Federal Appeals Court in New Orleans Hears Katrina Case

September 7, 2007

Policy language that a major insurance company invoked to deny Gulf Coast homeowners’ claims after Hurricane Katrina is at the center of a case that was scheduled for a hearing Sept. 6 in a federal appeals court in New Orleans.

State Farm Fire & Casualty Co. says its policies cover damage from hurricane-force winds, but not from rising water, and has refused to pay for any damage from Katrina’s monster storm surge.

The Bloomington, Ill.-based insurer also says damage from a combination of wind and rising water is excluded from coverage. Last year, however, a federal judge in Gulfport, Miss., ruled that this “anti-concurrent cause” policy language is ambiguous and therefore can’t be enforced.

In the same ruling, Judge L.T. Senter Jr. refused to throw out a lawsuit filed by John and Claire Tuepker, State Farm policyholders whose home in Long Beach, Miss., was reduced to a concrete slab by the Aug. 29, 2005, storm.

State Farm appealed Senter’s ruling to the 5th U.S. Circuit Court of Appeals in New Orleans. A three-judge panel was scheduled to hear arguments Sept. 6 from attorneys on both sides of the case.

In court papers, the Tuepkers’ attorneys suggest that State Farm’s policies are “craftily ambiguous” and are “woven so as to not give away their true intent.”

“Indeed, since Katrina, it has become painfully obvious that, in anticipating the risk posed by a powerful hurricane, State Farm intended all along to exclude damage ostensibly caused by a combination of water and water, the one-two punch without which a meteorological event is something other than a ‘hurricane,”‘ the couple’s attorneys wrote.

In a different case, however, the Mississippi Court of Appeals found that State Farm’s anti-concurrent cause language is “clear” and unambiguous, the company’s attorneys say.

“Courts in many other jurisdictions have likewise upheld the validity of this same language,” State Farm attorneys wrote in court papers.

The Tuepkers are among thousands of homeowners in Mississippi and Louisiana who have sued their insurers after the Aug. 29, 2005, storm. The couple is represented by attorney Richard “Dickie” Scruggs, who helped negotiate a multibillion dollar settlement with tobacco companies in the mid-1990s.

Last month, Scruggs appeared before a different three-judge panel of the 5th Circuit to challenge similar language in policies written by Nationwide Mutual Insurance Co. But the judges sided with Nationwide, ruling Aug. 30 that the Columbus, Ohio-based insurer’s policy language isn’t ambiguous.

David Rossmiller, a Portland, Ore.-based lawyer who closely follows Katrina insurance litigation, said policyholders shouldn’t expect a different result in the State Farm case even though its policy language is different from Nationwide’s.

“The handwriting is on the wall,” he said. “It would be shocking to me if the result was substantially different.”

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