State Farm: We're Paying Wind Damage Claims

April 7, 2006

State Farm Fire and Casualty Co. is paying for Hurricane Katrina property losses when evidence shows that wind caused the damage, James Burwell, claims manager, wrote in a letter to the Mississippi Insurance Commission.

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But this is news to policyholders whose claims have been denied.
"State Farm is paying for wind damage that can be substantiated," Burwell's letter says. "We are seeking proof that wind caused the damage to the item or items being claimed.

"When evidence shows that the hurricane winds (or objects driven by those winds) and rains entering the insured premises caused by the hurricane winds proximately caused damage to the insured property, those losses will be covered under the policy, and this will be the case even if flood damage, which is not covered, subsequently occurred."

Bay St. Louis attorney Randy Santa Cruz of the Merlin Law Group responded: "Yeah, sure they are. The thing is that they're turning a blind eye to the evidence. They're not finding any wind damage."

Santa Cruz is handling a case in which he says an engineer's report prepared for the company was altered to show all damage was caused by storm surge. Other claims have been denied even when reports show wind damage, he said, because State Farm policy language says damage is not covered when an excluded event, in this case water, contributes.

"We're seeing that the deck's stacked against the insured, that these engineering reports are being altered, that they're hiring engineering firms that aren't independent of the insurance companies or the insurance industry, and they're putting out these engineering reports that say all the damage was caused by storm surge regardless of the evidence."

State Farm spokesman Fraser Engerman said the company would not address such allegations.

"We haven't seen any proof,'' he said.

In regard to coverage for wind damage, he said the company's letter speaks for itself. The letter lists five ways the company determines the cause of loss: evidence gathered from site inspections, evidence gathered from neighboring locations, data from damage reports, information from policyholders and witnesses, and expert input.
Insurance Commissioner George Dale wrote State Farm on March 24 to demand an explanation of how the company was handling claims.

The same day, a federal judge ruled that insurance companies cannot use ambiguous policy language to deny wind coverage.

Diamondhead property owners Ken and Judy Dutruch feel that is exactly what State Farm has done in their case. Despite extensive evidence of wind damage that Judy Dutruch has collected, the company continues to deny her claim. She wants to know what, exactly, her policy with a "hurricane endorsement" did cover.

She is one of the homeowners whose complaints prompted Dale to write State Farm and demand an explanation.

Did the letter allay Dale's concerns?

Dale said: "Let's hope that this corrects it."