A federal judge on Tuesday ruled that a Mississippi couple'sÂ insurance policyÂ does not cover water damage caused byÂ Hurricane Katrina, letting their insurer off the hook for more than $150,000 in claims.
The ruling is the first of several hundred lawsuits against insurers -- including a civil action suit filed by Mississippi Attorney General Jim HoodÂ -- for denying coverage for flooding from the August 2005 storm. If insurers continue to win most or all of the cases, rates and policies would generally stay the same, according to industry watchers. However, if homeowners andÂ businessesÂ prevail, insurers could raise rates or drop hurricane coverage all together.
In his decision, U.S. District Judge L.T. Senter, who is expected to preside over the bulk of the cases, sided with Nationwide Mutual Insurance, saying the only wind damage to the home of Pascagoula residents Paul and Julie Leonard was "a hole in one window that witnesses described as golf-ball sized."
While he agreed extensive damage was caused by a storm surge that submerged the couple's home under five feet of water, Senter said a "storm surge is a type of flooding that is covered by flood policies sold under the National Flood Insurance Program and excluded under standard homeowner policies."
Still, Senter ruled the couple was owed an extra $1,200 for wind damages. Richard Scruggs, the couple's lawyer, had sought $158,000 from Nationwide.
"This ruling underscores just how important it is for all policyholders to carefully read and understand the terms of the coverage they purchase," Nationwide said in a statement released after the decision.
The company also said the lawsuit was seeking to "re-write our contract after the fact," and vowed to continue adjusting claims on a case-by-case basis "based on factual evidence that supports coverage payments."
Insurers have paid out more than $40 billion over 1.7 million claims related to Hurricane Katrina -- the biggest single loss in the history of insurance, according to the Insurance Information Institute, a national trade group based in New York.
More than 125,000Â small and midsize businessesÂ were disrupted by the storm, including many home-based sole proprietorships, according to the U.S. Chamber of Commerce.