495 F.3d 191 (5th Cir. 2007), 07-30119, In re Katrina Canal Breaches Litigation

Docket Nº:07-30119.
Citation:495 F.3d 191
Party Name:In re: KATRINA CANAL BREACHES LITIGATION. Richard Vanderbrook; Mary Jane Silva; James Capella; Madeline Grenier, misidentified as Sophia Granier; Jack Capella, as the Executor of the Succession of Lilian Capella; Gregory Jackson; Peter Ascani, III; Robert G. Harvey, Sr., Plaintiffs-Appellees-Cross-Appellants, v. Unitrin Preferred Insurance Company;
Case Date:August 02, 2007
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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495 F.3d 191 (5th Cir. 2007)

In re: KATRINA CANAL BREACHES LITIGATION.

Richard Vanderbrook; Mary Jane Silva; James Capella; Madeline Grenier, misidentified as Sophia Granier; Jack Capella, as the Executor of the Succession of Lilian Capella; Gregory Jackson; Peter Ascani, III; Robert G. Harvey, Sr., Plaintiffs-Appellees-Cross-Appellants,

v.

Unitrin Preferred Insurance Company; Hanover Insurance Company; Standard Fire Insurance Company, Defendants-Appellants,

State Farm Fire and Casualty Company Defendant-Cross-Appellee.

Kelly A. Humphreys, Plaintiff-Appellee-Cross-Appellant,

v.

Encompass Indemnity Company, Defendant-Appellant-Cross-Appellee.

Xavier University of Louisiana, Plaintiff-Appellee,

v.

Travelers Property Casualty Company of America, Defendant-Appellant.

Gladys Chehardy; Daniel Fontanez; Jacquelyn Fontanez; Larry Forster; Glendy Forster; et al., Plaintiffs-Appellees-Cross-Appellants,

v.

Allstate Indemnity Company; Allstate Insurance Company; American Insurance Company; Aegis Security Insurance Company; Lafayette Insurance Company; Liberty Mutual Fire Insurance Company; AAA Homeowners Auto Club Family Insurance Company; Louisiana Citizens Property Insurance Corporation; Lexington Insurance Company; Encompass Insurance Company of America; Great Northern Insurance Company; Hanover Insurance Company; Standard Fire Insurance Company, Defendants-Appellants,

State Farm Fire and Casualty Company, Defendant-Cross-Appellee.

No. 07-30119.

United States Court of Appeals, Fifth Circuit.

August 2, 2007

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Joseph M. Bruno, David S. Scalia, Bruno & Bruno, New Orleans, LA, James Parkerson Roy, Domengeaux, Wright, Roy & Edwards, Lafayette, LA, Joseph J. McKernan, McKernan Law Firm, Larry Dewayne Dyess, Baton Rouge, LA, Drew A. Ranier, Norval F. Elliot, III, Ranier, Gayle & Elliot, Lake Charles, LA, David Blayne Honeycutt, Wanda Jean Edwards, Fayard & Honeycutt, Calvin Clifford Fayard, Jr., Denham Springs, LA, Matthew D. Schultz, Levin, Papantonio, Thomas, Mitchell, Echsner & Proctor, Pensacola, FL, John N. Ellison (argued), Anderspon, Kill & Olick, Philadelphia, PA, for Plaintiffs-Appellees-Cross-Appellants.

Christopher Todd Handman, Hogan & Hartson, Washington, DC, Steven W. Usdin, Barrasso, Usdin, Kupperman, Freeman & Sarver, New Orleans, LA, for Great Northern Ins. Co.

James M. Garner, Sher Garner Cahill Richter Klein & Hilbert, New Orleans, LA, for Xavier University of Louisiana.

Laura Anne Foggan, Wiley Rein LLP, Washington, DC, for Am. Ins. Ass'n., Nat. Ass'n of Mut. Ins. Co., Property Cas. Insurers Ass'n of America and Reinsurance Ass'n of America, Amici Curiae.

Levon G. Hovnatanian, Christopher Weldon Martin, Martin R. Sadler, Martin, Disiere, Jefferson & Wisdom, Houston, TX, for United Services Auto. Ass'n, Amicus Curiae.

Alan S. Gilbert, Anne W. Mitchell, Sonnenschein, Nath & Rosenthal, Chicago, IL, for Horace Mann Ins. Co., Amicus Curiae.

Dominic J. Ovella, Sean Patrick Mount, Daniel Michael Redmann, Hailey, McNamara, Hall, Larmann & Papale, Metairie, LA, for Fidelity & Deposit Co. of Maryland, Empire Fire & Marine Ins. Co., Empire Indem Ins. Co. and Centre Ins. Co., Amici Curiae.

Marshall M. Redmon, Phelps Dunbar, Baton Rouge, LA, for Farmers Ins. Exchange, Amica Mut. Ins. Co. and Republic Fire & Cas., Amici Curiae.

Amy R. Sabrin, Skadden, Arps, Slate, Meagher & Flom, Washington, DC, for Farmers Ins. Exchange, Amicus Curiae.

