Defining "Flood," with Billions at Stake

A federal appeals court has ruled that insurance companies are not liable for the New Orleans homes and businesses that were flooded when Hurricane Katrina breached the city's levees. Attorney Daniel Becnel and his client Robert Harvey discuss the ruling.

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CHERYL CORLEY, host:

I'm Cheryl Corley in for Farai Chideya. And this is NEWS & NOTES.

A federal court added a new twist last week to a tangled post-Katrina story.

Many New Orleans resident lost their homes to flooding. Some sued their insurers for not covering the damages. But insurers argued the damage was caused by the city's breached levies and not their responsibility. A district court agreed, but a federal appeals court has now sided with insurers, clearing them of billions of dollars in potential claims.

This ruling could mean very bad news for tens of thousands residents, business owners, and schools in and around New Orleans. David Becnel is one of several lawyers representing plaintiffs in this and other federal Katrina cases. Among his clients is Robert G. Harvey, who is also with us now.

Gentlemen, welcome to the show.

Mr. DANIEL BECNEL (Litigation Lawyer, Becnel Law Firm, LLC): Glad to be here.

CORLEY: All right. Well, this has been a tug-of-war over what caused the damage during the hurricane and what insurance policies specifically said and if they - the insurance companies - were responsible for flood coverage.

Daniel, why don't I begin with you? Is this hairsplitting or pretty clear-cut as the appeals court would have us believe?

Mr. BECNEL: Well, I don't think it's as clear-cut as the appellate courts thought. In fact, Judge Duvall, who is a Louisiana U.S. district court judge, one of the most respected in the South, said the policy was ambiguous. And when it is an ambiguous policy, it is held to be in favor of the person who received the policy, not the person who wrote the policy.

One of the important areas of concern in this case was that the plaintiffs and their lawyers had asked the appellate court to remand this case for determination by the Louisiana Supreme Court. As you know, we have unique laws in Louisiana compared to most of the other states of the union.

CORLEY: How so?

Mr. BECNEL: And - well…

CORLEY: What is unique about Louisiana's law?

Mr. BECNEL: Well, the law is codified in - called the Code Napoleon, was originally put together by Napoleon Bonaparte in the 1700 and 1800s. So it's unique. In that determination, they refused to allow the Supreme Court of the state of Louisiana to interpret its own laws and they just did it themselves.

CORLEY: So you're saying that in this case - because Louisiana's system of laws based on what's called Napoleonic Code instead of English Common Law or Case Law, that there is a difference on how the case was handled and how the judges ruled in this case?

Mr. BECNEL: That's what we believe.

CORLEY: Mm-hmm. And you're saying that you would have liked it. Do you think you would have gotten a different ruling from the Louisiana Supreme Court?

Mr. BECNEL: I think we would have.

CORLEY: Mm-hmm. Mm-hmm. Now, Robert, you're home, as I understand, it was not covered by flood insurance, is that correct?

Mr. ROBERT G. HARVEY (Plaintiff): That is correct.

CORLEY: Uh-huh.

Mr. HARVEY: I live in an area where FEMA had designated it was not flood-prone. And therefore, flood insurance was not required.

CORLEY: So you decided not to buy flood insurance as a result?

Mr. HARVEY: Well, it was a part of a package through the bank, so they did not put flood insurance on the property. So I was in the property, the flooding occurred hours after the storm. I had gone outside and cleaned up - actually, I went to bed at 5:00 the evening of the storm, watching television with a generator. When I got up at around 8:30 or 9:00, go to the bathroom, and guess what? Water everywhere…

CORLEY: Mm-hmm.

Mr. HARVEY: …just coming up. When you begin taking the term flood, if you try to (unintelligible) it so many ways as the insurance companies have, it's going to be ambiguous. And I can give you an example if you want one.

CORLEY: Go ahead.

Mr. HARVEY: Well, if I have a homeowner's policy and I have a plumber come in and fix my washing machine, and I go off to the show and I come back and that pipe he fixed broke, and eight feet of water sitting in my house, I open at the door and it comes out, that's a flood. I mean, the first thing you'll say, my house flooded. In this case, what you have is you didn't have an overtopping of the levies. You didn't have any undercurrent. What you had was a wall that broke, just like the pipe broke. What is the difference between it occurring inside or outside? It should be a covered event.

CORLEY: Mr. Becnel, let me bring you back into this. What is your next step then?

Mr. BECNEL: Well, what we intend to do is, first, ask for a rehearing and possibly, ask for an en banc rehearing so some of the - in the Fifth Circuit Court of Appeals, you have judges from Mississippi, Louisiana and Texas. And so if we get an en banc, which would mean some Louisiana judges, some Mississippi judges and some Texas judges, we might have a different outcome.

Failing that, then we would apply to the United States Supreme Court. Because what is unique about this case and what is unique about Mr. Harvey, is not only did he lose his home, but he had, in earlier years, been chairman of the Orleans Parish Levee Board. He basically had to follow the federal rules that the U.S. Army Corps of Engineers told him what to do, how to do it, how to protect the city, as such.

Mr. HARVEY: Actually, I was president of the Orleans Levee District, which is charged with flood protection for the city of New Orleans. And in that capacity, I can tell you my knowledge of this is I was never for parallel protection where the wall broke. I was for (unintelligible) protection. But as Danny just said, you're obligated to follow the law as passed in Washington and then there's nothing else you can do about it.

CORLEY: Well, thank you so much, Robert and Daniel, for joining us. Daniel Becnel is one of several lawyers representing victims of Hurricane Katrina in this and other federal cases. Robert G. Harvey, one of his clients, they spoke with us from Audioworks in New Orleans.

Thank you, gentlemen.

Mr. BECNEL: Thank you.

Mr. HARVEY: Thank you.

CORLEY: Among the insurance companies named in the lawsuit is Allstate. They declined our invitation to appear on the show, but did send this statement, quote, We settled 98 percent of Katrina claims in Louisiana and 99 percent in Mississippi, resulting in billions of dollars going back into the community to aid recovery. As stated in the ruling by the Fifth Circuit Court, regardless of what caused the failure of the flood control structures that were put in placed to prevent such a catastrophe, their failure resulted in a widespread flood that damaged the plaintiffs' property. This event was excluded from coverage under the plaintiffs' insurance policies and under Louisiana law. We are bound to enforce the unambiguous turns of their insurance contracts as written, end quote.

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