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Allstate Hit With $2.8 Million Verdict on Katrina Claim

A New Orleans federal jury has awarded a Louisiana couple $2.8 million against Allstate Insurance Co., finding that the insurer wrongfully failed to pay for Hurricane Katrina's damage to their home.

After a six-day trial in the U.S. District Court for the Eastern District of Louisiana the jury awarded Robert and Merryl Weiss $561,600 for wind damage to their Slidell home and its contents.

The jury then added $750,000 in statutory bad-faith compensation and $1.5 million in punitive damages for Allstate's refusal to pay the couple's claim within 60 days of receiving proof of the loss.

Allstate had argued unsuccessfully that storm surge, which was not covered under the couple's homeowners insurance policy, caused nearly all the damage to the home.

Allstate spokesman Mike Siemienas said the jury's verdict shocked the company.

"Allstate believes it acted in good faith throughout the entire claims process with the Weisses," Siemienas said. "We will review our options including appeal."

The Weisses sued Northbrook, Ill.-based Allstate in the New Orleans federal court in July 2006.

According to the complaint, separate homeowners and flood insurance policies issued by Allstate covered the couple's home, located on the north shore of Lake Ponchartrain.

Court records said the homeowners policy had limits of $343,000 for the dwelling, $34,300 for other structures on the property and $240,100 for the contents.

The policy covered wind damage but specifically excluded losses caused by storm surge.

The flood policy provided $250,000 in coverage for the building and $100,000 for the contents.

Hurricane Katrina struck Aug. 29, 2005, with the eye passing just east of Slidell. In some locations the storm packed peak sustained winds of more than 120 miles per hour and a near 30-foot storm surge.

The Weisses alleged in their suit that the storm totally destroyed their home, leaving only a concrete slab and some fallen columns. They filed claims under both their homeowners and flood insurance policies.

According to the complaint, Allstate hired Houston-based engineering firm Rimkus Consulting Group to assess the cause of the damage. Rimkus sent two engineers to inspect the property in November 2005.

The Weisses alleged that the engineers initially told them that Katrina's winds had caused the majority of damage.

However, following a four-month delay Allstate gave the couple an engineering report that said storm surge was the main cause of the damage, according to the complaint.

Allstate paid the limits of the flood policy. However, the insurer only paid $42,128 for damage to the building and $14,787 for damage to the contents under the couple's homeowners policy, court records said.

The Weisses alleged in the suit that the $292,128 paid by Allstate for damage to the dwelling, including the $250,000 from the flood policy, was insufficient since the home's value was $775,000.

They said the flood affected only the first floor and that hurricane winds caused the vast majority of the damage.

Allstate refused to pay any additional benefits, arguing that the remaining damage to the home was caused by storm surge.

At trial the couple presented evidence purporting to show that the house was built high enough above sea level that the storm surge never reached it.

Allstate attempted to show that the sustained winds in Slidell never reached speeds that could destroy the house.

The jury overwhelmingly accepted the Weisses' arguments and rejected Allstate's evidence.

It not only found that Allstate breached its contract but also held that the insurer acted in bad faith by wrongfully refusing payment of the homeowners claim.

Hundreds of Louisiana and Mississippi homeowners have filed similar lawsuits against their insurers over denials of Hurricane Katrina claims. The Weisses' case is only the second to proceed to trial in Louisiana federal court so far.

The first case, also filed against Allstate, abruptly ended in February before a jury could hear closing arguments.

The plaintiffs, Lawrence and Elizabeth Tomlinson of Marrero, La., dropped their suit without explanation after the close of evidence.