A complaint filed this week in federal court by a Wynne woman whose home was destroyed March 31 by an EF-3 tornado that decimated much of the Cross County city claims that her insurance company undervalued the coverage on her home by more than $200,000.
According to a complaint filed by Forrest City attorney Austin Easley on behalf of Martha White of Wynne, White's home, located at 611 N. Wilson St. in Wynne, sat almost in the center of the the tornado's path and its 150 mile per hour winds and was destroyed. Inspections of the home by the Arkansas Department of Emergency Management and the Wynne Fire Department determined the structure to be a total loss, the complaint said, as did a claims adjuster for Allstate Vehicle and Property Insurance Company, the company that insured White's home.
According to the complaint, White's home was insured for $641,525 but she was only offered $425,091.78 for her loss, which was $215,433.22 less than the insured value.
The complaint charges Allstate with breach of contract by not timely paying the full amount of the coverage as listed on the policy and of acting in bad faith in a number of areas, including launching an investigation into the value of White's home for more than six weeks while White remained without a place to live and "with full knowledge that the actual value of the home is not relevant to the amount of the claim for the dwelling," and of doing so in disregard of state law requiring payment for the full insured value.
Easley said under Arkansas' valued policy law -- Act 683 of 2017 -- insurance companies are required to pay the full amount stated in the property insurance policy or the full amount upon which the company charges, collects, or receives a premium.
"If the insurance company insures a house for a certain amount and they say this is the amount the house is worth," Easley explained, "if there's a loss then they can't haggle with you over how much the house is worth."
According to March 24, 2022 article in Investopedia, 20 states, including Arkansas, have valued policy laws that dictate full reimbursement for covered losses as stated in the policy. The other 19 states are; California, Florida, Georgia, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Texas, West Virginia, and Wisconsin.
According to the Investopedia article, valued policy law is a legal statute that requires insurance companies to pay the full value of a policy to the insured in the event of a total loss. According to the article, valued policy law does not consider the actual cash value of the insured property at the time of the loss but mandates total payment of the insured loss.
A valued policy differs from what is known as an unvalued, or open, insurance policy, in which the value of the property is required to be proven following a loss through evidence such as invoices, repair estimates, documentation by claims adjusters or through other evidence to establish the value of the loss.
Easley said his office has received such a higher than usual number of inquiries related to insurance companies' dealings with clients in the wake of the March 31 tornadoes that he fears such tactics may be more widespread than people realize. He said his office alone has received numerous inquiries since March 31 regarding insurance settlement disputes.
"We're a small firm with three attorneys," he said, "and I've been contacted personally by six or seven folks who are having problems with their insurance claims."
Easley said normally following such an event, it takes three months or more before people who feel like they are being mistreated by insurance companies begin reaching out for legal representation.
"We're already hearing from a lot of folks so I think insurance companies are really taking advantage of a lot of people," he said. "People need to know that some of these insurance companies are not dealing with them fairly and that they're entitled to more than they're getting."
Easley said he advises his clients that should they receive a check from their insurer for less than the value of the policy, they should not accept the check unless it's made clear that doing so will not have the effect of closing the claim, which he said would make it much more difficult, if not impossible, to recover the full amount of the loss.
"Unless it's clear and in writing that the amount being paid is disputed and that's it's not a payment in full for the claim," he cautioned, "it's not advisable to cash that check."
Complicating matters somewhat, Easley said, are the different types of coverage contained within the typical homeowner's policy which include separate coverages for the dwelling itself, for the contents, for the loss of use of the property, for debris removal, to name a few. It's important, he said, to know specifically what coverages are included, especially for people who are questioning their insurance settlements whose finances are strained to the breaking point already due to being displaced from their homes.
"Most folks have coverage for loss of use of their home so they can be paid to go find a place to live and have some semblance of normalcy," he said. "So you can dispute the amount for the house and still have benefits available to you from the policy to find a place to live.
"The way that usually works," Easley continued, "you tell them you're staying in a hotel and they can either pay the hotel directly or they can pay you after you pay the hotel."
He added that insurance companies should settle loss of use claims promptly and that such payments should not be contingent upon any other coverage types contained in the policy.
"They shouldn't be able to use the loss of use as a bargaining chip to exempt some other portion of the policy," he said. "Those kinds of coercive tactics can lead to additional damages in the tort of bad faith. If an insurance company deals with somebody knowing they're vulnerable and they prey on that, they can subject themselves to additional liabilities over and above the contractual obligations of their policies."
According to the complaint, White is seeking the total amount of $641,525 for the loss of her home, a 12% statutory penalty in the amount of $76,983, attorneys fees equal to one-third of the total judgment, pre-judgment interest of 6% totaling $105.46 per day, as well as unspecified punitive damages, damages for mental anguish and emotional distress, and for post-judgment interest "at the highest legal rate."
An attempt Thursday night to reach Kimberly McGuire, the Allstate agent listed in the complaint, was unsuccessful.