$2.8 million verdict against Allstate

NEW ORLEANS --Attorneys say a federal jury that awarded more than $2.8 million to a man who lost his home to Hurricane Katrina sends a strong message to insurers who refused to pay thousands of other homeowners for damage from the storm.

"Insurers should worry about taking any case to a jury," said David Rossmiller, a Portland, Ore.-based attorney who writes a Web journal on Katrina insurance cases and other industry issues.

The U.S. District Court jury decided Monday that Allstate Insurance Co. did not pay Robert Weiss, of Slidell, enough money to cover wind damage to his home. Allstate had claimed that most of the damage was due to storm surge, an event not covered in its policy.

But the jury concluded that the Northbrook, Ill.-based insurer owes Weiss $561,600 for wind damage to his home and its contents, plus another $2.25 million in damages and penalties for not paying the claim quickly enough following the Aug. 29, 2005, storm.

Rossmiller called the award "eyepopping" -- even if a judge later reduces the amount.

Allstate spokeswoman Kate Hollcraft said the company will appeal.

"Allstate is shocked with the jury verdict in favor of the plaintiff. Allstate believes it acted in good faith throughout the entire claims process with the Weiss family," she said.

The verdict -- the first among hundreds of lawsuits that Louisiana policyholders have filed against their insurers in federal court -- gives a boost to thousands of homeowners challenging insurers for refusing to pay their claims.

Randy Maniloff, a Philadelphia-based lawyer who represents insurers and has written about the Katrina litigation, said the jury's decision means the "price of poker goes up" for insurers who are trying to settle out of court with policyholders and avoid costly trials.

"It changes the whole landscape of the cases," he said.

The trial for Weiss' lawsuit against Allstate was similar to several cases that already have been tried in Mississippi, where insurers blamed storm surge for demolishing tens of thousands of homes.

In January, a jury in Gulfport, Miss., awarded $2.5 million in punitive damages to a Biloxi, Miss., couple who sued State Farm Fire and Casualty Co. for denying their claim after Katrina. A judge later reduced that award to $1 million.

Weiss' case was the first of its kind in Louisiana to be decided by a federal jury. The first case tried in New Orleans, also against Allstate, ended abruptly in February when the plaintiffs dropped their lawsuit amid allegations that they misrepresented their claim.

Allstate also accused Weiss of misrepresenting his claim, saying he asked Allstate to pay for a boathouse that was not covered by his policy, but the jury rejected that allegation.

"Our intention was to get what we were owed and to send a message that we would not be intimidated," Weiss said after the verdict was read.

Allstate lawyer Judy Barrasso said in closing arguments that Katrina's winds were not strong enough to do the damage. She said Weiss already had received more than $400,000 in insurance payments -- including $350,000 in federal flood insurance.

"Have you really seen any proof that the damages were in the million-dollar range?" Barrasso asked the jury.

Before the verdict, Judge Sarah Vance told jurors that they must take the $350,000 flood payment into account when determining how much money, if any, Allstate owes Weiss for wind damage.

Maniloff said the jury's $561,600 award for wind damage, coupled with the earlier $350,000 flood payment, suggests that Weiss could be paid nearly the full limits of both his flood policy and homeowner policy.

"It just leaves you scratching your head," Maniloff said. "I thought the judge said you can't double-dip, and this is exactly what they did."

Robert Hartwig, president and chief economist of the industry-funded Insurance Information Institute, said the verdict may not set a precedent for other lawsuits, but it "adds a significant degree of uncertainty for insurers hoping to do business in the state."

In addition to federal flood insurance, Weiss had an Allstate homeowner policy with limits of $343,000 for the dwelling and $240,100 for personal property. The company, blaming the majority of damage on Katrina's storm surge, paid $29,483 for structural damage and $14,787 for additional living expenses.

Richard Trahant, a lawyer for Weiss, argued the house was 17 feet above sea level and that engineering data suggested only 14 feet of surge hit the area. "It never reached the bottom of the house," he said.

Jim Neva, a surveyor and engineer who inspected the house for Allstate, initially told Weiss, who is listed as the policy holder, and his wife, Merryl, that wind may have destroyed the home before the surge of water washed away its remnants.

He later backed off that conclusion, however, and deferred to engineering consultant Craig Rogers of Rimkus Consulting Group. Rogers, who wrote the final report on the home for Allstate, convinced Neva that storm surge demolished the house.

Rogers said he didn't personally inspect the property until after he wrote the report. He said he based his conclusions in part on evidence gathered by other Rimkus engineers -- a practice he described as common. But Trahant questioned the move.

"Why did Allstate elect to rely on the one engineer who never set foot on the property until long after he stamped his report?" Trahant said in closing arguments.

Jeffrey Mika, 30, foreman of the eight-person jury, said jurors were swayed by Allstate's decision to rely on the assessment by an engineer who didn't visit the property until after he wrote his report.

"We didn't feel that Allstate acted in good faith to settle this claim," Mika said.

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Associated Press Writer Cain Burdeau contributed to this report.