“Crash on the levee, Mama,
Water's gonna overflow.”
–Bob Dylan, “Down in the Flood.”
Not that insurance companies needed a reminder, but a Louisiana court ruling late last month underscored the fact that we have a long, long way to go before we sort out the industry's ultimate losses from Hurricane Katrina. The ruling, issued by Judge Stanwood R. Duval Jr., of the U.S. District Court for Eastern Louisiana, offered thousands of New Orleans residents a ray of hope that their flood-related losses may in some cases be covered by insurance because they resulted from the failure of levees.
The judge's ruling, in a case that consolidated several complaints for damages resulting from levee breeches, turned on the time-honored practice of interpreting insurance-policy ambiguities in insureds' favor-and the judge gets to decide what's ambiguous. According to news reports, Judge Duval found that the standard ISO flood-insurance exclusion was less than crystal clear-and therefore unenforceable–in regard to whether it applies to “man-made” flood disasters, like those that might result from ruptures of negligently designed or maintained canals or levees.
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