Hurricane Katrina (2005)
The hurricane that flooded New Orleans in 2005 when its levees failed, whose claims turned on the line between wind and water.
Katrina killed more through water than wind: the surge swamped the Mississippi coast, and levee failures flooded about four fifths of New Orleans. Yet US homeowners policies cover wind but exclude flood, which falls under the federal program that only a minority of households buy. Thousands of claims therefore hinged on a question of fact, whether a house was destroyed first by wind or by water, and on a question of law, the anti-concurrent causation clause, which excludes the damage once an excluded cause contributed to it. Federal courts upheld the flood exclusion, but the litigation lastingly damaged trust between insurers and policyholders on the Gulf Coast. The event also showed how far demand surge can go after a catastrophe, when materials and labor run short.
On August 29, 2005, Katrina made landfall in Louisiana; private insured losses reached about 41 billion dollars according to PCS, the federal flood insurance program paid more than 16 billion, and the Fifth Circuit upheld the flood exclusion in Leonard v. Nationwide on August 15, 2007.
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