Printer Friendly

Insurers win major Katrina flood ruling.

In a ruling that could mean a windfall worth hundreds of millions of dollars for insurers covering Hurricane Katrina damages, a three-judge panel of the U.S. Fifth Circuit Court of Appeals ruled that homeowners, renters and commercial-property policies do not cover damage caused by levee breaks.

The appellate court overturned a decision by U.S. District Judge Stanwood Dural Jr., who sided in November with policyholders. The group sued, claiming that flood damage exclusions in their policies were ambiguous and should therefore be resolved in the homeowners' favor.

Dural ruled that such damage may not be excluded, as the term "flood" may be read only to refer to a natural event and not the result of human errors in the construction and maintenance of the levees.

But Judge Carolyn King, writing for the three-judge panel, disagreed.

"We conclude, however, that even if the plaintiffs can prove that the leeves were negligently designed, contructed or maintained and that the breaches were due to this negligence, the flood exclusions in the plaintiffs' policies unambiguously preclude their recovery," King wrote.

"Regardless of what caused the failure of the flood-control structures that were put in place to prevent such a catastrophe, their failure resulted in a widespread flood that damaged the plaintiffs' property. This event was excluded from coverage under the plaintiffs' insurance policies, and under Louisiana law, we are bound to enforce the unambiguous terms of their insurance contracts as written," King wrote. "Accordingly, we conclude that the plaintiffs are not entitled to recover under their policies."

It is unclear whether the plaintiffs, a group of homeowners and business owners, will appeal to the U.S. Supreme Court. Robert G. Harvey Sr., their lead attorney in the case, was in court in New Orleans and not immediately available for comment, his office said.

American Insurance Association President Marc Racicot said in a statement that the case "corrected an earlier, flawed decision."

"There has been tremendous pressure upon the courts and insurers to craft political 'solutions' to overcome the tragic events of Hurricane Katrina," Racicot said. "Fortunately, the court ... has acted to preserve the sanctity of contract upon which private property and free markets ultimately depend."

Neil Alldredge, vice president for state and regulatory affairs for the National Association of Mutual Insurance Companies, said, "While we sympathize with the plight of the homeowners and residents affected by this tragedy, this was the correct decision for this issue,"

Katrina--Two Years Later

* As of July 27, 2007, 537 lawsuits were pending against insurers. Another 174 were ordered into mediation, with 84, or 49%, settled.

* More than 95% of the 1.1 million homeowners insurance claims in Louisiana and Mississippi were settled within one year of the storm.

* Nearly all of the 350,000 Katrina-related claims from damaged vehicles, totaling $2.2 billion, have been settled

Source: Insurance Information Institute
COPYRIGHT 2007 A.M. Best Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2007, Gale Group. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Highlights From BestWeek: Briefing
Author:Grier, Chris
Publication:Best's Review
Date:Sep 1, 2007
Previous Article:Quote/unquote.
Next Article:Mediterranean storm prediction stirs new concerns.

Related Articles
India's turn? Plans are being laid to unleash the Indian economy as the next major growth market for steel.
Appeals of flood exclusion ruling may linger for years.
Keeping Score.
Defective goods from China have many insurers on edge.
U.K. flood losses point to higher premiums.
On guard: one year ago, insurers implemented tough new federal anti-money-laundering regulations. Whether they're effective in fighting terrorism...
Rising in the East: a crowded field of insurance companies is eagerly prospecting in the former communist nations that now comprise "New Europe.".
Making the move: regulatory changes have forced life insurers to explore new ways to fund reserves.

Terms of use | Privacy policy | Copyright © 2021 Farlex, Inc. | Feedback | For webmasters |