Flood Exclusion Bars Coverage for Hurricane Katrina Storm Surge Based On Clear and Unambiguous Language in Mississippi Homeowners' Policy
August, 2006
A federal district court in Mississippi recently held that there is no coverage for flood damage caused by Hurricane Katrina where a flood exclusion in a homeowners’ insurance policy is clear and unambiguous. Buente v. Allstate Property & Casualty Insurance Co., 2006 WL 980784 (S.D.Miss. 2006). In reaching this decision, the Court denied the policyholders’ motion for partial summary judgment, which was based on the argument that the flood exclusion was ambiguous.
On August 29, 2005, Hurricane Katrina made landfall near Mississippi as a strong category 3 storm. As the hurricane made its second landfall on the Mississippi border, wind speeds were approximately 110 miles per hour. Precipitation analysis from the National Oceanic & Atmospheric Administration’s Climate Prediction Center (“NOAA”) showed that rainfall accumulations exceeded 8-10 inches along much of the hurricane’s path and to the east of the track. Large portions of Biloxi and Gulfport, Mississippi, were underwater as a result of a 20 to 30+ foot storm surge which flooded the cities.
Plaintiffs, Elmer and Alexa Buente, owned a home approximately five blocks from the Mississippi Gulf Coast and were insured under a homeowners’ policy with Allstate Property and Casualty Insurance Company (“Allstate”). The Buentes alleged that their home sustained damages as a result of Hurricane Katrina from a combination of “wind and wind-driven rain as well as rising water from the hurricane” and then sought coverage under the Allstate policy. After the Allstate adjustor made a settlement offer of $2,600.35, the Buentes indicated that the damages to the home and contents ranged from $50,000 to $100,000, and then filed suit in the Southern District of Mississippi.
Allstate moved for judgment on the pleadings, pursuant to Federal Rules of Civil Procedure 12(c). The basis of the motion was that the homeowners’ policy had an exclusion for any damage caused by storm surge. The Court denied Allstate’s motion, reasoning that there were questions of fact raised by the Complaint as to whether the Beuntes’ home was damaged by a combination of wind, wind-driven rain or storm surge, and to what extent this claim is covered and what portion is excluded. Specifically, the court stated as follows:
Under Mississippi law, where there is damage caused by both wind and rain (covered losses) and water (losses excluded from coverage), the amount payable under the policy of insurance is a question of which is the proximate cause of the loss. To the extent that plaintiffs can prove their allegations that the hurricane winds (or objects driven by those winds) and rains entering the insured premises through openings caused by the hurricane winds proximately caused damage to their insured property, those losses will be covered under the policy, and this will be the case even if flood damage, which is not covered, subsequently occurred. These are fact-specific inquiries that must be resolved on the basis of the evidence adduced at trial.
Plaintiffs also moved for partial summary judgment on the grounds that the Allstate policy exclusions for flood were ambiguous, and therefore, the damages to the Buentes’ home were covered. Conversely, Allstate argued that the exclusions were clear and unambiguous and should be enforced as written.
The Allstate Policy, Section I, Losses We Do Not Cover Under Coverages A and B, provided an exclusion for damage attributable to inundation. Specifically, the Allstate policy provided, in relevant part, as follows: “We do not cover loss to the [insured] property consisting of or caused by: 1. Flood, including, but not limited to, surface water, waves, tidal water or overflow of any body of water, or spray from any of these, whether or not driven by wind, * * * 4. Water or any other substance on . . . the surface of the ground regardless of its source.”
Based on the exclusionary language in the Allstate policy, the Court denied Plaintiffs’ motion, holding that the flood and water exclusions were clear and unambiguous. The critical issue in resolving the motion was whether the entry of water into Plaintiffs’ home was within the terms of the flood exclusion. The Court determined that the exclusions were “drawn quite broadly,” and they had the clear purpose of “excluding damage caused by inundation” from coverage. Moreover, the Court indicated that similar policy terms with respect to damage caused by high water associated with hurricanes have been enforced in many other reported decisions. Accordingly, the Court held that the clear and unambiguous language of the Allstate policy flood exclusion bars coverage for Hurricane Katrina storm surge.
Learning Point:
The Court in Buente followed existing law and found the flood and water exclusions, like those commonly found in homeowners and commercial property insurance contracts, to be clear and unambiguous. Thus, the Court adhered to long-established rules of contract interpretation and enforced the policy language as written. •
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