Burden of proof to determine insurance coverage in ‘slab’ case

When asked to determine coverage under an insurance policy, courts frequently recite the principle that the insured has the burden of proving coverage under the policy and the insurer has the burden of proving exclusions from coverage. For the majority of insurance coverage disputes, this black letter principle requires no detailed analysis. However, in those instances where the precise cause of a loss is unknown and intermingles between covered and excluded perils, the line where the insured’s burden of proof is met and where the burden accordingly shifts to the insurer to prove an exclusion from coverage can be murky indeed.

This difficult determination is illustrated by the “slab” cases arising out of the recent destruction wrought by Hurricanes Katrina and Rita. Due to the strength of the hurricanes and their accompanying storm surges, many homes and other structures were literally blown and washed away, leaving nothing other than concrete slabs or pilings to show that they ever existed. The Louisiana and Mississippi Gulf Coast areas are slotted with these sad reminders of shattered homes and lives.

Typical homeowners’ insurance policies cover damages caused by wind, but exclude damage caused by flooding, which is instead covered by a separate flood insurance policy underwritten by the federal government. The courts in Mississippi and Louisiana, the two states most affected by Hurricanes Katrina and Rita, have generally held that homeowners are entitled to recover under their homeowners’ insurance policies for damages resulting from wind even if additional damages was caused by flooding. [Leonard v. Nationwide Mutual Ins. Co., 438 F. Supp. 2d 684 (S.D. Miss. 2006);

Urrate v. Argonaut Great Century Ins. Co., 881 So. 2d 787 (La. App. 5th Cir. 2004), writ denied, 891 So. 2s 686 (La. 2005).]

Unfortunately, a large percentage of the homeowners affected by Hurricanes Katrina and Rita had homeowner’s policies but did not carry flood insurance. Thus, many of the affected homeowners are limited to recovery under their homeowners’ policies.

Nothing left but the slab
When all or part of the home remains following a catastrophic event such as a hurricane, it is relatively easy for the insured to submit proof of some loss caused by wind damages. For example, the insured may have pictures of missing roof tiles and water marks from water coming in through the roof. However, when the house is completely gone, the only proof typically offered by the insured is that the home was in the path of the hurricane and now it is gone. By the same token, when the insurer adjusts such a loss, there is nothing definitive to establish the amount of damage, if any, resulting from a covered peril. As a result, slab cases raise the question of whether the insured’s burden requires proof not only that damage was caused by wind, but also proof of the exact amount of damage caused by wind and proof negating that the damage was caused by flooding.

While it may seem that proof that damage was caused by wind would necessarily exclude damage caused by flooding or wave action, this cannot be assumed in slab cases. For example, the insured may be able to present proof that the wind was strong enough to tear off his roof, but the question becomes whether he or she must also prove that the roof was not damaged by flood (such as falling in because flood waters caused the house to collapse), or whether the insurer then bears the burden of proving that the roof damage was in fact caused by something other than wind (such as flood waters). Accordingly, in slab cases, the specifics of the evidence required for the insurer and insured to satisfy their respective burdens or proof may frequently decide the outcome of the coverage issue.

Starting point: policy language
In answering this question, the starting point should be the policy language, particularly the insuring clause of the policy. Although there can be many variations, property insurance policies can be generally divided into “all risks” and “named peril” policies. As the names imply, an “all risk’ policy covers damages caused by all perils (usually defined as fortuitous or accidental physical forces) which are not specifically excluded, while a “named peril” policy covers damage caused by only those perils specifically identified in the policy. [For a discussion of “all risks” and “named peril” policies, see Counch on Insurance §148.48 – 148.68 and Prudential Property & Casualty Ins. Co. v. Lilard-Roberts, 2002 WL 31495830 (D. Or. 2002).]

Logically, if the policy is an “all risk” policy, the insured should only have to make a prima facie showing that the house was destroyed by a fortuitous or accidental force, such as wind, and the burden would shift to the insurer to prove to what extent, if any, the loss was caused by a specifically excluded event, such as flood water. On the other hand, if the policy is a “named peril” policy, then the insured would presumably be required to prove the specific amount of damage caused by the named peril.

