Insurance Law

Reaction to Fifth Circuit's Broussard opinion

By David Rossmiller

I base a lot of my evaluation about how good a written product is on how long it takes me to read it.  In this evaluation, time is relative -- I don't mind spending an hour reading something long, as long as I am able to progress from the front to the back without a lot of problems and unnecessary stops along the way to try to decipher the trail.  By those standards, the Fifth Circuit's Broussard decision was good writing -- relatively short, easy to read, easy to understand, not filled with judicial pomposity and ego-mania. I didn't have time on Monday to post commentary about the case, but I did read it, and because I was pressed for time, I appreciated all those attributes of the opinion.

Before we discuss the decision itself, here's another copy for you to follow along with.

I think it's a reasonable decision.  You may remember I have written quite a bit about the Broussard case, and from way back I have said that, in my opinion, a reasonable juror could have found for State Farm on the evidence presented, and therefore Judge Senter shouldn't have granted a directed verdict.  I can see why he ruled the way he did, I just disagree. I wouldn't want to commit to whether the jury that was in place at the trial would have found for the insurer -- it seems unlikely, given the benefit of hindsight.  But could a hypothetical reasonable juror find for State Farm?

You may remember Judge Senter's directed verdict from January 2007 -- here's a pdf of it if you haven't memorized it.  In it, he said that "No evidence has been introduced from which any finder of fact could reasonably determine what part of the loss of the Broussards' property is attributable to water as opposed to wind."  Now, this has perplexed me for a long time, and I have thought and thought trying to see how this could be right, and it has never quite added up for me. Instead, it has always seemed to me that, based on the evidence presented by State Farm's expert that there was a 75 percent chance that zero to 35 percent of the shingles on the roof were damaged by wind, and that a big storm surge hit that wiped out the house if it hadn't already been destroyed by a tornado, that this means you could take your pick as a juror and find along the entire scale.

You could find that no damage came from wind (zero percent of shingles times 75 percent chance of damage is still zero).  You could find that a little bit of damage came from wind.  Or you could find that a tornado destroyed the house and all the damage was due to wind.  I wasn't there, of course, at the trial, but I have talked to people who were, and I think I have some understanding of the evidence that was presented.  I could be wrong, of course, but this is how I see it.  The Fifth Circuit's reasoning appears correct.  

The burden of proof argument that State Farm put forward is one that, frankly, I did not understand in their appellate brief and saw as overly technical.  I tend not to pay a lot of attention to this business of who has what burden of proof at what point.  In reality, the practical rule is get the best proof you can, and then at trial, the insurer's proof has to be way better anyway to overcome the natural desire of the jury to smack them down.  I don't think much about who has the burden of proof -- instead I concentrate my energy on trying to work up the case so it's not close enough to worry about.  The Fifth Circuit said the State Farm "shifting back" argument wasn't correct under Mississippi law, and that seems like a reasonable conclusion -- the insured has to furnish evidence of an accidental physical loss to property, and the insurer has to prove exclusions.  I just never could buy into this shifting back and forth thing, it was like watching a tennis match, you had to keep turning your head to keep up with it.  I talked about that in some posts last year, too.

On the punitive damages portion of the opinion, it looks like the circuit court struggled for a while with the fact State Farm had paid nothing at all for wind damage even after its expert found evidence that some wind damage probably had occurred. 

Here, the circuit court's decision seems somewhat troubled by the insurer's conduct, but doesn't feel it rises to the level of punitive damages: "on remand the district court should consider whether additional actual or consequential damages are appropriate."  After the Broussard decision in the trial court, in Katrina cases I was keeping track of, I saw State Farm made sure to pay at least something before the case was ready to come to trial -- it was the fact they had basically paid nothing that led to the punitive damages, although the Fifth Circuit points out that the Broussards had in fact erroneously been advanced $2,000 for a flood policy that they didn't have.  This section of the opinion looks like it occupied most of the court's time and attention, and I think there must have been some considerable debate among the panel about whether the punitive damages should stick. 

The change of venue ruling, I can see that too. 

Of the four big Fifth Circuit Katrina decisions, Broussard, In re Katrina Canal Breaches, Tuepker and Leonard, I have real problems only with the last one. Not long after Leonard came out, I began to believe that the case's analysis of the anti-concurrent cause provision was erroneously overbroad and would cause mischief down the road unless it was corrected.  I said this because during Katrina litigation, insurers actually did not claim that the presence of any amount of flood damage obviated the requirement to pay for separate wind damage, even if the house was destroyed by flood.  However, now it appears that, based on the Leonard case, some insurers are doing just that. (Read down near the bottom of this post and take a look at the two opinions I cited, the Dickinson opinion by Judge Senter and the Maxus decision by Judge Smith in Missouri). 

Could the Fifth Circuit actually have intended that result, to allow an interpretation beyond that claimed by insurers? I doubt it, but Leonard is a good example of why you don't say more than you need to to make your point.  It is quite obvious Judge Jones did not fully know what she was talking about -- the fuzzy grasp of the terminology in the case, and the substitution with empty buzzwords  like "synergy,"  is a dead giveaway -- but that didn't diminish her confidence or her willingness to press ahead anyway.  There was a lot of loose talk in Leonard, all of it completely unnecessary to the decision too.  I wouldn't call Leonard judicial activism so much as I would call it proof of the truth of Will Rogers' maxim: "It ain't what you don't know that hurts you, it's what you think you know for sure that just ain't so."

Full post as published by Insurance Coverage Law Blog on April 10, 2008 (boomark / email).