Mississippi Court Enforces Homeowner's Policy Exclusion For Water Damage Caused By Hurricane Katrina, But Finds Concurrent Causation Exclusion For Wind And Water Damage Ambiguous and Unenforceable
October, 2006
The Southern District of Mississippi recently held that the policy exclusions for flood and water damage in a homeowner’s policy were valid and enforceable even when the policy provides coverage for windstorms or hurricanes, such as Hurricane Katrina. However, the decision also held that policy provisions excluding wind damage occurring in combination with flooding were ambiguous. The decision in Leonard v. Nationwide Mutual Insurance Company, 438 F.Supp.2d 684 (S.D. Miss. 2006), is one of the first significant cases involving a homeowner’s claim for combined wind and water damage resulting from Hurricane Katrina. The first part of the decision upheld the well established principle that insurance policies may exclude coverage for water damage, even if the water damage is accompanied by the covered peril of hurricane. The second part of the decision found the policy’s “anti-concurrent causation” clause, which excluded all wind damage occurring at the same time as water damage, to be ambiguous.
Plaintiffs Paul and Julie Leonard’s home in Pascagoula, Mississippi was extensively damaged during Hurricane Katrina on August 29, 2005. At the time of the Hurricane, the Leonards’ home was insured under a homeowners insurance policy issued by Nationwide Mutual Insurance Company; the Leonards’ home did not carry any separate policy of flood insurance issued by the federal government or other commercial providers. The Nationwide Policy contained the following provisions which provided coverage for damage caused by winds of the hurricane:
Perils Insured Against
(Section I)Covered Causes of Loss
Coverage A- Dwelling and
Coverage B - Other Structures
We cover accidental direct physical loss to property described in Coverages A
and B except for losses excluded under Section I - Property Exclusions.
Coverage C - Personal Property
We cover accidental direct physical loss to property described in Coverage C
caused by the following perils except for losses excluded under Section I -
Property Exclusions:***
2. Windstorm or hail.
Direct loss caused by rain, snow, sleet, sand or dust driven through roof or wall openings made by direct action of wind, hail, or other insured peril is covered.***
The Policy also contained the following exclusions for water damage:
Property Exclusions
(Section I)1. We do not cover loss to any property resulting directly or indirectly from any of the following. Such loss is excluded even if another peril or event contributed concurrently or in any sequence to cause the loss.
***
b) Water damage caused by water-borne material. Loss resulting from water or waterborne material. Loss resulting from water or water-borne material damage described below is not covered even if other perils contributed, directly or indirectly to cause the loss. Water and waterborne material damage means:
(1) flood, surface water, waves, tidal waves, overflow of a body of water, spray from these, whether driven by wind.
***
n) Windstorm or hail to any:
(1) structure, other than a building, including the supports and screens, with a roof-like covering of cloth, metal, plastic or fiberglass, whether or not the structure is attached to a building.
(2) screens, including their supports, around a pool, patio or other areas.
(3) property lines and similar walls, including seawalls, greenhouses, hothouses, slathouses, trellis, pergolas, cabanas and outdoor equipment used to service the residence premises.
(4) Structure, including property in or on the structure, which is in whole or part, over water.***
In addition, the Policy contained the following exclusion intended to exclude damage from hurricane or other weather conditions when an excluded cause of loss contributes to a covered cause of loss:
2. We do not cover loss to any property resulting directly or indirectly from the following if another excluded peril contributes to the loss:
***
c) Weather conditions, if contributing in any way with an exclusion listed in paragraph 1. of this Section.
***
Based on the evidence presented at trial, the Court determined that the Leonards’ home was subjected to both hurricane winds in excess of 100 miles per hour and water from the Mississippi Sound which was driven onshore and inundated the home to a depth of approximately five feet. The wind broke one window, soiled the exterior of the home, damaged roof shingles, and blew down a tree damaging a fence. The water damage caused extensive damage to the floors, carpet, walls and personal property located on the first floor of the home.
After applying the $500 deductible, Nationwide issued a check to the Leonards in the amount of $1,661.17 for the damage caused by the wind and denied coverage for the water damage. The Leonards estimated the total damage to the home attributable to the storm to be $130,253.49, with $47,365.41 attributable to wind damage. Following the denial of coverage, the Leonards filed suit against Nationwide seeking recovery for the full amount of the damages. Among other arguments, the Leonards argued that they had been lead to believe that the policy provided coverage for damage caused by the hurricane, including the water damage.
Judge L.T. Senter, Jr., the Senior Judge for the Southern District of Mississippi, held as a matter of law that the provision of the Nationwide policy excluding coverage for damage caused by water was valid and enforceable. This ruling upholds the well established practice of permitting insurance policies to exclude damage caused by high waters associated with hurricanes. See Home Insurance Co. v Sherrill, 174 F.2d 945 (5th Cir. 1949); Lundy v. Lititz Mutual Insurance Co., 276 So.2d 696 (Miss.1973). In doing so, Judge Senter found that the exclusions for loss resulting directly or indirectly from water were unambiguous and clearly put the Leonards on notice that water damage associated with the hurricane would not be covered under the policy.
Judge Senter further found as a matter of law that the provision of the Nationwide policy that excluded coverage for damages caused by a combination of the effects of water (an excluded cause of loss) and wind (a covered cause of loss) were ambiguous and unenforceable. Specifically, the Judge found that the following provision, if read literally, would exclude all coverage when a windstorm (a covered loss) was accompanied by any type of excluded loss, regardless of how small or insignificant the excluded loss was:
2. We do not cover loss to any property resulting directly or indirectly from the following if another excluded peril contributes to the loss:
***
c) Weather conditions, if contributing in any way with an exclusion listed in paragraph 1. of this Section.
Such a reading of the policy would serve to make the windstorm coverage illusory for any property located in areas likely to flood. In effect, once the property suffered any type of water damage, the extensive wind damage coverage would be negated. Judge Senter implied that Nationwide had tacitly recognized this fact by agreeing to provide coverage for the Leonards’ wind damage even though it was accompanied by the excluded water damage.
Under Mississippi law, when insured property sustains damage from wind (a covered loss) and water (an excluded loss), the insured can recover the portion of the loss attributable to the covered cause of loss. See Grace v. Lititz Mutual Insurance Co., 257 So.2d 217 (Miss. 1972). In the event property is damaged by wind and then later damaged by water, the insured may recover the portion of the loss it can prove was caused by wind, but the insurer is not responsible for any loss it can prove to have later been caused by water. See Lititz Mutual Insurance Co. v. Boatner, 254 So.2d 765 (Miss. 1971). Applying these principles, the Judge found that the Leonards had proved property damage solely attributable to wind damage in the amount of approximately $3,000.
Learning Point: Courts will enforce policy exclusions for water damage even when accompanied by covered causes of loss for hurricane or windstorm damage. However, Courts are unlikely to enforce so called “concurrent causation” provisions excluding covered losses when accompanied by excluded causes of loss. This is particularly true if the “concurrent causation” provision may serve to make the windstorm coverage illusory in areas subject to flooding.
Back to New York CM Report of Recent Decisions (2006v3) 2006 Volume 3 Table of Contents
