USAA lost a bad faith jury trial in Mississippi with a $10 million verdict against it. The plaintiff policyholders are Paul Minor and his deceased wife. Paul Minor was a leading Mississippi trial attorney and member of the Inner Circle of Advocates. For several weeks we discussed his upcoming bad faith lawsuit against USAA, arising out of Hurricane Katrina. Hurricane Katrina hit in 2005. This must be the last case of Hurricane Katrina.
This was the second trial in this case. The first resulted in Minor winning his contract damages, but the trial judge prevented the bad faith case from going to a jury verdict in favor of USAA. The Court of Appeal overturned that trial decision.1 Students in bad faith should study the appeal decision. The duty to make a full investigation requires insurers to look at all available information, including insurance information:
On at least two occasions before Hurricane Katrina, in 1994 and again in 2001, USAA sent underwriters to visit the minors’ property. The purpose of these visits was for USAA to evaluate the insurance risk and determine the appropriate premium to be charged. Thus, prior to the storm and the damage, USAA had a significant amount of information about the minors’ property that would be, and ultimately was, useful in adjusting the minors’ claims. This was evidence that USAA had detailed information in its possession from the beginning of the minors’ claim that they did not use; and had USAA used the information in a timely manner, the minors’ claims would have been paid much sooner. Once USAA used this information, it actually issued a supplemental check for damage to the home/other structures. The minors correctly argue that this information was always available to USAA, as it was part of USAA’s corporate records.
From the time the claim was initiated, USAA had in its possession the inspections and appraisal reports in 1994 and 2001 that established and determined the value of the structures and contents; along with detailed diagrams showing the square footage of the home, guesthouse and other structures; in addition to the many photographs of these buildings showing the location of all the windows (about 90) and the unique glass doors and floor-to-ceiling windows that are 360 degrees around the house. Included in the appraisal reports were a large number of photographs depicting the minors’ personal contents in each room of the house and “special details” discussing the high quality of their personal property, i.e, ‘antique rugs throughout the home’; “special marble”; “art and expensive jewelry”; and “a collection of fine wine”…the wine cellar.
The appeals court noted a comment in USAA’s claims file about the state of mind of USAA’s claims manager who did not want to pay in full for what was damaged:
Additionally, USAA had an engineering report entered into its information management system (IMS) by adjuster Teri Bergström alerting USAA that all window systems had been damaged by Katrina’s wind forces, along with her “confidential” conclusion that this report makes USAA “responsible for replacing all windows and opens” up payment for “contents in all rooms (whole house) with windows.” The confidential memo, which was not entered into the IMS, included a comment from Bergström about what their USAA team leader would think of the engineer’s window observations: “If we pay for all the windows, it would open the contents of all the rooms with windows. You might want discuss this with your team leader.’ Bergström’s last words were: “You know he’s not going to be happy about it.”
Based on this information, it appears that USAA’s adjuster concluded that USAA was responsible for paying the losses to the contents of the entire home. Yet USAA did not make a payment for the loss of content for nearly four years, until May 2013, about three months before the lawsuit began, and for only $67,864.23.
This is certainly evidence that there is a genuine issue of material fact in dispute as to why USAA had engineering information in its possession, since March 2006, which concluded that all windows in the main building were destroyed by wind and which would make USAA liable for all contents in these rooms; but no payment was made until shortly before the trial. There was also evidence that there is a genuine issue of material fact in dispute as to why USAA told Minor, in a letter dated June 18, 2006, that “based on its engineering report” USAA would only consider payment for the contents of the southern height, when the engineer and USAA adjuster had said the insurance company was responsible for the contents of all rooms.
We find that this evidence was sufficient to conclude that there was a genuine issue of material fact in dispute as to whether USAA had an arguable and legitimate basis for denying or delaying payment to the minors.
When I read this decision, I wondered how many other USAA policyholders were subject to that type of claims culture and mindset. Insurance claims managers should make sure to fully and promptly pay policyholders for their losses. They should not be displeased to do so.
So, the case went back to trial and now results in a very public and embarrassing bad faith judgment against USAA for actions that happened a long time ago. A news report indicated in part:
Attorneys Jim Reeves and David Baria represented the estate. “This ruling should send a message to insurance companies that in the future when dealing with hurricane losses, the companies must promptly pay the claims that are owed,” Reeves said in a statement.
Evidence in the case indicated that USAA took more than seven years to pay some claims made by the minors and did so only after a lawsuit was filed.
Paul and his lawyer seemed pleased when I spoke to them last night. After the call, I thought, “now the post-trial motions are coming from USAA, and will it appeal this ruling?”
It’s not over until it’s over.
– Yogi Bera
1 Estate of Minor v. United Serv. Car. Ass’n, 247 So. 3d 1266 (Miss. App. 2017).