Wednesday, November 29, 2006

Katrina Insurance Decision

The New York Times reports an important decision favoring policyholders. The decision appears to impose a major limitation on the flood exclusion clauses in Louisiana insurance contracts:
Judge Duval’s decision centered on the distinction between flooding caused by high winds and heavy rains and flooding caused by human error. Much of the destruction in New Orleans in the wake of Hurricane Katrina in August 2005 was a result of levee failures.

He said the language in the insurance policies on flood coverage was ambiguous because it did not “clearly exclude man-made” flood disasters. Since the insurers provided the wording for the policies, he said he felt “constrained to interpret it against the insurers.”

He made an exception for State Farm and the Hartford Insurance Company, whose policies do not provide coverage for flooding “regardless of cause.”


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