State Farm faces class action suit over flood policies

New Orleans CityBusiness, Nov 17, 2005 by CityBusiness Staff Report

The Manard Law Firm has filed a class action suit on behalf of two New Orleans doctors and all individuals and businesses who suffered flood losses in excess of their flood policies with State Farm Insurance Co. because they allegedly were not advised of or offered excess flood insurance. F.J. Dennis an insurance agent for State Farm Mutual Insurance, was named as a class representative for all State Farm agents in Louisiana as defendants. Dennis did not immediately return phone calls for comment to CityBusiness.

Bob Manard of the Manard Law Firm said insurance agents owe a fiduciary duty to their clients to advise them of the ability to purchase excess flood coverage. He claims State Farm did not offer excess flood coverage, and did not educate agents that they owed a duty to their clients to advise them that excess coverage was available elsewhere. You go to an agent for advice just like you go to a plumber to have a leak fixed, a doctor to have an illness treated and a lawyer to have a legal problem solved, Manard said. You leave it in the experts' hands as to how best to do that. An insurance agent for State Farm holds themselves out as an expert. The suit will help people with the majority of their net worth tied up in their homes who counted on the equity in their homes to fund their retirement. We have some clients who are in their 60s and 70s and are too old to start over, Manard said. It is a crime that these people were not informed of a right to buy excess flood coverage.

Manard said many clients suffered flood damages in the millions yet were only offered $250,000 in flood insurance. Many of those people were told that was all they could buy, he said. That is a shame since excess flood insurance was fairly cheap. They relied on that advice and lost everything they had.

The suit alleges State Farm chose not to sell excess flood insurance but still owed a duty to their insureds to inform them it was available. He questioned whether there a financial motive to keep policyholders.

There is a built-in conflict of interest especially by these companies that do not sell excess flood coverage, Manard said. State Farm should have put a notice on all their flood policies that additional coverage was available. Many had homeowner policies well in excess of their flood limits.

Manard and co-counsel, Paul Mayeaux estimate thousands of homes suffered damages in excess of primary flood policy limits in the Old Metairie, Lakeview and New Orleans East areas alone.The lawsuit was filed Wednesday in Civil District Court. Manard and Mayeaux expect to file similar suits against Allstate, USAA, Met Life and Encompass soon.