Posted on 11/28/2006 10:32:40 PM PST by NormsRevenge
NEW ORLEANS (Reuters) - A Louisiana federal judge has ruled many New Orleans homeowners whose houses sustained water damage after Hurricane Katrina are not excluded from coverage under their insurance policies, a judgment that represents a loss for the insurance industry.
In an 85-page judgment, U.S. District Court Judge Stanwood Duval denied motions by some insurers seeking to stop policyholders from receiving claims they said were prevented by exclusion language spelled out in the policies.
The insurance companies argued the industry standard wording for what constitutes a flood covers any inundation of dry land by water.
But in his decision, which insurers are expected to appeal, Duval drew a distinction between flooding that occurs naturally and the destructive force of the water that rushed into the city when the levees gave way.
He also said insurers' definitions of the word "flood" were ambiguous and did not necessarily include man-made causes, such as levee failures.
"It is the considered opinion of the Court that because the policies are all-risk, and because 'flood' has numerous definitions, it reasonably could be limited to natural occurrences," Duval wrote.
One exception was State Farm Fire & Casualty Co., whose policy language specifically spelled out exclusion of flood coverage regardless of the cause.
Several levees and footwalls in and around New Orleans breached after the deadly August 29, 2005 storm, submerging 80 percent of the city and causing severe damage to more than 150,000 homes. Some studies have blamed the failures on poor design and maintenance of the flood barriers.
The judgment covers four separate cases under an umbrella for levee and canal failure proceedings and involved State Farm, Travelers Property Casualty Co. of America, Encompass Insurance Co. and a host of others.
"In the New Orleans area, everyone who bought insurance from a company other than State Farm at the moment now stands the prospect of getting full coverage under their homeowners policy for their damages, to the extent those damages were the result of water being released from the levee," John Ellison, co-lead counsel for the plaintiffs, said on Tuesday.
The decision runs counter to that of a judge in Mississippi, who ruled in August that a couple from that state, whose home was hit with $130,000 of damage from Katrina, was not covered by their policy due to the exclusion of flood coverage.
One insurance industry official said he believed the ruling will be overturned on appeal, as it appears to ignore that companies are using the well-established standards accepted by federal regulators.
If it stands, it will force insurers to restrict coverage and raise rates in the hurricane-ravaged Gulf Coast and slow the recovery, said Robert Hartwig, chief economist with the Insurance Information Institute.
However, companies have already raised rates even without paying the water damage claims yet, Ellison said.
Katrina cost insurers about $41 billion in claims, the largest event in the history of the industry, with homes accounting for nearly half of the total.
The homeowners will lose on appeal, and the appeal will take years.
I guess if you live on the beach, you should either pay extra for the flood coverage or build a monolithic dome.
http://www.domeofahome.com/ivan_ridersinthestorm.asp these domes seem to survived Hugo just fine.
I've been getting insurance industry news from this site:
http://insurancetransparencyproject.com/
I hate the guys writing, but I've yet to find another blog with his slant.
Regardless, the fact that you need an attorney to know what your supposedly plain English insurance policy covers, means something is dysfunctional in the state of Denmark.
Not the issue. A lot of folks have had claims denied after Katrina because they were on relatively high ground, and were advised by their agents that they did not need flood coverage. After the storm, adjusters described as "flood damage" whay you or I would think of as storm damage -- i.e. it isn't flood damage if the water causing the damage is moving horizontally.
And in this particular case, the homeowners were not on the beach, but in New Orleans. And the proximate cause of the flooding was not the rainfall, but the failure of the levees. It was not an act of God, and if the insurers are screwed, they can try suing the Corps of Engineers and other authorities.
or build a monolithic dome.
Monolithic dome construction is way cool, but also insanely expensive. I was talking to my uncle, a Florida architect, about this the other day -- according to him, all you have to do is follow or upgrade to current building codes, put garages with breakaway walls on the ground floor, and move all the living space above the high water mark.
The Mississippi Gulf Coast was hit hard by Katrina because so many of the houses were a century or so old. The houses built in their place will be better equipped to survive the next big storm.
The domes go for about $125/ft2, very cheap in Cali, not so bad elsewhere for a custom home.
They even have them here in Alaska due to the superior R values of the wall/insulation construction.
Round furnature, on the other hand, can be hard to come by.
Does anyone notice a pattern here?
Who were responsible for the levee's-the Federal Gov't.
Our tax dollars at work!
Who was responsible for the levees? It's not quote open-and-shut. The feds built the things (to specs that who knows established). The local gummint maintained them the last 30 or 35 years.
Bottom line - the gummint (at all levels) is the least efficient provider of any goods or services and ought to be the provider of last resort.
Amen.
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