LA Appeals Court Decision in Katrina Levee Case Good for Insurers
It was announced on Thursday that a three-judge federal appeals court ruled that the flood exclusion in Louisiana commercial and homeowners policies excluded recovery for water damage sustained when levees failed after Hurricane Katrina struck New Orleans in September 2005.
A group of about 40 policyholders held that the exclusion should not apply because of negligent design, construction and maintenance of the levees which was responsible for breaks. In a ruling issued on Nov. 27, 2006, a U.S. district court judge drew a distinction between natural and manmade flooding, holding that the language in most of the policies involved was ambiguous regarding manmade flooding and therefore allowed the coverage suit to proceed. About a dozen insurers named as defendants in the case appealed.
The U.S. Court of Appeals for the Fifth Circuit, however, ruled the insurers' contracts were valid, noting “…that even if the plaintiffs can prove that the levees were negligently designed, constructed or maintained and that the breaches were due to this negligence, the flood exclusions in the plaintiffs’ policies unambiguously preclude their recovery.”
"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," Judge Carolyn King wrote.
"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."
Published on August 3, 2007
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