Plaintiff rests in Weiss v. Allstate Katrina case, judge rules against double-dipping

I made the call repeatedly over the last week: you can’t double-dip on multiple indemnity insurance policies.  The purpose of indemnity insurance is to make you whole, to restore the value of what is insured, not function as a profit-making enterprise. So it’s no surprise to me that, in this story by Mike Kunzelman of the Associated Press on the Weiss v. Allstate case in Louisiana, the judge will instruct the jury to take into account that the policyholders have already received $350,000 in flood insurance money:

"That money cannot be recovered again in this case and I will instruct the jury to that effect," U.S. District Judge Sarah Vance said in response to a request from Allstate.

Vance made the announcement from the bench while the jury was out of the courtroom and after lawyers for homeowners Robert and Merryl Weiss of Slidell rested their case against Allstate.

Sometimes you have to be there to really figure out the context of a statement, but this position by the plaintiffs’ lawyer didn’t leap off the page at me as making a whole lot of sense:

"We’re not trying to get double recovery by any means," the Weisses’ lawyer, Richard Trahant said after Vance’s announcement. But he added that Allstate shouldn’t get credit for money supplied by federal government through the flood insurance program.

Hold on a minute.  If Allstate doesn’t get an offset for the money paid by another source, that is the definition of double-dipping — drawing on multiple indemnity sources for the same risk.  

The story says the trial continues today. 

3 Comments

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3 Responses to Plaintiff rests in Weiss v. Allstate Katrina case, judge rules against double-dipping

  1. Brian

    Do you agree with State Farm that if homeowners accept an SBA disaster loan, they lose standing to sue the insurer for the loss? Are homeowners required to refuse all flood payments or federal assistance in order to pursue a windstorm claim against the insurer?
    The homeowners should not collect more than their loss, unless there are noneconomic damages, but the insurer should not be able to reduce liability by overpaying the flood policy. If the jury rules that the roof was blown off before the surge, shouldn’t Allstate pay for some of the contents loss? Why can’t the court require Allstate to reconcile with the flood program? In Mississippi cases, Judge Senter has implied that the payment of policy limits on flood policies may not have been appropriate. His rejection of the Scruggs-SF settlement included a rejection of the proposal to automatically deduct the flood payments from what State Farm owed.

  2. Insurers do not receive subrogation rights to pursue another for payments they made unless the payments were on another’s behalf, in other words, if the same risk was covered. My homeowners insurer doesn’t get a whack at my auto insurer just because the homeowners insurance paid a claim to me.
    What the “same risk” is is sometimes a matter of debate when you are talking about damage occurring over a lengthy period of time, like environmental pollution. But although the house was the object of each indemnity agreement, the risk insured on the house was different and mutually exclusive. It’s a parlor trick to say this means you can collect twice: the value of the house is the maximum you can be indemnified for, and you can only collect under each policy if the other policy isn’t implicated. The arguments to the contrary were not really all that sophisticated. So there is no subrogation right of Allstate against the government.
    Also, why should an insurance company be penalized because someone claimed flood damage, had it adjusted by FEMA and not the insurance company, and accepted by the policyholder? A contract is a contract. If I have an indemnity contract with my neighbor to pay me the value of my car if it is stolen and one with you to pay the value if it is vandalized, you will not take it well if I tell the neigbhor it was stolen and accept his money, and then tell you it was really vandalized and I took the neigbhor’s money because I was without a car and needed to get money to buy a new one right away. You would probably take it even less well if I tell you you can just go ahead and pay me again and then get the money back from the neighbor. You know what the neighbor would say? Why are you asking me for the money? He’s the guy whose driving two new cars!
    I don’t know specifically what happened to the house, but people can’t take money from two sources for different causes that would result in payments for more damage than there was. If there was wind damage that was over and above the flood damage and less than the value of the house, theoretically they have a right to collect more wind insurance. If not, and they say they took too much flood money, they should give back the portion they took from the taxpayers that was in excess of what was due them. That argument isn’t very appealing, is it? But why should the policyholders get to say the insurers are ripping off the taxpayers when it is the policyholders who took the money? If they say the money was ripped off from the Treasury, then they participated in ripping it off and should pay it back and get the money from the insurance companies.

  3. Brian

    Allstate handled the flood claim AND the wind claim under the single adjuster program. NFIP does no oversight. The WYO program is administered by CSC, a private contractor who also sells adjusting software to the carriers. The whole system is rigged. Allstate, State Farm, and other WYO companies have a contract with NFIP in which they have a fiduciary reponsibility to the federal taxpayers to adjust the claim fairly and not place their own interests ahead of NFIP’s interests. They violated that contract. They went out and paid policy limits in the surge zone before they made any attempt to determine what damage may have been caused by wind. Then, as the FAEC emails show about State Farm, they rigged the reports by threatening/coercing/bribing supposedly independent engineering firms to blame flooding for all damage. One of the articles says that Allstate actually increased the amount of contents loss in the flood claim beyond what the Weiss had filed. It is not really the homeowners job to figure out how much was due do to wind and how much was due to flooding. That is Allstate’s job. Allstate cannot be allowed to assume flooding and make the homeowner prove wind. If Allstate says the damage is excluded, then Allstate must have the burden to prove that.