In In re Katrina Canal Breaches Consolidated Litigation, Civil Action Nos. 05-4182, 06-0169, 2006 WL 3421012 (E.D. La. Nov. 27, 2006), the court was asked to determine if two interpretations of “flood” existed under homeowners policies—a natural occurring event or one that occurs because of a negligent or intentional act of man.

 

Plaintiffs were New Orleans homeowners who suffered water damage when a section of the concrete outfall canal wall of the 17th Street Canal broke during Hurricane Katrina. Plaintiffs allege that the water damage did not result from flood but that water intrusion from a broken levee wall caused the losses. They also contended, separately, that the Levee Board breached its duty “by failing to correct the break [in the canal wall] or warn others including Petitioners of the impending water intrusion.”

 

The plaintiffs argued that, because Louisiana is an efficient proximate cause state, and because the efficient proximate cause of their losses was the negligence of the Orleans Levee District, their losses should be covered by their homeowners policies.

 

The homeowners insurers, however, maintained that the policies excluded water damage caused by flood, and that “clearly the inundation of the City of New Orleans caused by the failure of its levees was a 'flood.'” The insurers stated that floods are not limited to natural events.

 

The court examined the various policies the homeowners held and concluded that the ISO water damage exclusion was ambiguous. The court looked at several dictionary definitions of “flood” and stated “because 'flood' has numerous definitions, it reasonably could be limited to natural occurrences. The language of the ISO Water Damage Exclusion chosen by the insurer is unclear.”

 

The issue of man-made versus natural causes has been an issue for years, the court said, and the insurers could have drafted an exclusion stating that man-made causes of flood are excluded, but they chose not to.

 

The court said, “To find that the ISO language clearly excludes negligent acts would be to reward and encourage the use of vague language. This determination is underscored by the fact that the tension between natural flooding and flooding caused by negligent or intentional acts has existed for decades; obviously, some insurers made efforts to be clear in their intentions.”