A state court judge in Louisiana has handed the insurance industry another setback in its efforts to invoke flood exclusion policy language to avoid paying hurricane damage claims.

Judge Edward D. Rubin with the 15th Judicial District Court in Lafayette, La. made his ruling Monday in a case which pitted a Vermillion Parish couple, Mark and Barbara Landry, against the state's insurer of last resort, Citizens Property Insurance Corp.

Citizens plans an appeal and an insurance industry spokesperson said he was confident the ruling would be overturned.

The Landry's claim for $52,000 was denied by the insurer after their home was wiped out by Hurricane Rita in 2005.

Judge Rubin issued a summary judgment for the couple in a ruling which their attorney Paul J. Cox in Lake Charles, La. said would only apply to homes that were completely destroyed.

Theodore M. Haik III, Citizens attorney said before appealing the company will ask the judge to grant a new trial. He said the judge in making his ruling gave no reasons for his finding, "all he said was 'I grant the plaintiff's motion.'''

Mr. Haik said he did not know at this point whether all or part of the argument put forward by Mr. Cox was accepted by the judge.

The judge's ruling must be formalized on paper by the attorneys involved. His office referred questions about it today to Mr. Cox and Mr. Haik.

Mr. Cox said his client's home was obliterated by both wind and flood damage. He called the ruling "a victory for the victims of hurricanes Rita and Katrina."

The judge's ruling, he said, was based on the state's Valued Policy Law, which according to Mr. Cox said states that in the event of a total loss, the insured is entitled to the full value of policy on the structure without deduction or offset if their structure is partially damaged by a covered peril.

The full value would apply he said unless a different method of computing the loss "was listed in both the policy and the policy application."

"The covered peril in this case was wind," said Mr. Cox and, "My clients' policy had the water damage exclusion, but the application does not."

The insurance company "had an opportunity to exclude the water damage coverage in their coverage, but it wasn't in their application," he said.

According to Mr. Haik the application did not have the exclusion, but under law "it's just not required whatsoever."

Mr. Cox estimated if appeals took the case to the Louisiana Supreme Court the legal action could take another year.

Robert Hartwig, executive vice president and chief economist of the Insurance Information Institute, said the judge's interpretation of the law was faulty and would be overturned.

Insurers who never collected a penny for flood insurance, he said, could not legally be forced to pay for a non-covered peril. State insurers, he said, are not allowed to collect premiums for flood insurance.

The Landry's attorney he said was making "a very long stretch to try to find a way for a policy that clearly excludes water damage" to provide coverage.

Judge Rubin's decision, said Mr. Hartwig, "could force the state to assess billions more dollars" to fund Citizens. "It would be a Pyrrhic victory and the vast majority of citizens would pay through the nose."

The decision is going to be appealed "and it will be overturned," he predicted or it will "bankrupt the state-run insurer."

Last month, in another case that is on appeal, a federal judge in New Orleans ruled that the flood exclusion language in many insurers' policies was too vague to cover water damage from levee breaks.

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Another Louisiana Judge Rules Against Flood Exclusion

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