A Louisiana federal judge who stunned carriers last year byfinding that many of their policy flood damage exclusions do nothold water, appears to have seen the law differently in 2005,according to a legal expert.

That appraisal comes from attorney Randy J Maniloff, with theWhite and Williams law firm, in a working paper written for theWashington Legal Foundation that examined decisions by U.S.District Court Judge Stanwood Duval Jr. in New Orleans.

If Mr. Maniloff is correct, and a flaw is seen in Judge Duval'sreading of the law, it could impact an appeals court review that ispending, the attorney said in an interview.

Mr. Maniloff wrote that the judge's latest decision “is, plainand simple, an example of a court torturing policy language to findcoverage that clearly did not exist, in an effort to bringmuch-needed financial resources to a wide-scale problem.”

By some estimates, the decision, if upheld, would provide $1billion to property owners impacted by levee breaks in New Orleansduring Hurricane Katrina.

In Mr. Maniloff's view, unlike the judge, appellate courts “aremore likely to put blinders on and not be blinded by the sympathiesof the case”–that is, thousands of policyholders

In November 2006, Judge Duval–when he ruled on the effects ofHurricane Katrina on the levee breaks–found that flood damageexclusion language in policies issued by Allstate and othercarriers does not “exclude water damage caused by negligent orintentional acts of man.”

The policy language, he said, “does not address the ambiguity ofthe term 'flood' and the fact that all of the listed 'causes'appear to be the result of natural occurrences–not the monumentalcivil engineering debacle that is alleged by plaintiffs.”

Because several insurers' flood exclusions did not distinguishbetween man-made and naturally-occurring floods, Judge Duval foundthey are ambiguous and unenforceable, according to Mr. Maniloff'sreading.

But in another ruling in 2005, according to Mr. Maniloff, JudgeDuval took a different approach in addressing coverage for damageto a home that was flooded by Tropical Storm Allison. Contractorsat work on repairs found the home had a defective exterior stuccosystem, which the homeowners argued had caused long-term,previously unknown water damage.

In the course of a ruling on the case, Judge Duval found “thereis a material question of fact as to what extent the damage claimedby the plaintiffs is excluded under the homeowner's policy as floodwater damage.”

According to Mr. Maniloff, implicit in such a decision is thatin that case, the Allstate flood exclusion would apply to some ofthe damage.

The attorney wrote that it was curious Judge Duval took theflood exclusion's applicability to a man-made flood for granted inthat case, yet devoted 30 pages to the issue in arriving at acontrary conclusion in the Katrina Canal Breaches decision.

Allstate has appealed the Canal Breaches ruling, and a decisionis pending from the 5th Circuit U.S. Court of Appeals, which heardarguments May 6 and said they would rule shortly.