Court: Insurer added to anguish

• By ALLEN M. JOHNSON JR.
• Advocate New Orleans bureau
• Published: Dec 24, 2008 - Page: 10A - UPDATED: 12:05 a.m.

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NEW ORLEANS — Ruling just days before Christmas, a federal appellate court has upheld a judge who found that months of “bad faith” delays by an insurance company contributed to the mental anguish of a Louisiana man, whose wife died shortly after Hurricane Katrina severely damaged their home.

However, Dale Dickerson of Marrero might not get the full award of $175,467 that U.S. District Judge Carl Barbier ordered Lexington Insurance Company of Massachusetts to pay its former policyholder, after a one-day trial last year in New Orleans.

A three-judge panel of the 5th U.S. Circuit Court of Appeals on Monday ordered Barbier to reduce Dickerson’s judgment by $53,105 — the cost of his lawyers in the case. While rejecting nearly all of Lexington’s appeals, the 5th Circuit agreed with the insurer’s argument that it should not pay Dickerson’s attorney fees in the case.

Lexington attorneys successfully argued that the Marrero man submitted his Katrina claims before Aug. 15, 2006 — the day a new law took effect, allowing the recovery of attorney’s fees whose insurers delayed payment of claims in bad faith.

“We therefore reverse the judgment of the district court to the extent that it awarded attorneys’ fees,” the 5th Circuit panel ruled.

Noting that Lexington found some damage to Dickerson’s home in 2007 — not previously reported in two prior inspections after Katrina hit in 2005, the appellate judges recommended that Barbier consider whether Dickerson might recoup attorney fees from any part of the insurance proceeds that were paid after the new law took effect.

Dale and Shirley Dickerson’s home was badly damaged by wind and flood damage from Katrina in August 2005. The Dickerson held a $300,000 homeowners policy, which, like many policies in the area, did not cover flood damage.

The Dickersons notified Lexington of their wind and rain damage claim in mid-September 2005. A Lexington insurance adjustor inspected their home on Oct. 1. Dickerson’s wife died of cancer in January 2006.

Lexington issued a check to Dickerson for $11,335 in March 2006.

Dickerson sued his insurer in May 2006, then filed an additional claim in June 2006, after learning the storm had “twisted” the structure of his house. He received an additional $2,200 from Lexington. In May 2007, the insurer sent a third adjuster to Dickerson’s home, resulting in a $103,756 payment — about a month before his suit went to trial.

At trial, Lexington argued its delays arose from “a good faith dispute” with Dickerson over how much damage to the house and its contents was caused by water (which the company did not cover).

“The existence of such a dispute is not supported by the evidence,” the 5th Circuit ruled. “The insurer has pointed to nothing evidencing that it told Dickerson it was disputing his claim on the basis of flood damage” and other damage claims.

Dickerson’s adult children testified that they repeatedly called Lexington “about the insufficiency of payment but never got a response. His daughter, Cindy Bane, testified that her father’s 18-month dispute with Lexington caused his mental health to decline.”