When an insurance company wrongfully denies a claim for damages, the injured may bring a lawsuit against the insurance company and seek the determination of a judge or jury that the insurance company should have compensated the insured for the injury. Sometimes an insurance company will admit liability, but will estimate the amount of damages at a sum less than the insured believes it should be. These situations may also give rise to a lawsuit. In these latter situations, the amount the judge or jury will decide is owed to the insured will often depend on the credibility of witnesses. A recent decision from the United States Court of Appeals for the Fifth Circuit, French v. Allstate Indem. Co., No. 09-30209, 2011 WL 1228281 (5th Cir. Apr. 4, 2011), illustrates the importance of the credibility of witnesses.

In French, the plaintiffs built their lakefront home in Louisiana in 2003 and insured it with Allstate. In 2005, Hurricane Katrina caused severe damage to the home. Allstate paid approximately $215,000 for wind damage to the building and the homeowners received approximately $172,000 from their flood insurer. The homeowners then sued Allstate, alleging that the $215,000 paid for wind damage was grossly inadequate. After a bench trial, the judge at the trial court level granted the homeowners an additional $123,000 for their home and an additional $10,000 for “other structures.” Allstate appealed.

The Fifth Circuit Court of Appeals reviewed the trial court record and affirmed the award of an additional $123,000 in damages for the plaintiffs’ home. The appellate court found that the trial court had three main bases for its determination of the amount:

1) The plaintiffs’ expert’s estimate was “persuasive” as to the amount of damage;

2) Allstate’s estimates had consistently “lowballed” the amount of damage;

3) The judge had visited the home and observed the damage firsthand.

The appellate court then went on to review the trial court’s evaluation of the witnesses’ credibility:

At trial, the Plaintiffs and Allstate provided damage estimates that were, in the district court’s words, “all over the board,” and thus the question of the cost of wind damage to the Plaintiffs’ home turned essentially on witness credibility. “The district court, as the finder of fact in a bench trial, is best positioned to evaluate the credibility of the witnesses.” Dickerson, 556 F.3d at 295. We are not persuaded that the district court’s findings are against the preponderance of credible testimony, as Allstate urges us to hold. On this record, a reasonable factfinder could conclude that the Plaintiffs offered the more credible account of the ACV of the wind damage to their home.

This part of the opinion illustrates how important it is to have credible witnesses and to put the fact-finder in a position to see the heart of the damage. In this case, the judge was able to visit the home firsthand. In many cases the judge or jury won’t have that luxury, and it will be up to attorneys to present photographs, videos, or other demonstrative evidence to support the amount of damage. In the end, credibility may very well be the deciding factor on whether the insured or the insurance company’s estimate will be used to determine the amount of damage.

Allstate also raised other issues with the award, including an allegation that the award would amount to a windfall to the insured, that the award would give the homeowners more than the policy limits, and that the homeowners were not entitled to replacement cost value. The appellate court rejected these other contentions.