Federal Appeals Courts to Hear Key Mississippi Katrina Insurance Case

August 7, 2007

A federal appeals court is poised to review a judge’s verdict last year in the first trial among hundreds of lawsuits that Mississippi homeowners filed against insurance companies in Hurricane Katrina’s aftermath.

The 5th U.S. Circuit Court of Appeals in New Orleans planned to take up arguments today from lawyers on both sides of the groundbreaking case, which pitted a Pascagoula, Miss., couple against Nationwide Mutual Insurance Co.

In August 2006, U.S. District Judge L.T. Senter Jr. ruled that Nationwide policyholders Paul and Julie Leonard aren’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.

Nationwide is asking the 5th Circuit to overturn that portion of Senter’s ruling, which could affect hundreds of other cases brought by Gulf Coast policyholders.

“Nationwide is seeking to adjust the claims of such persons through a prompt and fair process, but that process will not work if the courts refuse to enforce the plain language of the written policies,” company attorneys wrote in court papers.

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

“Nationwide, having suffered no injury or prejudice at trial, already brings a moot case; put another way, it has no standing to bring its appeal,” the Leonards’ attorneys wrote in court papers.

Nationwide’s appeal, to be heard by Judges Edith Jones, Thomas Reavley and Jerry Smith, isn’t the first Katrina insurance case to go before the 5th Circuit.

Last week, a different three-judge panel 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.

The 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.

Zach Scruggs, one of the Leonards’ attorneys, said Thursday’s ruling shouldn’t have any impact on other Katrina insurance cases before the 5th Circuit.

“It was disappointing for the policyholders in Louisiana, but it doesn’t have any effect on the arguments we’re making in (Mississippi cases),” he said. “It’s a whole different set of coverage issues in play here.”

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.

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