State Farm Pays Up, But Argues Award Was In Error

Dec. 22--State Farm Fire & Casualty Co. recently paid a couple $179,100.31 for Katrina damage, but their attorney said the check came too late to save Henry and June Kuehn's Cove Place home.

Attorney Earl Denham said the two-story house further deteriorated as the Kuehns awaited settlement of their insurance claim. The city of Ocean Springs wants the property cleaned up.

U.S. District Judge L.T. Senter Jr. ordered the Katrina payment in August, but State Farm has asked him to reconsider the ruling.

"This amount is tendered without recourse, but with the understanding that this is not an admission of an amount owed," said a letter sent with the check by State Farm attorney Scot Spragins of Oxford. "Given the circumstances, State Farm has decided to make this tender to eliminate the threatened destruction of the Kuehns' home.

"State Farm intends to continue to litigate the issue. In the event that we are successful and it is determined that these sums are not owed, then State Farm will not seek reimbursement."

Ironically, the Kuehns were trying to avoid litigation when they asked State Farm for appraisal to determine the amount of their covered loss after Katrina. The company balked, arguing the appraisal process outlined in its insurance policies can be used only to determine the amount owed, not the cause of loss.

State Farm submitted to appraisal only after the Kuehns sued in state court to enforce the appraisal clause. The Kuehns sued in federal court when State Farm failed to pay the $175,000 appraisal award, reached by an appraiser for each side and an umpire who said they considered only damage above the second-story water line.

State Farm and other private insurers cover wind damage, but not destruction caused by storm surge.

After a hearing Senter ruled for the Kuehns, finding State Farm failed to offer any evidence of a flawed appraisal that included damage from storm surge. Senter also allowed the case to go forward for a jury to determine whether State Farm acted in bad faith and should pay the Kuehns punitive damages. The trial is set for September.

In response to Spragins' letter, Denham wrote: "As it is, with the fees and expenses having to come out of the check because of State Farm's failure to pay without extensive litigation and because of deterioration caused by the extreme passage of time, it appears we may have to give in to the city and allow the demolition.

"Still, thank you for the check, though it is a shame that it has taken so long for State Farm to wake up."

Denham said State Farm plans to have an engineer inspect the home today. State Farm sought and won court permission for the inspection to develop its defense in the case, court records show.

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