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Judge Senter on Katrina, cont'd

I'm not sure I really intended my first post on this, which reacted to initial news reports, to commit myself to an upbeat, cheery posture (or its reverse). At the time, I hadn't yet read the actual opinion.

The portion of the ruling that is hardest to comprehend is surely the part knocking out Nationwide's clause excluding coverage, not as unconscionable but rather as supposedly ambiguous. The plaintiff's lawyers had identified a (seemingly poorly drafted) passage elsewhere in Nationwide's policy which, read in a strained way, might seem to disclaim the same coverage for conventional wind damage that was being promised by the rest of the language in the policy. Note that Nationwide itself was not advancing or endorsing this (harsh if not fraudulent) interpretation, which meant nobody was. And yet by seizing on this supposed ambiguity -- between the exclusion Nationwide actually had made, and the super-duper-exclusion it had not intended to make -- Judge Senter came up with the remedy of disallowing both exclusions. It is as if, finding a letter which looked very much like "T" but could strainedly be read as "Z", the judge decided that plaintiffs would be permitted to read it as "D".

I had to remind myself that courts have a long tradition of seizing on supposedly ambiguous language in insurance policies and construing it against the insurer, often in creative and even acrobatic ways. (Insurance Coverage Blog has a discussion of the ambiguity issue here.) The logic, I gather, is that since the insurers devise the policies they can go back next time, perhaps several hundred million dollars later, and try to draft language that will be more judge-resistant. Of course Nationwide can also be expected to raise the issue on appeal.




Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.