Mississippi District Court Concludes Water Exclusion Enforceable
August 2006
The case of Leonard
v. Nationwide Mutual Insurance Company, (U.S. District Court, S.D. Miss.,
Aug. 15, 2006), involved an insured's residence that was extensively damaged
during Hurricane Katrina.
by Kevin
Merriman
Goldberg
Segalla LLP
The evidence established that the insured's neighborhood in Pascagoula, Mississippi,
was subjected to 100 mph winds. Water from the Mississippi Sound was driven
ashore by the storm, and the water level inundated the insured's residence to
a depth of 5 feet.
The inundation caused extensive damage to the floors, walls, carpets, and
personal property on the ground floor. The second floor was not damaged, and
physical damage to the roof was limited to broken shingles—the water-tight integrity
of the roof was not breached. The only wind damage on the ground floor was a
broken window. Exterior walls were soiled by wind-driven and water-borne debris,
and garage doors were also damaged by wind and water.
At the time of loss, the property was insured under a homeowners policy issued
by Nationwide Mutual Insurance. The insureds had no flood insurance. The policy
covered loss caused by wind, but excluded loss caused by water. At issue was
the cause of the damage, the extent of the damage, and whether the homeowners
covered any or all of the loss.
Applying Mississippi law, the court held that the provisions of the policy
excluding coverage for damages caused by water were valid and enforceable with
respect to damage caused by high water associated with hurricanes; however,
the provisions of the policy purporting to exclude coverage entirely for damages
caused concurrently by a combination of the effects of water (an excluded loss)
and wind (a covered loss) were ambiguous. The insured had the burden of proving
that insured property was damaged by a covered cause, while the insurer had
the burden of establishing the portion of loss attributable to an excluded peril.
Thus, the court concluded that where an insured property sustains damage
from both wind and water, the insured may recover that portion of the loss that
the insured can prove to have been caused by wind, while the insurer will not
be obligated to cover that portion of the damage that it can prove was caused
by water. The court also concluded that, to the extent property is damaged by
wind, and thereafter damaged by water, the insurer will not be responsible for
any loss that it can prove was caused by water.
The court found that almost all of the damage was caused by the incursion
of water, and that none of the damage to the interior was shown to have been
caused by wind. Damage to the garage doors was caused both by wind and water,
but the court found that the wind damage did not exacerbate the damage earlier
sustained by water damage, which resulted in a total loss. Thus, the court found
that the only damage caused by wind within the coverage of the policy was window
damage and the cleaning of exterior walls above water line. All other damage
was caused by water within the policy's exclusion.
The court also held that the insurance agent did not breach any duty to the
insured by expressing his opinion that the insured did not need to purchase
flood insurance, and did not constitute a negligent misrepresentation of fact.
The court concluded that any reliance by the insured on this statement was not
reasonable once the insured received a copy of the policy and had an opportunity
to read it.
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