Appeals court upholds State Farm policy language

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Wednesday, November 7, 2007

NEW ORLEANS (AP) - A federal appeals court on Tuesday upheld policy language that a major insurer has used to deny hundreds of policyholders' claims on the Gulf Coast after Hurricane Katrina.

The 5th U.S. Circuit Court of Appeals in New Orleans overturned a federal judge's ruling that a key clause in State Farm Fire and Casualty Co.'s homeowner policies is ambiguous and therefore cannot be enforced.

State Farm says its policies cover damage from a hurricane's wind but not its rising water. The Bloomington, Ill.-based insurer also says damage from a combination of wind and flood water can be excluded from coverage by "anti-concurrent cause" language in its policies.

U.S. District Judge L.T. Senter Jr. in Gulfport, Miss., had ruled that this clause is ambiguous and can't be enforced, but a three-judge panel from the 5th Circuit disagreed.

"State Farm argues that the ACC Clause is not ambiguous because it cannot be construed to have two or more reasonable meanings and it does not conflict with any other provisions in the policy. We agree with State Farm," Judge Will Garwood wrote in a 17-page ruling.

A different three-judge panel of the 5th Circuit already has found that similar language in Nationwide Mutual Insurance Co. policies is not ambiguous and can be enforced.

The 5th Circuit's ruling Tuesday was for a case filed by John and Claire Tuepker, State Farm policyholders whose home in Long Beach, Miss., was demolished by the Aug. 29, 2005, storm.

The court also upheld Senter's ruling in the Tuepkers' case that State Farm policies do not cover damage from storm surge, a hurricane's wind-driven water.

State Farm spokesman Phil Supple said the company is pleased with the ruling.

"The court's ruling reinforces our confidence in the clarity of the policy language," he said. "While we're pleased the court resolved these issues, State Farm is working to settle remaining outstanding claims (on the Gulf Coast)."


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