The first post-Katrina "wind versus flood" lawsuit will come down to a battle of dueling claims adjusters, one expert predicted after arguments in the case concluded last week.
U.S. District Judge L.T. Senter Jr. is presiding in Gulfport, Miss., over the case of a Mississippi couple seeking full compensatory damages from their insurer for their home, which was destroyed by Hurricane Katrina last summer.
The judge will receive post-trial briefs over the next week and will issue his ruling at some unspecified time after that.
The defendant in the case–Nationwide Mutual Insurance Company of Columbus, Ohio–maintains that storm surge caused the damage, which was therefore not covered by Paul and Julie Leonard's homeowners' policy for their dwelling in Pascogoula.
Vince Vitkowsky, New York-based partner in the law firm of Edwards Angell Palmer Dodge, said that since Judge Senter had in previous rulings declared that storm surge is part of flood damage, the argument in this case would have to focus on what exactly ripped through the Leonards' home–wind or flood waters.
Mr. Vitkowsky said the fact that the plaintiffs in making their case once again focused on the actions of their agent, Jay Fletcher, would seem to indicate they did not have much confidence in their assertions that wind severely damaged the Leonard home.
The Leonards contend that Mr. Fletcher told them they did not need flood insurance–which he denies. In addition, Nationwide asserts that since the couple had flood insurance with a previous carrier, they knew the role it plays in hurricane protection.
A Nationwide representative, Joe Case, agreed that the plaintiff's case has taken any number of tacks during the bench trial.
"This case is not about the agent. It is not about the wind tower that blew down at the Trent Lott Airport," Mr. Case said. "It is about the Leonards' home and the evidence as to what caused its damage."
Mr. Case said the fact there was a water mark at the five-foot level, while the second level for the most part remained intact, indicated this was damage caused by flooding and not wind. "Wind damage starts at the top and works down, while flood damages starts at the ground and works up," Mr. Case explained.
Mr. Fletcher was originally a defendant in the case, but was dismissed by the plaintiffs. Nonetheless, plaintiff attorney Zach Scruggs returned the focus on the role Mr. Fletcher played in allegedly advising the Leonards that they did not need to purchase flood insurance.
Mr. Case noted that Mr. Fletcher had sold flood insurance to several of the Leonards' neighbors, which would indicate that it was not his general practice to discourage the purchase of flood insurance. "After all, he makes a commission on that also," Mr. Case noted.
The Leonards' attorney is the son of famed plaintiff attorney Richard "Dickie" Scruggs, who is bringing several other such suits before Judge Senter. He did not respond to a request for an interview.
Mr. Vitkowsky said no matter what the outcome, this case would not be precedent-setting in the strictest sense of the term, "but it is a matter of practical importance to see how this judge is going to hear the other cases, and how he is likely to approach these other issues."
As a neutral observer, Mr. Vitkowsky said the merits of the wind versus flood issue seemed pretty close during the trial, "but it appears that Nationwide will prevail in that storm-surge-flood caused the damage."
Expert testimony from both sides focused on how strong the wind was, where it was coming from and when it happened. "It all overlapped in such a short time, but it looks as though the insurance company presented a good case on the factual question," he said.
Mr. Vitkowsky said he expects whichever side loses the case to appeal.
The attorney also said the other cases were not expected to be heard for at least a year. The Leonard case moved relatively swiftly since, as a bench trial, it was subject only to the judge's ruling.
The industry faces a different sort of challenge from Mississippi Attorney General Jim Hood, whose lawsuit against several national carriers asserts the companies' interpretation of the flood exclusion has created "unconscionable" suffering among policyholders.
"Wind vs. flood" lawsuits have arisen in numerous occasions over the past three decades since the federal flood insurance program paved the way for the flood exclusion, but they have taken on new urgency as state and federal lawmakers fear the plight of so many homeowners caught without flood insurance last year will cause a demand for some sort of government aid.
The National Flood Insurance Program's administrator, David Maurstad, told an industry-sponsored hurricane conference in New York City last week that estimates put about half of all homeowners nationwide in high-risk flood areas in the uninsured category.
Federal and state lawmakers and insurance regulators are looking at any number of solutions to shore up the property-casualty industry in the event of a mega-catastrophe.
The first order of business is an overhaul of the federal flood insurance program, calling for self-sustaining premiums and risk mitigation measures. But so far, that has fallen victim somewhat to the wind versus flood issue as U.S. Rep. Gene Taylor, D-Miss., has demanded any reform effort come with an "investigation" of how such claims are adjudicated.
Rep. Taylor is not a disinterested bystander. He, along with U.S. Sen. Trent Lott, R.-Miss., and U.S. District Judge Lou Guirola, have all filed suit against State Farm regarding their handling of Katrina claims. In fact, Judge Senter has the sole burden of hearing all such cases since his fellow federal jurist has had to recuse himself due to his own lawsuit.
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