The first post-Katrina court test of the flood exclusion ended in victory for the insurance industry today.
U.S. District Judge L.T. Senter ruled in favor of Nationwide Mutual Insurance Company in its contention that the great majority of damage to a Mississippi home was caused by flood, and therefore not covered under the terms of its homeowner policy.
“There is no evidence to support the finding that this insurance contract should be reformed,” wrote Judge Senter in his opinion in the bench trial of Paul and Julie Leonard vs. Nationwide.
The law firm of well-known plaintiffs' attorney Richard Scruggs represented Pascagoula residents Paul and Julie Leonard in their case that contends wind-driven rain, and not flooding, caused most of the damage to their home from Hurricane Katrina and therefore was covered under the terms of their homeowners' policy.
The judge wrote that since the Leonards had read the copy of the policy, “they were bound by the express terms of the policy, even if their interpretation of the policy was incorrect, and even if the inferences they drew from the conversations they had with Fletcher were erroneous.”
Nationwide insurance agent Jay Fletcher was originally named in the suit, as it was first alleged that he told the couple they did not need to purchase flood insurance because they were covered for hurricanes and resulting “storm surge.”
Nationwide presented evidence that the couple had flood insurance with a previous carrier as evidence that they knew the role it played in hurricane protection.
As for the agent, it was noted that he had sold flood insurance to several of the Leonards' neighbors, which would indicate it was not his general practice to discourage the purchase of such policies.
But in the end it was the judge's contention that virtually all of the damage to the Leonards' home was caused by an incursion of water validly excluded under the terms of their policy that carried the day for Nationwide and the industry.
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