Louisiana Supreme Court Agrees with Insurer in Wind v. Water Case

The Louisiana Supreme Court on May 21 upheld a previous appeals court’s decision upholding the state’s “valued policy law” (VPL).

The plaintiffs in Mark Landry and Barbara Landry V. Louisiana Citizens Property Insurance Company lost their Vermilion Parish home during 2005’s Hurricane Rita due to damage caused by both wind and water. Their homeowners policy covered wind damage but expressly excluded flood damage, according to court documents. The plaintiffs attempted to have the VPL applied to their property in order to recover the face value of their insurance policy from their homeowners insurer.

A trial court granted the Landrys’ motion and said the insurer should pay the full value of the policy. But an appeals court reversed the trial court’s decision “on grounds that it had not determined whether wind was the ‘efficient or proximate cause’ of plaintiffs’ total loss,” according to the opinion released by the Louisiana Supreme Court.

The high court instead found “the insurer validly set forth a different method of loss computation” allowed by statute and that the trial court “erred in failing to recognize the actual method of loss computation agreed upon by the parties.”

Greg LaCost, assistant vice president and regional manager for the Property Casualty Insurers Association of America (PCI), lauded the Louisiana Supreme Court’s ruling, stating it “is a win for consumers and businesses in the state. The issue before the court stemmed from debates over payment of wind damage and flood damage that occurred during the 2005 hurricane season. The lower court sought to expand coverage and allow the plaintiff to collect up to policy limits even when significant damage was due to flooding, an excluded peril. By rejecting the lower court’s decision, the Supreme Court ruling is consistent with the language of the statute.”

He added that the “Supreme Court ruling is significant as it will help to bring greater certainty and stability to an insurance marketplace that is still recovering from hurricanes Katrina and Rita.”