Posted on Fri, Apr. 18, 2008

-- For the first time, the Mississippi Supreme Court is being asked to decide the wind vs. water issue that led to thousands of Hurricane Katrina insurance disputes.

In their appeal of a state court case, policyholders' attorneys criticized a federal appellate court's "loose language" in upholding an insurance company's right to deny coverage for wind damage if storm surge later flooded the same area.

"Such federal court pronouncements of state law are not binding on this Honorable Court," the attorneys said in their petition filed Thursday with the Supreme Court. The judge in the Circuit Court case, Lisa Dodson, also agreed the high court's opinion is needed before the case of Corban v. USAA Insurance Agency proceeds to trial.

USAA covered $39,972 of damage to the Long Beach home of Magruder S. and Margaret Corban, whose policy exceeded $1 million in total coverage. Their home near the waterfront was a near-total loss.

In denying coverage, the insurance agency cited policy language, called an "anti-concurrent cause clause," that says water damage is excluded from coverage "regardless of any other cause or event contributing concurrently or in any sequence to the loss." The homeowners maintain wind destroyed their property hours before the storm surged ashore.

Dodson wrote: "The simple, basic interpretation of the language used and sentence structure used bars coverage for water damage and only the water damage, whether occurring alone or in any order with another cause."

However, Dodson yielded her judgment to the 5th U.S. Circuit Court of Appeals. In a Nationwide Insurance case, the 5th Circuit said if a policyholder's roof is blown off and rain enters the opening, damage would be covered, but if the excluded peril of storm surge floods the same area, the loss is not covered.

In a State Farm case, the 5th Circuit ruled damage caused exclusively by wind is covered, but destruction caused by wind and water, at the same time or in sequence, is not.

The 5th Circuit based its decisions on what it thought would be in line with state Supreme Court findings.

Because state law governs insurance contracts, Mississippi's high court is not bound by the federal appellate court's rulings.

The 5th Circuit rulings also reversed those of U.S. District Judge L.T. Senter Jr., who found the anti-concurrent cause language "ambiguous and unenforceable." In a recent opinion, Senter ruled that the policy language does not apply to Hurricane Katrina because wind and water are distinct forces that cause different damage.

This is the first time the wind-water issue from Katrina has been appealed to the state Supreme Court because insurance companies successfully fought for federal court jurisdiction in hundreds of Katrina cases. Many of those cases have been settled before trial.

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