Sonnenschein Nath & Rosenthal - Notable Matters - Hurricane Katrina Litigation

Hurricane Katrina Litigation

• Chehardy v. Allstate, et al. / Vanderbrook v. Unitrin, et al.., (App. No. 07-302119, reported at 495 F.3d 191 (5th Cir. August 2, 2007)): One of the most significant issues in the massive Hurricane Katrina litigation was whether the insurers’ standard flood exclusions applied to preclude flood damage resulting from the Hurricane, even if the cause of the flooding was something man-made, such as the failure of the New Orleans levees. The Federal Court in Louisiana, per Judge Duval, held that the flood exclusions would not apply in this circumstance. Sonnenschein represented one of the lead parties in the appeal of Judge Duval’s order to the 5th U.S. Circuit Court of Appeals, which reversed the prior adverse district court decision and ruled that the flood exclusion in the homeowners policies at issue applied to all floods, whether man-made or naturally occurring. The court also held that the Hurricane Deductible Endorsement did not provide or expand coverage to include damage caused by flooding. This decision saved the insurance industry billions of dollars in potential exposure.
• In re Katrina, (App. No. 08-30145, reported at 524 F.3d 700 (5th Cir. April 11, 2008)): In this matter, the State of Louisiana filed a class action, in Louisiana state court, against more than 200 homeowner insurance companies, including several Sonnenschein clients, seeking to recoup an alleged $9 billion in grants made by the state under the Road Home program, which was established in the wake of Hurricanes Katrina and Rita. The state asserted rights as a subrogee under thousands of homeowners policies, as well as the rights of underlying policyholders who were allegedly under-compensated for hurricane-related losses by their respective insurance carriers. The defendants removed the case to federal court and the state sought remand. In a substantial victory for Sonnenschein’s clients, the 5th Circuit affirmed the lower court’s order denying remand, finding that the case had been properly removed to federal court under the Class Action Fairness Act (CAFA).
• State of Louisiana v. Allstate, et al.., (App. No. 08-30465): The 5th Circuit affirmed a district court ruling denying the Louisiana attorney general’s motion to remand in the state’s antitrust price-fixing case against Allstate and others. The court accepted the defense case that the state’s action in State of Louisiana v. Allstate, et al.., was subject to federal jurisdiction under the Class Action Fairness Act (CAFA), even though the complaint contains no express class action allegations.