Articles Posted in Flood Damage

In January, the Louisiana Supreme Court considered an appeal from the Vermilion Parish School Board. The appeal centered on environmental damage to land that was subject to a mineral lease. The mineral lease allowed those leasing the land to look for and remove any mineral, including oil, that they found on the land. However, once they did this, they left the land in a state that was environmentally hazardous.

Louisiana has special procedures for dealing with restoring land so that we do not harm the environment, specifically when removing oil. The remediation of the land, this restoring process, was one of the major issues in the Vermilion Parish case. The defendants included Union Oil Company of California, Union Exploration Partners, Carrollton Resources, LLC, Chevron USA, Inc., and Chevron Midcontinent, L.P.

The Court faced two major issues in this case. The first was whether the parties could receive damages in excess of the amount it would take to restore the property, thereby correcting the environmental damage. The Court determined that the language of the legislation (La. R.S. 30:29) was clear and that the parties could receive a larger amount.

Under Louisiana law, when a case arises where a party is required to correct an environmental wrong, the funds are deposited into the court’s registry. The court will then disperse the funds to repair the land. This is a relatively new development because this act was put into effect in 2006. The legislature was concerned that parties who received funds to help correct the damage done to their land would not use it for that purpose if they were not so required. Leaving property that is damaged could create serious issues for the health, safety, and welfare of the surrounding population.

The legislation focuses on the role of the fact finder in determining whether there was environmental damage, and how much that environmental damage will cost to fix. As such, the court determined that the case should continue so that the fact finder could make those determinations.

The second issue was whether Chevron should be dismissed from the case. According to the facts, Union Oil had the mineral lease first, but Chevron subsequently acquired Union Oil and all of their assets, including the lease. As such, Chevron became responsible for any environmental damage that Union Oil may have caused. Chevron admitted responsibility initially, but then denied that they should be legally responsible later.

Chevron explained that while Chevron Corp. owns both Chevron USA and Union Oil Company of California, the two sections do not overlap. That is, Union Oil had $18 billion in assets, and should they be found liable for environmental damage, the amount that they will pay will come from their assets and not Chevron’s. Chevron explained that those assets were never transferred out of Union Oil, so Union Oil remained somewhat independent even after Chevron acquired them.

Therefore, Chevron argued that Chevron USA should be removed from the case so that those assets are not adversely affected. Nonetheless, Frank Soler, the senior liaison in the subsidiary governance unit of the corporate governance department for Chevron Corp. admitted that Union Oil does not have any employees and there may be service agreements between the two sections for day-to-day activities.

The Plaintiffs in the case were only allowed to discover a very limited amount of information from Chevron regarding this case. The court restricted the information until they determined whether or not Chevron should remain in the case a defendant. As such, many facts remained unknown regarding the relationship between Chevron and Union Oil. Therefore, the court determined that Plaintiffs should be allowed to gather more information and the case should continue.

Both of these issues failed the summary judgment test. The test is whether there is an absence of material facts in the case. If there is such an absence, then the court will only determine the questions of law and one side will receive a summary judgment. In this case, however, the court determined that there may be facts in dispute because they did not have enough information; therefore, the case continued.

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Years after Hurricane Rita, which hit in September 2005, those who have had their homes damaged are still dealing with cleaning up the wreckage and rebuilding. Litigation involving insurance companies is still particularly prominent. One couple from Lake Charles, Louisiana knows about this type of litigation all too well.

The couple had homeowners insurance through State Farm and made a claim for damage to their home as result of the storm. State Farm paid them for the damages and they began to rebuild. However, after the claims were settled, the couple found that significant damage to the home’s rafters in the attic. An adjuster came right over and paid the couple for damage to three windows. The rafters, on the other hand, were a different question. There was a separation between the center beam and the rafters that connected to the center beam to support the roof; the center beam was essential to the strength and integrity of the home’s overall structure. State Farm explained that the couple needed to have the opinion of an engineer to support their claim for damage to the rafters.

In Louisiana, like many other states, lay people are generally not allowed to offer their opinions at trial. Instead, they are supposed to supply facts and the jury or judge is supposed to provide their opinion, resulting in the outcome of the trial. The witness should not substitute their opinion for that of the factfinder. However, if the witness is certified as an expert in a particular area, then they can give their opinion to the court.

