Federal Court Rules Against Katrina Homeowners in Appeal

By Anastacia Mott Austin

In a case involving over 40 plaintiffs who sued their insurance companies to cover Hurricane Katrina flood damages, the federal appeals court sided against the homeowners Thursday.

The plaintiffs had sued their insurance companies to be reimbursed for repairs needed after levees broke and flooded over 80% of New Orleans after Hurricane Katrina hit in 2005.

After initially winning their case in November, the homeowners lost the appeal.

November’s case was presided over by United States district judge Stanwood Duval Jr., who ruled that the wording on the plaintiffs’ policies concerning flooding was ambiguous, and therefore the insurance companies owed them for flood damages.

The three-judge panel that voted Thursday did not agree with Duval.

Judge Carolyn King wrote in the judgment, "This event was excluded from coverage under the plaintiffs’ insurance policies, and under Louisiana law, we are bound to enforce the unambiguous terms of their insurance contracts as written."

Insurance companies generally do not cover their policyholders for flood damages, though other natural disasters caused by weather are sometimes covered.

In 1968 Congress instituted a National Flood Insurance Program, in which homeowners could buy supplemental insurance that would cover them in the event of flooding.

In the earlier ruling by Duval, a key point was that it had been difficult to determine the difference between flooding caused by "acts of God," and that caused by human negligence.

It doesn’t matter, said the appeals court. Flooding isn’t covered, no matter the cause. "…even if the plaintiffs can prove that the levees were negligently designed, constructed, or maintained and that the breaches were due to this negligence, the flood exclusions in the plaintiffs’ policies clearly excluded water damage caused by floods," read the judgment.

The case is expected to have a significant potential impact on thousands of homeowners and businesses who are trying to rebuild after Katrina.

David Rossmiller, an insurance company attorney, told reporters that the insurance industry could have taken a "multi-billion dollar hit," had they lost. He was not surprised at the ruling. "The 5th Circuit got it right," said Rossmiller to the press. "This was an easy one."