Insurance Litigation Lawyer & Attorney : National Insurance Law Forum : Insurance Coverage, Bad Faith Litigation

On Tuesday, the Louisiana Supreme Court upheld the standard flood exclusion in the standard commercial property policy rejecting the claims of the citizens and business owners of New Orleans who claimed the flood exclusion was ambiguous and should not exclude "man made" disasters such as levee breeches or the failure to operate drain pumps.   In Joseph Sher vs. Lafayette Insurance Co., No. 07-2441, the high court of Louisiana was presented with an opportunity to evaluate the Fifth Circuit's determination of the same issue last  August in the consolidated Katrina Canal Levee Breech Litigation where the Fifth Circuit held the flood exclusion to be unambiguous and precluded coverage for the Katrina flooding in New Orleans under the standard homeowner's policy.   The Fifth Circuit's decision prompted plaintiffs' lawyers to select Sher to expedite an appeal through the Louisiana appellate courts in an effort to essentially "reverse" the Fifth Circuit's earlier decision.   The holding of the Louisiana Supreme Court actually echoed that of the Fifth Circuit when it ruled: "The entire English speaking world recognizes that a flood is the overflow of a body of water causing a large amount of water to cover an area that is usually dry land....[T]his definition does not change or depend on whether the event is a natural disaster or a man-made one....The plain, ordinary and generally prevailing meaning is all-inclusive."

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Clarifying several rulings on coverage for construction defects, South Carolina’s Supreme Court ruled this week that a trial court did not err in determining that a CGL policy covered damages awarded to a homeowner in an arbitration against an insured contactor for water intrusion related to negligent application of stucco by a subcontractor. The court first clarified prior decisions and found that an “occurrence” is present where defective construction results in property damage. The court acknowledged that there was some confusion in the trial courts as to the difference between an “occurrence” of alleged negligent construction from negligent construction resulting in an “occurrence.” The court concluded that although “the stucco subcontractor’s negligent application is not on its own sufficient to constitute an “occurrence,” we find that . . . the continuous water intrusion into the home resulting from the subcontractor’s negligence qualifies as an “accident” involving “continuous or repeated exposure to substantially the same harmful conditions.” The court additionally rejected the insurer’s argument that the water intrusion damages were excluded under the policy as “expected or intended” damages as the insured contractor certainly did not intend for its subcontractor to perform negligently. Finally, the court allowed for recovery under the policy for that portion of the arbitration award concerning removal and replacement of the stucco stating this was necessary in order to remedy the extensive water intrusion damage behind the stucco and was therefore associated with remedying covered property damage.

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Not one to get left behind while the Fifth Circuit and other Gulf Coast states make all the first party law on concurrent causation, the New Hampshire  Supreme Court has issued a new opinion upholding a flood exclusion in a homeowner's policy.

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Although winter storms may bring another round of mold claims, California appellate courts again have upheld the right of insurers to exclude coverage for damage caused by mold. De Bruyn v. Superior Court (Fire Ins. Exchg.) (2007) 07 C.D.O.S. 5019. The efficient proximate doctrine, which in California (unlike many states) constrains insurers in how they communicate what they want to cover and not cover, did not prevent the insurer in this case from excluding mold, even where the insurer agreed to cover water damage from sudden and accidental discharge of water from plumbing and household appliances.

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Efficient proximate cause issues have been much in the news lately as insureds and insurers joust over wind-water and anti-concurrent causation clauses throughout the Fifth Circuit.  In an ew opinion, however, the Vermont Supreme Court has ruled that courts need not consider the efficient or predominant cause of a loss, much less ACC clauses, if the exclusion itself focuses on the nature of the loss, rather than its cause.

In Sperling v. Allstate Indemnity Co., 2007 VT 126 (Vt. November 9, 2007), a homeowner sought coverage for the cost of cleaning up oil that spilled out of a home heating tank in the insured’s basement after a suitcase fell on it breaking a valve through which oil passed on the way to the tank. Allstate denied coverage, citing an exclusion in the homeowner’s policy for loss to property caused by “vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic solids, waste materials or other irritants, contaminants or pollutants.”

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