A federal judge ruled in favor of Kirkland & Ellis LLP client Nationwide Mutual Insurance Company in the first Hurricane Katrina insurance coverage case to go to trial. Following an eight-day bench trial that was closely watched by the insurance industry and Gulf Coast communities, Senior Judge L.T. Senter, Jr. of the U.S. District Court for the Southern District of Mississippi upheld the validity and enforceability of the water damage exclusion in Nationwide's homeowner's insurance policy, agreeing with Nationwide that it was not obligated to pay for any storm surge damage to the property of Pascagoula residents Paul and Julie Leonard.
Represented by noted tobacco lawyer Richard "Dickie" Scruggs, the Leonards sought over $160,000 in monetary damages and, in a request that could have had far-reaching implications for Nationwide and the insurance industry, also urged the wholesale modification of their homeowner's policy to invalidate Nationwide's standard exclusion for water damage. Judge Senter rejected all but $1,228 of the Leonards' damage claims and denied their request that Nationwide's policy should be "reformed" so as to provide coverage for all hurricane-related damage. The court also rejected the Leonards' claims that Nationwide's agent had made misrepresentations regarding the scope of the Leonards' insurance coverage.
In his opinion issued on August 15, 2006, Judge Senter ruled that Nationwide "has met the burden of proving, by a preponderance of the evidence, that [almost all of the] damage to the Leonards’ property was caused by water and waterborne materials" excluded from coverage by their policy. In addition, the Judge noted, the Leonards "knew [separate] flood insurance was available and optional" but did not purchase it.
Nationwide said in a statement: "We are very pleased that the court ruled in our favor and upheld the long-standing flood exclusion language which is foundational to traditional homeowner policies across the country. This ruling underscores just how important it is for all policyholders to carefully read and understand the terms of the coverage they purchase."
The Kirkland trial team was led by Daniel Attridge. Other key members of the team included Thomas Clare, John O'Quinn, Christian Schultz, Padraic Fennelly and Jeffrey Wall.
Kirkland & Ellis LLP is a 1,100-attorney law firm representing global clients in complex litigation, dispute resolution and arbitration, intellectual property and technology, corporate, tax and restructuring matters. The Firm has offices in Washington, D.C., Chicago, London, Los Angeles, Munich, New York and San Francisco.