Insurance Coverage Blog

Kodrin v. State Farm is one of the Katrina cases, which I wrote about previously here and here.  It was different from many Katrina cases in that, at least as far as what was presented to the jury, there was nothing to sort out about wind vs. water and what damage had been caused by each.  So this is not one of the cases where anti-concurrent cause language became an issue -- although as I repeatedly talk about, under the facts of Katrina damage, anti-concurrent cause language should never have been an issue, because the facts of Katrina damage do not support analysis of the damage as caused by concurrent causes. 

I never get tired of saying this: I will be saying it in my speeches at the PLRB conference in Seattle later this month, and I probably will still be saying it when I am a little old man sitting in a rocker in front of the TV complaining about how the neighbor kids are so loud I can't hear my programs and by the way, why doesn't the milk wagon come anymore? No set of facts I have looked at -- and I have looked at a lot of them -- shows that any Katrina damage was caused by anything other than single forces working independently.  A lot of you may have heard this before, so you can skip the rant and jump down to a further discussion of Kodrin, but I think it bears repeating because this point is so easily lost in time.  Homeowners policies insure against damage to property, property has various elements.  Unless multiple concurrent forces cause the same damage to the same element of property, that is, unless they worked together to cause that result and unless it would not have occurred except for the combination, concurrent causes were not at work.

Kodrin is the ultimate in single causation questions: that's all the jury heard, a dichotomy between the Kodrins' claim that wind alone destroyed their house, and State Farm's claim that flood alone destroyed their house.  This may sound like a strange set-up to you, until you look at the facts of the case: the whole neighborhood was hit by Katrina flooding, which washed the rest of the houses off their foundations and kind of pooled them in one location.  These homes, although severely damaged, were not utterly torn down and demolished.  The Kodrins' home, among all of them, was the only one obliterated. 

This led them to,  as the Fifth Circuit put it in their opinion from a few days ago, "speculate" that a tornado destroyed the house.  Their claim was belied by their acceptance of the policy limits of their flood insurance.  I don't say this to be a smart alec, but rather because I wonder about this flood payment in Kodrin and a number of other instances: did they give the flood money back or did they keep it? I ask this because the choice before the jury was all wind or all flood, and the jury found all wind. So what happened to the federal flood money?   

The jury, as the first link above shows, felt the Kodrins had been treated unfairly and awarded them the maximum amount under the policy plus punitive damages under Louisiana law.   I'm not sure if I'm adding it up correctly, but it looks like the punitive damages were about $135,000, plus about another $140,000 in statutory attorney fees and costs, not a huge amount in the scheme of things, but the precedent was important to State Farm, I imagine. 

The challenge to the verdict on the damage itself, as opposed to the punitive damage portion, was a steep climb uphill -- you have to show that the jury instructions were wrong and prejudicial, and stuff of that ilk.  Most of the time such challenges don't succeed, and this one was no different.  Even though it wasn't necessary for the court to parse out causes -- because whether you believed it was wind or water that caused the damage, it was presented to the jury as an instance of single force causation -- I was pleased to see the Fifth Circuit panel recognized that merely because flood destroys a house does not mean that covered wind damage didn't previously occur.  This is the example they used, in footnote 15 on page 7:

It is important to distinguish between this dispute over which force totally destroyed a home and cases in which the parties disagree as to the causes of various damaged elements of a home. Distinct elements of damage would have to be considered separately. Flood damaged carpets, for example, would not bar recovery for a wind-damaged roof.

Now, this gives me some hope that this panel gets it when it comes to an understanding of the proper analysis to differentiate between single and multiple force damage: first determine what the loss is.  The example used, flooded carpets and wind-damaged roof, was a fairly common scenario in Katrina damage, but it really doesn't present any analytical problems, only problems of proof.  The real test of understanding is the realization that the carpet itself, or the roof itself, could be damaged by two single forces that caused separate damage, one covered and one uncovered, and that this does not make them concurrent forces. 

A house is not a unitary phenomenon of property, it has constituent elements that themselves are property.  Constituent elements such as carpet, likewise, are not monolithic, but have various degrees of worth as property -- merely because wind tears some pages out of a book does not make the book worthless, although its value might be lessened considerably.  There is still some value there when the book is destroyed by flood -- the two forces worked separately to cause separate damage, and the damage from the first force still occurred and caused damage even though the second force would have taken all the value of the book away.  The key is would have: in the hypothetical I pose, that is not actually what happened, and so would have doesn't matter.  However, as I said, it wasn't necessary for the Fifth Circuit to consider that issue this time, and so they didn't, and this is just as well, because explanations from the Fifth Circuit of Katrina causation analysis usually haven't been that great.

