On Monday, a Jackson County, Miss., couple took their insurer to court after being denied coverage for damages to their home caused by the August 2005Â storm.
The insurer, Nationwide Mutual Insurance, claimed the damages were caused by water -- rather than wind -- and as such weren't covered by its standard homeowners policy, according to papers filed with a federal court in Mississippi.
The case, believed to be the first of its kind to reach trial, is being closely watched by lawyers and insurance companies, because of the effect it could have on other similar cases.
Richard Scruggs, the lawyer representing the couple, said the insurance firm is merely playing semantics in order to get out of paying the claim.
"They are trying to hide behind bureaucratic and technocratic interpretations of the intentionally ambiguous wording in their policies," Scruggs said in statement when the suit was filed in October.
Just two weeks after the storm, the state of Mississippi filed a similar civil action suit against the insurance industry for trying to exclude coverage for damages caused by water.Â
"I want to encourage the people to continue to fight and I'll do everything I can to make sure that insurance companies pay what they owe," Mississippi Attorney General Jim Hood said in a statement.
That suit, which has yet to go to trial, also accused some firms of pressuring homeowners into signing away their rights to flood coverage in exchange for smaller settlements.Â Â
Yet, insurers insist residential policies typically cover wind and wind-driven rain damages, but rarely flooding.
Flood insurance, for both homes and small businesses, is purchased separately as part of the National Flood Insurance Program, said Loretta Worters, a spokeswoman for the Insurance Information Institute, a national trade group based in New York.
"From the insurance industry's perspective, the language has always been very clear," Worters said. "If this case is won, the insurance industry will either pull out of this area altogether, or raise the rates."
As such, she said small-business owners had a big stake in the outcome of the lawsuits.
Insurers have already paid out about 90% of the more than $40 billion in claims resulting from the storm, according to the Insurance Information Institute.
More than 125,000 small and midsize businesses -- including a large number of home-based, sole-proprietorships -- were disrupted by Katrina, the U.S. Chamber of Commerce estimates.