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Fifth Circuit's Guess Denies Katrina Victims' Insurance Claims Pending Louisiana Supreme Court Review

Three judges on Fifth Circuit sitting in New Orleans guessed at how the Louisiana Supreme Court would decided a dispute between homeowners and their insurance companies, and sided with the carriers.  The dispute centered on the language in the policy that purportedly excluded coverage for flood waters and hurricane damage.

Guessed?  Oh, you caught that part. 

Let me explain.  While MIPTC isn't admitted to practice before either the Fifth Circuit or the Louisiana state courts, the process in federal court is for the most part the same across the country, as it is here in California.  When the federal court gets a case that requires interpretation of state law, the court looks to state court decisions to render a ruling.

According to the Fifth Circuit opinion in this case, Louisiana has yet to rule on the precise issue in the series of cases involving homeowners, their carriers and the policy language relating to floods, however.  Here, the homeowners claim the policies were ambiguous and the insurance companies claim they excluded coverage (see footnote below).

When there's no law on point, the federal courts can do one of two things:  they can certify the question and send it to the state supreme court for a ruling or they can guess how the state supreme court would rule, and then rule on their own anyway.

Here, they guessed.  It's technically called an Erie guess, after the case by the same name from the United States Supreme Court, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).  The Court of Appeal puts itself in the shoes of the state supreme court, and then guesses how it would rule.  It's hard to do, most likely because they're not state court judges; they're federal judges who have lifetime appointments. 

In Louisiana, the seven state Supreme Court justices are elected.  For a judge, sometimes that difference creates more of an allegiance to the people who elect you - as opposed to the person who appointed you.  Sometimes not.

Even so, before the Fifth Circuit Court of Appeal heard the case, the federal trial judge made an Erie guess and ruled for the homeowners, declaring the policy language ambiguous because the carriers didn't distinguish between floods resulting from man-made negligence (read:  the Army Corps of Engineers levees) and Acts of God.  The appellate court judges reversed, and held that the policies weren't ambiguous, denying the homeowners' claims.

Lawyers for the homeowners have brought cases in the state court system, and expect to take the matter up to the Louisiana Supreme Court.

We'll yet get to see how well the appellate judges guessed.  Stay tuned.

Footnote

While I may overexaggerate, the insurers argue their flood exclusions are unambiguous, and their policies cover only falling whales and flying boxcars.  But as I say, I may have the latter aspect of their position wrong.

Printer friendly page Permalink Email to a friend Posted by J. Craig Williams on Friday, August 03, 2007 at 00:01 Comments Closed (2) |
 
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