Insurance Contract Interpretations and the Affect on Recovery of Damages

Homeowners across the Louisiana coast were affected by Hurricane Katrina. Many of those affected are still dealing with the stressful experience of rebuilding their homes, communities, and lives. Homeowners insurance is a boon to many when natural disaster strikes. Unfortunately, insurance companies do not always make recovery of benefits easy on the afflicted homeowner. The insurance recovery process can be overwhelming, and may be complicated by the often necessary instigation of litigation. Insurance negotiations can be complicated by differing interpretations of policy provisions. Many different provisions governing recovery are involved in insurance contracts. The interpretation of the language of the contract by the court plays a pivotal role in deciding the amount of damages an insured is entitled to recover.

The recent Fifth Circuit Court of Appeals case French v. Allstate Indemnity Co., illustrates that the recovery of damage benefits from an insurance company is not always a straight forward process. In French , homeowners in Slidell, Louisiana sued their homeowners insurance provider, Allstate Indemnity Co., to recover additional damages resulting from wind damage to their residence caused by Hurricane Katrina. The plaintiffs initially won a judgment in their favor in the United States District Court for the Eastern District of Louisiana , but they appealed, arguing that they were entitled to additional damages beyond the original award. The insurance company paid less than the full amount of the liability limit under the homeowners insurance policy. The District Court held that, since their repair costs would exceed their policy limit, they were entitled to at least the full limit and awarded them judgment accordingly.

On appeal, the plaintiffs argued that they were entitled to further damages under two provisions of their policy, an Extended Limits Endorsement provision and an Additional Living Expenses provision. They argued that the lower court erred in denying them recovery under these provisions. The court applied Louisiana case law which dictates that the language of the policy controls and “constitutes the law between the insured and insurer.” When an insurance contract is subject to interpretation “‘[w]ords and phrases … are to be construed using their plain, ordinary and generally prevailing meaning,’ unless the words have acquired a technical definition.” The appellate court reviewed the original award to determine if the lower court erred in their interpretation of these provisions and in denying recovery to the plaintiffs.

The Extended Limits Endorsement allowed for a certain amount of additional damages above and beyond the actual cash value of the insured’s home. The court found that the language of the provision indicated that, in order to recover under this provision, the insured had to show they had repaired or replaced their damaged property. They must also have insured their home to 100% of its value. The plaintiffs did not meet either of these requirements, and the court found the denial of an additional award under this provision was appropriate.

The Additional Living Expenses provision allowed for recovery of damages for “the reasonable increase in living expenses necessary to maintain [a] normal standard of living when a direct physical loss we cover . . . makes your residence premises uninhabitable.” The court determined that the plaintiffs had to show additional living expenses they had actually incurred. Since they had not yet begun repairs on their home, and continued to live in the residence, they were properly denied additional recovery under this provision.

Knowledge of the interpretation of insurance contract provisions is important when negotiating an insurance settlement or in litigation for recovery of damages. If you or a loved one has been affected by Hurricane Katrina you need an experienced law firm to help you navigate negotiations with your insurance company and to represent you in court should it be necessary. If you are looking for legal representation, the Berniard Law Firm has experience working with the victims of Hurricane Katrina and their families as well as a variety of storm and general insurance dispute issues.

Call us at 1-866-574-8005 or visit and let us help you.

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