Next Big Katrina Decision

The 5th U.S. Circuit Court of Appeals rules on New Orleans flooding.

By Matthew Brodsky

The 5th U.S. Circuit Court of Appeals handed insurers a victory in its Aug. 2 Katrina Canal Breaches Litigation decision, one that could resonate with lower courts deciding the fate of hundreds of other Katrina-related cases.

The court found that the flood exclusion in the defendant carriers' policies--which include the likes of State Farm, Allstate, Lexington and AAA--counts when it comes to the levee breaches in New Orleans after Hurricane Katrina in Sept. 2005.

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"This case has a major impact," said David Rossmiller, a partner with Portland, Ore.-based law firm Dunn Carney and author of the Insurance Coverage Law Blog. "The 5th Circuit's statement here is (from) one of the highest courts in the land."

As many as 400 or more Katrina-related cases are still pending in Mississippi, estimated Rossmiller, and as many or more in Louisiana. Judges in these cases can now look for guidance toward the ruling from the Appeals Court's three-judge panel.

The Appeals Court overturned a decision made by District Judge Stanwood R. Duval Jr. in November, who found that flood exclusions in those policies failed to specifically name manmade events. The breach of the levees in New Orleans was manmade, plaintiffs argued, because it was caused by human negligence.

The class-action suit is part of the so-called Katrina Canal Breaches Civil Action Consolidated Litigation, in which a class of policyholders have sued insurers, the government and contractors for damage to their homes caused by the Big Easy inundation.

The Appeals Court didn't concern itself with why the levees broke, but what happened when they did.

"Regardless of what caused the failure of the flood-control structures that were put in place to prevent such a catastrophe, their failure resulted in a widespread flood that damaged the plaintiffs' property," the judges wrote.

John Ellison, managing partner of Anderson Kill & Olick's Philadelphia office, said that plaintiffs, since the ruling, had attempted to get a full hearing with the 5th Circuit's 13 judges, as well as to stay any further proceedings in federal court. Both motions were denied on Aug. 29. Ellison represents some of the plaintiffs in the case.

"We're done in the Fifth Circuit," he said.

The issue is far from over, Ellison added. He said similar cases are in Louisiana's state court system, whose Supreme Court's verdict would hold final sway, not the federal court's.

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October 1, 2007

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