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   GCN Special Report     Filed 3/17/06

Katrina’s Receding Waters Left Waveland Apartment Renter Sheila Floyd Far Away In Warrensburg, Missouri.  Like Coast Homeowners, She Was Blindsided By Insurance Policy Water Exclusions. This is Part Two of GCN's Special Report on Sheila's plight and the challenges she and other Katrina survivors face regarding their insurance. - GCN


Owing To Court Rulings Dating Back to Camille, Insurance Policy Exclusions May Not Be So Exclusionary.  It All Hinges On The Legal Definition Of “Water.”

Part Two

By Perry Hicks & Mark Proulx- Special to Gulf Coast News

“The law is generally designed to reach a just and fair result,” Dickie Scruggs, attorney for Congressman Gene Taylor and Senator Trent Lott

Zach Scruggs, attorney seeking relief for Katrina-effected homeowners, was not dissuaded when I mentioned the famous maxim of jurisprudence: There is not a legal remedy for every wrong.  Indeed, Zach is quite upbeat that insurance companies will have to pay for hurricane damage- particularly if the homeowner’s policy had a “hurricane windstorm” deductible.

The principle on which he says the law will stand is the Proximate Cause Doctrine- if the proximate cause of the loss is covered under an insurance policy, then all damage resulting from the cause is also covered.

There is a kind of circular logic to it

·        “Storm surge” is only caused by hurricane wind

·        Water exclusions do not specifically set out that they exclude storm surge.

·        Storm surge is distinctly different from flood.”

·        Therefore damage from storm surge is covered under windstorm provisions.

“Hurricane windstorm deductibles imply that all damage caused by hurricanes is covered above the deductible limit.  The hurricane deductibles also define hurricane for purposes of the endorsement as what the National Weather Service or National Hurricane Center define to be a hurricane, which all include storm surge in the definition,” Zach told GCN in a recent telephone interview before adding, “Ambiguous exclusions are not enforceable.”

Since policies are contracts written by insurance companies and therefore dictated to policy holders, it is true that courts would maintain insurance companies accountable for a high standard of clarity.  Any doubt would go in favor of the insured.

Using the National Hurricane Center (NHC) definition would also seem to be a critical point in that Scruggs seeks to directly link storm surge to hurricane wind.  According to NHC, storm surge is primarily caused by “high winds associated with a land falling cyclone” and only secondarily by the “low pressure of the storm.”

“One of our Plaintiffs emailed the National Weather Service after the storm,” Zach told GCN, “and asked what happened to Gulfport; a flood or a hurricane?  NWS replied, “Hurricane.”

Also, according to Zach, the cases Scruggs Katrina Group have moving through the judicial pipeline have progressed to the point that decisions could soon be forthcoming saying, “I anticipate that the Courts will start deciding these cases within the next 2 months.”

The litigation dating back to Camille supporting Zach’s opinion are:

  • Grain Dealers v.Belk, 269 So.2d at 640 – “If the windstorm or similar peril insured against is the proximate cause of the loss, it need not be the sole cause, and it is generally sufficient to authorize a recovery on the policy that the cause designated therein was the efficient cause of the loss, although other caused contributed thereto, unless the contributing cause is expressly excluded by the terms of the policy.”
  • Grace v. Lititz Mutual Ins. Co, 257 So.2d at 224 – “it is sufficient to show that the wind was the proximate or efficient cause of the loss or damage not withstanding other factors contributed to the loss.”
  • Lititz Mutual Ins.Co. v. Boatner, 254 So.2d 765 (Miss. 1971) – “The tidal wave that washed about the debris in this case could not have deposited the debris above the level of the tidal wave, and there was no way for it to have gotten there except by terrific force of the wind ... “ It is sufficient to warrant recovery if the insured shows by a  fair preponderance of the evidence that that the loss or injury was one covered by the policy, that is, that it was brought about by a risk or cause insured against.”

MetLife’s Position

Joe Madden, Assistant Vice President for MetLife Auto & Home, was quick to return GCN’s inquiries and volunteered to review Sheila’s particular case with a subject matter expert.  Speaking to GCN by phone from his New York City office, Joe was quite affable, open, and candid in speaking for MetLife. 

