Source: https://www.insurancelawhawaii.com/insurance_law_hawaii/katrina/page/2/
Timestamp: 2019-04-26 12:22:19+00:00

Document:
Disputed evidence on whether the property damage was caused by wind or flood related to Hurricane Katrina was at issue in C.R. Pittman Constr. Co., Inc. v. Nat'l Fire Ins. Co. of Hartford, 2011 U.S. App. LEXIS 20002 (5th Cir. Sept. 30, 2011).
Pittman Construction had equipment for pumping units stored both inside and outside of its warehouse in New Orleans. Its "all risks" policy, issued by National Union, was in place when Hurricane Katrina struck. The equipment was damaged. When National Union refused to provided coverage, Pittman Construction sued. The parties disputed whether the damage was caused by rain and wind or by the excluded peril of flooding.
Both parties moved for summary judgment. Pittman Construction submitted an affidavit by its owner, Jay Pittman, Jr. Mr. Pittman stated he was present at the warehouse when Katrina hit, and that wind tore off parts of the side and roof of the warehouse, allowing rain to destroy the insured property before any flooding occurred. An employee's affidavit stated after wind blew away a tarp covering generators in the construction yard, rain destroyed the generators. In support of its motion for summary judgment, National Union contended the failure of the levee system had caused flooding that destroyed Pittman Construction's equipment. The district court granted National Union's motion for summary judgment and dismissed Pittman Construction's suit.
The Fifth Circuit reversed, in part. The district court failed to consider the Pittman affidavits because they were self-serving. Although they were arguably self-serving, the Pittman affidavits were not wholly conclusory, but were based on personal knowledge and created a fact issue as to the cause of the damage to the equipment. Therefore, granting summary judgment to National Union was improper.
Failing to understand the relationship between himself, his mortgage company, and his insurer, the plaintiff was left without coverage for damage caused by Hurricane Katrina. Dace v. Novastar Mortgage Inc., 2011 La. App. Unpub. LEXIS 233 (La. Ct. App. April 13, 2011).
Novastar held the mortgage on the plaintiff's property in New Orleans. There were two residences on the property. Novastar collected and held in escrow property taxes and fire/hazard insurance premiums. Novastar secured a policy with Lloyd's, but only one of the residences was insured under the policy. In August 2005, the property sustained significant wind damage from Hurricane Katrina. After the hurricane hit, Lloyd's refused to provide coverage for one of the residences because it was not covered under the policy.
The plaintiff sued Novastar and Lloyd's. The complaint alleged Lloyd's denial of claim for the second residence was in error because Novastar procured the policy to cover the entire property, including both residences. Regarding the mortgagor, Novastar knew Lloyd's denied the claim for loss of the second residence, yet did not nothing to pursue this claim under the policy. This caused damage to the plaintiff because he could not rent the second residence, which was the source of income for paying his mortgage. Novastar responded by foreclosing on the property.
The trial court granted Lloyd's motion for summary judgment. After a one day bench trial, the court ruled in favor of Novastar and dismissed the Plaintiff's claim. The mortgage contract did not obligate Novastar to purchase any particular type or amount of coverage.
The Court of Appeal affirmed. The mortgage contract expressly obligated the Plaintiff to procure and maintain insurance coverage. If the borrower failed to secure coverage, the lender could obtain coverage, at the lender's option. Further, the lender could make proof of loss if not made promptly by the borrower, but was not obligated to do so.
The Fifth Circuit considered whether the second-layer excess policy incorporated the anti-concurrent causation clause and water exclusion from the primary policy. See ARM Properties Management Group v. RSUI Indemn. Co., 2010 U.S. App. LEXIS 23174 (5th Cir. Nov. 5, 2010).
ARM purchased property insurance for hundreds of apartment complexes. By grouping separate properties together under a single policy, ARM was able to obtain better insurance rates for property owners. When Hurricane Katrina struck in August 2005, nine of ARM's covered properties sustained damage. Each of the properties had three layers of coverage. The primary policy had a $20 million coverage limit. A first-layer excess had a $10 million limit for damage amounts exceeding the primary policy limits. Finally, RSUI issued a second-layer excess policy with a $470 million coverage limit for damage amounts exceeding the combined primary and first-layer excess coverage limit of $30 million.
The primary policy also excluded water damage.
The parties stipulated that if the RSUI policy incorporated the anti-concurrent causation clause and water exclusion, the total losses would not reach RSUI's coverage layer. The district court awarded ARM its full claim of $5.5 million.
Two provisions of the RSUI policy directly referenced the primary policy and expressly incorporated the primary polices coverage parameters. First, under the "Insuring Clause," RSUI agreed to "indemnify in respect of direct physical loss or damage to the property . . . which are also covered by and defined in the [primary policy]." Second, the "Maintenance of Primary Insurance Clause" provided, "this policy is subject to the same warranties, terms and conditions . . . as are contained in or as may be added to the primary policy."
The Fifth Circuit held that taken together, these two clauses meant the RSUI policy only covered damage that was also covered by the primary policy and excluded any damage excluded by that policy. The plain language of the anti-concurrent causation clause and water exclusion, read together, excluded from coverage any damage caused by a combination of wind and water. Thus, the combined wind-water damage at issue here was a peril expressly excluded from coverage by the primary policy. The anti-concurrent causation clause and water exclusion were therefore expressly incorporated by the RSUI policy pursuant to the Insuring Clause and the Maintenance of Primary Insurance Clause. Accordingly, the district court was reversed.
