's a lesson in all of this for our Katrina cousins-in-circumstance along the Alabama-Mississippi-Louisiana Gulf coast, it's 'stick it out' -- if you can. In a recent private conversation, one lawyer from a locally prominent insurance defense firm said at least 50 percent of the cases coming in the door should have been paid policy limits a year ago.

Why weren't they? Topping his list were poorly trained adjusters, break-downs in claims file management at the office level ("a lot of the paperwork was lost in stacks on the floor"), and deliberate delays due to adjuster or company policies.