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KING, Circuit Judge:
On the morning of August 29, 2005, Hurricane Katrina struck along the coast of the Gulf
canals-the 17th Street Canal, the Industrial Canal, and the London Avenue Canal-
negligent design, construction, and maintenance of the levees and that the policies' flood
exclusions in this context are ambiguous because they do not clearly exclude coverage
for an inundation of water induced by negligence. The plaintiffs maintain that because
their policies are ambiguous, we must construe them in their favor to effect coverage for
damaged the plaintiffs' property. This event was excluded from coverage under the
plaintiffs' insurance policies, and under Louisiana law, we are bound to enforce the
unambiguous terms of their insurance contracts as written. Accordingly, we conclude that
the plaintiffs are not entitled to recover under their policies.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Richard Vanderbrook et al. v. Unitrin Preferred Insurance Company et al. (“the
Vanderbrook action”), Xavier University of Louisiana v. Travelers Property Casualty
Company of America (“the Xavier action”), Gladys Chehardy et al. v. State Farm Fire &
Casualty Company et al. (“the Chehardy action”), and Kelly A. Humphreys v.
Encompass Indemnity Company (“the Humphreys action”).FN1 The detailed factual and
petition for damages in Louisiana state court against their insurers. FN2 The
Vanderbrook plaintiffs allege that “[s]ometime between 10:00 and 11:00 a.m. on August
29, 2005, before the full force of [Hurricane Katrina] reached the City of New Orleans, a
small section of the concrete outfall canal wall known as the 17th Street Canal, suddenly
broke, causing water to enter the streets of the [c]ity,” resulting in damage to their insured
issue in this appeal.
The Vanderbrook plaintiffs allege that their insurers have refused to adjust or pay for
their losses, despite “a sudden break in the concrete wall of the levee outfall canal” not
being described in any of their policies as an excluded loss. They assert that their
insurance policies are contracts of adhesion and are “unduly and unreasonably complex,”
defendant-appellant Hanover Insurance Company (“Hanover”), plaintiffs-appellees Peter
Ascani III and Gregory Jackson were insured through defendant-appellant Standard Fire
Insurance Company (“Standard Fire”), and plaintiff-appellee Richard Vanderbrook was
insured through defendant-appellant Unitrin Preferred Insurance Company (“Unitrin”).
The Hanover,FN3 Standard Fire, and Unitrin policies provide coverage for risk of direct
it. Consequently, we leave it to the district court on remand to obtain a copy of the entire
policy and to interpret it consistently with this opinion.
We do not insure for loss caused directly or indirectly by any of the following. Such loss
is excluded regardless of any other cause or event contributing concurrently or in any
sequence to the loss.
The State Farm policies insured against loss to the dwelling and for certain losses to
personal property except as excluded by the policy. The policies contained the following
flood exclusion:
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
... Water Damage, meaning:
(1) flood, surface water, waves, tidal water, overflow of a body of water, or spray from
any of these, all whether driven by wind or not ....
The Vanderbrook action was removed to federal court on the basis of diversity
jurisdiction. Hanover, Standard Fire, Unitrin, and State Farm filed Rule 12(c) motions for
damage resulting from levee breaches where the breaches were induced by negligence.
The court determined that the policies' flood exclusions were ambiguous because the
term “flood” was susceptible to two reasonable definitions: one that relates to floods
resulting from natural causes only and one that relates to floods resulting from both
natural causes and negligent or intentional acts.
cases that interpreted flood exclusions as extending to inundations of water caused by the
rupture of a dam or dike.
Having concluded that the term “flood” as used in the exclusions was ambiguous, the
district court construed the Hanover, Standard Fire, and Unitrin policies in the insureds'
favor and concluded that the policies covered water damage caused by a ruptured levee
With respect to State Farm's policies, however, the district court concluded that the flood
exclusion's “lead-in” clause removed any ambiguity and clearly excluded coverage for all
floods, whether natural or not. The “lead-in” language on which the district court relied
provides in part: “We do not insure for such loss [i.e., loss resulting from flood]
regardless of ... the cause of the excluded event[ ] or ... whether the event ... arises from
Hurricane Katrina caused in excess of $30 million in damage to insured structures on its
campus. The complaint itself does not allege how the damage was caused-i.e., by water
inundation from failed levees or otherwise. Xavier avers that it has filed a claim with
Travelers and that despite lengthy communication, the insurer has failed to pay for the
damage to Xavier's campus. Xavier brings claims for breach of contract and for
Such loss or damage is excluded regardless of any other cause or event that contributes
concurrently or in any sequence to the loss.
