Insurance Law

Jury awards homeowners $64,000 in Aiken v. USAA, bad faith issue not sent to jury, engineering firm was previously dismissed

By David Rossmiller

It is a major story in Katrina litigation when an insurer goes to trial and doesn't get shredded by the jury.  By those standards -- by any standards, actually -- the $64,000 verdict against USAA yesterday in the Aiken case in federal court in Mississippi was a good result for the insurer and a less than satisfactory ending for the policyholders.

The case was somewhat unusual in that Rimkus Consulting Group, Inc., an engineering firm hired to evaluate Katrina wind vs. water damage to the home of David and Marilyn Aiken, was sued along with the insurer.   The Aikens alleged that Rimkus conspired with USAA to commit fraud and change an engineering report that was too favorable to the Aikens.

Allegations that insurers have falsified engineering reports are a standard part of many Katrina cases, but the allegations here didn't have quite the same steam behind them -- USAA paid the homeowners $178,000 in wind damages, unlike in some cases where insurers have paid little to nothing in wind damage for homes leveled by Katrina.  Still, the allegations against Rimkus and USAA were basically the same as those in another case last year involving Rimkus, Weiss v. Allstate, in federal court in Louisiana, where Allstate was pummeled by the jury, which awarded damages of more than $560,000 plus a bad faith verdict of $2.25 million. 

Here's a post I wrote about the Weiss case in April 2007, and here is a copy of the pretrial order in Weiss, where on pages 7-9 you can see the Rimkus allegations -- basically that the initial report was altered to deny wind damage, although Allstate did pay some $29,000 in wind damage.  In both the Weiss and Aiken cases, the insurer also paid, and the homeowners accepted, flood policy limits. 

In Weiss, the homeowners policy provided $343,000 in wind coverage plus a 20 percent rebuilding rider and $240,000 in personal property coverage.  In Aiken, the coverage was similar: $333,000 in dwelling coverage, plus a 25 percent rider for wind damage, and just under $250,000 for contents coverage.   In both cases, the plaintiffs alleged wind destroyed the home before storm surge arrived.

So why the big difference in the result between Weiss and Aiken? The difference in the amount paid by the insurer to the homeowner is one obvious difference, and the fact that the presence of Rimkus as a defendant in the Aiken case may have also made a difference.  In the Weiss case, allegations against Rimkus were not rebutted in the same way as they were in Aiken -- in the earlier case, it looked bad to the jury that the Rimkus engineer of record did not visit the site.  That was also true in Aiken, but with Rimkus as a defendant and its attorneys in the courtroom, there was more of an opportunity to explore what this meant -- according to those who closely followed the case, even the Aikens' experts admitted that they had issued reports on property damage without setting foot on the damaged property.  There may, of course, be other factual differences between the two cases I am not aware of, such as the credibility of the wind damage evidence presented by the plaintiffs.

The trial judge in Aiken, Judge L.T. Senter, Jr., last week granted Rimkus' motion for judgment as a matter of law and dismissed the engineering firm from the case. That had to make an impression on the jury. Here's a copy of his ruling on Rimkus, which is uncharacteristically lengthy. Whenever Senter goes past 20 pages, it's news, because often his writing is not just brief; by judicial standards it is downright laconic.  Not saying there's anything wrong with what he wrote here, mind you, I'm just sayin'.   

Yesterday's verdict (here's a copy of the signed jury form) for $64,000 appears to consist of a reversal of some of the depreciation of contents taken by USAA and additional unpaid wind damage to a boat house. Considering that the Aikens were asking for $427,000 in damages plus punitives, the result was a good one for USAA.  Judge Senter did not send the case to the jury on punitive damages because, he said, "there was no substantial evidence that USAA was acting in bad faith."  

Here's a story on yesterday's verdict  by Mike Kunzelman of the Associated Press.  Here's a copy of the Aiken pretrial order.

Here is a story by Anita Lee of the Sun Herald about Judge Senter's dismissal of Rimkus from the case last week.  Here is an earlier story by Anita Lee on the testimony of Rimkus structural engineer James Jordan. 

Full post as published by Insurance Coverage Law Blog on January 29, 2008 (boomark / email).