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We’ve all heard the horror stories about insurers denying claims to Hurricane Katrina victims based on whether damage to homes was caused by water or wind. Lawsuits continue – even though it’s been well over two years since the hurricane hit. A lawsuit has been filed – this one by the Port of New Orleans against Factory Mutual Insurance for over $100 million in unpaid claims.

The case

The Port of New Orleans was hit hard by Hurricane Katrina. It estimates that it suffered nearly $175 million in damages from property losses and lost business. One of its primary insurance carriers, Factory Mutual Insurance Company, has only paid approximately $18 million of the Port’s $145 million policy – which is clearly just a small fraction of what it may owe.

The lawsuit alleges that the insurance company has acted in bad faith by underpaying claims and wrongly accusing the Port of not providing accurate accounts of its damages. Although the lawsuit was filed over a year ago, it was recently transferred to a Louisiana federal court where the Port is seeking a jury trial.

Domino effect

The Port also had flood insurance to cover a significant portion of the damages; however, the Federal Emergency Management Agency (FEMA) will not release those funds – nearly $100 million until all insurance coverage issues have been resolved.

The Port has reported that other insurance companies have paid its claims in full, but that it can’t get its FEMA money until it resolves its claim against Factory Mutual – a domino effect that will undoubtedly raise the damages the Port will seek because of continued lost business.