New Orleans and Efficient Proximate Cause

Only those who have been dead for the past nine months are unaware that the great city of New Orleans was hit by Category 4 Hurricane Katrina, which caused levees between the city and Lake Pontchartrain to break, flooding the city. Across the state line in Mississippi, the full brunt of the hurricane pushed storm surge over towns, tearing them apart. This created an insurance dilemma; windstorm is a covered peril, but damage from flood waters or storm surge is not, unless one has flood insurance. Most did not. Now they have nothing, their homes are destroyed, and the Federal Emergency Management Agency is doing very little to help them.

Homeowners’ and commercial property policies, such as the Insurance Services Office’s forms, are quite clear in what they will not cover in the event of a multitude of disasters. As the typical Homeowners’ 3 policy reads, “We (the insurer) insure against risk of direct physical loss to property described in Coverages A (Dwelling) and B (Other Structures). We do not insure, however, for losses excluded.” It no longer says all risk of loss, just risk of direct physical loss, and the exclusions are thick and voluminous. Included in those exclusions are a variety of factors such as ordinance or law, earth movement, water damage (including flood, surface water, waves, tidal water, overflow of a body of water or spray, whether or not driven by wind), power failure, neglect, war, nuclear hazard, intentional loss, and governmental action.