A homeowner who claims Allstate Indemnity Co. failed to properly or promptly pay his damage claim after Hurricane Katrina took the witness stand in federal court Monday, kicking off testimony in the first trial for one of the several thousand such Louisiana lawsuits.
Lawrence Tomlinson and his wife, Elizabeth, accuse the Northbrook, Ill.-based company of bad faith and say the company underpaid them for wind damage that tore holes in their roof and let water rain into their home in the New Orleans suburb of Marrero.
The Tomlinsons also say Allstate didn’t start adjusting their claim after the Aug. 29, 2005, storm until Nov. 28 — more than the 30 days allowed by law.
“The whole house was a mess,” Tomlinson said, describing how water had pooled inside the home. “There was a lot of damage to everything.”
Allstate disputes the extent of the wind damage to the Tomlinsons’ home and accuses the couple of misrepresenting parts of their claim.
Jury selection was completed quickly Monday morning, despite U.S. District Judge Martin Feldman’s early fears that there were potential problems in finding an unbiased panel in southeast Louisiana, where Katrina caused widespread death and destruction.
The seven-member jury first heard arguments from the Tomlinsons’ lawyer, Christy Howley, who said the Tomlinson’s paid their premiums in a timely manner but didn’t get paid for their Katrina claims until after they sued in January 2006.
“And the one time they needed Allstate to step up to the plate, it didn’t happen,” Howley said.
Howley said Allstate ignored evidence of widespread damage to the Tomlinson home. She denied Allstate allegations that the couple tried to bill Allstate for renovation work not related to the storm.
Allstate attorney Judy Barrasso said Allstate already has paid $151,133 to the couple.
Insurer defends action
“You’re going to see that Allstate has paid them more than enough, but they want more,” Barrasso said. She said the Tomlinsons misrepresented parts of their claim and that Allstate paid them more than $30,000 for additional living expenses after they moved to office property that they already owned.
Tomlinson said they notified the company when they moved into his office building and misrepresented nothing.
Cross-examination of Tomlinson was scheduled to resume Tuesday morning and was expected to last several days.
Tulane Law School professor Ed Sherman said a victory for the Tomlinsons could embolden other homeowners to sue their insurers, but he downplayed the possible legal implications for the roughly 4,000 other Katrina lawsuits awaiting trials here in federal court.
“These are very personal, individual issues,” he said.
The Tomlinsons are challenging the manner in which Allstate adjusted and paid their claim, but not how the company interpreted its policy terms. In Mississippi, meanwhile, hundreds of homeowners have filed similar lawsuits challenging insurance companies’ refusal to pay for damage from Katrina’s storm surge.
The big issue: Wind or water?
The companies say their policies cover damage from a hurricane’s wind but not rising water, including wind-driven surge. This wind versus water debate — a central issue for many of the roughly 350 federal lawsuits still pending in Mississippi — isn’t a factor in the Tomlinsons’ case because their home didn’t flood.
A recent string of legal milestones for Katrina insurance cases in Mississippi has largely overshadowed the court battles between homeowners and insurers in Louisiana.
A jury last month awarded $2.5 million in punitive damages to a Biloxi, Miss., couple who sued State Farm Fire and Casualty Co. for denying their claim. A judge later reduced that award to $1 million but concluded the company acted in a “grossly negligent way.”
State Farm also agreed last month to pay about $80 million to settle lawsuits by 640 policyholders in Mississippi and pay at least an additional $50 million to thousands of policyholders who didn’t sue the company.
The latter “class action” portion of the settlement calls for State Farm to reopen, review and possibly pay up to 35,000 disputed claims. A judge has refused to approve this part of the deal without knowing more details, however.
Damages in the Louisiana cases are likely to be less than in Mississippi because Louisiana does not have unlimited punitive damages. It does have potential “bad faith” damages, but such awards are capped under a complicated formula.