....
... Water
... Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their
reasons that the court denied Hanover's, Unitrin's, and Standard Fire's motions in the
Vanderbrook action, the court granted partial summary judgment in Xavier's favor on the
second issue, determining that water damage resulting from a failed levee due to
negligence would be covered under the insurance policy. But the court denied Xavier's
partial-summary-judgment motion on the question whether the damage to the campus
They bring a putative class actionFN5 against their insurers, asserting that their losses
were covered by their respective insurance policies.
FN4. The Chehardy plaintiffs comprise plaintiffs-appellees-cross-appellants Gladys
Chehardy; Daniel and Jacquelyn Fontanez; Larry and Glendy Forster; Kenneth and Judy
Maier; Randy and Lori Gervais; Andre and Marlin Mauberret; Debbie and Dave Strawn;
own immovable property with improvements, principally houses or related residential
structures, as well as personal property located there, which was destroyed or damaged
by winds generated by Hurricane Katrina in excess of their respective policy deductibles
and not reimbursed by their insurance companies, but excluding members of the
judiciary, their administrative staff and any other personnel who may cause a member of
Company (“American”), Auto Club Family Insurance Company (“Auto Club”), Standard
Fire, Lexington Insurance Company (“Lexington”), Aegis Security Insurance Company
(“Aegis”), and Hanover. The remaining Chehardy defendants are defendants-appellants
Allstate Indemnity Company and Allstate Insurance Company (collectively, “Allstate”),
Louisiana Citizens Property Insurance Corporation (“Louisiana Citizens”), Encompass
hours after the hurricane's landfall, there was six to eight feet of water in the Lower Ninth
Ward area of New Orleans, and approximately eighty percent of Orleans Parish
ultimately became submerged. The plaintiffs aver their properties sustained damage as a
result of these events.
The Chehardy plaintiffs also allege that “any damages attributable to the levee failures
the Army Corps of Engineers that “the Corps neglected to consider the possibility that the
levee walls atop the 17th Street Canal levee would lurch away from their footings under
significant water pressure and eat away at the earthen barriers below” and that “[t]he
levees simply failed to work the way they were supposed to work.” Additionally, the
complaint alleges that “the levee breach of the Industrial Canal to the Lower Ninth Ward
policies contained flood exclusions, but they assert that these exclusions should not be
read so broadly as to disallow coverage for their damages because to do so “would
contravene the very purpose of [all-risk] policies.” They posit that the reasonable
expectations of Louisiana policyholders would be that “flood” would “encompass[ ]
overflowing of the Mississippi River, accumulation of water due to heavy rainfalls, or
of their damage were windstorm, acts of negligence, and storm surge, all of which were
covered perils; that “[t]he breaking or failure of boundaries of lakes, reservoirs, rivers,
streams, or other bodies of water was a peril not specifically excluded by any of the ...
policies”; and that “[t]he damage caused by water entering the City of New Orleans ...
due to the breaches in the levees ... neither falls within the regular definition of ‘flood,’
The Chehardy plaintiffs did not include in their complaint the pertinent language from
their insurance policies, nor did they attach the policies or identify which plaintiff was
insured through which defendant. Instead, copies of the policies were attached to the
defendants' motions seeking dismissal of the plaintiffs' claims.FN6
FN6. In its order, the district court stated that it was unable to identify with certainty
respect to the insurers and will not be able to identify the specific plaintiff who is
[a]ffected by such order.