There are very few cases which discuss the issue of burden of proof beyond reciting the general hornbook principles, and almost none that are slab cases. In addition, the cases which do contain such a discussion do not specifically relate allocate of the burden of proof to the policy language.

One slab case is Lititz Mutual Ins. Co. v. Boatner, 254 So. 2d 765 (Miss. 1971). In that case, following Hurricane Camille, there was “nothing left of the insured property except the concrete slab on which the house had been erected.” The homeowner’s insurer denied coverage on the grounds that the property was destroyed by flooding rather than by wind, and flood damage was specifically excluded under the policy. The homeowner filed suit and prevailed against the insurer at trial. The insurer appealed.

On appeal, the insurer argued that it should have been granted a directed verdict based on the evidence submitted by the homeowner. The court began its discussion of the appeal by noting that the “great weight of the evidence” showed that the home had been destroyed by the wind before the storm surge came ashore. The Court then stated:

“Without sanctioning the argument that the burden of proof was upon the homeowners, not only to show that their property was damaged by windstorm, but to also show that it was in no respect damaged by tidal wave, we point out the general rule [that the homeowner may establish the amount or extent of loss by preponderance of the evidence, including circumstantial evidence].”

The court concluded that the evidence was sufficient to support an award in favor of the homeowner without addressing which party in fact had the initial burden of proof.

Although not a slab case, the burden of proof issue was addressed more directly in Cruz v. Hanover Ins. Co., 239 So. 468 (La. App. 4th Cir.), writ ref’d, 241 So. 2d 255 (La. 1970). There, the insurer admitted that there was some wind damage, but denied the bulk of the homeowner’s claim. The homeowner filed suit, but lost in the trial court and appealed the judgment. At the outset, the appellate court addressed the question of burden of proof, stating:

“At the outset, the plaintiff suggests that the trial court erred in requiring that he bear the burden of proving causality. That seems true. Eyewitnesses are seldom on hand at the height of a storm and although the cases skew a bit it is a fair synthesis that proof of coverage, together with a showing that wind damage was suffered during the course of a storm, creates a rebuttable presumption of causality.” [citations omitted]

Mr. Cruz made such a showing.

Most recently, in Leonard v. Nationwide Mutual Ins. Co., 438 F. Supp. 2d 684 (S.D. Miss. 2006), the Court, in ruling on an owner’s claim to recover under a homeowner’s policy for wind and water damage sustained during Hurricane Katrina, stated:

“Under applicable Mississippi law, in a situation such as this, where the insured property sustains damage from both wind (a covered loss) and water (an excluded loss), the insured may recover that portion of the loss which he can prove to have been caused by wind. Grace v. Lititz Mutual Insurance Co., 257 So. 2d 217 (Miss. 1972). Nationwide is not responsible for that portion of the damage it can prove was caused by water. To the extent property is damaged by wind, and thereafter is also damaged by water, the insured can recover that portion of the loss which he can prove to have been caused by wind, but the insurer is not responsible for any additional loss which it can prove to have been later caused by water. Lititz Mutual Insurance Co. v. Boatner, 254 So. 2d 765 (Miss. 1971).”

These decisions suggest that in slab cases, as long as the insured presents evidence making a prima facie showing that wind caused substantial damage to their home, the insured will not be required to present further evidence negating the possibility that the damage was caused by water and the burden will instead shift to the insurer to prove the extent of damage caused by water. This, in turn, will make it easier for the insureds to recover under their homeowner’s policies, and more difficult for the insurers to avoid coverage under their policy exclusions.

Texas courts appear to take a different approach and place the burden of proof on the insured to prove that a loss is caused by wind and not be any excluded peril. Coyle v. Palatine Ins. Co., 222 S.W. 973 (Tex. Comm. 1920).

Robert Redfearn, Jr. (Redfearnjr@spsr-law.com) is a partner in Simon, Peragine, Smith & Redfearn, a regional law firm with offices in New Orleans, La., and Mississippi.