Gulfport, Miss. – A federal judge ruled Tuesday that an insurance company’s policies do not cover damage from flood waters or storm surge in a decision that could affect hundreds of upcoming cases related to property damage from Hurricane Katrina.
U.S. District Judge L.T. Senter Jr. ruled that a Mississippi Gulf Coast couple cannot collect damages from storm surge because Nationwide Mutual Insurance Co.’s policies do not cover wind- driven-water damage.
Senter said Paul and Julie Leonard of Pascagoula could be compensated for damage that they could prove was caused by high winds, however.
“Almost all the damage to the Leonard residence is attributable to the incursion of water,” Senter wrote in the 13-page decision.
Senter’s ruling could set a precedent for hundreds of other court challenges to the insurance industry for denying billions of dollars in claims after the Aug. 29 hurricane ravaged the Louisiana and Mississippi coasts.
Although Senter ruled that Nationwide’s policies do not cover damage from storm surge, the judge also concluded a key policy provision the company has used to deny coverage is ambiguous.
Nationwide and other insurers say their homeowners policies cover damage from a hurricane’s wind, but not in cases where it resulted from a combination of wind and water.
“This reading of the policy would mean that an insured whose dwelling lost its roof in high winds and at the same time suffered an incursion of even an inch of water could recover nothing under his Nationwide policy,” he wrote.
“From our perspective, it lifts a very large cloud of uncertainty that has been hanging over the insurance market of the Gulf Coast,” Joseph Annotti, spokesman for the Property Casualty Insurers Association of America, said in reaction to the ruling.
The Leonards had estimated the total damage to their home at $130,253. They said $47,365 in damage was caused by wind. Nationwide paid only $1,661, blaming the remainder on the storm surge. Senter ruled that Nationwide owed the Leonards only about $1,228 more than what the company already has paid them for wind damage.
