All major businesses carefully construct a public image. Sometimes reality bumps up against the image with gale force winds. Insurance giant State Farm likes to present itself as a "good neighbor, someone you can count on." For nearly 700 homeowners whose homes were destroyed by hurricane Katrina, the good neighbor is beginning to look a bit like Jack Nicholson in The Shining. Picture a family huddled in the ruins of their home. A hatchet blasts through what's left of the front door and a grinning Nicholson says, "State Farm is here!"
State Farm has categorically denied insurance coverage for hundreds of homeowners in the wake of Katrina. The denials are based upon an engineering report developed by Haag Engineering, a Texas company founded in 1924 that specializes in failure and damage assessments. Famed attorney Dickie Scruggs says that the engineering report produced by Haag is "patently biased" because it concludes that Katrina's storm surge arrived before the wind could do any damage to policy holder homes. Because State Farm policies exclude flood damage, the claims of these 669 homeowners have been denied.
Scruggs has already lost one lawsuit when a court found that State Farm's policy of excluding damage from Katrina's flood waters are "valid and enforceable." So if the storm surge indeed destroyed the homes, these homeowners are simply out of luck. If, on the other hand, they can prove that at least some of the damage was caused by the winds that preceded the storm surge, they may be able to collect something. How much they collect will ultimately be determined by the courts.
Scruggs also claims in the lawsuit that many of the State Farm adjusters who inspected homes in Katrina's immediate aftermath told homeowners that wind damaged their houses hours before any water from the Mississippi Sound surged onto land. But State Farm apparently rejected their findings and fired, transferred or reassigned many of the adjusters. Exit Gregory Peck, enter Jack Nicholson. Depositions from current and former claims adjusters will make for interesting reading.
Good Neighbors versus Good Insurers
A good neighbor helps out, no matter what the circumstances. But that's not the way insurance works. Any help from an insurance company is contingent upon the language of a specific document. For hundreds of Gulf Coast residents, one thing is clear: their homes have been destroyed. Whether they will be reimbursed for their losses depends on whether the destruction came from wind or water. Good neighbors don't give a hoot about such distinctions, but insurers certainly do.