Although the court left standing the jury verdict on property damage, it vacated the award of punitive damages.  The court said, in light of the evidence, there could be an honest dispute about what caused the damage to the Kodrin home.  Again here, I don't know what happened with the flood payment, whether that was returned or not, or the precise circumstances under which it was applied for, paid and accepted, but the very fact of a flood payment creates an idea in my mind that there could be an honest belief that flood caused the damage. 

Here's what  the court said about bad faith, when it exists and when it doesn't: 

State Farm declared that it determined flooding was the more likely cause of the damage to the home because (1) the Kodrins’ neighborhood was inundated when a levee was overtopped during Hurricane Katrina, (2) the Kodrins’ home was just one house away from that levee, and (3) many other houses in the area were lifted off their foundations and destroyed by the floodwaters. The Kodrins themselves acknowledged that their claimed wind damage to their home was unusual in their neighborhood, advancing that a tornado must have caused the damage as their speculation why their home was the only one in the area destroyed by wind, not flooding. On these facts, we perceive no probative evidence that State Farm acted in bad faith. State Farm’s refusal to pay was with reason, even if the jury ultimately rejected that reason. The Kodrins have failed to prove otherwise; they essentially ask this court to find bad faith any time an insurer denies coverage and a jury disagrees. This would unduly pressure insurers to pay out claims that they have reason to believe lie outside the scope of coverage, solely to avoid penalties later. Such a rule would pervert the presumption that insurers act in good faith unless the insured proves bad faith, and this is foreclosed by Louisiana law.

"The key is would have: in the hypothetical I pose, that is not actually what happened, and so would have doesn't matter." Excellent job. Not easy to break all of this down.

"Again here, I don't know what happened with the flood payment, whether that was returned or not, or the precise circumstances under which it was applied for, paid and accepted, but the very fact of a flood payment creates an idea in my mind that there could be an honest belief that flood caused the damage."

I am trying to get my arms around your fixation with flood offsets and wonder if you knew the estoppel argument you raise does not exist under Louisiana law.

Neither the Western District of Louisiana nor the Southern District of Mississippi allows flood offset (or the silly SBA loan offsets) for that matter.

State Farm and the others pushed those flood payments out with the promise to adjust the wind claims, which they never did beyond blanket denials. And in the proper context, the argument that homeless people at the mercy of their insurance companies are somehow responsible for how the claim is adjusted and paid is beyond absurd.

While I'm happy to see Kodrin profiled here there have been several other cases such as Grilletta and Dickerson where bad faith penalties were applied to essentially the same conduct found in Kodrin (and upheld by the 5th Circuit). You have to put the bad faith on the record in order to get it however.

sop

That's what I like, someone who sets up a straw man and beats the stuffing out of it instead of addressing the implications of what I REALLY said. First, I've written about offsets in posts, and some courts allow them and others don't. I don't feel like going back to look it up because it has nothing to do with what I said.

I am assuming you know the difference between an offset, which is a legal theory that reduces an award or payment due to money already received for the same purpose, or because of money owed, on the one hand, and whether someone's wind claim is plausible in the first place because they themselves represented there was flood damage.

In some cases, there could of course be be flood damage and wind damage, and so accepting a flood payment doesn't preclude a wind claim too. In some cases, however, as I have written about, the amounts don't add up, and taking the flood money was inconsistent with the amount of the wind claim. In Kodrin, according to the information I have, the claim was either one thing or the other, not a mix. So if it was claimed to be wind damage only, no flood, how does that square with them also taking federal flood money?

Now do you get understand my point? You complain that there was some conspiracy to force people to accept flood payments. Your view infantalizes people and takes away any responsibility they have for their actions. You can't on the one hand say these payments were a ripoff of the taxpayer and then take it to the streets when I ask why, if it was fraud, was it not wrongful for the recipients to apply for and accept the money?

No one has ever been able to refute that point, except with more unproven conspiracy theories and vague talk about social justice. I fail to understand your fixation with conspiracy theories and vague talk about social justice.

Ah, a man who knows straw men well I see. Please name me one case where State Farm either paid wind first or adjusted the claim together. Your answer will also answer your question on how that squared with them taking federal flood money.

