The insured, Versai, managed apartments that were so extensively damaged by Hurricane Katrina that they were uninhabitable. See Versai Mg. Corp. v. Clarendon Am Ins. Co., No. 08-30874, 2010 U.S. App. LEXIS 3479 (5th Cir. Feb. 19, 2010). Versai notified its insurers and submitted claims with the assistance of its private adjusters and contractors. Estimated repairs amounted to over $17 million, but was later increased by $10 million to comply with building codes. Lloyd's paid limits of $2.5 million on its all-risk policy. Standard Fire Insurance Company paid $6 million under a flood insurance policy. Excess coverage was provided by Clarendon and EFIC up to $13.4 million. Each eventually paid $2.9 million.
Versai sued the excess carriers, seeking additional for coverage for property damage, business interruption loss, replacement costs, and code compliance upgrades. The district court granted summary judgment to the carriers on all claims.
The Fifth Circuit affirmed in part, reversed in part. The district court denied further coverage for property loss based on Versai's failure to support its proofs of loss with sufficient documentation. The Fifth Circuit reversed on this point because the policy did not require additional documentation to support a proof of loss. The Fifth Circuit also determined summary judgment had been improperly granted to the excess carriers on the business interruption loss because there were issues of fact regarding the length of apartment vacancies after the hurricane.
The Fifth Circuit affirmed, however, the district court's granting summary judgment on the claim for payment for the costs of bringing the apartments into compliance with current building codes. The policy did not provide for such costs until after the insured had incurred the expense of compliance with the building code. Finally, Versai's claim for replacement costs was properly dismissed because the policy required completion of repairs before the insured could be reimbursed.
