When I saw media stories last week about Buente v. Allstate, a Hurricane Katrina case over whether certain storm damage was covered under a homeowners’ policy, the descriptions were so messed up I decided to wait until I had a chance to read the case thoroughly before commenting. Thanks to Steve Brostoff at Liability and Insurance Week for e-mailing me a copy of the case. Westlaw also just published the case. The cite is 2006 WL 763085 (S.D. Miss. March 24, 2006). The plaintiffs, Elmer and Alexa Buente, bought a house in Gulfport in June 2005, just a couple months before Katrina.
Although a lot of stories made it seem like the case was the insurer’s Little Bighorn, the truth is the opinion looked pretty good for Allstate, to my reading, even though Allstate lost the motion to dismiss. The judge acknowledged that any damage from hurricane flood waters, or "storm surge," would not be covered by the Buentes’ policy, which contained the standard flood exclusion. The judge, however, found there were issues of fact about what percentage of the damage was caused by flood waters, and how much was caused by wind, which is a covered caused of loss. He also said there were factual questions that needed to be resolved regarding allegations that the Allstate agent who sold the Buentes their policy told them it covered all damages from a hurricane. If so, the insurer might be estopped from denying coverage.
The judge also disallowed language in the policy, as contradictory, that would have precluded coverage of loss caused by wind if flood waters were the main cause of loss. The standard for granting a motion for judgment on the pleadings, of course, is that there must exist no possibility the plaintiffs can prove a set of facts in support of their allegations. The judge merely said that this particular case was not one he could decide as a matter of law based only on the language of the insurance policy.
These Katrina lawsuits have led to some wild stories, like this one about alleged "whistleblowers" who are ready to blow the cover off doctored engineering reports on Katrina damage. How much doctoring do you think insurers would have to do to reports to show that a lot of damage was caused by uncovered flood waters?