Hurricane Ida Insurance Claims: Seen It Again? | Adams and Reese LLP
Louisiana experienced deja vu in 2021 when Hurricane Ida inflicted damage to the southeastern part of the state similar to that suffered by citizens affected by Hurricane Laura a year earlier and to the occasion of the sixteenth anniversary of Hurricane Katrina. Just over a year after Hurricane Ida landed, hundreds, if not thousands, of lawsuits have been filed over property damage and disputes over homeowners insurance policies. These lawsuits will be guided by the decisions of the extensive Hurricane Laura litigation, and policyholders and insurers should be aware of these decisions when evaluating their case.
The anti-competitive cause clause rolls again
A central issue in the Hurricane Laura litigation has been anti-competitor causation (“ACC”) clauses in insurance policies that have received little judicial attention since Hurricane Katrina. Generally, an ACC clause provides that a loss caused by a combination of covered and excluded perils will not be covered. This provision can be found at the beginning of a policy’s exclusions list with language similar to the following:
We do not reimburse loss of the types of property covered by this policy caused by any of the following. Such loss is excluded regardless of any other cause or event contributing simultaneously or in any sequence to the loss.
Or there may be a dedicated clause excluding any claims:
caused directly or indirectly by . . . [a]any damage that occurred before the policy took effect. . . Where [a]any claims or damages arising out of [an excluded peril] . . . regardless of any other cause or event contributing simultaneously or in any sequence to the loss.
The Louisiana courts have confirmed that the provisions of the ACC are enforceable under Louisiana law and have dismissed summary judgment claims under these provisions, notwithstanding other legal presumptions favoring coverage and taking a close reading of the exclusions.
A small clause has a big impact
In Little c. Aegis Sec. Ins. Co.the court said:
The Fifth Circuit has held that CCAs like the one described above are unambiguous and may properly exclude coverage for damages caused by a combination of an excluded peril and a non-excluded peril. …Such clauses are not excluded from application by Louisiana statutory law, case law, or public policy…Defendant [insurer] bears the burden of demonstrating that an exclusion applies, by a preponderance of the evidence.
In Littlethe district court entered summary judgment in favor of the insurer as an excluded risk contributed to all losses according to defendant’s expert and found that plaintiff’s subjective evidence was insufficient to create a genuine issue of material fact .
What else could be excluded?
Courts have most often considered CCA provisions in the context of wind damage (covered) versus flood damage (excluded). However, Louisiana law does not limit the application of ACC clauses only to excluded perils involving flooding and applies these provisions to any excluded perils listed in the policy. Excluded perils that may impact coverage, in addition to flooding, often include claims or damages resulting from labor, repairs and/or lack of repairs that occurred prior to the start of the police, i.e. poor maintenance and neglect. For this reason, insurers and policyholders should be aware of the damage involved when assessing claims and carefully document any related cause.