We examined the record on appeal and identified what appear to be insurance policies
corresponding with each named Chehardy plaintiff except Wendell Glation and Andre
and Marilyn Mauberret. With respect to those plaintiffs, we granted unopposed motions
appeal. All of these policies provide coverage for risk of direct physical loss to structures
on the property as long as the risk is not an excluded peril. They also provide coverage
for direct physical loss to personal property but only if the loss is caused by an
enumerated peril and not by an excluded peril. With respect to both structures and
personal property, the policies contain a list of exclusions that are not insured against-
... Water Damage, meaning:
... Flood, surface water, waves, tidal water, overflow of a body of water, or spray from
any of these, whether or not driven by wind ....FN7
FN7. The only variations in language between these policies are immaterial to this
appeal. For example, American and Hanover substitute the words “loss or damage” for
following: “We do not insure for loss caused by any of the following.” The effect is that
Aegis's flood exclusion reads as follows:
We do not insure for loss caused by any of the following.
....
... Water Damage, meaning:
· flood, surface water, waves, tidal water, or water borne material from any of these;
· overflow of water or water borne material from a body of water;
...
from any source, even if driven by wind.
The policies also define “caused by” as “any loss that is contributed to, made worse by,
... Flood, including, but not limited to surface water, waves, tidal water or overflow of
any body of water, or spray from any of these, whether or not driven by wind.
The State Farm policies in the Chehardy action are identical in every relevant respect to
the State Farm policies in the Vanderbrook action.
Each of the defendants in the Chehardy action filed a Rule 12(b)(6) motion to dismiss for
the Vanderbrook action. As to the extra-contractual claims (for breach of the implied
covenant of good faith and fair dealing, insurance bad faith, and breach of fiduciary
duty), the district court denied the motions to dismiss without prejudice to their being re-
urged at a later time, after the resolution of this appeal.
D. The Humphreys Action
accidental event’ storm water drainage exerted pressure against the storm wall and levee”
erected along the canals, “causing the levee and storm wall to collapse” and “result[ing]
in storm waters being distributed over large portions of New Orleans.” Humphreys
alleges that the cause of the collapse was “inadequate maintenance” of the levee and
storm wall on the part of the Orleans Levee District. She avers that as a result of these
attorney's fees, and treble damages under various provisions of Title 22 of the Louisiana
Revised Statutes.
FN8. Humphreys amended her petition to add the Orleans Levee District as a defendant.
Her claims against the Orleans Levee District are not at issue in this appeal.
Humphreys's homeowners policy with Encompass Indemnity covers direct physical loss
1. Real Property and Tangible Personal Property. We do not insure for loss:
a. Caused by water damage, meaning:
(1) Flood, surface water, waves, tidal water, overflow of a body of water, or spray from
any of these, whether or not driven by wind;
The policy also contains the following “Hurricane Deductible Endorsement”:
loss caused by a hurricane. In no event will the deductible applied for a hurricane loss be
less than the property deductible shown on the Coverage Summary.
Hurricane means wind, wind gust, hail, rain, tornado, cyclone or hurricane which results
in direct physical loss or damage to property by a storm system that has been declared to
be a hurricane by the National Weather Service ....
the wind-damage portion of Humphreys's claims as well as the entirety of her bad-faith
claim. The parties' stipulation of partial dismissal specified that the remaining claim was
the “claim to seek recovery for flood/rising water damage” under the policy.
The next day, Humphreys moved for partial summary judgment, asking the district court
to rule that her policy provided coverage for flood damage to her residence pursuant to
flood exclusion's applicability in her motion for partial summary judgment. Encompass
Indemnity characterizes the district court's grant of partial summary judgment in
Humphreys's favor on this issue as sua sponte and contends that it did not receive Rule
56(c)'s requisite notice. Because we conclude that even if Encompass Indemnity did have
notice, the grant of partial summary judgment was nonetheless erroneous, we need not
Humphreys's alleged damage was covered under her policy and granted partial summary
judgment in her favor on this issue.
E. Appeal
The district court certified that its orders involved a controlling question of law as to
which there is a substantial ground for a difference of opinion and that appeal may
district court's grant of State Farm's motions to dismiss. And Humphreys cross appeals
the district court's denial of her motion for partial summary judgment on the issue
whether her policy's hurricane-deductible endorsement provides coverage for her losses.
