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Louisiana high court finds flood insurance exception unambiguous in Katrina case

[JURIST] The Louisiana Supreme Court ruled [PDF text] Tuesday that an insurance company was not required to pay for water damage caused when New Orleans levees breached after Hurricane Katrina [JURIST news archive]. Homeowner Joseph Sher sued Lafayette Insurance Company [corporate website] after the insurer refused to cover damage resulting from a four-foot water rise in his home after the 2005 hurricane; Sher's policy did not cover "flood" damage, but Sher argued that the term "flood" was ambiguous as to whether it referred to all water damage or just that caused by natural rather than man-made events. The Louisiana 4th Circuit Court of Appeal [official website] last year ruled [PDF text] that the term was ambiguous, but the state Supreme Court Tuesday found that ordinary usage of the term rendered the policy exception clear and enforceable, even if "flood" has multiple definitions relating to its cause and character. The Court reduced Sher's award from $870,652 to $247,001, covering damage from wind as well as lost rent and other costs.

Insurance insiders say that the Louisiana decision is consistent with earlier federal court precedents across the country. Last November, the US Court of Appeals for the Fifth Circuit upheld language used in a homeowner insurance policy [opinion, PDF; JURIST report] by State Farm Fire and Casualty [corporate website], finding the policy's anti-concurrent causation clause unambiguous and enforceable. That decision followed precedent set forth in a case against Nationwide Insurance [corporate website] decided in August 2007, in which the circuit court ruled that policy language was not "ambiguous" [opinion, PDF; JURIST report] about whether damage caused by combinations of wind and water is covered under a policy that only lists one of the two. AP has more.

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