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New Orleans, LA (November 29, 2006) - In a ruling that will have unprecedented impact on hundreds of thousands of Greater New Orleans Metropolitan Area residents whose homes were damaged or lost in the wake of Hurricane Katrina, the Honorable Stanwood R. Duval ruled that homeowners insurance companies cannot deny claims for losses caused by water released from the failed New Orleans Levees System unless their policies expressly exclude coverage for water-related losses caused by negligent acts or man-made causes of the water's release.  The ruling is the most significant decision to date in Louisiana in connection with insurance-related litigation following Hurricane Katrina and will allow New Orleans Metropolitan Area homeowners in a five-Parish region to pursue claims for insurance which had previously been denied or refused on an industry-wide basis.

The opinion was issued in the consolidated matter of In Re: Katrina Canal Breaches Consolidated Litigation, Civil Action No, 05-4182, which is currently pending in the United States District Court for the Eastern District of Louisiana and encompasses all cases related to damages caused by water released from the New Orleans levees.  Included among the three matters which were the subject of Judge Duval's opinion is Chehardy, et al. v. State Farm, et al., the most comprehensive class action lawsuit filed on behalf of New Orleans area homeowners.  The Chehardy action was brought against fifteen insurance companies that sold All-Risk homeowners insurance policies to Louisiana residents.

Judge Duval's decision is a major defeat for the insurance industry, which, despite collecting premiums from Louisiana policyholders for years, attempted to exclude losses caused by Hurricane Katrina's windstorms, the storm surge created by the winds, as well as the negligent acts of third-parties with regard to the New Orleans area levees.  As noted by Judge Duval in his opinion, the insurance companies systematically sought to avoid payment of claims by applying the "broadest possible definition of [the term] 'flood,"which is undefined in their all-risk homeowners policies.  In denying the motions to dismiss of all but one of the insurance companies in the Chehardy action, Judge Duval squarely rejected the insurance companies' position and held that the term "flood" must be narrowly construed and limited to naturally-occurring events and not man-made causes or events such as the negligent construction, design or maintenance of the levees.

The Court noted that the insurance companies "wrote every word of their respective policies" but failed to draft a clear exclusion for water damage caused by negligent acts, something the insurance companies could have done "with very little effort."  Consequently, the Court refused to accept the insurance companies' overbroad interpretation of "flood" and held the term to be ambiguous which, under Louisiana law, requires an interpretation providing coverage to the homeowners.  Moreover, Judge Duvall refused to dismiss bad faith claims against State Farm which was identified by former employees as having used biased engineering reports to deny policyholder claims.

The Chehardy action was filed on behalf of the policyholders by lawyers from Anderson Kill & Olick, P.C., The McKernan Law Firm, Fayard & Honeycutt, P.C., Ranier, Gayle & Elliot, LLC, Bruno & Bruno, Levin Papantonio Thomas Mitchell Echsner & Proctor, P.A., and Domengeaux Wright Roy & Edwards.  All of the law firms involved are based in Louisiana or Florida, with the exception of Anderson Kill,  a national policyholders law firm brought in by their Louisiana colleagues to add their expertise acquired in over three decades of litigating on behalf of policyholders against insurance companies.

For more information, please contact:

Carol A. Ueckerman
Communications/Marketing Manager
cueckerman@andersonkill.com
(212) 278-1339