The problem as Joe sees it is that these are named peril policies.  Joe admitted that as much as his and others at MetLife’s hearts go out to those impacted by Katrina, the company must adhere to its contractual obligations.  If they didn’t for even one policy, figuratively speaking, the floodgates would be opened.

So that there would be no misunderstanding on GCN’s part, Joe readily agreed to put MetLife’s position in writing:

“All of us here at MetLife Auto & Home sympathize deeply with the tragic plight of the many families whose lives were forever changed by Hurricane Katrina and the storms that battered the Gulf Coast during the recent historic hurricane season. Our hearts go out to everyone who has been touched by this tragedy. We are very proud of the efforts of MetLife Auto & Home to help our customers. Our claim associates and catastrophe response vehicles were on the scene quickly to meet with our customers and assist with temporary repairs, issue checks for immediate expenses, and help our customers to start putting their lives back together. Since then we have processed and paid thousands of claims.

(Referring to me) “You called to inquire about coverage afforded under a MetLife renter's policy. Our renter insurance policies pay for damage from water loss in some situations, as renters policies are "Named Perils" policies - meaning that they pay for damages from 16 listed perils - such as theft, lightning, fire, etc - but no others. One of these Named Perils is "windstorm or hail," and coverage is provided where the "wind or hail first damages the roof or walls and the wind forces rain, snow, sleet, sand or dust through the opening." For example, if the wind rips off a portion of the roof, and rain enters the building and damages the insured property, there is coverage. If the wind blows out a window, and rain enters the building and damages the insured property, there is coverage. Similarly, if flying debris breaks a window, and rain enters the building and damages the insured property, there is coverage. In other words, there is indeed coverage for renters for damage from windstorms such as hurricanes, where the force of wind damages the structure and rainwater enters and damages the contents.

“Unfortunately, some of the damage on the Gulf Coast was caused by waves and wind driven tidal water, which have never been covered by standard rental policies, including those we offer. Coverage for this type of loss is provided through the National Flood Insurance Program, which is widely promoted and available in coastal areas. In some instances, there were questions about what caused the damage - hurricane winds, which are a covered peril under insurance policies - or wind driven tidal water and waves, which are not. To help answer these questions and determine whether or not the damage was caused by a covered event, MetLife Auto & Home retained the services of professional engineers.

“What may be causing some confusion for you is the policy language you read to me over the phone: "we do not cover... flood, surface water, waves, tidal water or overflow of any body of water, or spray from any of these, whether or not driven by wind." The "whether or not driven by wind" language does not apply to ALL water, such as the wind or hail mentioned in the Named Perils, but only to excluded water, such as wind driven tidal water. That is why the language quoted comes from the "Losses we do not cover" section of the policy.”

Note and compare Joe’s definition with that of Zach Scruggs.  The outcome of pending litigation could well turn on whether storm surge is “wind driven tidal water” or a “wind driven object” no different from sand or other debris.

An Interesting Twist

In the meantime, Sheila Floyd waits to hear if her attorney has been able to negotiate a settlement.  She will be lucky if she receives enough money after paying her attorney to furnish the most basic apartment and buy some kind of cheap used car.  However, her case has an interesting twist that could well take her far away from the wrangling over excluded water.

Sheila’s policy also provided protection from theft.  Not long after she evacuated, her apartment management removed all of her belongings so that workmen could make the internal repairs requisite to make the apartment habitable again.  While outside, looters ransacked and stole everything salvageable.

However, even if the law does come through with what Dickie Scruggs would call a just and fair result, and Sheila is able to collect on her policy, mere money can never make Sheila whole.  Ruined in her first floor apartment were precious keepsakes- like the bible and memorial from her youngest son’s funeral- things that no amount of money could ever replace.

Perhaps that maxim is correct after all; there really isn’t a legal remedy for every wrong.

In the final Part Three, we will examine insurance industry’s possible future strategy in Mississippi and compare it to what it did in Florida after Hurricane Andrew.

Part 1   Part III

About the Author.....

Perry Hicks is the senior writer for GCN. He is a former Mississippi Coast resident and was a correspondent for the old Gulfport Star Journal. He has appeared on Fox News Channel. Perry has also hosted his own radio talk show on the auto industry with a mix of politics. Perry is a former college professor and a frequent contributor to GCN writing on stories of national importance with local interests. His articles can be found in the GCN Archive.

Contact the Author: arielsquarefour@hotmail.com

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