Handling Katrina Claims
With the 2006 Hurricane Season just around the corner, insurers are racing against the clock to settle claims that are still pending as a result of Hurricane Katrina which struck the Gulf Coast Region in 2005.
Penalties of Not Having Offered Settlements
The states hit hardest by Hurricane Katrina - Louisiana, Mississippi and Alabama - have all imposed penalties upon insurance companies for unfair or deceptive trade practices, triggered by an insurer’s improper handling of a claim. Claims handling requirements are a matter of state law. Louisiana, for example, requires that all insurers make a written offer to settle a property damage claim within 30 days after receipt of a “satisfactory proof of loss” for that claim. LA. REV. STAT. ANN. Sec. 22.658 (West 2005). The insurer’s failure to make the written offer to settle, if found to be arbitrary, capricious or without probable cause, entitles the insured to statutory penalties of up to twenty-five percent on the amount due. Id. A “satisfactory proof of loss” has been defined under Louisiana law as occurring when the insurer has adequate knowledge of the loss. See Matter of Hanover Corp. of America, 67 F.3d 70, 73 (5th Cir. 1995).
In addition to having to contend with potentially strict penalties, insurers are adjusting claims in a climate of anti-insurer bias which has become far too common in the region. As reported by adjusters working in the region affected by Hurricane Katrina, local politicians are getting press coverage by making irresponsible comments about insurance coverage. For example, State Representative Emile “Peppi” Bruneau of New Orleans has declared that insurers have taken “an adversarial position” to their policyholders by declaring that flood damage caused by Katrina is not covered under a homeowner’s insurance policy. Bruneau has warned that “World War III” could break out if the companies “don’t change their position.”
With the storm of controversy surrounding the insurance industry, insurers hope that 2006 will bring a much calmer hurricane season.