Reversing an earlier U.S. District Court judgment from lastNovember, the U.S. Fifth Circuit Court of Appeals has ruled thatLouisiana homeowners affected solely by flood waters that resultedfrom multiple levee breaches following Hurricane Katrina won't beable to recover damages from their insurance companies.

The decision is a major victory for insurance companies, whocould have been forced to pay billions of dollars in claims. Theruling puts to rest many cases bolstered by Judge Stanwood Duvall,Jr.'s ruling last year that concluded the term “flood” used inISO's water damage exclusion, which is found in most homeowners'policies, was ambiguous and therefore inapplicable. This rulingopened the door for plaintiffs to recover, but that door now seemsfirmly shut.

“Despite exclusions in their policies providing that damagecaused by 'flood' is not covered, the plaintiffs seek recovery oftheir losses from their insurers,” wrote Carolyn King, one of threecircuit judges who ruled on the cases. “Their primary contention isthat the massive inundation of water into the city was the resultof the negligent design, construction, and maintenance of thelevees, and that the policies' flood exclusions in this context areambiguous because they do not clearly exclude coverage for aninundation of water induced by negligence. The plaintiffs maintainthat because their policies are ambiguous, we must construe them intheir favor to affect coverage for their losses.

“We conclude, however, that even if the plaintiffs can provethat the levees were negligently designed, constructed, ormaintained and that the breaches were due to this negligence, theflood exclusions in the plaintiffs' policies unambiguously precludetheir recovery,” continued King. “Regardless of what caused thefailure of the flood-control structures that were put in place toprevent such a catastrophe, their failure resulted in a widespreadflood that damaged the plaintiffs' property. This event wasexcluded from coverage under the plaintiffs' insurance policies,and under Louisiana law, we are bound to enforce the unambiguousterms of their insurance contracts as written. Accordingly, weconclude that the plaintiffs are not entitled to recover undertheir policies.”

Duval had previously dismissed all of the cases against bothState Farm and The Hartford because the two companies had specificlanguage in their homeowners' policies that went beyond ISO'stypical exclusion language. Allstate, Travelers, Unitrin, LibertyMutual, Louisiana Citizens Property Insurance, American Insurance,Aegis Security Insurance, Lafayette Insurance, AAA Homeowners,Lexington Insurance, Encompass Insurance, Great Northern Insurance,Hanover Insurance, and Standard Fire Insurance can now be added tothat list.

To read the entire 52-page judgment, click here.

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