Court Confirms Katrina Damage Was Not "An Act Of God"
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|Hurricane Katrina victims whose homes and businesses were destroyed when floodwaters breached levees in the 2005 storm cannot recover money from their insurance companies for the damages, a federal appeals court ruled Thursday.
While insurance may cover some "acts of God," the insurance industry had enough fine print to invalidate claims of flooding due to negligence on the part of the Army Corps of Engineers, which led to the majority of the city's destruction, and therefore, victims were not qualified to be covered under their insurance policies.
The case could affect thousands of rebuilding residents and business owners in Louisiana. Robert Hartwig, chief economist at the industry-funded Insurance Information Institute in New York, said in June that a ruling against the industry could have cost insurers $1 billion.
"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," Judge Carolyn King wrote for a three-judge panel of the 5th U.S. Circuit Court of Appeals.
As a result, the panel found those who filed the suit "are not entitled to recover under their policies," she said.
More than a dozen insurance companies, including Allstate and Travelers, were defendants.
The decision overturns a ruling by U.S. District Judge Stanwood Duval Jr., who in November sided with policyholders arguing that language excluding water damage from some of their insurance policies was ambiguous.
Duval said the policies did not distinguish between floods caused by an act of God — such as excessive rainfall — and floods caused by an act of man, which would include the levee breaches following Katrina's landfall.
But the appeals panel concluded that "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 unambiguously preclude their recovery."