NEW ORLEANS - An insurance company should have paid for Hurricane Katrina damage to a policyholder's home because it's unclear what types of flood damage were excluded from coverage by its homeowner policies, a state appeals court ruled Monday.
The law firm Gauthier, Houghtaling and Williams said the ruling affects hundreds of thousands of policy holders in Louisiana whose homes were flooded as a result of Katrina.
"The Louisiana courts are the proper courts to be interpreting state law and today's ruling could have ramifications for lawsuits pending in federal court," said attorney James Williams, who argued on behalf of Louisiana Attorney General Charles Foti's office.
The Fourth Circuit Court of Appeal upheld a state judge's ruling that Lafayette Insurance Co.'s policy failed to exclude all forms of flooding because its language was ambiguous.
"Lafayette failed to specifically exclude all floods because of the ambiguity contained within the water exclusion," Judge Terri Love wrote in a 53-page majority opinion.
The Fourth Circuit sided with policyholder Joseph Sher, who blamed much of the water damage to his property on water from levee failures in New Orleans following the Aug. 29, 2005, hurricane.
Williams and other attorneys said the ruling is the correct interpretation of Louisiana law.
"It was the correct ruling, a major ruling that's key to the rebuilding of New Orleans," said James Garner, an attorney for Sher.
"Everybody (the court) agreed that Mr. Sher was not handled properly by Lafayette Insurance Co. They all agreed that the company acted in bad faith and didn't treat him fairly."
Garner said it was likely the insurance company would ask the Louisiana Supreme Court to review the case. A spokesperson for the company could not be immediately reached for comment.
Two of the five Fourth Circuit judges who heard the case agreed with the result of the majority opinion but gave different reasons for their conclusions.
"As I read the applicable policy provisions (quoted by the majority), because Lafayette's all-risk policy did not specifically exclude coverage for business personal property losses, I find that coverage was afforded under the policy as written," said Judge Max N. Tobias Jr. in concurring.
Orleans Parish Civil District Court Judge Robin Giarrusso also had sided with Sher, a 91-year-old Holocaust survivor who owned an apartment complex in New Orleans and sued Lafayette for denying most of his claim after Katrina.
The 4th Circuit case mirrors one already decided by a federal appeals court. The 5th U.S. Circuit Court of Appeals dealt a blow to Gulf Coast homeowners by ruling that insurers aren't obligated to cover water damage from a levee failure.
Sher, who lived in one of the five units at his apartment complex, rode out the storm at home and blames much of the damage to his property on water from levee failures in Katrina's aftermath.
Lafayette paid Sher about $2,700 for wind damage, but he estimates his home sustained a total of $223,488 in damage that should be covered.
In March, a jury awarded Sher $369,077 for property damage and lost rent, plus $184,538 in penalties. Giarrusso also ordered Lafayette to pay $258,728 in attorney fees.
The Fourth Circuit amended the awards to $461,346 for property damage and lost rent but said the trial court erred in awarding attorney's fees.
Foti's office has sided with Sher in the case, arguing that Lafayette and other insurers are obligated to pay for water damage from levee breaches.
View the Attorney James Williams Discusses Pending Appeal (Fox 8) segment: