Recent decisions by courts against the insurance industry in flood cases will not stand up on appeal, predicts an attorney– and recent opinions appear to back him up.
Randy J. Maniloff, an attorney and partner in the law firm of White and Williams LLP, based in Philadelphia, said that while jurists may empathize with policyholders who lost their homes from the floods in the aftermath of the 2005 hurricane season, the weight of the law is against them.
Referring to a recent decision by Louisiana State Judge Edward D. Rubin with the 15th Judicial Court in Lafayette, La., Mr. Maniloff called it "a classic example of the court trying to find cover for this horrific situation."
In that case, Judge Rubin decided in favor of the policyholder. He has yet to render a written decision in the case, but Paul J. Cox, the attorney who represented the policyholders, Mark and Barbara Landry, against the state's insurer of last resort, Citizens Property Insurance Corp., said the judge's decision was based on the state's valued policy law. Mr. Cox said that under the law, in the event of a total loss, the insured is entitled to the full insurance value of the policy on the structure without deduction or offset if the structure is partially damaged by a covered peril.
However, there have been many more decisions supporting the industry's stance on flood exclusion. Mr. Maniloff, an attorney who represents carriers in civil disputes, said Judge Rubin's decision will not stand up on appeal.
He pointed to two recent federal court decisions, Chauvin vs. State Farm and Armand Richard vs. State Farm Fire and Casualty Co., (the latter decided on Dec. 1), that rejected arguments extending the concept of valued policy law to excluded losses.
Valued policy law, he explained, is intended to prevent insurers from paying less for a property than what the policyholder insured the property for.
"Insurers can't change the value after the loss," he said. "It was designed to prevent insurers from charging more [premium] than the property was worth."
He said the concept has been around for over 100 years and the concept is well established in law.
He called Mr. Cox's argument applying the concept to an excluded loss–in this case flood–a "novel interpretation."
In Florida, a court did rule that under valued policy law, a partial damage to a property meant the insurer was responsible for full coverage of the loss, but the legislature later stepped in and clarified the statute to its original concept.
While he said he is confident the Louisiana decision will be reversed on appeal, he does not believe it would go to the federal level since it does not entail federal questions.
However, he said he does believe that recent federal decisions that support the industry on flood exclusion and valued policy law would guide the Louisiana appeals courts in their decisions.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.