The latest in the post-Katrina courtroom battle on insurance contract
language from Insurance Journal:
U.S. District Judge L.T. Senter Jr., in a ruling released
Wednesday, said State Farm cannot rely on “ambiguous” language in a clause
that is used to introduce what is excluded from coverage in its
policies.The judge agreed with State Farm that tidal surge is not covered.
However, he said a policy clause that purports to deny coverage when wind
acts in any sequence with an excluded event, such as tidal surge, to cause
damage is ambiguous.[...]“Both sides can claim victory here,” said J. Robert Hunter, former Texas
insurance commissioner and currently director of insurance for the Consumer
Federation of America. “When the damage is very clearly caused purely by
flood, State Farm will win. But if there is wind damage or rain damage
before flood damage, then State Farm may have to pay quite a
bit.”
And with that ruling, every insurers’ attorneys who oversee policy form
language reached for their libraries, and many insurance company executives
began reconsidering their appetite for Mississippi business.
Snarkishness aside, and with a caveat that I haven’t read the decision and
am relying on media coverage to educate myself on the Katrina suits, the
ruling sounds at least reasonably balanced, particularly in the context
where insurers are perhaps taking a too-conservative approach to settling
claims. Storm surge and flood are clearly excluded from HO policies. It’s
the claims where both covered and excluded perils are at work where there’s
an issue.
I wonder how many insurers will be seeking to rewrite their homeowners
contracts, to make coverage very clearly secondary to NFIP coverage in the
wake of this ruling.