JURIST - Paper Chase: Federal appeals court backs insurance companies in Katrina flood damages case

[JURIST] The US Court of Appeals for the Fifth Circuit [official website] held [opinion, PDF] Thursday that insurance policies held by many victims of Hurricane Katrina [JURIST news archive] did not cover flood damage caused by the storm. Writing for a three-judge panel, Judge Carolyn King said that flood damage was excluded from coverage provided by a range of defendant companies and that their policies did not distinguish between floods that were 'acts of god' and floods that were 'acts of man.' King wrote that the court was "bound to enforce the unambiguous terms of [the] insurance contracts as written." An insurance expert had testified that if the court would have ruled for the insured, it could have cost the insurance companies $1 billion.

The case was an appeal of a November decision [PDF text; case information] on the issue of what constitutes flood coverage in insurance policies. US District Judge Stanwood Duval Jr. agreed with plaintiffs that the language was ambiguous, but allowed insurance companies, including Allstate, State Farm and Travelers Insurance [corporate websites], to appeal whether there is an innate distinction between floods naturally caused by excessive rainfall and floods caused by the failure of levees. The Fifth Circuit promised to fast-track its decision [JURIST report] in the insurance case after hearing oral arguments in June. AP has more.

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