Couple sues over Katrina insurance

BAY ST. LOUIS, Miss. — A couple who got conflicting reports from an engineering firm about how one of their homes was destroyed during Hurricane Katrina filed a lawsuit Wednesday accusing State Farm Insurance Co. of manipulating those reports to deny their claim.

The lawsuit, which comes as Mississippi's attorney general investigates insurance companies for "fraudulent" handling of post-Katrina claims, is one of many spawned by a fierce debate over whether homes were destroyed by the Aug. 29 hurricane's wind or water.

In the latest case, Terri and William Mullins have two conflicting reports prepared by the same engineering firm.

The first report, dated Oct. 23, found the couple's two-story home in Kiln, a rural community near the Mississippi-Louisiana line, was destroyed by hurricane-force wind — damage their policy covered. On Jan. 3, however, the firm issued a second report that blamed the damage on the storm's floodwaters.

State Farm used the second report as the basis for denying the Mullins' claim. Insurance companies say their homeowners' policies do not cover damage from rising water, including wind-driven waters, but policyholders argue that storm surge should not be considered flooding.

"State Farm's actions show that it believes that it should be able to pick and choose which proof it relies upon in evaluating the validity of a claim," the Mullins' lawsuit states. "State Farm will only accept reports from engineering firms that support a denial of coverage."

Terri Mullins said she obtained a copy of the first engineering report from her local insurance agent's office in December. A month later, when employees of a State Farm office in Biloxi showed her the second report, she showed a copy of the first and demanded an explanation.

"They flat out told me, 'You were not supposed to get that (first) report,' " she recalled in an interview.

Mullins and her husband are seeking unspecified damages from State Farm and Forensic Analysis & Engineering, the Raleigh, N.C.-based firm that prepared both reports.

Such disputes with insurance companies over the wind vs. water debate have been commonplace for many homeowners in the path of Katrina's destruction, particularly those without federal flood insurance.

The Mullins' case may be part of Mississippi Attorney General Jim Hood's fraud investigation. A grand jury in Mississippi has subpoenaed records from a State Farm office in Biloxi and from Forensic, according to both companies. A spokeswoman for Hood's office said she couldn't comment.