Judge Duval considered the language used by three different contracts and ruled in favor of the exclusions contained in two of the contracts: State Farm and The Hartford. State Farm's language excluded flood regardless of cause, and The Hartford's language specifically excluded flood resulting from negligently maintained levees.

The remaining language, which was provided by ISO and used by many insurers, excluded water damage defined as, “Flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind.” The judge found no clear definition of the term “flood” in the ISO exclusion and declared it to be ambiguous. Reasoning that water damage caused by broken water mains has been covered, and similar exclusions for earth movement limit their exclusion to naturally occurring events, he construed flood as inundation that is caused by a natural event.

Since he believed the word “flood” was ambiguous, he allowed coverage. To say that he was grasping at straws is a bit strong, but the argument that a flood is not a flood if it is caused by the failure of a levee is problematic. The appeals court found that the exclusion was clear and unambiguous and overturned the original ruling.

Anyone standing on a roof staring at 10 feet of water covering their property would undoubtedly say their property had been flooded regardless of what caused the flood.

Will the language in homeowners' policies be affected by this final ruling?

Contrary to public perception, the job of an adjuster is to find coverage for the insured, not to look for a way to deny coverage. Adjusters are trained to know their contracts extremely well, and this includes understanding all of the items excluded by homeowners' policies. Adjusters are more likely to pay mistakenly for damage that is excluded than to deny coverage that should be provided.

The typical homeowner's policy is designed to provide coverage for all perils except those items that are specifically excluded. In general, policies exclude coverage for perils that would be cost prohibitive to insure and for which coverage is available elsewhere. Flood is one such peril. Coverage for flood is available at a reasonable cost through the same agents who sell homeowners' policies. Most policy declarations pages in flood-prone areas contain specific warnings emphasizing that homeowners' policies do not cover flood, and policies have had such warnings for many years.

The job of reevaluating the language and intent of insurance policies to ensure clarity falls on the shoulders of attorneys, not adjusters. Since the flood exclusions in two of the three contracts considered by Judge Duval were upheld, it is likely that some changes will be made to the language of the ISO exclusion to enhance clarity. Such changes will be minor and will not result in large volumes of exclusions.