II. STANDARD OF REVIEW
exclusions in this context are ambiguous because they do not clearly exclude coverage
for an inundation of water induced by negligence. The plaintiffs maintain that because
their policies are ambiguous, we must construe them in their favor to effect coverage for
damaged the plaintiffs' property. This event was excluded from coverage under the
plaintiffs' insurance policies, and under Louisiana law, we are bound to enforce the
unambiguous terms of their insurance contracts as written. Accordingly, we conclude that
the plaintiffs are not entitled to recover under their policies.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Richard Vanderbrook et al. v. Unitrin Preferred Insurance Company et al. (“the
Vanderbrook action”), Xavier University of Louisiana v. Travelers Property Casualty
Company of America (“the Xavier action”), Gladys Chehardy et al. v. State Farm Fire &
Casualty Company et al. (“the Chehardy action”), and Kelly A. Humphreys v.
Encompass Indemnity Company (“the Humphreys action”).FN1 The detailed factual and
petition for damages in Louisiana state court against their insurers. FN2 The
Vanderbrook plaintiffs allege that “[s]ometime between 10:00 and 11:00 a.m. on August
29, 2005, before the full force of [Hurricane Katrina] reached the City of New Orleans, a
small section of the concrete outfall canal wall known as the 17th Street Canal, suddenly
broke, causing water to enter the streets of the [c]ity,” resulting in damage to their insured
issue in this appeal.
The Vanderbrook plaintiffs allege that their insurers have refused to adjust or pay for
their losses, despite “a sudden break in the concrete wall of the levee outfall canal” not
being described in any of their policies as an excluded loss. They assert that their
insurance policies are contracts of adhesion and are “unduly and unreasonably complex,”
defendant-appellant Hanover Insurance Company (“Hanover”), plaintiffs-appellees Peter
Ascani III and Gregory Jackson were insured through defendant-appellant Standard Fire
Insurance Company (“Standard Fire”), and plaintiff-appellee Richard Vanderbrook was
insured through defendant-appellant Unitrin Preferred Insurance Company (“Unitrin”).
The Hanover,FN3 Standard Fire, and Unitrin policies provide coverage for risk of direct
it. Consequently, we leave it to the district court on remand to obtain a copy of the entire
policy and to interpret it consistently with this opinion.
We do not insure for loss caused directly or indirectly by any of the following. Such loss
is excluded regardless of any other cause or event contributing concurrently or in any
sequence to the loss.
The State Farm policies insured against loss to the dwelling and for certain losses to
personal property except as excluded by the policy. The policies contained the following
flood exclusion:
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
... Water Damage, meaning:
(1) flood, surface water, waves, tidal water, overflow of a body of water, or spray from
any of these, all whether driven by wind or not ....
The Vanderbrook action was removed to federal court on the basis of diversity
jurisdiction. Hanover, Standard Fire, Unitrin, and State Farm filed Rule 12(c) motions for
damage resulting from levee breaches where the breaches were induced by negligence.
The court determined that the policies' flood exclusions were ambiguous because the
term “flood” was susceptible to two reasonable definitions: one that relates to floods
resulting from natural causes only and one that relates to floods resulting from both
natural causes and negligent or intentional acts.
cases that interpreted flood exclusions as extending to inundations of water caused by the
rupture of a dam or dike.
Having concluded that the term “flood” as used in the exclusions was ambiguous, the
district court construed the Hanover, Standard Fire, and Unitrin policies in the insureds'
favor and concluded that the policies covered water damage caused by a ruptured levee
With respect to State Farm's policies, however, the district court concluded that the flood
exclusion's “lead-in” clause removed any ambiguity and clearly excluded coverage for all
floods, whether natural or not. The “lead-in” language on which the district court relied
provides in part: “We do not insure for such loss [i.e., loss resulting from flood]
regardless of ... the cause of the excluded event[ ] or ... whether the event ... arises from
Hurricane Katrina caused in excess of $30 million in damage to insured structures on its
campus. The complaint itself does not allege how the damage was caused-i.e., by water
inundation from failed levees or otherwise. Xavier avers that it has filed a claim with
Travelers and that despite lengthy communication, the insurer has failed to pay for the
damage to Xavier's campus. Xavier brings claims for breach of contract and for
Such loss or damage is excluded regardless of any other cause or event that contributes
concurrently or in any sequence to the loss.
