INDIANAPOLIS (Jan. 12, 2007) - A federal court’s ruling against State Farm Mutual Automobile Insurance Company could ultimately mean higher rates for consumers, according to the National Association of Mutual Insurance Companies (NAMIC). The case, Broussard v. State Farm, is one of thousands of lawsuits stemming from Hurricane Katrina.
Despite expert testimony showing damage to the home of Norman and Genevieve Broussard was clearly caused by water — which was not covered by the policy — rather than wind, U.S. district Judge L.T. Senter said State Farm must pay $2.7 million in actual and punitive damages to the couple.
“We are disappointed in the decision,” said Robert Detlefsen, NAMIC’s vice president of public policy. “Insurers need to be able to rely on their contract language to determine appropriate rates.” Detlefsen also pointed out that the wording in policies is pre-approved by state insurance regulators.
“Changing the terms of a policy after the fact is extremely costly, since insurers have not collected premiums for the additional losses,” Detlefsen said. “If this practice were allowed to become routine, insurers would have to cover the unexpected costs through higher rates on policyholders.”
State Farm is evaluating its next steps and will likely appeal the decision.
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Posted: Friday, January 12, 2007 12:00:00 AM. Modified: Friday, January 12, 2007 2:20:55 PM.
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