Further Analysis Of Broussard v. State Farm

UPDATED January 15:  Also check out commentary at PointofLaw from Ted Frank and Michael Krauss on the Broussard case.  Thanks to George Wallace at Declarations and Exclusions and Mike the Actuary for the links, and to Ted Frank for the link at another blog he contributes to, Overlawyered.   Thanks also to Steve Rosenberg of the Boston ERISA & Insurance Litigation Blog for the link and kind words, and also to IDR Mediation Blog for the links, for the nice words of support and for placing me on the blogroll. 

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Here is a pdf of the rough draft of Judge Senter’s directed verdict ruling yesterday in Broussard v. State Farm.  It’s short and to the point, and pretty much what I had surmised without seeing it. 

Judge Senter said the plaintiffs had met their burden of showing covered property loss, shifting the burden to State Farm to establish by a preponderance of the evidence "the portion of the total loss attributable to excluded flooding and rising water. State Farm is obliged under its policy to pay all of the loss that it does not establish . . . to have been caused by flooding."  

Here are the key parts: 

It is without dispute that Hurricane Katrina was a windstorm.  Once this was shown, the burden was in place on [State Farm] to establish that plaintiffs’ losses were attributable to a cause that was not covered by the policy, in other words, flood.  [State Farm] attempted impermissibly to place the burden of proof on the plaintiffs that their losses were caused by wind damage, whether discernably independent or not.

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No evidence has been introduced from which any finder of fact could reasonably determine what part of the loss of the Broussards’ property is attributable to water as opposed to wind.  Accordingly, I find, as a matter of law, that State Farm has not met its burden of proof as to the segregation of this total loss into wind damages which are covered and water damages which are excluded from coverage.  State Farm has also failed to establish or to offer evidence that would support a finding that the insured property sustained no wind damage.  Since State Farm offered no evidence which would meet its burden of proof as to the damage caused by water, I find that State Farm is liable to the plaintiffs for the limits of coverage of coverage under their policy, the sum of $223,292.

Since I surmised Judge Senter’s reasoning already in my last post, I don’t have a lot to add, but I’m left with this question that I asked earlier: if an insurer cannot precisely allocate the damages between wind and flood, does reason tell us that no reasonable juror could make that allocation based on what is more probable than not?  Now, based on the jury’s award of $2.5 million in punitive damages, maybe the jury would have found the same way as Judge Senter.  However, the directed verdict standard is not whether the jury probably would decide the same way, but that no reasonable juror could find otherwise.  

5 Comments

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5 Responses to Further Analysis Of Broussard v. State Farm

  1. The problem here appears to be the striking down of the concurrent cause clause, which was designed precisely to avoid this sort of indeterminancy problem. Senter appears to be holding that the plaintiffs met their burden of proof that there was wind simply by showing there was a hurricane, and that the insurer has the burden to show that there was a flood. But there was a flood, so I don’t begin to understand why the fact of the flood doesn’t swing the burden right back to the plaintiff, and require a directed verdict in the other direction under Senter’s reasoning. Especially since there was more than circumstantial evidence that the hurricane winds didn’t cause the house to explode.

  2. More on Broussard v. State Farm

    Following up on Michael’s post: “It sets a horrendous precedent in terms of these cases when you’re talking about a policy sold in Mississippi providing wind coverage, but that has to pay several hundred thousand in water damages and several…

  3. Steve O

    I’d like to commend you on your excellent coverage and analysis of this trial. Please keep up the good work, it is extremely interesting.

  4. Plaintiffs go first at trial and show damage due to covered cause. If the defendant adduces any evidence, has the plaintiff sustained its burden (yes) and thus it is awarded its full proven damages. If the carrier puts the causation issue “in play”, it still has to overcome the plaintiff’s showing that and thus say that all the damage was caused by something excluded. This is the mixed causation problem, which plainly favors coverage. If a covered cause causes damage and an excluded cause subsequently causes damage, then coverage applies completely based on the first cause (as if the later one did not happen). We assume that the second event is essentially irrelevant — or that we don’t care that the subsequent event would have come along anyway.
    From what I can tell from the source materials so kindly posted by David in this and previous posts, the issues here really went off on order and burdens of proof along these lines.
    These same rules apply regarding bad faith with one key difference: while the insurer may be able to litigate the causation issues, for purposes of bad-faith law it is charged with knowing that, e.g., ambiguous policy language is construed against the insurer and the foregoing causation rules. Thus State Farm’s adoption of a method of adjusting claims that is inconsistent with the law would be a breach of the duty to act in good faith and treat the insured fairly. I lay out the bad faith argument in general at http://www.spriggs.com/news/pdfs/MSM-31.pdf, my long reconstruction of first-party bad-faith law substantively and procedurally, and in a more desultory fashion as befits the medium at my blog, http://www.insurancescrawl.com
    Marc Mayerson

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