When the insureds purchased their home along the Mississippi Gulf coast, they discussed obtaining property insurance with Richard Schmidt, a Nationwide insurance salesman employed by Felsher Insurance Agency. See Mladineo v. Schmidt, 2010 Miss. LEXIS 569 (Miss. Oct. 28, 2010). The insureds' complaint alleged they told Schmidt they desired a policy with full protection from all weather conditions. Schmidt allegedly informed them they needed a hurricane policy, but would not need a separate flood policy in order to be covered for all wind and water damage. Schmidt further informed the insureds their property was not located in a flood zone.
The insured's agreed to purchase a "hurricane policy," which became effective the day the insureds closed on the purchase of their new home. The policy, however, was not received by the insureds for another six weeks. Upon receipt, the insureds filed the policy without ever reading it. The policy provided that hurricane coverage did not include loss caused by flooding. Further, loss resulting from water was not covered even if other perils contributed directly or indirectly to cause the loss.
Hurricane Katrina caused extensive damage to the insureds' home on August 29, 2005. Nationwide denied coverage for damage to the home caused by water. The insureds alleged that in subsequent conversations, Schmidt admitted he never indicated that an exclusion existed in the policy for water damage. Moreover, the insureds subsequently learned that a portion of their property was in a flood zone. The insureds sued Nationwide, Felsher and Schmidt on a variety of claims for negligence, negligent misrepresentation and tortious breach of contract. The trial court granted defendants' motion for summary judgment on all claims. The insureds' reliance on Schmidt's representations that contradicted the policy was per se unreasonable.
The Mississippi Supreme Court affirmed in part and reversed in part. Having possession of the policy for four months before Katrina hit was enough time to have read the policy. Therefore, the insureds were imputed with knowledge of the policy's contents. Nonetheless, if an insurance agent offered advice, ﻿﻿he had a duty to exercise reasonable care. Accordingly, there was a question of fact whether Schmidt breached his duty of care by allegedly stating the property was not in a flood zone and counseling against flood insurance. Further, there was a question of fact whether any such breach proximately caused any damages such as uninsured claims resulting from a lack of flood coverage. Consequently, summary judgment was improperly granted to defendants on the negligence issue.
The trial court properly granted summary judgment on the negligent misrepresentation claim, however. The insureds could not have reasonably relied on the alleged assurances of coverage by Schmidt that directly contradicted the plain language of the policy they had in their possession.
A prior post [here] discussed the Fifth Circuit's grappling with the proper measurement for covering loss of a home due to Hurricane Katrina. On rehearing, the Fifth Circuit altered its prior determination that the policy's loss provision was ambiguous. See Bradley v. Allstate Ins. Co., 2010 U.S. App. LEXIS 19476 (5th Cir. Sept. 20, 2010).
Hurricane Katrina totally destroyed the insureds' home, leaving only a slab. Allstate determined the dwelling was unlivable. Payments for structural damage under the insureds' flood policy were $63,800 and from their homeowners' policy $41,339.06, for a total of $105,139.06. Allstate later performed a retroactive analysis that appraised the pre-storm market value of the home at $85,000. The insureds indicated at a deposition they intended to rebuild their home.
Section 5 (a) of the Allstate policy promised to pay actual cash value if the insured did not repair or replace the damaged property. If the insured repaired the home within 180 days of the actual cash value payment, additional payments would be made to reimburse for the costs of repair. Section 5(e) stated that in the event of the total loss of the dwelling, the insured would pay the policy limits of $105,600. Elsewhere, however, the policy excluded coverage for loss to property caused by flood. Moreover, if there were two causes of loss and the predominant cause was excluded by the policy, there was no coverage.
The insureds sued Allstate, claiming they were entitled to policy limits of $105,600. The district court determined that, despite the total loss provision in the homeowners policy, the insureds were only entitled to the actual cash value of their home, which, prior to Katrina, was less than the total amount they received under their homeowners and flood policies. Accordingly, any further recovery would amount to a double recovery.
In its initial decision, the Fifth Circuit determined "total loss" was ambiguous because the provision was susceptible of two possible meanings. The ambiguity was construed in favor of the insureds, entitling them to a recovery of up to policy limits, or $105,600. Bradley v. Allstate Ins. Co., 606 F.3d 215 (5th Cir. 2010). The new decision abandoned the ambiguity determination, instead noting the relevant question was whether a non-covered peril (flood) was the predominant cause of the loss, an issue never decided by the district court. Accordingly, the district court did not address the total loss provision under section 5 (e), instead grating summary judgment to Allstate based on the actual cash value under section 5 (b). Consequently, the case was remanded so that the district court could evaluate the causation issues and ascertain the applicability of the section 5(e) total loss provision.
The Fifth Circuit also altered its prior discussion on the potential double recovery by the insureds. Previously, the court found an unresolved question on whether the appropriate measure of the insureds' actual loss was the cost to rebuild or actual cash value, believing the insureds had an option to rebuild. The new decision held that the insureds had failed to repair, rebuild, or replace their home within the two year period allowed under the policy and state law. Thus, the appropriate measure of loss was the actual cash value of the property, not the cost to rebuild or replace the property.
Further, depending on the factual determinations to be made on remand regarding the predominant cause of the damage to the insureds' property, either: (1) the total loss provision in section 5 (e) would dictate that the insureds were entitled to recover the full policy limits for covered losses; or (2) the actual cash value provision in section 5 (b) would dictate that the insureds were entitled to recover the actual cash value of their home, replacement cost minus depreciation. Under either section 5(e) or 5(b), the fact-finder would arrive at the proper figure for the actual cash value to establish the amount of actual loss. As long as the insured's combined recovery under their homeowners and flood policies was less than their actual loss, then the double recover rule would not preclude the insureds from receiving additional compensation under their homeowners policy.

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