Thursday, October 8, 2009

Supreme Court of Mississippi Issues Important Insurance Opinion Relating To Hurricane Katrina Damage - Corban v. USAA

In Corban v. United Services Automobile Association a/k/a USAA Insurance Agency (NO. 2008-IA-00645-SCT), the Supreme Court of Mississippi issued an important decision relating to an insurance claim filed by a Long Beach, Mississippi resident whose home sustained damage during Hurricane Katrina.  An article in the Sun Herald can be found here.  It looks as though it is being billed as a win for the insurer by some and the insured by others.  However, the Sun Herald article probably has it right when they quote "Joseph Lavitt, a Berkeley Law School professor" who said "the Corbans' battle is far from over. Either party may yet prevail under today's ruling."
No reasonable person can seriously dispute that if a loss occurs, caused by either a covered peril (wind) or an excluded peril (water), that particular loss is not changed by any subsequent cause or event. Nor can the loss be excluded after it has been suffered, as the right to be indemnified18 for a loss caused by a covered peril attaches at that point in time when the insured suffers deprivation of, physical damage to, or destruction of the property insured...The insured’s right to be indemnified for a covered loss vests at time of loss. Once the duty to indemnify arises, it cannot be extinguished by a successive cause or event...The same principle applies in reverse. In the case of a loss caused by an excluded peril, that particular loss is not changed by any subsequent covered peril or event. Nor can that excluded loss become a covered loss, after it has been suffered.
The ACC clause applies only if and when covered and excluded perils contemporaneously converge, operating in conjunction, to cause damage resulting in loss to the insured property
Thus, a finder of fact must determine what losses, if any, were caused by wind, and what losses, if any, were caused by flood. If the property suffered damage from wind, and separately was damaged by flood, the insured is entitled to be compensated for those losses caused by wind. Any loss caused by “[flood] damage” is excluded. If the property first suffers damage from wind, resulting in a loss, whether additional “[flood] damage” occurs is of no consequence, as the insured has suffered a compensable wind-damage loss.  Conversely, if the property first suffers damage from flood, resulting in a loss, and then wind damage occurs, the insured can only recover for losses attributable to wind.
The ACC clause is inapplicable here. All “direct physical losses” under Coverages A, B, and C which are caused by wind are covered. All “direct physical losses” under Coverages A, B, and C which are caused by “[flood] damage” are excluded. Any “[flood] damage” losses to which a covered peril (in this case, wind) “contribut[ed] concurrently” are excluded.


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