Judge Rules Against Katrina Victims With Flood Damage

An important ruling has come out in one of many lawsuits involving homeowner's policies and Katrina damage. A judge ruled that the policies do not cover wind-driven water:

A federal judge ruled Tuesday 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.

U.S. 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 Jr. said Paul and Julie Leonard of Pascagoula could be compensated for damage that they could prove was caused by high winds, however.

This is bad news for homeowner's who did not have federal flood policies, especially those whose homes were destroyed by storm surge (such as Senator Trent Lott who has a similar suit against State Farm). They will probably get next to nothing.

This decision may well save the financial lives of many insurers who were facing extinction should they have been required to cover damage caused by something which was excluded on their policies and for which they had not collected a dime of premium.

Bad for the homeowners who had damage, but good for other homeowners who don't want their insurers to go bankrupt. A real mixed result.