GULFPORT, Miss. -- A federal judge ruled yesterday that an insurance company's policies do not cover damage from flood waters or storm surge in a decision that could affect hundreds of upcoming cases related to property damage from Hurricane Katrina.
US District Judge L.T. Senter Jr. ruled that a Mississippi Gulf Coast couple cannot collect damages from storm surge caused by Katrina because Nationwide Mutual Insurance Co.'s policies do not cover wind-driven water damage.
Senter said Paul and Julie Leonard of Pascagoula could be compensated for damage that they could prove was caused by high winds, however.
``Almost all the damage to the Leonard residence is attributable to the incursion of water," Senter wrote in the 13-page decision.
Senter's ruling could set a precedent for hundreds of other court challenges to the insurance industry for denying billions of dollars in claims after the Aug. 29 hurricane ravaged the coasts of Louisiana and Mississippi.
Although Senter ruled that Nationwide's policies do not cover damage from storm surge, the judge also concluded a key policy provision the company has used to deny coverage is ambiguous.
Nationwide and other insurers say their homeowners policies cover damage from a hurricane's wind, but not in cases where it resulted from a combination of wind and water.
``This reading of the policy would mean that an insured whose dwelling lost its roof in high winds and at the same time suffered an incursion of even an inch of water could recover nothing under his Nationwide policy," he wrote.
``From our perspective, it lifts a very large cloud of uncertainty that has been hanging over the insurance market of the Gulf Coast," Joseph Annotti, spokesman for the Property Casualty Insurers Association of America, said in reaction to the ruling. ``A healthy insurance market is absolutely key to a rejuvenated economy down there."
The Leonards had estimated the total damage to their home at $130,253. They said $47,365 in damage was caused by wind. Nationwide paid only $1,661, blaming the remainder on the storm surge.
The couple's lawyers had asked for more than $158,000 for the damage to the house and its contents, plus interest and attorneys' fees and expenses. Senter, however, ruled that Nationwide only owed the Leonards about $1,228 more than what the company already has paid them for wind damage.
Both sides claimed victory.
``The Leonards did not win as much money as I hoped they would have, but they won this case," said one of their attorneys, Richard ``Dickie" Scruggs. ``It's always great to get a win in the first game of the season, whether it's by one point or 30 points."
Paul Leonard, a police lieutenant, acknowledged that an extra $1,228 only covers a fraction of the repair costs for his home, but he also considered Senter's ruling a victory. ``I believe anybody in a civil trial asks for the moon and is able to live with what they get," he said.
The couple's lawsuit was the first among hundreds of Katrina insurance cases to be tried since the storm slammed into the Gulf Coast nearly a year ago, demolishing tens of thousands of homes.