Wystan M. Ackerman and Seth A. Schmeeckle on “Handling the Flood of Coverage Litigation: Lessons Learned from Katrina”

   By Wystan M. Ackerman and Seth A. Schmeeckle

In their article, “Handling the Flood of Coverage Litigation: Lessons Learned from Katrina,” Wystan M. Ackerman and Seth A. Schmeeckle examine a number of insurance coverage cases that arose in the wake of Hurricane Katrina and note that insurers achieved considerable success on key issues, including: (1) the robust applicability of the flood exclusion in property insurance policies; (2) the interpretation of the Louisiana Valued Policy Law that it is most likely applicable only to fire losses under fire insurance policies and not to homeowners’ policies; and (3) the defeat of class certification in most Katrina putative class actions.

The authors conclude that the Katrina litigation thus far affords several lessons for insurers in terms of best practices for litigation stemming from a catastrophe, including: (1) establishing coordination among defense groups and using  test cases that “cleanly present[ ] the critical question of policy interpretation”; (2) recognizing the unique issues of judicial ethics that can occur when a widespread catastrophe affects everyone living in the affected area; (3) giving serious thought to moving to strike class allegations in a putative class action; (4) utilizing methods to efficiently resolve large amounts of relatively smaller suits, such as establishing a protocol to administratively stay cases, conduct written discovery, and then have settlement negotiations;  and (5) taking measures to minimize possible class action tolling of suit limitation provisions in insurance policies.

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