May 3, 2011
Pearson Legal

Gravely & Pearson wins first Hurricane Ike trial – $3.9 million dollar verdict

By Chris Paschenko

The Daily News

Published April 30, 2011

GALVESTON A jury returned a $3.96 million verdict against a Boston insurance company, saying it didn’t fairly compensate owners of an apartment complex damaged by Hurricane Ike.

The verdict rendered Thursday was the first in Galveston or Harris counties against an insurer related to residential damage caused by the storm.

Ike made landfall Sept. 13, 2008, causing widespread flooding and damaging much of the Upper Texas Coast.

The trial in Judge Lonnie Cox’s 56th District Court, in Galveston, lasted nine days.

Ten members of the 12-person jury ordered Lexington Insurance of Boston, Mass., to pay $3.96 million in damages to Jaw The Point, a limited liability company that owned The Point apartments, 7301 Stewart Road. Only 10 jurors must agree in civil cases, Cox said.

The Galveston complex, consisting of 168 units in 13 buildings, sustained about 3 feet of flood water, and couldn’t have been rebuilt without raising the structures to meet flood guidelines, Matthew Pearson, the plaintiffs’ attorney, said Friday.

“The issue the jury decided was solely judging the conduct of the insurance company and how they adjusted the claim,” Pearson said.

“They found not only that it engaged in bad faith, but they did it intentionally.”

Messages left Friday for Lexington’s attorney weren’t returned.

Emery Jakab, of Houston, was present at the trial and one of the major shareholders.

The shareholders purchased the complex in the summer of 2007 when it was 83 percent occupied, Pearson said.

The owners completed $560,000 in renovations, including exterior work and the addition of a playground.

The unit was 100 percent occupied with a waiting list before the storm, Pearson said.

“The Point was one of about 135 apartment complexes in the Galveston and Houston area that were part of an insurance program that included several layers of insurance, first being Lexington,” Pearson said.

The buildings sustained roof and structural damage, and because the buildings were damaged at more than 50 percent of their value, they had to be demolished, Pearson said. Codes would have required owners to elevate the buildings about 2 feet to meet flood guidelines, he said.

“There was no way they could do that, so it had to be torn down,” Pearson said, noting that would encompass a large part of the insurance policy.

“Instead of paying that, they ignored it until the money ran out,” Pearson said.

Lexington paid the owners $1.1 million on their original windstorm claim. The owners also received their flood insurance claim, Pearson said.

The owners haven’t decided what to do with the property, Pearson said. They hired a Galveston architect to design the rebuild, he said.

The first verdict related to Hurricane Ike damage in Galveston County came March 7. A jury sided with the insurer named in a lawsuit related to a damaged sailboat, court officials said.

Many of the thousands of cases filed in Galveston and Harris counties related to Hurricane Ike insurance claims have been settled before reaching trial.