State Farm Backed by Federal Court in Wind Versus Water Case

As ex-Tropical Storm Ida chugs up the East Coast with flood water surging in on the Atlantic states, insurers like State Farm, Allstate and Travelers bask in the warm glow of a federal court decision this week backing their version of what happens when a major storm hits the U.S.

Property insurers such as State Farm pay claims based on wind damage. Water damage payout comes from the federal flood insurance program, which offers only limited coverage.

Not surprisingly, when a hurricane hits homeowners like to put in a claim with their private insurer because they pay more. Also not surprising, these insurers try to duck and dodge whenever possible, claiming that water was responsible rather than wind.

That’s exactly what happened to the Reginald Bossier family in Biloxi, Mississippi, whose one-story home was destroyed by Hurricane Katrina in 2005. That storm, which carried a 135-mile-per-hour wallop, as well as a wave of water that leaped up to 30 feet, hit so hard that almost everyone evacuated before hand, so there were no witnesses to how the Bossier home was wrecked.

State Farm said water destroyed it; Bossier said the winds came first. Bossier won when the Mississippi State Supreme Court said that an insurance company can deny coverage only if it proves that water caused the loss.

But state courts tend to look kindly on state residents. A U.S. district court this week took a different tack. A jury there denied Bossier the $650,000 he was asking for, so he wound up with a much smaller amount.

Since federal courts mostly trump state courts, and a Mississippi decision doesn’t extend beyond the state limits, insurers can breathe easy, knowing that however much it rains, it won’t hurt their checkbooks that much.

As for homeowners who want to prove that it’s wind and not water that knocked down their homes, it seems that their only option is to hang around for the hurricane, snap some pictures, and high tail it out of there in a hurry.