A Louisiana state appeals court said a lower court could not make a summary judgment against the state's Citizens Insurance Company using the state's Valued Policy Law and ordered a jury trial to sort out the issue.
In a 3-2 decision, the State Third Circuit Court of Appeal ruled that the lower court should not have rendered a summary judgment against Louisiana Citizens Property Insurance Company. Instead, it ruled it is up to a jury to apportion responsibility under the law.
The case, Landry vs. Citizens, was heard on appeal from the Fifteenth Judicial District Court in the Parish of Vermillion. The court was asked to review the state's valued policy law. The law requires insurers to pay for the full value of a homeowners policy when the resulting total loss involves a combination of covered and non-covered perils.
Citizens denied payment of the claim because the loss, the insurer contends involved flooding, non-covered peril. The insureds said because the home suffered wind damage from Hurricane Katrina, the valued policy law effectively covered their loss.
While rendering the case back to the lower court for trial, the appeals court appeared to place the onus on the carrier to prove that the loss was the result of a non-covered peril, such as flood, to avoid indemnifying the risk.
"It is not sufficient to show that flood water contributed in part, as Citizens argues, to a building's destruction or constructive loss; the insurer must prove that the excluded peril caused the total loss to avoid fully indemnifying the insureds," Judge Sylvia R. Cooks said writing for the majority.
The court also said that when there is a mix of perils resulting in the loss of a home, it is up to a jury to decide proportion of cause.
"Each case must turn on its own facts which are left for the trier, judge or jury, to resolve," Judge Cooks said.
What this spells for the industry appears to be up to interpretation.
"The Landry decision represents a Louisiana Appellate Court's faithful adherence to insurance law principles that have long protected Louisiana homeowners," said John N. Ellison in a statement, an attorney from Anderson Kill & Olick one of several counsels involved in the case for Mark and Barbara Landry. "In the wake of other recent negative rulings in the Federal system, it is critical for policyholders to continue to seek relief in the Louisiana Court system…"
On the other hand, John Wortman, executive director for Louisiana Citizens, did not feel the decision was necessarily a negative one for the insurer. He believed it reaffirmed past decisions that insurers should be responsible for paying those portions of the loss that were a covered peril.
"We think this is obviously a better decision that moves in the right direction for us," said Mr. Wortman.
However, he cautioned that he still needed to meet with attorneys to understand the full measure of the court's decision.
If insurers thought they could take comfort from the court's dissenters, however, they would be sadly mistaken. Both Judges, James T. Genovese and John D. Saunders, felt the lower court's ruling was correct and the summary judgment should stand.
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