....
... Water
... Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their
reasons that the court denied Hanover's, Unitrin's, and Standard Fire's motions in the
Vanderbrook action, the court granted partial summary judgment in Xavier's favor on the
second issue, determining that water damage resulting from a failed levee due to
negligence would be covered under the insurance policy. But the court denied Xavier's
partial-summary-judgment motion on the question whether the damage to the campus
They bring a putative class actionFN5 against their insurers, asserting that their losses
were covered by their respective insurance policies.
FN4. The Chehardy plaintiffs comprise plaintiffs-appellees-cross-appellants Gladys
Chehardy; Daniel and Jacquelyn Fontanez; Larry and Glendy Forster; Kenneth and Judy
Maier; Randy and Lori Gervais; Andre and Marlin Mauberret; Debbie and Dave Strawn;
own immovable property with improvements, principally houses or related residential
structures, as well as personal property located there, which was destroyed or damaged
by winds generated by Hurricane Katrina in excess of their respective policy deductibles
and not reimbursed by their insurance companies, but excluding members of the
judiciary, their administrative staff and any other personnel who may cause a member of
Company (“American”), Auto Club Family Insurance Company (“Auto Club”), Standard
Fire, Lexington Insurance Company (“Lexington”), Aegis Security Insurance Company
(“Aegis”), and Hanover. The remaining Chehardy defendants are defendants-appellants
Allstate Indemnity Company and Allstate Insurance Company (collectively, “Allstate”),
Louisiana Citizens Property Insurance Corporation (“Louisiana Citizens”), Encompass
hours after the hurricane's landfall, there was six to eight feet of water in the Lower Ninth
Ward area of New Orleans, and approximately eighty percent of Orleans Parish
ultimately became submerged. The plaintiffs aver their properties sustained damage as a
result of these events.
The Chehardy plaintiffs also allege that “any damages attributable to the levee failures
the Army Corps of Engineers that “the Corps neglected to consider the possibility that the
levee walls atop the 17th Street Canal levee would lurch away from their footings under
significant water pressure and eat away at the earthen barriers below” and that “[t]he
levees simply failed to work the way they were supposed to work.” Additionally, the
complaint alleges that “the levee breach of the Industrial Canal to the Lower Ninth Ward
policies contained flood exclusions, but they assert that these exclusions should not be
read so broadly as to disallow coverage for their damages because to do so “would
contravene the very purpose of [all-risk] policies.” They posit that the reasonable
expectations of Louisiana policyholders would be that “flood” would “encompass[ ]
overflowing of the Mississippi River, accumulation of water due to heavy rainfalls, or
of their damage were windstorm, acts of negligence, and storm surge, all of which were
covered perils; that “[t]he breaking or failure of boundaries of lakes, reservoirs, rivers,
streams, or other bodies of water was a peril not specifically excluded by any of the ...
policies”; and that “[t]he damage caused by water entering the City of New Orleans ...
due to the breaches in the levees ... neither falls within the regular definition of ‘flood,’
The Chehardy plaintiffs did not include in their complaint the pertinent language from
their insurance policies, nor did they attach the policies or identify which plaintiff was
insured through which defendant. Instead, copies of the policies were attached to the
defendants' motions seeking dismissal of the plaintiffs' claims.FN6
FN6. In its order, the district court stated that it was unable to identify with certainty
respect to the insurers and will not be able to identify the specific plaintiff who is
[a]ffected by such order.
