Hurricane Litigation

U.S. Supreme Court Denies Writ
LA Homeowners are not entitled to agreed
face value from total loss due to flood

The United States Supreme Court denied writ of certiorari from the Fifth Circuit ruling in Chauvin v. State Farm & Casualty Co.  The Fifth Circuit’s August 6, 2007 ruling held that homeowners were not entitled to agreed face value of their policies pursuant to Louisiana’s Valued Policy Law where their homes sustained some damage from a covered peril, but total loss resulted from a non-covered peril. 

Chauvin, et al  v. State Farm, ---S.Ct. , 2008 WL 114049, 76USLW 3255 (U.S. Jan. 14, 2008) (No. 07-602).

For more information please click here to see the attached case summary of the Fifth Circuit ruling.

Homes damaged by flood waters from levee
failures are covered by Homeowners policies

In analyzing the contractual disputes between an individual policy holder and the relevant insurers, the Court interpreted the language pursuant to the Louisiana Civil Code and Louisiana Law. In an eighty five page opinion rendered on November 27, 2006, Judge Stanwood Duval denied several insurers’ Motions to Dismiss the plaintiffs’ Complaints. The insurers argued the homeowners’ request for coverage was excluded pursuant to the Water exclusion. The Court held the water exclusions contained in the homeowner’s policy for Hanover Insurance Company, Standard Fire Insurance Company, Hartford Insurance Co. of Midwest and Unitrim Preferred Insurance Co. were ambiguous and denied the insurers Motion to Dismiss. The Court found the language contained in the water exclusion was ambiguous as to whether it included water from man made failure due to a levee breach. State Farm’s Motion was granted due to a water exclusion that contained “regardless of cause” language. The insurers are expected to file an immediate appeal. For additional information, click here to view the 85-page decision by Judge Duval.

To avoid conflicting decisions among the various sections of the Federal Court in New Orleans, all cases which concern damages caused by flooding as a result of breaches or overtopping in the areas of the 17th Street Canal, the London Avenue Canal, the ndustrial Canal and the Mississippi Gulf River Outlet (“MRGO”) have been consolidated in the captioned case, “In re: Katrina Canal Breaches Consolidated Litigation,” C.A. No. 05-4182 before Judge Duval.

MS Judge cuts punitive damage
award in hurricane litigation

Judge L. T. Senter awarded a Biloxi, Mississippi couple $224,000.00 for the loss of their home in Hurricane Katrina. The jury awarded the couple an additional $2.5 million in punitive damages against State Farm. Judge Senter cut the punitive damages award to $1 million. He believed the award had been too high given the damages the couple actually suffered. For more information, click here to read the Business Insurance article on the case (Broussard v. State Farm Fire & Cas. Co., 2007 WL  268344 (S.D. Miss.  2007)).

LA Supreme Court rules extended prescriptive
period for Hurricane claims constitutional

The Louisiana Supreme Court heard on an expedited basis whether Acts Nos. 739 and 802 enacted by the Louisiana legislature to extend the prescriptive period under which certain insurance claims arising from Hurricane Katrina and Rita may be filed and which may alter the insurance contractual provisions regarding the time period in which to bring a claim were constitutional.  Prior to these amendments, Louisiana law held that no insurance contract issued in Louisiana could limit the right of action against an insurer to a period less than twelve months.  See. La. R.S.629(A)(3). 

On August 25, 2006, the Supreme Court ruled the legislative acts are constitutional.   The Supreme Court found the legislation to be substantive in nature.  The Court analyzed the effect of the 2006 act in a four step analysis: “first, the court must determine whether the state law would in fact, impair a contractual relationship; second, if an impairment is found, the court must determine whether the impairment is of constitutional dimension; third, if the state regulation constitutes a substantial impairment, the court must determine whether a significant and legitimate public purpose justifies the regulation; finally, if a significant and legitimate public purpose exists, the court must determine whether the adjustment of the of the rights and responsibilities of the contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation’s adoption.” Segura, 630 So. 2d at 729.

The Supreme Court found the state law would impair a contractual relationship but found the legislative extension of the prescriptive period for damage claims is based upon a significant and legitimate public purpose.  The Supreme Court found the Louisiana Legislature Acts Nos. 739 and 802 were both appropriate and reasonable and would neither violate federal or state constitutional prohibitions against impairment of contractual obligations. Click here to view opinion.

MS Judge denies both sides’ motions
and case proceeds to trial

Federal Court - Southern District of Mississippi
Judy Guice v. State Farm Fire & Casualty Company, et al

In the continuing wind versus flood debate, State Farm filed a Motion to Dismiss based on policy exclusions. Plaintiffs filed a Motion for Declaratory Judgment for interpretation of the insurance policy and class action status.

