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Insurance Policies Contained Ambiguous Language

New Orleans Judge Rules in Favor of Hurricane Katrina Victims

NEW ORLEANS, LA -- December 15, 2006 -- A federal judge has ruled that the insurance policies of several companies covered water damage from Hurricane Katrina. In reaching this decision, Judge Stanwood Duval Jr. concluded that the policies contained ambiguous language that could not shield the companies from making payments.

The policies were classified as "all risks," broad insurance contracts that cover many situations, except for specific exclusions. The policies excluded "flood," but the court said that the word has many meanings. As a general rule, when an insurance policy is ambiguous, it should be interpreted to effect, not deny coverage, according to the court.

One could interpret the exclusion for "flood" as applying only to natural disasters, the court said, and the water damage to the homes was due to a break in the New Orleans levees that may have been caused by negligence. This type of water damage did not occur because of a natural disaster, but from a man-made problem, according to the court's analysis. Therefore, the water damage was not necessarily excluded by the terms of the policies.

The ruling, In re: Katrina Canal Breaches Consolidated Litigation, applies to several combined cases. The full text of the 85-page decision is on the web site of the United States District Court for the Eastern District of Louisiana. You will need to obtain a copy of Adobe Acrobat Reader to open these files. If you do not already have this software, you may download a free copy at the Adobe Acrobat web site.

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