Water Damage Exclusion Ruled Ambiguous in Louisiana

In an unexpected ruling that could have wide-ranging effects on insurers and Katrina claimants affected by the rupture of the New Orleans levee system, a federal judge in the city has ruled that the water damage exclusion is ambiguous because it does not necessarily include man-made causes and therefore must be construed against the companies.

“The word ‘flood’ has numerous meanings,” said United States District Court Judge Stanwood R. Duvall, Jr., in his 85-page ruling issued late Monday. “It is defined in virtually all dictionaries first as a noun then as a verb. In the policies being examined by the Court, it is used as a noun. As noted, most of the definitions of the noun imply encroachment of water caused by an act of nature. Furthermore, this exclusion has been the subject of differing interpretations in the jurisprudence, which further demonstrates that it is susceptible of two reasonable interpretations. As such, under Louisiana civilian principles and the jurisprudence constant, this Court finds the ISO Water Damage Exclusion ambiguous.”