One year after Hurricane Katrina made landfall, the U.S. District Court of Southern Mississippi has dismissed a lawsuit that contended a Nationwide insurance agent misled a policyholder into believing his homeowners' policy would cover flood damage. The decision also reinforced what many industry experts believe is a clear exclusion for flooding and storm surge in standard homeowners' insurance policies.
In Leonard v. Nationwide Mutual Insurance, at issue was coverage relating to the significant storm surge that occurred as a result of Katrina making landfall. The surge was so severe that it drastically damaged many residential properties located outside of Mississippi's designated flood plain area that requires flood insurance as part of homeowners' lending agreements. Some homeowners outside this designated area believed that they were not at risk or that damages would be covered by their homeowners' insurance policies, even though exclusions for such damage are expressly stated in their policies.
In Paul and Julie Leonard's lawsuit, they argued that a Nationwide agent whom did business with them was misleading on coverage issues and encouraged them not to purchase a flood-insurance policy from the National Flood Insurance Program.
In his memorandum opinion, however, Judge L.T. Senter Jr. disagreed and stated, “The evidence was insufficient to support this conclusion. [Nationwide agent] Fletcher gave no explanation for his recommendation that Leonard not purchase a flood insurance policy, and he made no representation that suggested that the water damage exclusion in the Nationwide homeowners' policy did not apply in the context of a hurricane. In fact, Fletcher and Leonard never had any discussion of specific policy provisions and coverages.”
The judgment prompted responses from several insurance industry associations as well as from Nationwide.
“The American Insurance Association (AIA) is encouraged by the court's reaffirmation of the long-standing water damage ex-clusion found in most state-approved homeowners' insurance policies,” said Cecil Pearce, vice president of AIA, in a statement.
“In the insurance coverage debate over wind vs. water, Judge Senter's ruling has taken much of the wind — literally and figuratively — out of the plaintiff attorney's argument,” said Ernie Csiszar, president and CEO of the Property Casualty Insurers Association of America.
“We are very pleased that the court ruled in our favor and upheld the long-standing flood exclusion language,” said Nation-wide, in a release. “We also are pleased that the court found no misrepresentation on the agent's part. The facts clearly demonstrated the damage the Leonards' home incurred was overwhelmingly due to floodwaters. This is clearly the type of damage covered by flood insurance.”
The industry next faces Mississippi Attorney General Jim Hood's lawsuit, which attacks what it claims is ambiguous language used in homeowners' policies.
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