If you’ve been following other blogs and looking at the trackbacks under my posts on the decision in the Leonard case, you know there is some difference of opinion about how to read Judge Senter’s opinion. Opinion is still being formed, and I’m not going to hold anyone to what their impressions have been so far. But I’m going to have to differ with anyone who sees Judge L.T. Senter’s opinion in the Leonard case as putting the Leonards or other Katrina plaintiffs in a better position.
Leonard is the third of three decisions in Katrina cases by Senter this year. The first was Buente v. Allstate and the second was Tuepker v. State Farm. Of the three, only Leonard involved a trial on all the facts and the law. Buente was a motion for partial summary judgment by the plaintiff homeowners. The motion was about the Allstate flood exclusion, which Senter upheld as valid and unambiguous. Tuepker was a little different. It was State Farm’s motion for judgment on the pleadings. Senter denied the motion because factual issues existed about what caused the destruction of the Tuepker home, wind or flood. In the course of denying the motion, Senter discussed the State Farm anti-concurrent cause exclusion and said this: to the degree anyone wants to interpret it to bar coverage for damage from wind, the exclusion is ambiguous, because the policy clearly covers wind damage. He acknowledged flood damage was excluded.
He said the same thing in the Leonard case (the issue didn’t arise in the Buente decision). Wind damage clearly is covered, flood damage clearly is not, Senter said. To the degree the anti-concurrent cause clause could be interpreted to say otherwise, that result contradicts the main purpose of the policy and therefore is ambiguous. The apportionment of damage between wind and water was not especially difficult or contentious in Leonard, and therefore the clause wasn’t a key to this decision. I suspect, however, that Nationwide is fine with Senter’s interpretation of the clause being applied in future cases and that other insurers are too. To say that a house destroyed by wind would be uncovered because it would have been later destroyed by waves is an extreme reading and would be contrary, as Senter points out, to the policy’s purpose. Insurers were never going to get that under Mississippi law or, probably, the law of any other state.
Anti-concurrent cause clauses were introduced by the Insurance Services Office in about 1995 in response to cases in which insureds won coverage for excluded causes of loss by saying they happened concurrently with a covered cause of loss. The purpose of the anti-concurrent cause clause, then, is not to exclude everything that happens, including covered damage, which Senter points out. Rather, the purpose of the clause appears consistent with Mississippi law: when a cause is the proximate or "moving" cause of loss (sometimes called the efficient proximate cause), that damage is covered. To the degree a cause of loss merely happens at the same time or in some sequence but is not the moving cause of loss, it is not and should not be covered.
I’m open to other readings of Senter’s decisions, but this makes sense to me from my review of Mississippi law and case law on the anti-concurrent cause clause in various jurisdictions.
One final point about agent liability. I don’t think this case will turn out to be a blueprint for policyholder misbehavior, as Ted Frank fears. A lot of these Katrina cases appear to include some element that either the agent or the insurance company, or both, said flood damage was covered. But for a plaintiff’s lawyer, going after alleged misrepresentations or seeking to reform the language of the policy on the basis of a supposed mutual mistake or purported oral agreement that differs from the written policy comes in a poor second to a stand-up fight over the actual policy language.
Reformation comes with a burden of establishing proof by the clear and convincing standard and requires factual determinations on a case-by-case basis, which is not what the plaintiff lawyers in these cases wanted. They wanted to invalidate the flood exclusion, which would have applied to all policies in every case. To reform a policy, there must be a mutual agreement on oral terms that pre-date the written instrument. Reformation is like a game of King of the Hill. The policy is the hill, the party opposing reformation is on top, and the party seeking it has to fight his way up a steep slope against someone with a commanding position. As Senter said in the Leonard opinion, he saw no basis for reforming the Nationwide policy based on anything the agent, Fletcher said. Also, agents don’t necessarily have any affirmative duty to tell you anything, or match you up with the coverage that, in hindsight, would have been optimal for you. If every Katrina case went to a bench trial on a reformation claim or some claim that policy terms were altered by misrepresentations, I would be surprised if even one of them succeeded. If there’s a jury, I’ll grant you, there might be a different result in some cases, but the jury is always a wild card when the defendant is an insurance company.