Sonnenschein Secures Major Victories for Insurance Industry in High Stakes Cases in U.S. Court of Appeals for the Fifth Circuit
Sonnenschein’s appellate expertise in the insurance arena has been on display in a series of cases in the Fifth Circuit during the last year. We highlight three of those cases here.
Chehardy v. Allstate, et al. / Vanderbrook v. Unitrin, et al., (App. No. 07-302119, reported at 495 F.3d 191 (5th Cir. August 2, 2007)): One of the most significant issues in the massive Hurricane Katrina Litigation was whether the insurers’ standard flood exclusions applied to preclude flood damage resulting from the Hurricane, even if the cause of the flooding was something man-made, such as the failure of the New Orleans levees. The Federal Court in Louisiana, per Judge Duval, held that the flood exclusions would not apply in this circumstance.
Sonnenschein represented one of the lead parties in the appeal of Judge Duval’s order to the Fifth Circuit, and Sonnenschein’s Richard Fenton was one of the presenters for the defense group at oral argument. The Fifth Circuit reversed the prior adverse district court decision, and ruled that the flood exclusion in the homeowners policies at issue applied to all floods, whether man-made or naturally occurring. The Court also held that the Hurricane Deductible Endorsement did not provide or expand coverage to include damage caused by flooding. This decision saved the insurance industry billions of dollars in potential exposure.
In re Katrina, (App. No. 08-30145, reported at 524 F.3d 700 (5th Cir. April 11, 2008)): In this matter, the State of Louisiana filed a class action, in Louisiana state court, against more than 200 homeowner insurance companies, including several of Sonnenschein's clients, seeking to recoup an alleged $9 billion in grants made by the State under the Road Home program, which was established in the wake of Hurricanes Katrina and Rita. The State asserted rights as a subrogee under thousands of homeowners policies, as well as the rights of underlying policyholders who were allegedly under-compensated for hurricane-related losses by their respective insurance carriers. The defendants removed the case to federal court and the state sought remand. In a substantial victory for our clients, the Fifth Circuit affirmed the lower court’s order denying remand, finding that the case had been properly removed to federal court under the Class Action Fairness Act (CAFA).
Sonnenschein’s team has had a leading role in the joint defense efforts throughout the litigation, including removing the action under CAFA, filing the lead opposition brief in the district court that successfully defeated the State's motion to remand, and filing the lead appellate brief in the Fifth Circuit. Additionally, the joint defense group selected Sonnenschein’s Richard Fenton to argue the case in the Fifth Circuit on behalf of all of the defendants. He successfully convinced the court of appeals to affirm the district court's order despite significant concerns expressed by the appellate panel.
The Fifth Circuit's decision is an important victory for our clients, the insurance industry, and all corporate defendants. This was an issue of first impression, and this victory will help prevent private class action plaintiffs' attorneys from avoiding the scope of CAFA by simply borrowing the offices of a state attorney general.
State of Louisiana v. Allstate, et al., (App. No. 08-30465): In a major win for Sonnenschein, the 5th U.S. Circuit Court of Appeals affirmed a district court ruling denying the Louisiana attorney general's motion to remand in the state's antitrust price-fixing case against Allstate and others. The court accepted the defense case, argued last month by Rick Fenton, that the state's action in State of Louisiana v. Allstate, et al., was subject to federal jurisdiction under the Class Action Fairness Act (CAFA), even though the complaint contains no express class action allegations. The complaint alleges that Allstate and other insurance companies and various vendors conspired to artificially depress prices for repairing damage resulting from Hurricane Katrina by manipulating construction values in computer programs. Last year, the joint defense group convinced the district court to remove the action to federal court under CAFA, arguing that the relief sought by the Louisiana attorney general turned the alleged parens patriae action into a disguised class action. As with the Road Home case, another significant and similar case brought by the state of Louisiana, the joint defense group asked Fenton to argue the case before the 5th Circuit.
