Fifth Circuit hears arguments in Leonard v. Nationwide Katrina appeal

Oral argument for the Leonard v. Nationwide was held Monday.  Here’s an  Associated Press story about it.  The Leonards, represented by Dickie Scruggs, on July 23 dropped their appeal of Judge Senter’s decision, which held that the Leonards were not entitled to reform the policy based on alleged misrepresentations about hurricane coverage by the insurer and the Leonards’ insurance agent.  But Nationwide continued to press its appeal of another portion of Judge Senter’s ruling — that the anti-concurrent cause language in the Nationwide policy was ambiguous.  Here’s how the story reported Nationwide’s argument:

On Monday, Nationwide attorney Chris Landau asked a three-judge panel of the 5th Circuit to overturn that portion of Senter’s ruling [regarding the anti-concurrent cause language], which he said gives "enormous leverage" to policyholders in other cases.

"This has a huge practical effect on so many of these cases," Landau said. "In so many of the cases, you just can’t tell if it’s wind or water" responsible for damage.

The Leonard case resulted in a bench trial before Judge Senter.  In his August 15 Memorandum Opinion, he analyzed the anti-concurrent language that precedes the flood exclusion.  The language reads as follows (I’ve omitted the section headings and paragraph number from the policy):

We do not cover loss to any property resulting directly or indirectly from any of the following. Such a loss is excluded even if another peril or event contributed concurrently or in any sequence to cause the loss.

This anti-concurrent language is the standard ISO language used by a number of insurers.  Here’s what Judge Senter wrote about it:

The "loss," "such a loss" and "the loss" referred to in this paragraph, is, in this instance, damage caused by rising water during Hurricane Katrina.  These three terms refer to this particular excluded loss, i.e. damage caused by rising water, but this paragraph does not affect the coverage for other loses (covered losses), i.e. damage caused by wind, that occur at or near the same time.  Thus, this language does not exclude coverage for different damage, the damage caused by wind, a covered peril, even if the wind damage occurred concurrently or in sequence with the excluded water damage.  The wind damage is covered; the water damage is not. 

What Judge Senter is saying here is mostly right and it is a clearer statement about the effect of anti-concurrent language than was contained in the later Tuepker v. State Farm decision by the judge.   The key words in this anti-concurrent clause are "resulting directly or indirectly from" and "if another peril or event contributed . . . to cause the loss."  Remember that the coverage grant of the policy insures against "accidental direct physical loss to property."  Merely because damage occurs at or about the same time does not make it either concurrent or in sequence in this context.  To qualify as either of those, a single type of accidental direct physical loss to property must be caused by multiple forces. If wind damage occurs, for example, that is a different cause and a different loss than flood damage. Two separate losses, two separate causes.   That is why I would disagree with Judge Senter’s use of the terms "concurrently" and "in sequence" in the second-to-last sentence above.  He seems to have said that these are two separate forces and two separate losses, which I agree with.  But to that degree, the anti-concurrent, anti-sequential language is not even implicated, much less ambiguous. That’s where I would differ with his analysis, with all due respect.  The issue is then one of allocation between the covered wind and the uncovered water.  If, however, there actually is evidence that some particular damage to the Leonard home occurred only because the wind and water acted together or in sequence, then the anti-concurrent language would be relevant.  But in reading through the findings of fact and conclusions of law in the opinion, I have trouble seeing what damage would fall into that category. 

Of course, it’s always good to have Dickie Scruggs involved in one of these scrums, because there is sure to be drama — I’m just waiting to see if he ever makes a guest appearance on Boston Legal alongside Denny Crane.  Here’s an account from the story of his exchange with the Court during arguments.  

The Leonards dropped their appeal of Senter’s ruling on July 23. Their attorneys, led by high-profile litigator Richard "Dickie" Scruggs, said the 5th Circuit shouldn’t hear the case now that the couple has abandoned their appeal.

"This family is tired of dealing with this matter, and they want to move on with their lives," Scruggs said.

Scruggs said Nationwide’s bid to overturn Senter’s verdict is based on "collateral issues" that are irrelevant to the outcome of the trial.

Chief Judge Edith Jones told Scruggs that his move to drop the appeal a week before Monday’s hearing was the latest in an "odd course of events" in this case.

"It does raise an inference in my mind that there’s something else going on here," she said.

"This is not some sort of a dodge or gamesmanship," Scruggs responded.

No doubt it has crossed the Court’s mind that Scruggs dropped his appeal in an attempt to leave in place the part of the ruling about the anti-concurrent language being ambiguous, and that this in fact might amount to "gamesmanship."  Really, judges can have such suspicious minds.


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