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The Fifth Circuit gets it right

The Fifth Circuit Court of Appeals has overturned the district court's determination last year that flood exclusions in the homeowners policies of various insurers were ambiguous and unenforceable in relation to New Orleans canal breaches.

The case is called In Re Katrina Canal Breaches Litigation, and one astute commentator, Randy Maniloff, had labeled the underlying decision by Judge Stanwood Duval In Re Breach of Common Sense. Judge Duval's thinking was that the standard flood exclusions in most policies did not specifically refer to the type of flooding that occurs because of man's negligence in designing levees that crumble. He did acknowledge that they would exclude traditional "natural" flooding.

However, as I point out in a post today at my Insurance Coverage Law Blog (where a pdf of the appellate court's decision is available), the Fifth Circuit sliced right through this tortured reasoning, and said that human negligence was not really a cause of the flooding at all, in the sense that word is understood in analysis of first-party property insurance losses. The Fifth Circuit also said that once this type of negligence analysis gets started it has no logical end: due to extent of human flood control measures such as dams and levees, many if not most floods can be said to involve the human hand. This is an important decision that is in keeping with the interpretation of flood exclusions by the overwhelming majority of courts that have considered this policy language.



Rafael Mangual
Project Manager,
Legal Policy

Katherine Lazarski
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.