The lawyers for Lexington created the "amounts don't add up straw man" you're fond of and actually argued it in Dickerson, another 5th Circuit policyholder win you've chosen to ignore. It is irnoic because the case was heard by the same panel on the same day as Kodrin due to perceived commonalities between those cases and Sher. The 5th Circuit didn't buy Lexington's intellectually dishonest arguments that you dutifully parrot here, which is also why I'm here challenging you now on this topic. And yes I assume you are familar with the legal concept of estopppel.

This isn't about vague conspiracy theories, it never was, rather these are real cases with real fact patterns that you ignore not I. If you had bothered to listen to the oral arguments on both Kodrin and Dickerson you'd appreciate why those two cases, which insurers represented to the 5th circuit as having identical issues went in two vastly differing directions.

As to your stange personal viewpoint that decades of case law requiring an insurance company to properly adjust their claims in good faith are somehow trumpted by your contrived concept of personal accoutnability I'll add I thought this was a law blog when it came to analyzing these cases. Blanket denials do not constitute an adjustment buttercup, they never have in any court we can find.

If the treasury is to be reimbursed let it be the people, the so called claims professions at State Farm, that wrote the check and stuffed it into the Kodrin's pcokets. State Farm was not only paid by the NFIP and they also had a fiduciary duty to the NFIP to properly adjust the claim which the court results indicate they didn't.

sop

You have to differentiate between arguing with me and venting about something else that is bugging you. I'm not making any "amounts don't add up" in the sense you are talking about -- offsets and the like. Instead, what I am saying is a point I've made many times, that the "massive fraud" argument that was so consistently advanced -- and your statements are a subset of that point of view -- could only include a relatively fractionaly portion of the total Katrina claims, because you need to have several conditions present for the argument to even be plausible. I've listed those conditions any number of times as I suspect you know, so I won't repeat myself here. If you don't remember you can look it up. The point was made most recently by Judge Senter in the Qui Tam opinion I posted about earlier this week.

"Bothered to listen to"? Do you imagine I have the time or inclination to fly around the country listening to oral arguments so I can blog about them? I've got oral arguments of my own to make and prepare for.

I haven't ignored Dickerson or other cases, except insofar as I was too busy to blog. I imagine at some point I will discuss the Fifth Circuit decision in Dickerson, as well as a lot of other stuff, such as the market conduct survey of State Farm, which I have also not written about. This is just a hobby. I have a full time job and then some.

As for personal accountability, I don't think it's strange to ask how acceptance of flood money can be proper if the payment was fraudulent in the first place. No one has ever answered that question, up to and including now. I never claimed the flood payments were fraudulent, so I don't claim their acceptance was fraudulent either. Instead, I ask those who say the payments were fraudulent why it is OK for people to knowingly accept fraud money. I don't point the finger at those who accepted the money. Rather, my purpose is to show the argument, by its own terms, is based on ideology rather than reason. It's just an element of faith for some people, you included, apparently.

Nice posting on both parts. I do not understand where David keeps refering to a conspiracy theory. Did I miss something? I like a conspiracy theory as good as the next fella. But I can't follow the one David is mentioning here. It just confused me about David's position. Are you trying to say there is some type of conspiracy going on in regards to these cases? That would be news indeed.

Welcome back, David, by the way. SOP, as for your question about wind payments and no flood payments, I'm guessing there were, oh, tens of thousands of them about the surge line, if not hundreds of thousands.

Steve, the conspiracy theory being floated about by those who think the insurance companies are always in the wrong and the conusmer is always right is the insurance companies all got together to defraud the policyholders and the government. They did this by allegedly pressuring claims adjusters to falsify reports, by using the NFIP when allegedly, according to those who hate insurance companies, every one of those homes were really wind damaged, etc.

Yeah, I'm being way over-dramatic and definitely over the top but I think you get the idea.

Underdog touche'. I do remember State Farm advancing nominal amounts early on such action helped assure policyholders their claims would be adjusted. The poor wording on my part is mixing the terms "payment" and "adjustment" which we now know from the MID examiner evidence of which was missing from close to a quarter of the wind-water files he examined.

It would be wrong not to give props to State Farm for the early bone they did throw their policyholders and you are right, State Farm did advance small sums early on.

sop

As we are talking in a larger arena than just Louisiana about the effect of accepting a flood coverage payment, may I remind you all that Judge Senter has held "that acceptance of flood insurance benefits is an admission by the recipient that the insured property was damaged by storm surge flooding to the extent of the SFIP benefits accepted." Sanders vs. Nationwide Mut. Fire Ins. Co.