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Texas Judges Prep for Hurricane Ike Insurance Lawsuits

Dec 1, 2008 | Parker Waichman Alonso LLP

Judges in Texas are preparing for an onslaught of lawsuits related to Hurricane Ike insurance claims.  According to a report in the Associated Press, the judges don't want to be caught off guard like they were in 2005, when hundreds of victims of hurricanes Katrina and Rita sued their homeowners' insurance companies.

In October, the risk assessment firm Risk Management Solutions estimated that damage costs from Hurricane Ike could go as high as $21 billion. Another report from the Insurance Services Office (ISO) found that Texas led all other states in insured losses this year, owing mostly to the impact of Hurricane Ike, as well as Gustav and Dolly, on the state.  

While the Associated Press report said that few Texas policy holders have yet to file Hurricane Ike lawsuits, judges in that state expect things to change next year.  Shortly after Ike hit, the Texas Windstorm Association, the state's insurer of last resort, said it would not be paying for damage from storm surge, which they consider a flooding event.  Other insurance companies follow similar policies.

But consumer advocates argue that because storm surge is caused by hurricane winds, such damage should be classified as wind-caused.  "Though this is a predictable industry attempt to deny thousands of legitimate storm surge claims, this position is ludicrous." Alex Winslow, executive director  of the consumer group Texas Watch, said in an October memo to state and local officials. "After all, storm surge is a phenomenon peculiar to windstorms, which should be covered by windstorm insurance,”

The storm surge conflict was a major source of complaints among policyholders affected by Hurricanes Katrina and Rita in 2005.  Conflicts between Hurricane Katrina homeowners and insurance companies over the storm surge issue led to more than 1000 lawsuits against insurance companies, the largest number  ever to follow a natural disaster in the US.

A 2008 Government Accountability (GAO) report urged better assessment of “the accuracy of flood payments on hurricane-damaged properties.”   Insurance companies’ handling of damage claims from hurricanes, where both wind and water destroy property, needs closer government scrutiny, the report said.

Judges in Texas want to be ready if Hurricane Ike results in another deluge of lawsuits.  To that end, they have discussed appointing one judge as pretrial judge for all residential insurance lawsuits, the Associated Press said. The move could expedite initial court procedures and ensure consistent pretrial rulings.  The Associated Press said they hope to have a plan in place by January.