Wind coverage counts: Supreme Court: Even with surge, policies stand

A landmark ruling Thursday from the Mississippi Supreme Court establishes that homeowner insurance policies cover wind damage from hurricanes when water contributes to the loss.

"This opinion by a unanimous Mississippi Supreme Court in Corban vs. USAA clears up a question of untold importance to homeowners in Mississippi and in every corner of this nation," said policyholders' attorney Richard "Flip" Phillips, who pointed out that more than 50 percent of Americans live near a coastline. "An insurance company can always come up with some contorted interpretation to deny coverage if it just does not want to pay.

"Homeowners can depend on their contracts of insurance only if the courts are willing to enforce those contracts."

Phillips said the ruling is "bittersweet" because it came too late for many homeowners who settled lawsuits against their insurance companies based on an erroneous ruling from the 5th U.S. Circuit Court of Appeals.

The federal appellate court held that "anti-concurrent causation" clauses in insurance policies mean wind damage is not covered when water contributes to the loss. The appellate court ruling reversed decisions by U.S. District Judge L.T. Senter Jr. that were in line with the Supreme Court decision Thursday.

The state Supreme Court opinion now prevails because insurance contracts are governed by state law.

Robert Hartwig, who heads the Insurance Information Institute, said the ruling could affect the cost and availability of homeowner policies on the Mississippi Coast.

"What this basically suggests is that the cost of claims is going to be higher than insurers anticipated," Hartwig said, "so there are direct consequences for the price of insurance in Mississippi. and potentially for the availability as well.

"If the state of Mississippi is going to take a different tack from the federal courts, the policies will have to be priced and underwritten appropriately. It makes selling policies in Mississippi risky and, on average, more expensive. There's just no other way around that."

A USAA spokesman said after consulting with a company attorney that USAA is "pleased" with the state Supreme Court ruling. The company believes its policies cover wind damage when homes also are subjected to tidal surge, spokesman Paul Berry said.

"The court confirmed USAA's approach to handling Katrina claims in Mississippi is correct," Berry said. "Although other insurers may have taken different approaches, USAA has always paid for damage solely caused by wind. We are also pleased the court confirmed USAA's position and decades of insurance law that damage caused by storm surge is not covered."

Nationwide, which also was allowed to present an argument in the Corban case, contended no wind damage should be covered for structures also subjected to tidal surge.

The state Supreme Court justices reasoned, in the opinion written by Justice Michael K. Randolph, that wind and water created separate losses in Hurricane Katrina and, once the wind loss occurred, the USAA policy entitled homeowners to coverage.

"We conclude that the ACC clause has no application for losses caused by wind peril," Randolph wrote. "An insurer may not abrogate its duty to indemnify for such loss by the occurrence of a subsequent, excluded cause or event," a position advanced by Nationwide.

" ... Nationwide unconvincingly posits that loss is not determined until the hurricane is over. Nationwide contends that any loss which the 'storm surge' would have caused anyway is excluded. Such an interpretation fails to consider the common understanding of 'loss,' and would avoid payment for covered 'losses,' an unreasonable result."

In an all-risk homeowner's policy, the Supreme Court also held, to deny coverage for structural damage, the insurance company must prove storm surge caused the loss once the homeowner has established the loss occurred. Personal property is covered for named perils such as wind, leaving the homeowner to prove the cause of loss.

The case has been sent back to Harrison County Circuit Court for a jury to determine what caused losses at the waterfront home of Margaret and Magruder S. Corban of Long Beach and whether they are owed additional payment from USAA.

The Corbans had requested the high court clarify the policy before the trial proceeds before Circuit Court Judge Lisa Dodson.

Biloxi attorney Judy Guice, who argued the case before the high court for the Corbans, suffered the loss of her own waterfront home to Katrina and battled her insurance company, State Farm, until the case was settled.

Guice said Thursday afternoon:

"To me, this was always much more than just a business issue. This was a personal issue to me. Getting the law straight was really one of the critical parts of my recovery and I'm relieved that has now happened.

"The overwhelming feeling I have right now is relief that our children and grandchildren, and everybody else who had to suffer like we've all suffered since Hurricane Katrina, will not be stuck with the harsh law, the incorrect law that was previously created and has now been corrected by our Mississippi Supreme Court."