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Thursday,
April 20, 2006
Hurricane Katrina and its aftermath have produced a plethora of litigation, ranging from the mundane, such as claims for insurance proceeds for loss of refrigerator contents, to claims of substantive significance to industry and businesses in Louisiana. The bulk of the substantive litigation can be broadly divided into several categories:
- Cases involving damages due to spillage of chemical products,
- Cases involving damages due to levee failure,
- Cases involving claims for environmental damages that allegedly increased the impact of Hurricane Katrina's wind and storm surge, and
- Cases involving conflicts with insurance companies, generally concerning interpretation of policy provisions.
Primary among the chemical-spill cases is Turner v. Murphy Oil USA, Inc., which involves over 30 consolidated class actions arising from an alleged 25,000-barrel spill of crude oil from an above-ground storage tank at Murphy's Meraux Refinery in St. Bernard Parish. After a two-day hearing, Judge Fallon of the Eastern District of Louisiana certified a class of plaintiffs who resided or owned property within a designated geographic area surrounding the refinery on the date Hurricane Katrina made landfall. The court later adopted a bifurcated trial plan under which Phase I will address liability and the comparative fault defense, with Phase II evaluating causation and quantum for each individual plaintiff's claim. The State of Louisiana has intervened in the litigation under La. R.S. 30:2015, on the basis that plaintiffs claim damage to usable groundwater.
Prior to certification of the class, Murphy set up a program offering immediate settlements for a designated amount to those within a specified geographic area. The court has established a common fund requiring that for each such settlement, Murphy must withhold between 7% and 12% of the gross amount of the settlement, to be apportioned between the attorney fee portion of the settlement and the client's portion. This set-aside will form a common fund from which class counsel may eventually apply for payment of fees and costs.
There are over 20 cases alleging negligence in design, construction, and maintenance of the New Orleans levee system, filed against various defendants including the Board of Commissioners of the Orleans Levee District, the Corps of Engineers, and numerous contractors and engineering firms. Plaintiffs in the first-filed of these cases, Berthelot v. Boh Brothers Construction Company, have moved to recuse all of the judges of the Eastern District of Louisiana on the basis that due to widespread destruction in the New Orleans area, all of them were either directly or indirectly affected by Hurricane Katrina.
Another defective construction class action, Greer v. U.S., brought claims against the United States and the Corps of Engineers alleging that the Corps was aware of problems with the foundation of floodwalls but failed to disclose the inadequate construction. This suit was recently dismissed by Judge Duval of the Eastern District of Louisiana on the basis of sovereign immunity, finding that the court lacked subject matter jurisdiction because the plaintiffs failed to exhaust their administrative remedies as required by the Federal Tort Claims Act.
The environmental damage cases include Comer v. Nationwide Mutual Insurance Co., filed in the Southern District of Mississippi federal court, which alleges among other things that a class of oil and refining company defendants have produced the greatest single source of greenhouse gases and are therefore responsible for global warming. Global warming, the petition alleges, produced the conditions that generated a storm the size and strength of Katrina, therefore the suit asserts claims for hurricane damages and punitive damages against the oil company defendants. The court has indicated that it foresees "daunting evidentiary problems," but thus far has declined to dismiss these claims.
The oil industry also is the target of a group of cases consolidated in the Eastern District of Louisiana under the caption Barasich v. Columbia Gulf Transmission Co., alleging that oil and gas exploration and production and transportation activities have eroded the south Louisiana marshes, depriving New Orleans of its natural barrier protections from storm damage. The suit pits a class of plaintiffs against two classes of defendants. The plaintiff class is alleged to include all persons, businesses and entities in the State of Louisiana who suffered damage as a result of Katrina's winds and storm surge. The two defendant classes are a "pipeline class" including pipeline companies who dredged pipeline canals or installed transmission lines in the south Louisiana marshes, and an "exploration and production" class consisting of all companies that drilled for oil and gas in the Louisiana marshes and/or dredged access or location canals.
The most prominent insurance cases ask the courts to invalidate the flood damage exclusion of homeowners' insurance policies. In Chehardy v. Wooley, the plaintiffs seek declaratory judgment that the damages resulting from water entering New Orleans due to breaches of levees and floodwalls do not fall within the "rising water" or "act of God" exclusions, and that the flooding of the city resulted from negligence in construction and from "windstorm," which are covered perils. The petition alleges that approximately 60% of New Orleans residents did not have flood insurance, in reliance on the levees and flood protection system. The defendants in Chehardy included the Louisiana Insurance Commissioner and every insurance company writing homeowners' policies in the New Orleans area. The suit sought a mandamus order requiring the Commissioner to interpret homeowners' policies in such a manner that flood damage would not be excluded. However, the federal court recently dismissed all claims against the Commissioner, and also all claims against all defendants other than State Farm, Allstate, and American Insurance Company.
Buente v. Allstate Property and Casualty Insurance Company, pending in the Southern District of Mississippi, raises similar issues. The court recently ruled that flood exclusions in a homeowner's policy were not ambiguous and were crafted to exclude precisely the type of damage caused by storm surge. Notably, in an earlier ruling the court held that, if Allstate's agent and/or employee represented to plaintiffs that they would not need flood insurance because their house was located outside of a floodplain, Allstate could potentially be liable for all damage to plaintiffs' property.
For more information, please contact Stevia Walther at smwalther@liskow.com or Drew Spaniol at dspaniol@liskow.com or go to www.liskow.com.
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