Insurance Hearing Precedent

12/28 Judge moves AG's Katrina suit to state court
Insurers wanted it in federal court
THE ASSOCIATED PRESS
GULFPORT - A federal judge agreed Tuesday to transfer Attorney General Jim Hood's lawsuit against insurance companies over Hurricane Katrina damage from federal to state court.
U.S. District Judge L.T. Senter Jr. ruled Hood's lawsuit belongs in state court because interpreting the terms of private insurance policies is traditionally a function of state law.
Senter rejected arguments by insurers that Hood's suit should be heard in federal court because the companies write flood insurance policies that are funded and administered by the federal government.

LA. Judge Rules Differently than MS

Judge refuses to kill lawsuit against insurers
THE ASSOCIATED PRESS
NEW ORLEANS - A federal judge refused to throw out a lawsuit for damages from Hurricane Katrina's floods, saying the language excluding water damage from some policies is ambiguous.
The 85-page ruling by U.S. District Judge Stanwood Duval Jr. covered several cases that had been consolidated because they were similar. He immediately sent the decision to the 5th U.S. Circuit Court of Appeals for review.
There is no timetable for that review, plaintiffs' attorney Joseph Bruno said. Still, he was optimistic.
"Right now, we're on the verge of an opportunity to get a recovery for people who have lost everything and who didn't have flood insurance or didn't have enough flood insurance," he said.
Under Louisiana law and precedent, Duval ruled, insurance companies must prove that a clause excluding coverage applies _ and, without such an exclusion, provisions are generally construed in favor of coverage.
"The law says that when you write an exclusion, it has to be strictly construed. If it's ambiguous, it doesn't apply," Bruno said.
He said Duval found that language used by most insurance companies doesn't differentiate between a flood caused by an act of God, such as excessive rainfall, and a flood caused by an act of man, which would include the levee breaches.
Allstate Insurance Co., one of the companies named in the suit, plans to appeal Duval's decision to the 5th Circuit, said Mike Siemienas, a spokesman for Allstate Insurance Co.
"Allstate disagrees with the judge's conclusion that its policy exclusions do not apply to water damage resulting from the flooding in the New Orleans area," he said.
Although the ruling covers several cases, Duval has not decided to certify it as a class-action suit yet. A decision on whether to do that probably won't come until the appellate court rules on Duval's decision, Bruno said.
If the suit becomes a class action, it could grow exponentially, he said, because it could include everyone whose home sustained storm-related water damage.
Duval was appointed to the federal bench by President Clinton in 1994.
Duval's ruling contrasts sharply with an August decision by a federal judge in Gulfport, Miss., who ruled that a couple could not collect from their insurer because their policy doesn't cover damages from floodwaters or storm surges.
"Almost all the damage ... is attributable to incursion of water," U.S. District Judge L.T. Senter Jr. wrote in the Mississippi suit.
Senter did say that the policy the couple's insurer used to deny coverage was ambiguous because it covers wind damage but not damage caused by wind and water.
"The reading of the policy would mean that an insured whose dwelling lost its roof in high winds and at the same time suffered an incursion of even an inch of water could recover nothing," he wrote.
At the time, Louisiana Insurance Commissioner said the decision probably would not affect Louisiana litigation because Senter sits in a different district.
But Allan Kanner, chairman of the Louisiana Trial Lawyers Association, said insurance companies probably would use it in litigation.
And, since Mississippi also is part of the 5th Circuit, any appellate court ruling in the Mississippi case would apply to Louisiana.

New insurance trial rejected
THE ASSOCIATED PRESS
GULFPORT - A federal judge says he won't order a new trial for a Pascagoula couple whose lawsuit against their insurance company was the first case to be tried here after Hurricane Katrina spawned hundreds of similar lawsuits.
U.S. District Judge L.T. Senter Jr. last week refused to change his ruling in August that Nationwide Mutual Insurance Co.'s policies do not cover damage from a hurricane's storm surge, or wind-driven water.
Senter, who heard the landmark case without a jury, also said he sees no reason to order a new trial for Paul and Julie Leonard, who sued Nationwide after the company paid them only $1,661 for more than $130,000 worth of damage to their home.
Zach Scruggs, one of the Leonards' attorneys, said he might appeal Senter's decision.
Attorney Richard "Dickie" Scruggs had asked Senter to reconsider his ruling, which also held that insurers must pay for any damage from hurricane-force winds.
The Leonards' lawyers argued that Nationwide's policies are ambiguous and therefore can't be enforced because "storm surge," or wind-driven water, isn't specifically excluded from coverage.
Senter rejected that argument, however. The judge said the flood exclusion in the company's policies applies to rising water from a hurricane.
"Substantially identical policy exclusions were considered and applied during litigation following Hurricane Camille, and none of the courts who considered this language found it to be ambiguous or otherwise unenforceable," Senter wrote, referring to the major storm that hit the Gulf Coast in 1969.
In August, Senter ordered Nationwide to pay the Leonards about $1,228 more than what the Columbus, Ohio-based company already had paid them for wind damage. That money, which Nationwide paid on Monday, will be held by the court pending the outcome of any appeal.