Louisiana Fourth Circuit finds flood exclusion ambiguous

The Louisiana Fourth Circuit Court of Appeal came out with a case yesterday that I didn’t learn of until about 8:42 p.m., and on this night I was safely home at that hour, but if I had been at work, I just may have been holding my red Yellowstone mug of decaf with the white moose silhouette, and had this been so, I surely would have dropped it in dumbfoundment when I came to pages 7 to 9 of this case.

The name of this case is Sher v. Lafayette Ins. Co., et al., and it is a case in which the trial court granted partial summary judgment for the policyholder, saying the insurer’s flood exclusion was ambiguous.  The appellate court agreed.  Now, I am quite familiar with arguments positing a dichotomy between natural and man-influenced physical forces, and I am quite familiar with arguments that draw this distinction even more intricately in discussing the difference between natural causes and human causes.  Sometimes parties present these arguments with great skill, other times they don’t.  Sometimes courts write about these issues with sophistication, and although I may not agree fully, I can appreciate the reasoning.  Sometimes, however, courts don’t seem to care what appearance they make for the rest of the world, and they write conclusions like the Sher case.

Here is a copy of the decision. What happened was that Joseph Sher’s commercial building in New Orleans was flooded by Katrina waters.  This is not a "wind vs. water" case in any way that is obvious to me, it appears to be just a pure flood case.  The court mentioned early in the decision that the Corps of Engineers flood levees failed, and one would suspect this negligent human involvement in the flooding was a factor in the court’s analysis, but the court refused to make this absolutely clear.  Here is what is excluded by the flood exclusion:

1.  We will not pay for loss or damage caused directly or indirectly by any of the following.  Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss:

g.  Water.  Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, whether driven by wind or not . . . .

This language is analyzed by the court as follows in a passage that is about as close to being completely incomprehensible as one would dare to come:

A review of the Policy reveals that the parties intended to cover and include all risks that were not specifically excluded or limited.  Lafayette failed to specifically exclude all floods because of the ambiguity contained within the flood exclusion.  While the Policy states that it does not cover damage caused by a "flood," it also states that it does not cover "waves, tides, tidal waves," and the "overflow of any body of water  . . . whether driven by the [sic] wind or not."  This exclusion includes "flood," but then continues to list specific natural disasters that cause inundations of water, commonly labeled as "floods."  For example, a varying cause of a flood can be man-made or natural, as documented in La. R.S. 29:762, which states that a "flood" is a "natural disaster."    

Mind you, I am not against arguments about the distinction between natural and man-made causes and whether insurance policy clauses encompass both, and I can picture sophisticated reasoning on this particular clause that could come out either way.  The Sher reasoning, however, is primitive and cursory, all the more noticeable because the court found time to go on for page after mind-numbing page examining damage issues. Further, what role the lead-in anti-concurrent cause language might or might not play in working to exclude human negligence as a covered cause was not discussed.  

The court’s decision is perhaps particularly surprising because outgoing Louisiana Attorney General Charles Foti sided with the policyholder — Foti’s involvement is usually a sure sign a case will be lost. 

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