And an Undefined "Flood" in an Insurance Policy Does Not Mean
Water Washout Allegedly Caused by Negligence of Human
Beings.
A Federal Judge in Louisiana is faced with a special set of claims. The Consolidated Case of all of these claims would be special by reason of the claims alone. There is another reason the Consolidated Federal Case is special. The Federal Judge just issued an 85-page Opinion ordering the Coverages of almost as many Insurance Companies. Here is a link to this Order which is now "attached" to this post: In re: Katrina Canal Breaches Consolidated Litigation Pertains to Insurance (E.D. La. Case No. 05-4182 et al., Opinion Filed Mon., Nov. 27, 2006).
Each of the Claimants in that Consolidated Insurance Coverage Case has sued her and his own Insurance Company for Insurance Coverage for Damages after Hurricane Katrina in the City of New Orleans. However, the claims they allege are not alleged for Damages caused by the Hurricane . The claims are for Damages allegedly caused by the alleged negligence of People, i.e., the members of the Board of Commissioners for the Orleans Levee District. Parenthetically, the Federal Judge kept all the Insurance Coverage Claims for disposition in Federal Court, but remanded all Damages claims against the Orleans Levee District to Louisiana State Court.
"This case began the stream of complaints that have been filed as a result of damages arising out of all levee breaches which occurred in the aftermath of Hurricane Katrina." So begins the very recent Order on various motions by the U.S. District Judge in In Re: Katrina Canal Breaches Consolidated Litigation/Pertains to Insurance" (Eastern District of Louisiana).
This is a summary of the 85-page Order of the Federal
Court. It is a summary of some of the significant Insurance Coverage
Issues addressed by the Federal Judge.
1. All of the Policies involved in this Consolidated Federal Case were Homeowners Policies and they all provided "all-risks" Coverage, said the Federal Court. That means that, in the face of many Federal Rule 12(b) Motions to Dismiss in particular, said the Federal Judge, "under Louisiana law, unless there is a specific exclusion for the type of water damage that an insured has incurred, coverage is presumed under these policies. The focus of a court's inquiry then is on the relevant exclusions to coverage." (The Federal Judge, it should be pointed out, also confronted and resolved Motions for Judgment on the Pleadings and Motions for Summary Judgment, although most of the Motions were Rule 12(b) Motions to Dismiss.) The quoted ruling is found on page 9. The Homeowners Policies are quoted in pertinent part in the opinion. "ISO Policies" are quoted by the Court on page 15; State Farm Policy language is published on page 16, and Hartford Policy language is found on pages 16-18.
2. The State Farm and Hartford Policies are held to Exclude Coverage for "flooding" regardless of cause, in this Federal Order under Louisiana law. After consulting and analyzing numerous authorities, the Federal Judge ruled that a disaster caused by the alleged negligence of Human Beings regarding levee breaches and ensuing water damage is not an otherwise undefined "flood" in the first place. Hurricane Katrina may have caused a "flood", but the Claimants in this case did not sue for alleged Katrina Damages -- they sued for Damages that resulted after Katrina was all or almost totally gone.
The State Farm and Hartford Exclusions for damage by flooding "regardless of cause", however, are held to mean exactly what they express in the attached ruling which of course applies to all of these consolidated cases. (Pages 50 and 73 regarding State Farm; Pages 53-54 regarding Hartford). [Emphasis added.]
3. ISO Flood Exclusions, which the Federal Judge referred to as "Water Damage Exclusions," were held to be ambiguous in this particular Consolidated Coverage Case. Under Louisiana law, an ambiguous Insurance Policy provision is strictly construed against the Insurance Company since, said the Federal Judge, the Policy provisions are prepared by the Insurance Company and in Louisiana an Insurance Policy is commonly referred to as an adhesion contract. (Page 10.) "ISO Policies" subject to this ruling and strict construction were issued by many Insurance Companies which are Defendants in this Consolidated Insurance Case. (See, for example, the Federal Judge's rulings regarding all these types of Policies on pages 15, 39, 44-45, 58, 65-66, 68-69, 74, 74-75, and 77-78.)
The Federal Judge in part analyzed case law from other Gulf Coast States in the course of reaching the ruling of ambiguity, such as case law from Alabama and from Florida, as well as from North Carolina, an Atlantic Coast State which has had some experience too with Hurricanes (page 13). Of particular interest to Florida Attorneys, the Federal Judge's attached Opinion focuses at one point on a decision of the Supreme Court of Florida (pages 35-36).
Further, those familiar with rulings previously issued by the Federal Court in the Southern District of Mississippi will find them analyzed in the attached Opinion, too. The guts of those rulings were attached to "anti-concurrent cause" Exclusions, which did not yet apply in the Federal Consolidated Coverage Case in Louisiana, Order attached; the Federal Judge in the Eastern District of Louisiana distinguished those rulings because there were no allegations presented in the challenged complaints in Louisiana Federal Court that involved any more than one cause. (Pages 49 and 71.) The Federal Court noted in the attached Order that the actual evidence may reflect more than one cause, and the Court would in that case revisit the anti-concurrent cause Exclusions relied on by the Insurance Companies, at that time. (See for example Pages 33, 69, and 78.)
4. The Federal Court in the attached Eastern District of Louisiana Consolidated Insurance Coverage case concluded its rulings by candidly holding that there is a substantial ground for differences of opinion as to the governing Insurance Law Questions, such that the Court ordered that an immediate appeal may be taken from these orders. (Page 85.)
A Notice of such Appeal is expected on or before Thursday, December 7, 2006. Further known developments, if any, in this Consolidated Insurance Coverage Case will be posted here.
REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
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