Insurer must pay condo association for Hurricane Harvey damage

A federal appeals court has affirmed a lower court ruling in favor of a Texas condominium association, holding it is entitled to damages for boat slips destroyed during Hurricane Harvey.

The August 2017 hurricane caused unprecedented rainfall and flooding in Texas, according to Friday’s ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Playa Vista Conroe v. Insurance Co. of the West.

To prevent the Lake Conroe Dam from overflowing and failing, the San Jacinto River Authority released 79,141 cubic feet of water per second from the dam, which was nearly twice the flow rate of Niagara Falls. The 22 boat slips of Montgomery, Texas-based Playa Vista were destroyed, the ruling said.

The condominium association’s insurer, San Diego-based Insurance Co. of the West, a unit of ICW Group Holdings Inc., denied coverage on the basis its policy did not cover flooding caused by a hurricane or tropical storm, and the association filed suit against it. The U.S. District Court in Houston ruled  Playa Vista was entitled to $190,828 in damages and $50,000 in attorneys fees.

The ruling was upheld by a unanimous three-judge appeals court panel, which said that three potential exclusions the insurer pointed to do not apply.

The insurer also argued after the district court entered final judgment that because Playa Vista stipulated its losses were caused by the decision of a governmental body, the San Jacinto River Authority, it “triggered a theretofore unmentioned exclusion” for acts by a governmental body.

“That is far too little too late,” the ruling said.  If the insurer “wanted to rely on the governmental-body exclusion it was obligated to raise it (at the latest) at summary judgment,” the ruling said, in affirming the lower court.

Attorneys in the case did not respond to requests for comment.