Katrina's flood damage is excluded, Louisiana SC rules

BATON ROUGE - The Louisiana Supreme Court on Tuesday unanimously ruled that homeowners insurance policies do not have to cover damages caused by levee breaches in the wake of Hurricane Katrina.

The justices agreed that Lafayette Insurance Co. was within its rights to deny coverage for flooding to the Uptown fourplex belonging to Joseph Sher, 92, ruling that when his apartment took on four feet of water after the levees broke on Aug. 29, 2005, the disaster was a flood, and therefore is excluded from coverage under his policy.

The American Insurance Association, an insurance industry lobbying group, hailed the court's decision for making a "reaffirmation of the sanctity of contracts between an insurance company and its policyholder," AIA President Marc Racicot said in a statement.

"Given the current political environment throughout the entire Gulf Coast, the Louisiana Supreme Court has shown great courage and understanding in rendering its decision," said Racicot, former governor of Montana.

The high court's decision reverses a November decision by the 4th Circuit Court of Appeal that found the definition of the word "flood" in a Lafayette Insurance Co. policy was ambiguously worded and that the policyholder's interpretation of the contract had to be followed.

"The plain, ordinary and generally prevailing meaning of the word 'flood' is the overflow of a body of water causing a large amount of water to cover an area that is usually dry," the court ruled.

"This definition does not change or depend on whether the event is a natural disaster or a man-made one-in either case, a large amount of water covers an area that is usually dry. The plain, ordinary and generally prevailing meaning is all-inclusive," the majority opinion added.

In writing the majority decision, Justice Chet Traylor wrote that the flooding in New Orleans that followed Hurricane Katrina was only aided by human errors, not caused by human error.

"The flood was caused by Hurricane Katrina, not by man," Traylor wrote. "The levees did not cause the flood, they, whether through faulty design, faulty construction, or some other reason, failed to prevent the flood."

Four of the seven justices signed on to the 29-page majority opinion, while two other justices concurred, and one justice concurred in part and dissented in part.

Louisiana Attorney General James "Buddy" Caldwell had argued that residents were disadvantaged by insurance companies that refused to pay for flood damage otherwise covered by flood policies.

The case is Joseph Sher vs. Lafayette Insurance Co. et al.