In last week's decision in Corban vs. CSAA, the Mississippi Supreme Court rejected the anti-policy-holder view that the Fifth Circuit had earlier adopted. It ruled that, under Mississippi law, even though storm surge might be excluded by a flood exclusion, it was up to a jury to decide how much covered damage was caused by hurricane winds notwitstanding an anti-concurrent causation clause in the policyholders' homeowners policy.
The Mississippi Supreme Court's reasoning was that the causes of loss (wind and storm surge) did not occur simultaneously but sequentially and that even if the covered and uncovered causes lead to damages, it was for the jury to determine the quantum of damage caused by the hurricane. In so ruling 9-0, the Mississippi high court rejected the contrary and hostile interpretation that had been adopted by the Fifth Circuit.
Not surprisingly, even though the insurer has the burden of proving how much of the damage was caused by the excluded peril, CSAA has issued a press release praising the decision as confirming how well-taken its actions have been. However, the real story about this decision can be seen in one comment that sneaks through the praise for the decision from the insurance industry. As acknowledged in P&C National Underwriter,
The person being quoted by the P&C National Underwriter seemingly cannot accept that the inconsistency has in fact now been resolved, at least insofar as Mississippi law is concerned and the Fifth Circuit's narrow view has been rejected by a unanimous Supreme Court. His last comment is the key as to why the decision is so important. Whenever the insurance industry starts talking about "cost consequences", you know that they know two things: that they will need to be making payments that they were trying to avoid by claiming that they never intended to cover them, no matter what the policies they sold actually say; and that they have suffered a major loss.
The Mississippi Supreme Court's reasoning was that the causes of loss (wind and storm surge) did not occur simultaneously but sequentially and that even if the covered and uncovered causes lead to damages, it was for the jury to determine the quantum of damage caused by the hurricane. In so ruling 9-0, the Mississippi high court rejected the contrary and hostile interpretation that had been adopted by the Fifth Circuit.
Not surprisingly, even though the insurer has the burden of proving how much of the damage was caused by the excluded peril, CSAA has issued a press release praising the decision as confirming how well-taken its actions have been. However, the real story about this decision can be seen in one comment that sneaks through the praise for the decision from the insurance industry. As acknowledged in P&C National Underwriter,
Insurance Information President Robert P. Hartwig told National Underwriter in an e-mail that the decision “introduces uncertainty into an issue that virtually all had believed had been settled once and for all by the federal courts.” He added that “if insurers are now going to be held responsible for damage they believed--and the 5th Circuit believed--was excluded, there are obvious cost consequences. The inconsistency in the decisions between the state and federal courts will at some point need to be resolved.”
The person being quoted by the P&C National Underwriter seemingly cannot accept that the inconsistency has in fact now been resolved, at least insofar as Mississippi law is concerned and the Fifth Circuit's narrow view has been rejected by a unanimous Supreme Court. His last comment is the key as to why the decision is so important. Whenever the insurance industry starts talking about "cost consequences", you know that they know two things: that they will need to be making payments that they were trying to avoid by claiming that they never intended to cover them, no matter what the policies they sold actually say; and that they have suffered a major loss.
