I have been thinking about the issues of allocation of proof between the insured and the insurer since the day I read Judge Senter’s opinion in Broussard v. State Farm, and a couple things have troubled me:
1. Everyone knows that an insurer has the burden of proving an exclusion. But does that mean that, upon the introduction of any bit of evidence by the insured that a loss may be covered, even if the evidence is speculative, way out there or in the "Abracadabra" category, the insurer must then nail the damages down to the penny or face a directed verdict that it hasn’t proven the exclusion? Senter has said in other cases that the insured’s responsibility is to show that covered damage occurred and how much of it there was.
2. Why couldn’t a reasonable jury weigh the evidence as to what kind of damage happened and decide? Why did Senter believe he had to direct the verdict? For example, couldn’t the jury have decided that several thousand dollars in shingle damage occurred, but that a couple hundred thousand dollars of damage was caused by a surge of water that flattened the Broussards’ home?
In case you don’t have it handy, here is a pdf of Senter’s opinion.
I was reading an article my friend Randy Maniloff wrote for National Underwriter’s FC&S publication on Broussard. It came out yesterday, and here is a pdf of the article. It’s very good and written with the usual attention to detail and skill you expect from Randy. In the article, Randy says the Broussard opinion is a lot of hat and very little cattle when it comes to the law. I have to agree. As Randy has pointed out before, Senter’s opinion relied on one case, Lunday v. Lintz, which is not an especially strong case or an intellectual discourse on the allocation issue. Randy also brought up the State Farm appellate briefing on allocation in the Tuepker v. State Farm case, another Katrina case in Senter’s court. That briefing relied on some stuff about burdens shifting back and forth, and I found myself swaying in my chair, I didn’t really like it. I don’t think there are any shifting burdens. It’s simpler to say it the way I said it in the questions above. This issue of the insurer having to prove exclusions gets distorted, and people lose sight of the fact that the insured has to establish damages in the first place, they can’t just dance in with a smile and a happy tune, they have to show something real.
Randy also points out that Senter has never cited what Mississippi caselaw supports the imposition of punitive damages on State Farm. This is true, and it is potentially a troubling development to hold an insurer liable for bad faith for its failure to pay a claim after a lawsuit is filed against it. As I understand Senter’s opinion, he said the lawsuit does not toll the insurer’s duty to pay, but instead the clock is ticking the whole time. But isn’t that what a lawsuit is for, to determine whether the prior denial was in bad faith?