Katrina cases get hearing

• By JOE GYAN JR.
• Advocate New Orleans bureau
• Published: Feb 27, 2008 - Page: 1D

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NEW ORLEANS — The state’s highest court heard its first insurance payment cases Tuesday stemming from the 2005 hurricanes with high-stakes implications for insurers and tens of thousands of property owners in the New Orleans area and southwest Louisiana.

In one of the cases, attorneys for Lafayette Insurance Co. and uptown New Orleans resident Joseph Sher — a 92-year-old Holocaust survivor — jousted over whether the water that inundated 80 percent of the Crescent City constituted a “flood’’ caused by Hurricane Katrina or a man-made disaster unleashed when levees built by the federal government failed during the storm.

In the other case, lawyers for Louisiana Citizens Property Insurance Co. — the insurer of last resort — and Vermilion Parish couple Mark and Barbara Landry argued over whether wind damage or storm surge destroyed their home.

The Louisiana Supreme Court, which allowed television cameras in the courtroom for the two hearings, took the hour’s worth of arguments in each case under advisement without indicating when decisions would be issued.

Loyola University New Orleans distinguished law professor Dane Ciolino said rulings could be expected in the range of six to 10 weeks.

Ciolino also said that, if the justices side with policyholders, the decisions would take precedence over federal court rulings that have gone in favor of insurers.

“Absolutely. The federal courts have to apply state law,’’ he said.

Justice Catherine “Kitty’’ Kimball made it clear during the hearing in the Landry case that the state Supreme Court will decide the matter.

“I’m not interested in what the federal courts said in this case, frankly,’’ she told lawyer Paul Cox, who represents the Landrys.

Rulings by the high court in favor of policyholders could bolster a claim by former state Attorney General Charles Foti on behalf of an estimated 165,000 “Road Home’’ applicants against nearly every insurance company operating in Louisiana. Foti’s lawsuit claims the companies underpaid all Road Home recipients by interpreting homeowners policies to exclude coverage for the water damage caused by the levee breaches.

Insurance companies, on the other hand, are warning that an adverse ruling for the insurance industry would have a chilling effect on insurers’ willingness to remain players in the state, particularly in flood-prone areas.

Sher v. Lafayette
In the Sher case, Lafayette contends its policies cover damage from wind but not flood water, while Sher’s attorneys claim that water damage from a levee breach is not specifically excluded from coverage under the company’s policies. Lower courts have ruled that Lafayette’s policy language was ambiguous and did not specifically exclude damage from a levee breach from coverage.

In August, three Texas judges on the New Orleans-based 5th U.S. Circuit Court of Appeals ruled the opposite way in a similar case. The panel said a flood is a flood, regardless of what causes it.