AIG violated unfair practices, but cleared of acting in bad faith

A Florida jury last week found an insurance company illegally slow-walked a claim from a resort owner asserting wreckage from Hurricane Irma and awarded an unspecified amount of compensatory damages. However, both sides in the case said they were pleased with the outcome.

That’s because jurors in the federal case in Miami rejected claims that the insurer, AIG, acted in bad faith when it processed the claims on the $95 million oceanfront property, and thus awarded no punitive damages. But it said AIG had violated state unfair practices acts by issuing settlement payments more than 15 days late.

Complaint had claimed lowball estimates

The homeowners, Edith Newman and her late husband Joel Newman, argued that AIG intentionally overworked and understaffed its claims department following Hurricane Irma in 2017, forcing customers to spend extra time and money fighting over lowball claims estimates. The complaint said the slow walking was part of a pattern that repeatedly stalled settlements throughout the state.

The Newmans had accused AIG of bad faith in March 2022, alleging that one of its subsidiaries, American Home Assurance, was malicious when "at every opportunity it tried to reduce, delay and deny all or part" of their claim for hurricane damage to their 28,000-square-foot oceanfront home in Golden Beach.

They claimed that American Home estimated that the covered damage was less than the $296,000 deductible on the policy. The insurer's investigator, however, put the damage estimate around $500,000, according to the suit. But a public adjuster hired by the Newmans estimated the total property damage at about $7.3 million, plus alternative living expenses, according to the suit.

They also accused the insurer of burying a report that said the Newmans were owed $210,000 a month under the policy to pay for living costs during repairs.

Appraisal panel awards

Eventually, an appraisal panel issued two awards for the Newmans that totaled about $11.1 million: $9.6 million for property damage and $1.5 million for alternative living expenses and assessed personal property losses, according to the suit.

AIG paid out nearly $16 million after appraisals determined that the loss to the Newmans amounted to $17.3 million. AIG originally estimated the lass was just $287,000.

But attorneys for AIG said the Newmans concealed details of the home’s condition before the hurricane struck. They said the 1995-era mansion still had its original roof, doors, and windows that had many defects beyond those caused by the hurricane.

An AIG spokesperson said the company was pleased with the verdict. And the Newman’s attorney, Matthew Weaver, said his clients were “pleased” the jury agreed with them that AIG’s conduct violated Florida law and looked forward to the final judgement that will have to be calculated by the court at a later date. AIG will likely have to pay some statutory penalty and the Newman’s attorneys’ fees and costs.

The 1.5-acre property is now listed for sale for $95 million.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com.

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com.