USAA lost a jury bad faith trial in Mississippi with a $10 million verdict against it. The plaintiff policyholders are Paul Minor and his deceased wife. Paul Minor was a premier Mississippi trial lawyer and member of the Inner Circle of Advocates. For several weeks we discussed his upcoming bad faith trial against USAA, which arose out of Hurricane Katrina. Hurricane Katrina struck in 2005. This must be the last Hurricane Katrina case.
This was the second trial of this case. The first one resulted in Minor winning his contract damages, but the trial judge prevented the bad faith case from going to the jury ruling in favor of USAA. The appellate court reversed that trial decision.1 Students of bad faith cases should study the appellate decision. The obligation of a full investigation requires insurers to look at all available information, including underwriting information:
On at least two occasions before Hurricane Katrina, in 1994 and again in 2001, USAA sent underwriters to visit the Minors’ property. The purpose of these visits was for USAA to evaluate the underwriting risk and determine the appropriate premium to be charged. Thus, before the storm and the damage, USAA had a substantial amount of information about the Minors’ property that would be, and ultimately was, useful in the adjustment of the Minors’ claims. This was evidence that USAA had detailed information in its possession from the beginning of the Minors’ claim that it did not use; and had USAA used the information in a timely manner, the Minors’ claims would have been paid much sooner. In fact, once USAA used this information, it issued a supplemental check for damage to dwelling/other structures. The Minors correctly argue that this information was at all times available to USAA, as it was part of USAA’s corporate records.
From the time the claim was initiated, USAA had in its possession the 1994 and 2001 inspections and appraisal reports that established and set the value of the structures and contents; along with detailed diagrams showing square footage of the home, guest house and other structures; in addition to the numerous photographs of these buildings showing the location of all windows (approximately 90) and the unique floor-to-ceiling glass doors and windows that are 360 degrees around the house. Included in the appraisal reports were numerous photographs that depicted the Minors’ personal contents located in every room in the house and ‘special features’ that discussed the high quality of their personal property, i.e., ‘antique rugs throughout the home’; ‘special marble’; ‘fine arts and expensive jewelry’; and ‘a collection of fine wine’…the wine cellar.
The appellate court noted one comment in the USAA claims file about the state of mind of USAA’s claims leader not wanting to fully pay for what was damaged:
Also, USAA had an engineer’s report entered into its Information Management System (IMS) by adjuster Teri Bergstrom that put USAA on notice that all the window systems had been damaged by the wind forces of Katrina, along with her ‘confidential’ conclusion that this report makes USAA ‘accountable to replace all the windows and opens’ up payment for ‘contents in all the rooms (the entire house) with windows.’ The confidential memo, which was not entered in the IMS, included a comment by Bergstrom about what their USAA team leader would think about the engineer’s window observations: ‘If we’re paying for all the windows it would open up contents in all the rooms with windows. You may want to discuss this with your team leader.’ Bergstrom’s final words were, ‘You know he won’t be happy w/that.’
Based on this information, it appears that USAA’s adjuster concluded that USAA was accountable to pay for the losses to contents in the entire home. Yet USAA did not make a payment for loss of contents for almost four years, until May 2013, approximately three months before the commencement of the trial, and for only $67,864.23.
This is certainly evidence that there is a genuine issue as to a material fact in dispute as to why USAA had engineering information in its possession, since March 2006, that concluded all of the windows in the main structure were destroyed by wind and that would make USAA liable for all of the contents in those rooms; yet no payment was made until just before the trial. There was also evidence that there is a genuine issue as to a material fact in dispute as to why USAA told the Minors, in a letter dated June 18, 2006, that ‘based on its engineer report’ USAA would only consider payment for contents on the southern elevation, when the engineer and the USAA adjuster had said the insurance company was accountable for contents in all of the rooms.
We find that this evidence was sufficient to conclude that there was a genuine issue of a material fact in dispute as to whether USAA had an arguable and legitimate basis to deny or delay payment to the Minors.
When I read this decision, I wondered how many other USAA policyholders were subject to that type of claims culture and mindset. Insurance claims leaders should be looking to fully and promptly pay policyholders for their losses. They should not be unhappy to do so.
So, the case went back to trial and now results in a very public and embarrassing bad faith verdict against USAA for actions that happened long ago. A news report indicated in part:
Attorneys Jim Reeves and David Baria represented the estate. ‘This verdict should send a message to insurance companies that in the future when dealing with hurricane losses, the companies must promptly pay the claims that are owed,’ Reeves said in a statement.
Evidence in the case indicated that USAA took more than seven years to pay certain claims presented by the Minors and did so only after a lawsuit was filed.
Paul and his attorney seemed pleased when I spoke with them last night. After the call, I thought, “now comes the post-trial motions by USAA, and will it appeal this verdict?”
Thought For The Day
It ain’t over till it’s over.
1 Estate of Minor v. United Serv. Auto. Ass’n, 247 So. 3d 1266 (Miss. App. 2017).