Homeowners Insurance: A Shrinking Parasol?

When I first saw the title of this post at Terra Extraneus, I thought it was going to be about the reduced coverage available to folks along the hurricane costs.  However, it turned out to be about an Oklahoma case decided and reported in August 2005.  OK, I thought, this better be a pretty good post  to get me interested in a year-old case.  Well, I don’t agree with everything said, but it’s a pretty decent analysis of the case as well as a ripping good stem-winding rant against the insurer.

The insurer’s position in the case was this: a foundation slab that settled because of a pinhole leak in a pipe under the house that washed away the underlying sand base was excluded "earth movement," rather than covered damage from a sudden and accidental discharge from a plumbing system.  The policyholder said the opposite.  Now, if you take a roomful of coverage lawyers and analysts and ask them to vote on which is better, the insurer’s position or the policyholder’s, I would guess that the policyholder’s position wins the vote as the better interpretation of the two.  Strictly on the basis of which I think is the stronger argument, that would be my vote, too.  However, that doesn’t mean, in absence of controlling state law, that the insurer’s position was in bad faith, unreasonable or contrary to decent behavior, as the post implies, and in my view the Court of Appeals correctly reversed the jury verdict for bad faith and punitive damages.  My purpose here isn’t to defend insurance companies — I’m not exclusively insurer-side in litigation, have frequently represented policyholders and am acutely aware that insurance companies and those who work at them are fallible just like the rest of us.  But as far as instances of egregious insurer conduct are concerned, I just don’t see this as ranking up there in the top million. 

Here’s a link to the case so you can judge for yourself. (You may have noticed that in recent posts   I no longer acknowledge any need to put an apostrophe in "homeowners policy," when the words refer to a type of insurance policy and not the specific policy of a specific homeowner.  To me, the apostrophe in the phrase does not serve an explanatory purpose, inhibits communication by making people stop and wonder if it is right, and looks funny.  Therefore, unless I face a revolt by readers, I’ve exiled it from the blog).    

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