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A lot rides on how 'flood' defined
La. justices hear arguments on Katrina's waters
By David Hammer : Times-Picayune : February 27, 2008
Louisiana Supreme Court justices aren't linguists, but their definition of one solitary word -- "flood" -- will decide the fate of thousands of insurance claims worth millions of dollars to New Orleans area homeowners.
The state's high court heard its first Hurricane Katrina insurance payment case Tuesday, and the crux of the policyholder's argument -- one that mirrors many others still trudging through the lower state courts and the federal court system -- is that the inundation of 80 percent of New Orleans after the 2005 storm was not a "flood."
Homeowners have been arguing for nearly two years that the failure of federal flood control structures after winds and rain had subsided was a man-made disaster, something other than the traditional definition of the word "flood." But the insurance industry is counting on Webster's, Black's and any other dictionary to convince the justices that the cause of the flooding doesn't change the fact that it's a flood.
If the state court follows the 5th U.S. Circuit Court of Appeals' ruling in a similar case last year, "a flood is a flood" and insurance companies coast to coast will be able to rest easy because they generally are not responsible for covering flood damage. If there is any doubt about the word's meaning, however, the court will have to rule in favor of the policyholders, and the Louisiana Supreme Court trumps the federal courts on such questions of state law.
The case came before the court about an hour after the justices heard their first Hurricane Rita insurance case, another one that could have wide-reaching effect on both hurricane victims and the insurance industry. In that case, a western Louisiana couple argued that a 108-year-old state law allows anyone whose home is totally destroyed by a combination of forces to collect full payment from homeowner's insurance, even if an uncovered peril like flood causes much of the damage.
In both cases, the insurance industry has said unfavorable rulings could lead to higher premiums and an exodus of companies from the Louisiana market. Homeowners' advocates say that's a tactic meant to scare the justices, who are elected.
Flood is expressly excluded from coverage under homeowner's insurance policies, and there is a federally subsidized flood insurance program to pay for damage caused by floods. But Joseph Sher, a 92-year-old Holocaust survivor, collected an undisclosed amount from his flood insurance policy and now claims his insurer, Lafayette Insurance Co., also should have paid him for the water damage to his Uptown fourplex.
Sher's homeowner's insurance policy, like the vast majority of all-risk policies, excluded certain water events from its coverage, listing "flood" along with "tidal waves" and other "acts of God." But Lafayette did not take advantage of an industrywide policy form that clarified the meaning of "flood" in 2004, wording that was approved by Louisiana Insurance Commissioner Jim Donelon. Sher's attorney, Jim Garner, said that proved the term's ambiguity.
Lafayette's attorneys, meanwhile, argued that Garner was trying to overcomplicate the issue, and the court should simply follow the "generally prevailing meaning" of the word "flood." They said all that matters is that the average person on the street would call what happened in New Orleans after Katrina a flood.
"The question really is a simple one: whether the massive inundation of 80 percent of New Orleans during Hurricane Katrina was a flood, and the answer is clearly 'yes,' " said Ralph Hubbard.
Hubbard noted that the Supreme Court itself, in deciding to give homeowners an extra year to file Katrina and Rita related insurance lawsuits, referred to the "flood waters" that covered New Orleans. He also said that no dictionary definition of the word distinguishes between flooding caused by natural or man-made forces.
But Garner said the standard should be stricter for something that excludes coverage. He said the onus is on the insurance company to tightly define what isn't covered under an all-risk policy.
The justices offered several questions suggesting they were skeptical of Hubbard's argument. Associate Justice John Weimer noted that some insurance companies clarified the term in their policies after 2004. Associate Justice Bernette Johnson asked if a broken water main could lead to a flood, which would be covered by the homeowner's policy. Associate Justice Jeffrey Victory offered that someone can "flood" a car's engine or one's eye with water to wash out particles.
"What if . . . the hose connecting my washing machine to the water breaks and floods my house? Is that a flood?" Associate Justice Catherine "Kitty" Kimball asked Hubbard.
"If you call that a flood, that's the use of hyperbole," Hubbard said.
"If I have three feet of water in my house, is that hyperbole?" Kimball shot back.
Garner said in an interview after the hearing that he was encouraged by the justice's line of questioning, but that isn't always indicative of how they will rule. And policyholders may have lost a sympathetic ear when Chief Justice Pascal Calogaro Jr. recused himself because he owns property in New Orleans that had a hurricane claim with Lafayette. He was replaced by Appeals Court Judge Lemmie Hightower of Shreveport.
The justices also may be limited in considering evidence presented by attorneys for both sides Tuesday. Hubbard brought up the fact that Sher collected flood insurance payments from the National Flood Insurance Program, then said 67 percent of single-family homes in New Orleans had that coverage, collecting a total of $6.5 billion for their claims. But Garner said the data hadn't been entered into the record and the issue of Sher's flood insurance payment never came up at trial and, therefore, was inadmissible on appeal.
In turn, another Lafayette attorney, Howard Kaplan, said in an interview outside the courtroom that Garner shouldn't have been allowed to submit the insurance commissioner's 2004 approval of policy language to clarify the meaning of a flood, because that argument was only made after trial by the attorney general's office, which intervened in the interests of thousands of other New Orleans area litigants.
Hubbard contended that interpreting the word "flood" so it didn't apply to the results of the 2005 New Orleans levee and floodwall breaches would lead to an absurd situation in which thousands of homeowners would collect double payments, one from flood insurance and one from homeowner's policies, for the same losses.
Garner later said that unlike federal aid programs, there is nothing preventing a homeowner from collecting insurance payments from two separate policies for the same damages.
"Mr. Sher paid both premiums, didn't he?" Garner said. He declined to say how much money Sher collected from flood insurance.
The justices also will consider whether Lafayette acted in bad faith in repeatedly denying Sher's claims, and whether the company must pay for pain and suffering and legal fees.
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David Hammer can be reached at dhammer@timespicayune.com or (504) 826-3322.