Katrina Homeowners Can't Be Certified as Class, Fed. Judge Says

A Louisiana homeowner's lawsuit claiming State Farm underpaid his Hurricane Katrina claim cannot proceed as a class action because the insurer's defense will require proof on a case-by-case basis, a federal judge in Louisiana has ruled.

Billy Melancon says State Farm failed to sufficiently account for the overhead and profit that general contractors were charging in the wake of Katrina and Hurricane Rita.

Melancon's home in Buras, La., was damaged by Katrina, which struck the Gulf Coast Aug. 29, 2005.

He alleges the insurer adjusted his claim based on estimates of 10 percent overhead and 10 percent profit, when general contractors were charging much more than that post-Katrina and Rita.

His lawsuit in the U.S. District Court for the Eastern District of Louisiana is part of a larger action.

Here, Melancon sought to certify a class of State Farm policyholders whose homes were damaged by Katrina and/or Rita and whose repairs, in State Farm's view, required a general contractor to oversee the project.

Ruling on Melancon's motion to certify the class, U.S. District Judge Sarah S. Vance said the plaintiff proposed an "adequately defined and clearly ascertainable class."

The problem, she said, was that State Farm's defense would require proof on a case-by-case basis, such that individual questions would predominate over class-wide issues.

State Farm is entitled to argue that its payments were reasonable, and to do that it would have to present evidence specific to each class member's situation, the judge said.

In some cases State Farm may have paid for a general contractor's services when they were not used, so those class members would not have been damaged by the alleged underpayment of overhead and profit, the judge said.

In other cases, she said, the general contractor participated in the claim adjustment process, agreeing to accept a single, total amount from State Farm for the repair job.

For those situations, Judge Vance said, it would be hard to separate the overhead and profit from other elements involved in adjusting the claim.

"In the end," she said, "plaintiff's breach-of-contract claim is an adjustment dispute that is inappropriate for class certification."

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