John Powers Wolff, III, Steven C. Judice, Nancy B. Gilbert, Christopher Keith Jones, Tiffany N. Thornton, Keogh, Cox & Wilson, Ltd., Baton Rouge, LA, for Amica Mut. Ins. Co., Amicus Curiae.

Christopher Raymond Pennison, Jay M. Lonero, Larzelere, Picou, Wells, Simpson & Lonero, Metairie, LA, for Republic Fire & Cas. Ins. Co., Amicus Curiae.

Appeals from the United States District Court for the Eastern District of Louisiana

Before KING, DeMOSS, and OWEN, Circuit Judges.

KING, Circuit Judge:

On the morning of August 29, 2005, Hurricane Katrina struck along the coast of the Gulf of Mexico, devastating portions of Louisiana and Mississippi. In the City of New Orleans, some of the most significant damage occurred when levees along three major canals--the 17th Street Canal, the Industrial Canal, and the London Avenue Canal--ruptured, permitting water from the flooded canals to inundate the city. At

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one point in Katrina's aftermath, approximately eighty percent of the city was submerged in water.

Each plaintiff in this case is a policyholder with homeowners, renters, or commercial-property insurance whose property was damaged during the New Orleans flooding. Despite exclusions in their policies providing that damage caused by "flood" is not covered, the plaintiffs seek recovery of their losses from their insurers. Their primary contention is that the massive inundation of water into the city was the result of the negligent design, construction, and maintenance of the levees and that the policies' flood exclusions in this context are ambiguous because they do not clearly exclude coverage for an inundation of water induced by negligence. The plaintiffs maintain that because their policies are ambiguous, we must construe them in their favor to effect coverage for their losses.

We conclude, however, that even if the plaintiffs can prove that the levees were negligently designed, constructed, or maintained and that the breaches were due to this negligence, the flood exclusions in the plaintiffs' policies unambiguously preclude their recovery. Regardless of what caused the failure of the flood-control structures that were put in place to prevent such a catastrophe, their failure resulted in a widespread flood that damaged the plaintiffs' property. This event was excluded from coverage under the plaintiffs' insurance policies, and under Louisiana law, we are bound to enforce the unambiguous terms of their insurance contracts as written. Accordingly, we conclude that the plaintiffs are not entitled to recover under their policies.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The cases in this appeal are a handful of the more than forty currently pending cases related to Hurricane Katrina that have been consolidated for pretrial purposes in the Eastern District of Louisiana. In several of the consolidated cases, property owners are suing their insurers to obtain recovery under homeowners, renters, and commercial-property policies for the damage their property sustained during the inundation of water into the city that accompanied the hurricane. This appeal involves four such cases: Richard Vanderbrook et al. v. Unitrin Preferred Insurance Company et al. ("the Vanderbrook action"), Xavier University of Louisiana v. Travelers Property Casualty Company of America ("the Xavier action"), Gladys Chehardy et al. v. State Farm Fire & Casualty Company et al.("the Chehardy action"), and Kelly A. Humphreys v. Encompass Indemnity Company ("the Humphreys action").1] The detailed factual and procedural background of each of these cases follows.

A. The Vanderbrook Action

In the Vanderbrook action, eight individuals ("the Vanderbrook plaintiffs") filed a petition for damages in Louisiana state court against their insurers.2 The Vanderbrook plaintiffs allege that "[s]ometime between 10:00 and 11:00 a.m. on August 29, 2005, before the full force of [Hurricane Katrina] reached the City of New Orleans,

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a small section of the concrete outfall canal wall known as the 17th Street Canal, suddenly broke, causing water to enter the streets of the [c]ity, " resulting in damage to their insured property. They assert that the water damage "was not the result of flood, surface water, waves, [tidal] water, tsunami, seiche, overflow of a body of water, seepage under or over the outfall canal wall or spray from any of the above but was water intrusion, caused simply from a broken levee wall."

The Vanderbrook plaintiffs allege that their insurers have refused to adjust or pay for their losses, despite "a sudden break in the concrete wall of the levee outfall canal" not being described in any of their policies as an excluded loss. They assert that their insurance policies are contracts of adhesion and are "unduly and unreasonably complex, " resulting in their lack of understanding of the policies' provisions. And they allege that the policies' exclusions are so "oppressive" to them and "unreasonably favorable" to the insurers that the exclusions are unconscionable and void. The Vanderbrook plaintiffs seek compensatory damages, additional damages for the insurers' arbitrary and capricious conduct, interest, expert fees, and attorney's fees.

Plaintiffs-appellees James Capella and Madeline Grenier were insured through defendant-appellant Hanover Insurance Company ("Hanover"), plaintiffs-appellees Peter Ascani III and Gregory Jackson were insured through defendant-appellant Standard Fire Insurance Company ("Standard Fire"), and plaintiff-appellee Richard Vanderbrook was insured through defendant-appellant Unitrin Preferred Insurance Company ("Unitrin"). The Hanover, 3Standard Fire, and Unitrin policies provide coverage for risk of direct physical loss to structures on the property as well as for certain risks of loss to personal property, as long as the loss is not an excluded peril. The policies contain the following flood exclusion:

We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

....

... Water Damage, meaning:

...

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