Katrina: insurers treated fairly shock

David Rossmiller writes an encouraging piece over at Insurance Coverage Blog on the case of Buente -v- Allstate:

Although a lot of stories made it seem like the case was the insurer’s Little Bighorn, the truth is the opinion looked pretty good for Allstate, to my reading, even though Allstate lost the motion to dismiss.  The judge acknowledged that any damage from hurricane flood waters, or “storm surge,” would not be covered by the Buentes’ policy, which contained the standard flood exclusion.  The judge, however, found there were issues of fact about what percentage of the damage was caused by flood waters, and how much was caused by wind, which is a covered caused of loss.  He also said there were factual questions that needed to be resolved regarding allegations that the Allstate agent who sold the Buentes their policy told them it covered all damages from a hurricane.  If so, the insurer might be estopped from denying coverage.

The judge also disallowed language in the policy, as contradictory, that would have precluded coverage of loss caused by wind if flood waters were the main cause of loss.  The standard for granting a motion for judgment on the pleadings, of course, is that there must exist no possibility the plaintiffs can prove a set of facts in support of their allegations.  The judge merely said that this particular case was not one he could decide as a matter of law based only on the language of the insurance policy.

Looks pretty encouraging for reinsurers.