August 16, 2006
Katrina Storm Surge is "Flood," Not "Wind"
In the big contract law news today, Mississippi senior federal judge L. T. Senter, Jr., has ruled that the insurance policies issued by Nationwide Mutual Insurance do not cover losses caused by wind-driven water, or "storm surge." It's a major ruling from Judge Senter, who is presiding over virtually all of the Mississippi insurance claims related to Hurricane Katrina.
The case, Leonard v. Nationwide Mutual Insurance Co., involved damage to a house in Pascagoula, Mississippi. The standard language in the homeowners' policy excluded flood damages but did include damages from wind. Flood insurance must ordinarily be purchased separately from the National Flood Insurance Program, but the plaintiffs (like many other residents of Pascagoula) had not bought flood insurance. Nationwide's policy read:
We do not cover loss to any property resulting directly or indirectly from any of the following. Such a loss is excluded even if another peril or event contributed concurrently or in any sequence to cause the loss. . . . (b) Water or damage caused by water-borne material. Loss resulting from water or water-borne material damage described below is not covered even if other perils contributed, directly or indirectly to cause the loss. Water and water-borne material damage means: . . . flood, surface water, waves, tidal waves, overflow of a body of water, spray from these, whether or not driven by wind.
The plaintiffs argued that this language was ambiguous, and that since the storm surge that engulfed Pascagoula, Mississippi, was caused by wind, all damages to their home were covered. Senter ruled that the clause was ambiguous, but not that ambiguous -- it plainly excluded wind-driven water.
Commentary on the Leonard decision from the insurers' point of view, can be found at at Insurance Coverage Blog, here and here. (Top left: Storm surge damage in Pascagoula, courtesy Wikipedia GNU License.)
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