Six Flags Inc. v. Westchester Surplus Lines Ins. Co. (E.D. La.
April 6, 2010)
Following Hurricane Katrina, Six Flags Inc. submitted claims for losses
in excess of $150 million. The park sits
in a high risk flooding area, designated by the Federal Emergency Management
Agency. Because of this, the excess
insurers capped their liability at $2.5 million with some compensation for
losses that resulted from wind damage.
In 2008, the United States District Court for the Eastern District of
Louisiana granted motions for partial summary judgment in favor of, including
others, Liberty Corporate Capital Ltd., Arch Speciality Insurance Co., Axis
Specialty Insurance Company, and Commonwealth Insurance Co. The court held that an unambiguous sublimit
in policies applied to the flood loss and limited recovery for flooding in the
zone in which the park sits to a dollar value per occurrence.
In April 2009, the Fifth Circuit of the United States Court of Appeals
partially upheld the decision, rejecting Six Flags’ argument that Hurricane
Katrina was a distinct peril not subject to the sublimit. The court, however, reversed entry of
judgment for Commonwealth Insurance Co., holding that a reasonable reading of
the flood definition endorsement in the policy supported the view that the
policy excluded the applicability of the flood sublimit to a flood caused by
Hurricane Katrina.
Following this decision, Six Flags Inc. and Commonwealth Insurance Co.
settled the dispute and the United States District Court for the Eastern
District of Louisiana entered an order on April 7, 2010 dismissing Six Flags’
claims with prejudice.
For a copy of the decision click here
Toni Frain and Tom Segalla