A U.S. court of appeals ruling dashed the hopes of potentially hundreds of post-Hurricane Katrina claimants Tuesday when it ruled a major insurer’s policy language unambiguous.
The case is based on State Farm Fire and Casualty Co.’s refusal to pay Long Beach, Miss., claimants John and Claire Tuepker for the complete destruction of their home and property caused by Hurricane Katrina in August 2005. The couple had a current and valid homeowners’ insurance policy with State Farm at the time.
When State Farm refused to compensate the Tuepkers for their losses, the Tuepkers sued the insurer on Nov. 21, 2005. State Farm filed a motion in December 2005 to dismiss the complaint citing anti-concurrent causation.
State Farm argued that the policy’s anti-concurrent causation clause is not ambiguous – in this case, coverage of wind damage but not water damage associated with wind – because it cannot be construed to have two or more reasonable meanings and it does not conflict with any other provisions in the policy.
A three-judge panel from the 5th U.S. Circuit Court of Appeals agreed with State Farm.
Tuesday’s ruling overturns the decision U.S. District Judge L.T. Senter Jr., made earlier this year in Gulfport, Miss., stating the clause is ambiguous and can’t be enforced.
The Tuepkers wanted the U.S. Court of Appeals to uphold the district court’s conclusion that the ACC Clause was ambiguous. They argue that the ACC clause is unenforceable because it conflicts with other provisions in the policy, namely the express coverage for losses attributable to wind and the Hurricane Deductible Endorsement.
According to the ruling, the State Farm ACC Clause clearly states that excluded losses – here, any loss which would not have occurred in the absence of one or more of the excluded events – will not be covered even if a non-excluded event or peril acts “concurrently or in any sequence” with the excluded event to cause loss.
State Farm spokesman Frasier Engerman said the company is pleased with the ruling.
“The court’s ruling reinforces our confidence in the clarity of the policy language,” Engerman said. “While we’re pleased the court resolved these issues, State Farm is working to settle remaining outstanding claims on the Gulf.”
In the judicial trio’s 17-page document, Judge Will Garwood concluded that Mississippi law validates Water Damage Exclusion and the storm surge that damaged the Tuepkers’ home is a peril that is unambiguously excluded from coverage under State Farm’s policy.
Richard “Dickie” Scruggs, an attorney for the Tuepkers, said the ruling doesn’t absolve State Farm of paying for wind damage when it can be distinguished from flood damage.
David Rossmiller, a Portland, Ore.-based lawyer who has written about Katrina insurance litigation but isn’t involved in any of the cases, said Tuesday’s ruling is a “big victory for State Farm.”
“Over the years, State Farm has invested huge amounts in this anti-concurrent cause language,” he said. “Having this enforced is a top priority for the company.”
On Feb. 6, State Farm and the Tuepkers entered into a “High-Low Agreement” under which the Tuepkers (for specified consideration varying in amount depending on the outcome of this appeal), agreed to release State Farm from all claims at the conclusion of all appeals of the case, so the case will not continue in lower courts.
Sources: 5th U.S. Circuit Court of Appeals
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