Our firm filed an amicus brief in this case on behalf of Untied Policyholders. We have followed this case quite closely and I, along with several of our attorneys, decided to attend the oral arguments on Thursday, September 6th. Watching and listening to law being argued is a difficult task when you are used to being a player rather than a spectator. I found myself shaking my head and muttering. It is a grueling exercise to not answer questions when you have the feeling that the participants, especially the jurists, do not fully understand the law of a very specialized area with so much at stake.
Neither Dickie or Zach Scruggs argued on behalf of their client, but I felt their selection of Chip Robertson was a great one. He correctly pointed out that Judge Jones’ example from Leonard is clearly wrong. He stated that ‘flood cannot be an ensuing damage because there has to be new damage for there to be an ensuing loss.’ Hopefully, this may be a basis for obtaining an en banc review. The Court was quite concerned with the difference between the anti-concurrent causation language in the Nationwide policy in Leonard and that in the State Farm policy. Far from a model of clarity, the lead-in language State Farm chose to use in its ‘LOSSES NOT INSURED’ section is replete with double negatives and circular reasoning which is indecipherable to a skilled wordsmith, much less the ordinary policyholder. In any event, the lead-in and "water damage" exclusion state as follows:
SECTION I – LOSSES NOT INSURED * * * 2. We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs suddenly or gradually, involves isolated or widespread damage, arising from natural or external forces, or occurs as a result of any combination of these: * * * c. Water Damage, meaning: (1) flood, surface water, waves, tidal water, tsunami, seiche, overflow of a body of water, or spray from any of these, all whether driven by wind or not;
There is no fair reading of this exclusionary language that would compel a different result from that reached by the District Court with respect to the burden of proof and the fact that State Farm must provide coverage for damage that is not caused by an excluded event. Indeed, in discussing the lead-in language to the losses not insured section of its policy, State Farm conceded in its brief "(i)t plainly states that ‘any loss which would not have occurred in the absence of’ certain excluded events, including water damage, is not covered under the policy, ‘regardless of’ the operation or effect of other causes of the loss." Under the Mississippi Supreme Court’s allocation of the burden of proof, State Farm then has the burden of proof to establish what portion of the accidental direct physical "loss which would not have occurred in the absence of" an excluded event.
Respectfully, I just wish this point had been made more forcefully in the oral argument. These Jurists are conservative by nature and do not want to deviate from the recent Leonard precedent. But, State Farm is having its attorneys argue out of a product and burden of proof that I am certain its claims management is well aware of-just to avoid a significant loss. As a student and critic of this clause for a long period of time, I actually think the State Farm clause may come closest to expressing the intent of what the industry wanted to say in the first place. From our perspective, it is a shame they will not honor the benefit of the all risk nature of the policy they sell when they cannot prove the storm surge exclusion. Mississippi law is pretty clear:
Where there is doubt as to the meaning of an insurance contract, it is universally construed most strongly against the insurer, and in favor of the insured and a finding of coverage. The basic reason that uncertainty is decided in favor of the insured is that the insurer prepares the policy and should not be allowed by the use of obscure or ambiguous exceptions to defeat the purposes for which the policy was sold. Thus, "in accord with the general standard of giving effect to the purpose of the contract, the rule is that provisos, exceptions, or exemptions, and words of limitation in the nature of an exception, are strictly construed against the insurer, where they are of uncertain import or reasonably susceptible of a double construction."
Universal Underwriters Ins. Co. v. Buddy Ford Lincoln-Mercury, Inc., 734 So. 2d 173, 176-177 (Miss. 1999) (internal citations omitted). It would seem that if the learned Judge Edith Jones cannot provide a correct example about how an anti-concurrent clause is supposed to work, then there is proof that there is some doubt about the meaning of the clause. Policyholders everywhere are praying that the Tuepker court will work hard at their decision and not simply rubber stamp a poorly reasoned decision in Leonard.