Although 2017 feels like decades ago, insureds are still in courtrooms battling out their Hurricane Harvey claims with their insurance companies. Earlier this month, on March 5th in Playa Vista Conroe v. Insurance Company of the West,1 the Fifth U.S. Circuit Court of Appeals affirmed the lower court’s decision in favor of a Texas condominium association, requiring the insurance company to pay $190,827.50 for the damage plus $50,000 for the insured’s legal fees.

Playa Vista Conroe is a condominium association located on the north shore of Lake Conroe, a manmade lake on the San Jacinto River outside of Houston, Texas. Before Hurricane Harvey, the Playa Vista property included 22 boat slips. These boat slips, along with the dock, were insured by Insurance Company of the West (“ICW”) just three months before Hurricane Harvey. The policy documents included: a “difference in conditions form” (“DICF”); a “limited coverage—flood endorsement” (“FE”); and a “specified flood exclusion” (“BSE”).

Hurricane Harvey, a Category 4 hurricane, devastated Texas and Louisiana in August 2017. The San Jacinto River Authority released from the dam 79,141 cubic feet of water per second in order to prevent the Lake Conroe Dam from overflowing and failing. This flow rate was almost equivalent to the flow rate of Niagara Falls. As a result, the Playa Vista boat slips were obliterated.

Playa Vista sought compensation for the slips based on its policy with ICW. In its notice of loss, Playa Vista described the loss as “[d]estruction of various components of the condominium property from severe weather, including complete destruction of [the] boat dock, damage to condominium buildings, damage to garages, bulkhead damage, fencing damage, landscaping damage, pool damage, awning damage, and other miscellaneous damage.” ICW denied coverage and stated the damage “appear[ed] to be the result of Hurricane/Tropical Storm Harvey,” and that Playa Vista’s “policy d[id] not cover flooding caused by a hurricane or tropical storm.”

ICW argued three potential exclusions, which the three-judge Circuit Court of Appeals panel unanimously found did not apply.

After the trial court entered final judgment in favor of Playa Vista, ICW filed a motion arguing for the first time that because Playa Vista stipulated its losses were caused by the San Jacinto River Authority, it “triggered a theretofore unmentioned exclusion for ‘acts or decisions, including the failure to act or decide, of any person, organization, or governmental body.’”

The opinion, written by Circuit Judge Andrew S. Oldham, criticized this legal ‘gotcha’ as “far too little too late. If ICW wanted to rely on the governmental-body exclusion, it was obligated to raise it (at the latest) at summary judgment.”2
1 Playa Vista Conroe v. Ins. Co. of the West, No. 20-20307 (5th Cir. Mar. 5, 2021).
2 See, e.g., Mid-Continent Cas. Co. v. Bay Rock Operating Co., 614 F.3d 105, 113 (5th Cir. 2010).