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The United States District Court for the Southern District of Mississippi, Southern Division, made an important decision regarding water damage and insurance coverage raised after Hurricane Katrina.
I Leonard v. Nationwide Mutual Insurance Co 499 F.3d 419 (5th Cir. 08/30/2007), the first of the Katrina cases to go to trial, the court found that Leonard's home was not covered by any flood insurance policy at the time of the storm. Flood insurance is available to everyone, regardless of the flood zone in which their home is located, but the plaintiffs did not purchase it;
The evidence presented at the trial finally established the following points:
- That on August 29, 2005, the entire area around Pascagoula, Mississippi, including the Leonard residence and its surrounding neighborhood, was exposed to violent winds of over 100 miles per hour. These winds gradually increased during the early morning hours and reached an intensity peak between kl. 9:00 a.m. and noon.
- The water from the Mississippi Strait was driven ashore by the storm and the water level in the Leonard neighborhood rose to a peak level between 11:00 and 12:00. At its highest point, this water flooded the Leonard residence to a depth of about five feet.
- The Leonard residence is about 12 feet above sea level. This property is located 505 feet from the beach in the south.
- The flooding of the ground floor of Leonard's residence caused extensive damage to their floors, carpets, walls and personal property. The second floor of the Leonard family's property was not damaged. The physical damage to the roof of Leonard's property consisted of a small number of broken shingles, and the waterproof integrity of the roof was not broken during the storm. The attached garage on Leonard's property was also extensively damaged during the storm.
- The only wind damage on the ground floor of Leonard's home was a hole in a window that witnesses described as "golf ball size". The exterior of Leonard's home and the attached garage were soiled by a combination of wind-powered and water-borne materials.
Based on facts established by evidence at the trial, the court concluded: caused by water are valid and enforceable terms in the insurance contract. Similar insurance terms have been applied with respect to damage caused by high water in connection with hurricanes in many reported decisions.
The judge did not deprive the insured of total coverage. He noted that under applicable Mississippi law, in a situation where the insured property suffers damage from both wind and water, the insured can recover the portion of the loss that he or she can prove to have been caused by wind. Nationwide is not responsible for the part of the damage that it may prove to be caused by water. The final verdict was therefore only for wind damage and was less than $ 2,000.
After the trial, the case was appealed to the Fifth Circuit Court of Appeal, which upheld the decision of the trial court but did not agree with the methods used:
justification is its failure to acknowledge the three discrete categories of damage at issue in this litigation: (1) damage caused solely by wind; (2) damage caused solely by water; and (3) damage caused by wind "simultaneously or in any sequence" with water. The classic example of such a simultaneous wind-water risk is the storm surge that follows in the heels of a hurricane's landfall. The only type of damage covered by the insurance is damage caused solely by wind. However, if wind and water synergistically caused the same damage, such damage is excluded. Thus, Leonard's money was based on their roof damage caused solely by wind. However, unlike the court's injury matrix, they had also proved that part of their property damage was caused by simultaneous or sequential action of water – or any number of other listed waterborne hazards – the policy clearly allows recovery.
] This decision will make it more difficult for plaintiffs with damaged property to avoid the effect of exclusions of simultaneous causes when wind, water, storm surge or mold coincides with excluded causes, leading to loss. [Interestingisthattheplaintiff'scourtlawyerRichard"Dickie"Scruggisnowservingalongsentenceinfederalprisonforhavingtriedtobribepropertywithregardtoadisputewithhisassistant Barrett v. Jones, Funderburg, Sessums, Peterson & Lee, LLC No. 2008-IA-00421-SCT (Miss 2009-11-12); USA v. Whitfield No. 07-60748 (5th ed. 2009/12/11); United States of v. David Zachary Scruggs No. 3: 07CR192-B-A (N.D.Miss. 5/13/2011); USA ex rel Rigsby v. State Farm Insurance Co., No. 1: 06CV0433 LTS-RHW (S.D.Miss. 2008-05-19). These cases and the indictment against Richard and David Scruggs questioned the validity of all Katrina trials and claims.]
In Tuepker v. State Farm, 507 F.3d 346 (5th Cir. 2007) the Fifth Circuit reaffirmed the majority of the court's decision, an important and far-reaching conclusion that interprets insurance coverage in the wake of a disaster. Judge Senter, the trial judge, concluded:
In the case of damage caused by wind, there is coverage under the provisions of State Farm policy because destruction of the insured home by a windstorm, including a hurricane, would constitute an unintentional direct physical loss and would therefore be a covered danger. Thus, to the extent that the plaintiffs' property was damaged by wind or by objects propelled by wind, the State Agricultural Insurance covers the loss . This also applies to damage to personal property inside the insured home caused by rain that entered the plaintiff's home through breakthroughs in walls or in the roof caused by hurricane winds.
Losses that are directly attributable to water in the form of a "storm wave" are excluded from coverage because this damage was caused by the flooding of the plaintiffs' home by tidal currents from Mississippi Sound that drift ashore during Hurricane Katrina. This is water damage within the meaning of the policy exemption. The exclusion contained in the policy for water damage is a valid and enforceable policy regulation. In fact, similar policy terms have been applied with respect to damage caused by high water in connection with hurricanes in many reported decisions.
Since the adjective "physical" is defined as "having a material existence", mold spores undoubtedly have a "material existence". Even if they are not noticeable or noticeable to the naked eye. Therefore, mold contamination constitutes a "physical loss" under an insurance policy and, provided that all other insurance terms and conditions are met, the cost of removing mold from a property or replacing personal property may be recovered under a property policy. However, the Fifth Circuit found that the exclusion was enforceable for the same reason and annulled the part of the decision of the Court of Justice which ruled that the exclusion did not apply.
Under Mississippi law, the judge concluded that where there is damage caused by "both winds". and rain (covered losses) and water (losses excluded from the insurance), the amount to be paid under the insurance becomes a matter of what is the closest cause of the damage. "This of course depends on the evidence presented at the trial.
Regardless of whether a claim concerns water damage, wind damage or resulting mold infestation as a result of water infestation, it is important that the insurer makes a thorough investigation of the causes, determine which ones are due to a covered hazard and those that are clearly and unequivocally excluded from the insurance. decisions made by courts following a hurricane disaster.
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to the position of insurance consultant specializing in insurance coverage, insurance claims handling, bad faith and insurance fraud almost the same for insurers and policyholders.
He also acts as arbitrator or media  for insurance-related disputes. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry.
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He is available at http://www.zalma.com and firstname.lastname@example.org. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award. For the past 53 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claimants to become professionals in insurance claims.
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