Trial may help decide Katrina insurance claims

A federal judge on Monday began hearing a groundbreaking trial that could signal whether thousands of people whose homes were destroyed by Hurricane Katrina can receive payouts for losses their insurance companies claim were caused by flooding.

Attorneys for Paul and Julie Leonard claim the couple were misled by their insurance agent and then denied much of their claim for their Pascagoula home without a full review of the facts.

Nationwide Mutual Insurance Co., argued that while wind damage is covered by its homeowners’ policies, damage from flooding is excluded, including Katrina’s wind-driven storm surge.

The trial, being heard without a jury by U.S. District Judge L. T. Senter Jr., is the first legal test for insurers who claim their policies do not cover floods. It could be a barometer for other lawsuits filed against insurance companies by thousands of policyhol- ders.

Paul Leonard asked a Nationwide Mutual Insurance Co. agent in 1999 if he should get flood coverage. “You don’t need that,” the agent replied, according to one of the Leonards’ lawyers.

The agent did not want to write a flood policy “because he didn’t make much money off of it,” attorney Zach Scruggs said in opening statements.

Scruggs and his father, Richard “Dickie” Scruggs, represent about 3,000 policyholders on Mississippi’s Gulf Coast. Their law firm also has filed suits against other insurers, including Allstate Insurance Co., Metropolitan Life Insurance Co. and State Farm Insurance Cos.

Leonard, the first witness, said before Katrina, he had “always considered flood as coming from a river. Storm surge doesn’t happen unless there’s a hurricane.”