Law Reviews are where the academic discussions of law are openly published. While in law school, I was fortunate to serve as the Executive Editor on the University of Florida Law Review. The experience enabled me to research, correct and debate with law professors and scholars about points of law and how they should be framed for public review. Last week, the Mississippi Law Journal published an article, William F. “Chip” Merlin, Jr., Corban v. USAA: A Case Providing Far Too Little Because It Was Rendered Far Too Late, 79 MISS. L.J. Supra 129 (2010), which I humbly suggest may help many understand the issues related to the anticoncurrent clause in cases involving storm surge. I strongly urge you to read it if you are an attorney representing policyholders. For everybody else, it is another example of how I can make sleep potions better than anything you can find at the pharmacy.
The Readers Digest introduction to this article is:
To understand the significance of the Mississippi Supreme Court’s decision in Corban v. USAA, it is necessary to consider the financial devastation and unnecessary insurance coverage litigation caused by the absence of it during the four years from the date Hurricane Katrina hit Mississippi’s gulf coast. During that time, insurers used the relatively untested Anticoncurrent Causation Clause (ACC), intervening Fifth Circuit Court of Appeal decisions interpreting it, and a new adjusting method called the wind/water protocol to wrongfully deny or underpay thousands of claims.
The property damage caused to Mississippi’s gulf coast during Hurricane Katrina was unprecedented in that the tremendous amount of damage was caused by both storm surge and wind. Shortly after the storm, Mississippi officials estimated that 90% of the structures within half a mile of the coastline were obliterated. Indeed, in the thirteen months following the storm, there were 263,774 insurance claims made in Mississippi’s six coastal counties alone. Most structures were insured by all-risk policies. Under traditional insurance adjustment rules, all-risk policyholders bear a minimal burden to establish that a “direct physical loss” was sustained and the dollar amount of their loss. Insurers are then required to prove the amount of the excluded or uncovered loss. Most all-risk policies also contained an exclusion for flood. Faced with the prospect of paying for thousands of slab or tremendously damaged homes, many insurers adopted the position that, where storm surge occurred, the claim would be denied unless there was physical evidence demonstrating wind damage. This was the wind/water protocol. Since there was usually no physical evidence remaining on a slab, many of the most catastrophic losses were denied with little or no investigation. To justify these denials, insurers cited the relatively new and untested Anticurrent Causation Clause. Several insurers also adopted a method of claims adjusting where claims for property that suffered flood damage were denied in whole unless the insured could prove a portion of the loss was attributable to wind alone.
The bottom line conclusion is:
…This shows that the true problem at the heart of the Katrina litigation remains. Insurers are using their vast resources to evade their responsibilities under the policies they wrote. The individual policyholder who has lost everything in a catastrophe is not a formidable opponent for an insurer. Most often, the policyholder is in a state of financial and emotional crisis.
Policyholders have a right to expect that the insurance they purchased, often for tens of thousands of dollars over the years, will provide the benefits they bought. Before Corban, the Fifth Circuit held that insurers had an arguable basis to deny claims and shift their burden of proof based on the ACC or wind/water protocol. I believe the Court would be hard-pressed to reach the same conclusion now.
In the end, Corban was a victory for policyholders, but a hollow victory because it came far too late for most Katrina victims to benefit from it. During the four years from the time Katrina obliterated the gulf coast to the date Corban was released, those who lost everything were further victimized by insurers that manipulated words or phrases in complex and difficult to understand policies to wrongfully deny and underpay millions in claims. Homes and businesses were lost and lives changed; there is no way to calculate the true devastation. Unless you have lost everything and have had your insurance denied, it is hard to comprehend how frustrating being embroiled in a sea of insurance lawyers can be—it is a curse at best.
While Corban cannot fix the ruin that resulted from insurers’ evasions of their obligations, every loss presents opportunities. Policyholders are taking more responsibility for the insurance they purchase and recognize that flood coverage is essential. Policyholders are demanding meaningful oversight and regulation of insurers by the Departments of Insurance. Most importantly, there is a movement to strengthen legislation that protects policyholders and exacts a high price from insurers that wrongfully deny, delay, or underpay claims. Corban will provide guidance in these efforts. (emphasis added)
Most of the Hurricane Katrina litigation is completed in Mississippi. The same issues are now raging in Texas from Hurricane Ike. They will appear again. As a result, I humbly suggest those involved with first party insurance coverage decisions should fully understand all the subtle and significant issues raised in this work.