A New Orleans home owner whose home was destroyed during Hurricane Katrina has won an appeal against the home owner’s insurance company that denied his claim. By ruling against Lafayette Insurance Company, the Louisiana Court of Appeals for the Fourth Circuit has given new hope to the thousands of Katrina victims who say their insurance companies acted in bad faith when they denied claims. 

Lafayette had appealed an earlier state court decision that said the insurance company had to pay for damage to an apartment building owned by an Orleans Parish man that was caused by flooding brought on by levy failure following Hurricane Katrina. In addition to being a source of income, the building also served as the man’s home. Lafayette paid the policyholder about $2,700.00 for wind damage, but he estimates his home sustained a total of $223,488.00 in damage that should be covered. Lafayette maintained that because the additional damage was caused by flooding, it did not have to cover the loss.

In March, a jury awarded the policyholder $369,077.00 for property damage and lost rent, plus $184,538.00 in penalties. The judge presiding over the case also ordered Lafayette to pay $258,728.00 in attorney fees. Lafayette appealed the ruling to the Fourth Circuit. The appeals court agreed with the original ruling that Lafayette Insurance Co.’s policy failed to exclude all forms of flooding because its language was ambiguous. Because of that, the court ruled that Lafayette is required to pay for flooding from the destroyed levees. In the majority opinion, the court wrote that "Lafayette failed to specifically exclude all floods because of the ambiguity contained within the water exclusion." The Louisiana appeals court’s ruling contradicts one made by the US 5th Circuit, which found that insurance companies did not have to cover damage caused by failed levees. Lafayette is expected to appeal to the Louisiana State Supreme Court.

Thousands of homes were reduced to rubble by wind and the massive storm surge created by Hurricane Katrina in 2005. Many Gulf Coast homeowners have accused their insurance companies of using bad faith tactics to try to avoid paying claims. Some insurance companies initially made offers to settle Hurricane Katrina claims for only pennies on the dollar, resulting in thousands of lawsuits along the Gulf Coast. Hurricane Katrina caused more than $80 billion in damage along the Gulf Coast, making it the single most expensive natural disaster in US history. The tactics used by insurance companies have also led to more insurance lawsuits than any other disaster.

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