I started my morning read-around with Can an Insured Recover Under a Flood Policy and an All Risk Homeowners Policy for the Same Damage? on Merlin’s blog – and that plus the beautiful sunshine here in the “Bold New City” just made my day.
Chip did his usual good job spotlighting the significant points in the decision and his post in total is below. However, he didn’t mention the name of the judge and – call it a side-effect of my exposure to the corruption in Jefferson Parish and the pending impeachment of Thomas Porteous- but, nowadays, that’s the first thing I want to know about a Louisiana court decision. If you follow the link to the case as I did, you’ll find this victory for justice credited to one of the truly Honorable federal district judges in the Eastern District of Louisiana, Carl J. Barbier.
In Louisiana, the answer is probably “yes.” The FC&S pondered this question in its March 2010 Dec Page report titled, “Recovery Under Flood Policy and Homeowners Policy?” The highlighted case was Lightell v. State Farm Fire & Cas. Co., 2009 WL 4505942 (E.D.La. 2009). The article noted the significant facts and issues as follows:
The insured suffered property damage due to the wind and flood caused by Hurricane Katrina. They collected partial payment of their policy limits from both the homeowners and flood insurance policies. Believing that the payments were not indicative of the extent of the actual damage to the home, the insured filed a lawsuit against the insurers. State Farm, the homeowners insurer, filed a motion for summary judgment.
State Farm asserted that the insured is estopped from recovery related to wind claims because he previously alleged that he was entitled to flood policy limits due to the total destruction of the property. And, the insurer said that the insured has the burden of proving the damage was caused by wind (a covered loss) as opposed to flood (not covered).
The Federal Court wrote an interesting section on estoppel, which arises in these types of cases, and the burden of proof. Regarding the estoppel issue, the Court noted:
Defendant argues that summary judgment is proper because according to Defendant, once Plaintiffs alleged, in a separate suit, that their property was totally destroyed by flood damage, Plaintiffs are estopped from asserting claims against their homeowners policy. In support of this argument, Defendant cites Webster v. State Farm, Civ. A. No. 07-4812, 2008 WL 2080907 (E.D .La. May 14, 2008).
The Webster Court held that even if a plaintiff received payments from his flood policy, the plaintiff is not estopped from making a claim pursuant to his homeowner’s policy…The only stipulation the Court placed on the plaintiff’s ability to recover from both the homeowner and flood policy was that the plaintiff’s combined recovery cannot exceed the value of the property…Here, Plaintiffs’ recovery from their flood policy has not exceeded the value of their property. Further, even if Plaintiffs were to receive their flood policy limits, it appears that they could actually recover at least partial payment from their homeowner’s policy without exceeding the value of their property.
Therefore, although Plaintiffs are “not entitled to obtain a windfall double recovery by recharacterizing as wind damage those losses for which [they have] already been compensated by previously attributing them to flood waters”…there is no policy or legal principle preventing them from recovering for previously uncompensated, covered damage, without reference to the amount received under their flood policy…As a result, Plaintiffs are not estopped from asserting homeowner policy claims…
Regarding the burden of proof issue, the Court expressly disagreed with several other district court decisions, finding as follows:
…despite the multiple district courts that have held that the burden shifts back to the insured to segregate the damages between covered an non-covered perils, the United States Court of Appeals, Fifth Circuit, has held that this is not the case. In Dickerson v. Lexington Insurance Company, 556 F.3d 290 (5th Cir.2009), the Fifth Circuit stated,
‘[u]nder Louisiana law, the insured must prove that the claim asserted is covered by his policy. Once he has done this, the insurer has the burden of demonstrating that the damage at issue is excluded from coverage. Thus, once [the insured] proved his home was damaged by wind, the burden shifted to [the insurer] to prove that flooding caused the damage at issue, thereby excluding coverage under the homeowner’s policy.’
Defendant states that the Fifth Circuit’s interpretation of the burden shifting is simply dicta and that courts in the Eastern District addressing this issue have “uniformly” rejected this interpretation. However, this Court respectfully disagrees with the decisions of those courts-specifically Copelin, Weiser, and Nunez-to the extent that they did not follow Dickerson. This Court believes it is bound by the holding in Dickerson and that the analysis of the burden shifting test was not dicta… As a result, Plaintiffs’ burden at trial will be to prove that they are entitled to additional payments to damage to their property. Plaintiffs do not have the burden of segregating the damages based on covered and non-covered perils.
I agree with this decision. The all risk policy gives the insurer the burden to prove the amount of the excluded damage. The insured should only have to prove the amount of damage that occurred during the policy period. Under an all risk or open-perils policy, the insurer then has the burden to prove that the loss was excluded in whole or part. If in part, the insurer should prove the amount of that excluded loss the policyholder does not have the burden to segregate the amount–that would essentially defeat the purpose of “all risk” coverage by making the policyholder prove the cause of the damage.
Some Courts have wrongfully turned this principle on its head, noting that the insured has the duty to prove the amount of the covered damage. That is true in a “named peril policy,” but that was not how the “all risk policy” was designed to work. Some Courts are getting this wrong because they are repeating case language from old, named peril cases.
The FC&S editor agrees with me and the Lightell Court:
Editor’s Note: Courts will be answering coverage questions raised by Hurricane Katrina for quite some time. This case is noteworthy for its mention of the ruling in the 5th Circuit pertaining to which party, the insured or the insurer, has the responsibility to show what is excluded from coverage. As is customary, this burden falls on the insurer. (emphasis added)
I am certain this case will be analyzed in detail by insurance defense attorney, Stephen Pate, and myself at the Texas Windstorm Insurance Network Symposium Set May 11 in Dallas. In my respectful opinion, Texas law has these traditional principles mixed up as well. Many policyholders in Galveston and the Bolivar peninsula who suffered flood and wind damage from Hurricane Ike should hope that the Texas judges and their attorneys attend this symposium. Stephen Pate and I will set them straight on how burdens of proof in all risk policies were traditionally designed to work.
Have a great weekend!
SLABBED joins Merlin in wishing all “a great weekend” with a h/t to his Property Insurance Coverage Law Blog and another to Judge Barbier for his commitment to justice for all.