Court to hear Katrina insurance case

Court to hear Katrina insurance case

	Published : Mon, 06 Aug 2007 23:05 By : Agencies Print this Story

NEW ORLEANS (AP) - A federal appeals court is reviewing a judge's verdict in a groundbreaking trial over Hurricane Katrina damage, a case that could affect many of the lawsuits that Mississippi homeowners filed against insurers in the storm's aftermath.

The 5th U.S. Circuit Court of Appeals in New Orleans heard arguments Monday from lawyers on both sides of the case, which was the first trial among hundreds of lawsuits that Gulf Coast homeowners filed against insurance companies after the August 2005 storm.

In August 2006, U.S. District Judge L.T. Senter Jr. ruled that Nationwide Mutual Insurance Co. policyholders Paul and Julie Leonard, of Pascagoula, Miss., weren't entitled to payments for damage from Katrina's storm surge because the insurer's homeowner policies don't cover damage from rising water.

The Leonards had estimated the total damage to their home at $130,253. The Columbus, Ohio-based company only paid the couple $1,661, blaming the rest of the damage on storm surge. Senter, who presided over the trial without a jury, ordered Nationwide to pay them an additional $1,228 for wind damage.

Although Senter's ruling was viewed as a major victory for the insurance industry, Nationwide appealed a portion of the verdict that challenged a key provision in the company's policies.

Nationwide and other insurers say their homeowners policies cover wind damage, but not in cases where the damage stemmed from a combination of wind and water. Senter said this so-called 'anticoncurrent causation' provision is ambiguous and, therefore, can't be enforced.

On Monday, Nationwide attorney Chris Landau asked a three-judge panel of the 5th Circuit to overturn that portion of Senter's ruling, which he said gives 'enormous leverage' to policyholders in other cases.

'This has a huge practical effect on so many of these cases,' Landau said. 'In so many of the cases, you just can't tell if it's wind or water' responsible for damage.

The Leonards dropped their appeal of Senter's ruling on July 23. Their attorneys, led by high-profile litigator Richard 'Dickie' Scruggs, said the 5th Circuit shouldn't hear the case now that the couple has abandoned their appeal.

'This family is tired of dealing with this matter, and they want to move on with their lives,' Scruggs said.

Scruggs said Nationwide's bid to overturn Senter's verdict is based on 'collateral issues' that are irrelevant to the outcome of the trial.

Chief Judge Edith Jones told Scruggs that his move to drop the appeal a week before Monday's hearing was the latest in an 'odd course of events' in this case.

'It does raise an inference in my mind that there's something else going on here,' she said.

'This is not some sort of a dodge or gamesmanship,' Scruggs responded.

The court did not immediately rule on Nationwide's appeal, which isn't the first Katrina insurance case to go before the 5th Circuit.

Also on Monday, a different three-judge panel for the 5th Circuit upheld the dismissal of lawsuits filed by a group of Louisiana homeowners whose homes were destroyed by hurricanes Katrina and Rita.

The homeowners argued that Louisiana's Value Policy Law required insurance companies to pay for the full value of their wind-damaged homes even if flooding, a 'non-covered peril,' was responsible for the home's destruction.

But the 5th Circuit disagreed, ruling that the law does not apply when a covered peril like wind isn't solely responsible for demolishing a home.

Allstate Indemnity Co., one of several insurers named as defendants in the case, applauded the 5th Circuit's ruling.

'The ruling is further confirmation that Allstate's own claims practices are appropriate and in full compliance with the law,' company spokesman Michael Siemienas said.

The 5th Circuit has been the setting for a flurry of recent activity in Katrina insurance cases.

Last week, the appeals court ruled that insurance companies aren't obligated to pay for damage from the flood water that inundated thousands of homes and businesses following the failure of levees in the New Orleans area.

That decision overturned a ruling last year by U.S. District Judge Stanwood Duval Jr., who concluded that many insurance policies do not distinguish between floods caused by an act of God, such as a severe rainstorm, and manmade disasters like levee breaches.

Randy Maniloff, a Philadelphia-based attorney who has closely watched Katrina insurance litigation, said the recent rulings support the 5th Circuit's reputation for taking a conservative approach to such cases.

'They are certainly not doing any favors for homeowners in Louisiana,' Maniloff said.

On Sept. 6, the 5th Circuit also is scheduled to hear arguments in a different Katrina insurance case, also involving Senter and Mississippi policyholders represented by Scruggs.

In that case, Senter refused to dismiss a lawsuit that John and Claire Tuepker, of Long Beach, Miss., filed against State Farm Fire and Casualty Co. for denying their claim after the Aug. 29, 2005 hurricane.

State Farm appealed Senter's ruling that the company relied on ambiguous policy language to deny the Tuepkers' claim.