We examined the record on appeal and identified what appear to be insurance policies
corresponding with each named Chehardy plaintiff except Wendell Glation and Andre
and Marilyn Mauberret. With respect to those plaintiffs, we granted unopposed motions
appeal. All of these policies provide coverage for risk of direct physical loss to structures
on the property as long as the risk is not an excluded peril. They also provide coverage
for direct physical loss to personal property but only if the loss is caused by an
enumerated peril and not by an excluded peril. With respect to both structures and
personal property, the policies contain a list of exclusions that are not insured against-
... Water Damage, meaning:
... Flood, surface water, waves, tidal water, overflow of a body of water, or spray from
any of these, whether or not driven by wind ....FN7
FN7. The only variations in language between these policies are immaterial to this
appeal. For example, American and Hanover substitute the words “loss or damage” for
following: “We do not insure for loss caused by any of the following.” The effect is that
Aegis's flood exclusion reads as follows:
We do not insure for loss caused by any of the following.
....
... Water Damage, meaning:
· flood, surface water, waves, tidal water, or water borne material from any of these;
· overflow of water or water borne material from a body of water;
...
from any source, even if driven by wind.
The policies also define “caused by” as “any loss that is contributed to, made worse by,
... Flood, including, but not limited to surface water, waves, tidal water or overflow of
any body of water, or spray from any of these, whether or not driven by wind.
The State Farm policies in the Chehardy action are identical in every relevant respect to
the State Farm policies in the Vanderbrook action.
Each of the defendants in the Chehardy action filed a Rule 12(b)(6) motion to dismiss for
the Vanderbrook action. As to the extra-contractual claims (for breach of the implied
covenant of good faith and fair dealing, insurance bad faith, and breach of fiduciary
duty), the district court denied the motions to dismiss without prejudice to their being re-
urged at a later time, after the resolution of this appeal.
D. The Humphreys Action
accidental event’ storm water drainage exerted pressure against the storm wall and levee”
erected along the canals, “causing the levee and storm wall to collapse” and “result[ing]
in storm waters being distributed over large portions of New Orleans.” Humphreys
alleges that the cause of the collapse was “inadequate maintenance” of the levee and
storm wall on the part of the Orleans Levee District. She avers that as a result of these
attorney's fees, and treble damages under various provisions of Title 22 of the Louisiana
Revised Statutes.
FN8. Humphreys amended her petition to add the Orleans Levee District as a defendant.
Her claims against the Orleans Levee District are not at issue in this appeal.
Humphreys's homeowners policy with Encompass Indemnity covers direct physical loss
1. Real Property and Tangible Personal Property. We do not insure for loss:
a. Caused by water damage, meaning:
(1) Flood, surface water, waves, tidal water, overflow of a body of water, or spray from
any of these, whether or not driven by wind;
The policy also contains the following “Hurricane Deductible Endorsement”:
loss caused by a hurricane. In no event will the deductible applied for a hurricane loss be
less than the property deductible shown on the Coverage Summary.
Hurricane means wind, wind gust, hail, rain, tornado, cyclone or hurricane which results
in direct physical loss or damage to property by a storm system that has been declared to
be a hurricane by the National Weather Service ....
the wind-damage portion of Humphreys's claims as well as the entirety of her bad-faith
claim. The parties' stipulation of partial dismissal specified that the remaining claim was
the “claim to seek recovery for flood/rising water damage” under the policy.
The next day, Humphreys moved for partial summary judgment, asking the district court
to rule that her policy provided coverage for flood damage to her residence pursuant to
flood exclusion's applicability in her motion for partial summary judgment. Encompass
Indemnity characterizes the district court's grant of partial summary judgment in
Humphreys's favor on this issue as sua sponte and contends that it did not receive Rule
56(c)'s requisite notice. Because we conclude that even if Encompass Indemnity did have
notice, the grant of partial summary judgment was nonetheless erroneous, we need not
Humphreys's alleged damage was covered under her policy and granted partial summary
judgment in her favor on this issue.
E. Appeal
The district court certified that its orders involved a controlling question of law as to
which there is a substantial ground for a difference of opinion and that appeal may
district court's grant of State Farm's motions to dismiss. And Humphreys cross appeals
the district court's denial of her motion for partial summary judgment on the issue
whether her policy's hurricane-deductible endorsement provides coverage for her losses.
II. STANDARD OF REVIEW