Judge Senter denied State Farm’s Motion to Dismiss the complaint under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. State Farm argued the water damage exclusion, as well as the weather conditions’ provision, unambiguously bar coverage caused by a combination of wind and water. Judge Senter also dismissed Plaintiff’s Motion for Declaratory Judgment. Judge Senter explained that both plaintiff and State Farm focused on “diametrically opposed interpretations of the policy language.” Judge Senter commented that the evidence is not known at this early juncture and anticipates expert testimony from both sides regarding the cause or causes to plaintiff’s damage. Additionally, Judge Senter denied plaintiff’s motion to certify this matter as a class action. For further information, please click here to see Judge Senter’s ruling.

The Guice lawsuit seeks to represent those policyholders with "slab'' or "foundation'' claims in Harrison, Hancock and Jackson counties. Plaintiffs further seek to represent homeowners in cases in which a State Farm adjuster requested an engineering report that allegedly the company subsequently canceled. A jury trial in this matter is set for December 11, 2006 with Judge Senter presiding.

MS Federal Judge ruled policy
does not cover water damage

Federal Court - Southern District of Mississippi
Leonard v. Nationwide Mutual Insurance Company

After hearing testimony for a couple of weeks, Judge Senter ruled in favor of the insurer and dismissed plaintiffs’ claim with the exception of $1,228.16 in damages that the plaintiffs proved was caused by wind damage. Judge Senter held an insurer does not have to cover water damage from Hurricane Katrina if the policyholder had not purchased flood insurance. The Memorandum Opinion is clear that the provisions of the Nationwide policy that exclude coverage for damages caused by water are valid and enforceable terms of the insurance contract.

However, in finding that all damages from wind and concurrent causes were covered, Judge Senter noted that the policy exclusion for combined causes of loss was ambiguous. Nationwide had relied upon this key provision in its claim that such concurrent losses were excluded from coverage. For further information, please click here to see Judge Senter’s ruling.

New Orleans Federal Court
Hurricane related lawsuit against numerous
federal and state officials is dismissed

Judge Duval issued a lengthy opinion in favor of defendants, the City of New Orleans, Ray Nagin both individually and in his official capacity, Eddie Compass, both individually and in his official capacity as Chief of Police, Kimberly Williamson Butler, individually and in her official capacity as Clerk of Court for the Orleans Parish Criminal District Court, the State of Louisiana, Kathleen Blanco, both individually and in her official capacity as Governor of the State of Louisiana, Eddie Jordan, both individually and in his official capacity as District Attorney for the City of New Orleans, United States and against all plaintiffs dismissing their claims.

The Court found there was no subject matter jurisdiction for the majority of the claims alleged. In regard to the civil rights federal jurisdictional claims, because the plaintiffs failed to state a claim against any of the moving defendants. In the remaining state law claims, the Court exercised its discretion and declined to exercise Supplemental jurisdiction over any of the state law claims brought against the moving defendants. Click here to see Judgment by Judge Duval.

Hurricane filing deadline extended

Louisiana Insurance Commissioner Jim Donelon ordered property insurance providers on Tuesday, July 11, 2006 to allow homeowners and business owners two years to file lawsuits. The Insurance Commissioner said he will use "all means necessary" if the property insurance providers do not voluntarily comply with his order. The commissioner advised this could possibly include fines and revocation of the insurance companies' certificates of authority to operate in Louisiana.

Louisiana's one-year statute of limitations is one of the shortest in the country. Other Gulf states allow up to six years to file suits regarding insurance claims. For more information, click here.

LA Federal Judge rules “Value Policy” law
does not apply to hurricane losses

Federal Court - Western District of Louisiana
Turk, et al v. Louisiana Citizens Property Ins. Co., et al

Judge Haik granted partial summary judgment for carriers, State Farm and Louisiana Citizens Property. Judge Haik ruled that Louisiana’s valued policy law under La. R.S. 22:695 does not apply to hurricane losses that result from both wind and water.

In Judge Haik’s Order he noted that the issue involved “a controlling question of law as to which there is a substantial ground for difference of opinion.” Judge Haik stayed further proceedings and certified his order for immediate appeal to the Fifth Circuit. However, plaintiffs filed a Motion to Vacate Judge Haik’s order instead of filing immediate appeal. Judge Haik is currently considering the motions without oral argument. For further information, please click here to see Judge Haik’s ruling.