Burned Mississippi Courthouse Spurs Lawsuit Against Insurer

A dispute over how much an insurance company owes Webster County for its burned courthouse has moved into federal court.

The Webster County Board of Supervisors and Atlantic Specialty Insurance Co. have sued each other, with two separate cases now pending in U.S. District Court in Aberdeen, Miss.

Officials have said an electrical short sparked the fire that burned the two-story 1915 courthouse to the walls, at least on its upper level. In a non-binding referendum Tuesday, voters overwhelmingly told supervisors they wanted a new courthouse in Walthall, a 150-person village.

The insurer has paid Webster County $2.32 million for damage to the structure and contents, which burned in January 2013. But Webster County has hired an independent adjuster who says Atlantic should pay Webster County the maximum limits of its insurance policy – at least $8.17 million.

That set off a chain of legal action. Atlantic Specialty sued Webster County in federal court on Feb. 10, seeking a judgment supporting its position. Webster County sued the insurer in Webster County Circuit court on March 6, with the insurer seeking to move that suit into federal court and get it dismissed, saying it sued first.

The county said the initial federal lawsuit by Atlantic Specialty was “for the bad faith purpose of harassing and intimidating Webster County, and forcing Webster County to settle its claim for less than Atlantic Specialty owed.”

The county contends that under state law, Atlantic Specialty must pay the limits of the policy. But the insurer said the building isn’t a total loss, and thus the law requiring full payment doesn’t apply.

Atlantic Specialty said it properly rejected three claim documents submitted by the county in recent months because they didn’t include supporting documentation. The Minnesota-based insurer, a unit of OneBeacon Insurance Group Ltd. of Bermuda, said the county hasn’t responded to its requests for information, a duty insurance policies typically impose on claimants. The insurer calls claims seeking policy limits “unsupported.”

The county says the insurer wrongly wants to pay a depreciated value for the courthouse, saying that the policy provides for replacement cost and denying that the courthouse was depreciated. “The Webster County courthouse is a historical building which does not lessen in value. Its value increases over time,” the county lawsuit states.

Atlantic, though, said additional payments for replacement value aren’t due, if at all, until the county rebuilds the courthouse and buys new furniture and equipment.

Similarly, it said payments for demolition, debris removal and increased cost of construction aren’t due until the county undertakes such work.

Webster County said the insurer wrongly declined to settle differences in appraisal, an insurance procedure where each side appoints a representative to survey damages and jointly agree on how much the insurer should pay. If they can’t agree, a court appoints a third person to settle disputes.

The county wants a judge to force Atlantic Specialty to go to appraisal, and is also seeking punitive damages, interest and attorney’s fees.