June 26, 2007

When it was handed down late last year, the decision by federal Judge Stanwood Duval in In re Katrina Canal Breaches Consolidated Litigation was widely greeted with amazement. Judge Duval declared the flood exclusions in a number of insurers' policies ambiguous (and therefore not enforceable) because, he said, they did not clearly exclude flooding from man-made sources like New Orleans' canals, as opposed to floods that are "natural occurrences." Never mind that what caused the New Orleans canal breaches was a natural occurrence called Hurricane Katrina. Randy Maniloff has written an analysis of judicial restructuring of contracts that focuses on the case, which he renames "In re: Breach of Common Sense." Interestingly, he notes that in a prior case with lower stakes, Judge Duval appeared to come out on the other side of the question. See prior posts by Ted Frank on this case here and here.