Testimony of expert witnesses is particularly useful in highly technical trials. For example, if an individual is suing for a personal injury, it may be helpful to have a doctor come in to explain the injury and state how he or she thinks the plaintiff acquired the injury. If you can only acquire the injury a certain way, then the fact finder should know that information so they can provide an accurate final verdict.

In this case, the couple had their contractor come in to testify. Their contractor built the home and testified as to his opinion of how the damage occurred. He was a valuable witness because he could tell the judge that when he built the home, the center beam and rafters were not separated as they are now. He explained that if they were separated like that, then the house would not have been up to code and the couple could not have lived there.

The couple also employed an engineer to testify at the trial regarding the cause of the split in the rafters. The engineer looked at the house after the storm and, using his experience, explained that only extremely high winds could have created that kind of damage in the time between when the house was built and shortly after Hurricane Rita hit. He also stated that the home’s structure would have continued to get worse if the attic frame was not properly restored.

State Farm argued that the contractor was not an appropriate expert because he was not trained to be an expert regarding causation of the movement in the rafters. Because he was not an engineer, he could not compute the effect of the wind speed on the house nearly as well as an engineer could. However, State Farm did not like the engineer that the couple used either. In fact, they argued, the contractor did not even use the correct wind speed when he calculated the effect of the wind, so his testimony should be entirely discredited.

The court determined that both the contractor’s and the engineer’s testimony would remain in evidence. First, it concluded that the contractor was not retained as an expert for the trial, so he did not need to be qualified as an expert. Instead, he spoke about the before and after affects regarding the rafters. Louisiana law allows witnesses who are not experts to testify about their inferences and opinions if they are “rationally based upon the perception of the witness and helpful to a clear understanding of [the] testimony or determination of the fact at issue.” In addition, the court kept the engineer’s testimony because they determined that even though he had used the incorrect wind speed in his calculations, the correct wind speed would not have changed the outcome of his opinion.

Witnesses can make or break a case, and expert witnesses are particularly important to explain technical concepts that the average person may not understand. Those technical concepts are usually essential to the case.

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“An insurance policy is a contract between the parties and should be construed using the general rules of interpretation of contracts set forth in Civil Code.” As such, the courts generally try to confine their analysis of an insurance agreement to the language within the contract. They try to determine the common intent of the parties when they entered the contract, and do not want to make the contract any more inclusive than it was intended to be. That is exactly what happened with a New Orleans School Board sued under an insurance contract regarding flood insurance.

The School Board argued that two of their insurance carriers had flood coverage because they were “follow form” policies. That is, they “followed” the form of another insurance carrier, the primary insurance company, which the school also used. Follow form policies are designed to be very similar to the primary insurance company, but cover large loss amounts that the primary insurance company may not cover. For example, if the first insurance company covers only $100 of loss, then the secondary, or excess, insurance company may cover the an additional $50 of the same type of loss. Generally, they cover the same things, but the amounts may be larger or specifically state that they will cover above a certain amount that the primary insurance company covers.

It is not uncommon for large structures to have several insurance companies. The School Board in this case actually had five insurance policies that built upon one another and covered various hazards. The school had already settled their complaints with their other three insurance companies. The major concern in this case, however, was flood damage relating to Hurricane Katrina. Even in mid-2012, individuals and insurance companies were still dealing with the complications that Katrina created.

In this case, the policy that the excess insurance companies followed had some flood coverage, specifically for electronic media, so the school argued that these other carriers also offered flood coverage. In addition, the policy also had a coverage for “fungus, wet rot, dry rot, and bacteria” that may imply partial coverage for flood insurance.

However, the two other insurance carriers’ polices specifically stated that they did not offer any flood coverage. Therefore, although some of the language in the contract may have appeared to offer some coverage, the contract negated that appearance by specifically stating that no flood insurance was provided. An excess carrier is allowed to include extra exclusions that do not completely follow from the primary insurer.

The court concluded that where the insurance company specifically stated that it did not cover flood, the court would not create that inclusion: “We decline to create flood coverage out of an exclusion to an exception.” The court notes that although the “fungus” provision may look like it covers flood slightly, it also specifically states that the fungus, wet rot, dry rot, and bacteria can only be a result of hazards that are covered in the insurance policy, namely, not flood.

The plain language of the contract won in this case, which gave the school less coverage than they may have anticipated. It is important to read through your insurance contracts so that you are aware what they do and do not cover.

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