Back in 2004, Makas Management sought to acquire hurricane insurance for six Touchdown Trading Co. properties located within the Golden Triangle area.

When Rita hit, the Touchdown properties were still uninsured. Now Makas and Touchdown are pairing up and suing XL Lloyds Insurance Company and three other insurance providers for failing to cover Touchdown's property.

The two businesses filed their deceptive trade practices lawsuit with the Jefferson County District Court on Sept. 5. The other defendants listed in the suit are International Catastrophe Insurance Managers, Burns & Wilcox and A and S Insurance Agency, Inc.

According to the plaintiffs' original petition, in the year 2004, Makas Management, acting on behalf of Touchdown, sought to acquire hurricane insurance protection for six commercial buildings in Southeast Texas. Makas Management contacted Affordable, who in turn, contacted Burns & Wilcox, an insurance wholesaler/underwriter, who in turn, issued an insurance binder on behalf of ICAT/XL Lloyds Insurance, an insurance carrier, who in turn, issued a composite policy of hurricane insurance for all six buildings.

The initial policy period was from Dec. 24, 2004 to Dec. 24, 2005. A separate Declarations Page was issued by ICAT/XL Lloyds for each of the six separate commercial locations. The Declarations page for "Location No. 5" stated that the building being insured was located at 104 South Twin City Highway in Nederland, the suit said.

Approximately one month latter, in a letter dated Jan. 27, 2005, Burns & Wilcox stated that an inspection of each property had taken place, and that the "property value" of each insured property was found to be different than the insured value stated on the respective Declaration Page. In particular, Burns & Wilcox claimed the inspection of "Location 5" revealed the structure had a value of $104,675, compared to the insured value of $125,000 stated on the Declarations Page, the suit said.

The importance of this correspondence lies in the fact that Burns & Wilcox, acting with actual and apparent authority on behalf of ICATIXL Lloyds Insurance, had an employee conduct an actual physical inspection of "Location #5" in January of 2005, about a month after the effective date of the policy. No discrepancies in the physical structure or the composition of any of the construction materials at "Location #5" were noted during this physical inspection of the property, the suit said.

About six months later, on or about June 17, 2005, Burns & Wilcox, again acting on behalf of ICATI Lloyds, claimed they sent another inspector to look at each of the six buildings identified on the composite policy. Greg Howard, an employee of Burns & Wilcox Ltd, signed off on that letter to Affordable. The June 17, 2005, letter was sent only to Affordable.

In that June 17, 2005 letter, Burns & Wilcox disclosed for the first time since the ICAT/XL Lloyds policy was issued, that "Location 5" was found to have several alleged construction and maintenance discrepancies, the suit said.

According to that letter, the discrepancies at "Location 5" were so significant that ICAT/XL Lloyds/Bums & Wilcox announced their unilateral decision to cancel the aforementioned hurricane insurance on the structure, the suit said.

Again, this correspondence was sent only to Affordable rather than to the actual insured, and Affordable never advised the insured of its receipt of this letter, or the imminent threat to cancel the hurricane insurance on "Location 5," the suit said.

On Aug. 25, 2005, Hurricane Katrina formed over the Bahamas, and crossed southern Florida, heading in the general direction of Texas. It strengthened rapidly to Category 5 in the Gulf of Mexico and became one of the strongest hurricanes on record. Throughout this time, Texas, and in particular, the Golden Triangle, were potential targets of Katrina. The storm eventually turned north and made Iandfalls as a Category 3 storm on the morning of Aug. 29 in southeast Louisiana. As a matter of custom and practice, insurance company do not write new hurricane policies for the upper Gulf Coast while a Category 5 hurricane is prowling in the waters of the northern Gulf, the suit said.

On Aug. 25, 2005, while Katrina was leaving Florida heading toward Texas, ICATIXL Lloyds followed through with its threat to cancel the hurricane coverage on "Location 5." ICATIXL Lloyds cancelled the coverage on that structure by issuing a "Policy Change Endorsement" in which "Location 5" was deleted from the composite policy.

Once again, ICATIXL Lloyds/Bums & Wilcox failed to send notice of that critical cancellation to the actual insured. And, once again, Affordable inexplicably sat on that critical information rather than alerting the insured, the suit said.

As a direct consequence of the actions of Lloyds/Burns & Wilcox/ Affordable, the actual insured did not learned about the cancellation of coverage on "Location 5" until some time after Sept. 6, 2005 - three months after the ICATIXL lloyds/Burns & Wilcox first announced that the cancellation was a certainty, the suit said.

On Sept. 6, 2005, Affordable finally wrote to the plaintiffs to announce the cancellation of hurricane coverage on "Location 5." That letter marked the first notice of any kind sent by anyone to the insured regarding ICATIXL Lloyds/Burns & Wilcox's unilateral decision to cancel the hurricane insurance on "Location 5," the suit said.

Affordable's letter disclosed that the grounds for cancellation of the hurricane insurance included the underwriter's dissatisfaction with the type of construction of the building (wood frame construction), and the type of shingles on the roof (wood and composite), the type of siding on the walls (corrugated metal and fiberglass), and the rotten wood on the roof and the joists. The specific grounds for cancellation communicated to the plaintiffs were completely inaccurate, the suit said.

The commercial structure at "Location #5" had no wood frame construction, no composite shingles, no wood roof, no wooden joists, no galvanized corrugated siding, and no corrugated or plastic siding. The building at "Location 5" was a high quality, modem commercial structure. In fact, as proof of that, on Dec. 1, 2005, the chief building official for the city of Nederland, Jon R. Hatch, wrote a letter which the insured sent to Affordable in which the building in question was described as:

"Under the 2003 International Building Code, the structure located at 104 S. Twin City Highway (Hwy 347) is considered to be Type II B with cinder block exterior walls and hollow core concrete roof decking," the suit said.

Affordable based the content of its Sept. 6, 2005, cancellation notice letter on information contained in the inspectors report Bums & Wilcox provided to Affordable. The Bums & Wilcox inspector recorded conditions and construction materials that simply did not exist. The fact that none of those conditions existed should have been apparent to Burns & Wilcox and Affordable since that structure had been inspected previously by another Bums & Wilcox inspector on January 27, 2005, with no such deficiencies found, the suit said.

In Affordable's letter, Affordable stated that it, "had already submitted a quote request with other carriers for this location," the suit said. However, on Sept. 16, 2005, a tropical depression formed east of the Turks and Caicos Islands.

On Sept. 18, 2005, it strengthened to a tropical storm and was named Rita. By 3:55 p.m., Sept. 21, 2005, Rita was a Category 5 hurricane, with maximum wind speeds of 165mph, and it was heading for Nederland.

At 10 p.m. Rita reached its maximum intensity, with sustained winds of 180 mph. Hurricane hunter aircraft recorded peak wind gusts at 235mph. Rita made landfall between Sabine Pass, Texas, and Johnson's Bayou, Louisiana, on Sept. 24, 2005, and passed directly over "Location 5," the suit said. The impact was severe, and substantial damage occurred to all of the structures, fixtures, equipment, supplies and materials at "Location 5."

During the 18 day period from Sept. 6, 2005 until Sept. 24, 2005, Affordable Insurance failed to procure any replacement hurricane insurance for "Location 5." As a result, the building was uninsured for hurricane damage.

The plaintiffs are suing for actual, special, statutory and exemplary damages and are represented by the Stone & Stone law firm.

Judge Milton Shuffield, 136th Judicial District, will preside over the case.

Case No. D179-951

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