Carolyn King, one of the 5th U.S. Circuit Court of Appeals judges who will rule on the case involving New Orleans homeowners and insurance companies, has promised a quick ruling. Although such rulings usually take months, Judge King has acknowledged that tens of thousands of people could be affected by the case, so a quick ruling is important.

In November, U.S. District Judge Stanwood Duval ruled for policyholders who said that the insurance policy language excluding water damage from policies was ambiguous. He said that the policies didn’t distinguish between floods and rainfall that were acts of God, and other water damage caused by something like a broken levee. (I have a hard time seeing how a policyholder might think that a flood did not include water from a levee break. A flood is a flood, and flood damage was excluded.)

The insurance companies appealed this ruling on the flood exclusion, saying that their homeowners’ policies do not cover damage from any type of flooding, whether from an act of God or a levee break.

$1 billion in insurance benefits is at stake in Louisiana. Attorneys for the plaintiffs say that the insurance companies were intentionally vague in their definition of flood in order to avoid paying benefits to policyholders.

The insurance companies counter (correctly, I think) that policies are not secretive… they clearly exclude flood coverage. They also have argued that punishing the insurance companies for not “defining” a common word like “flood” would hurt policyholders in the future because insurance companies would be forced to make policies so specific that they are completely unreadable by policyholders.

State Farm has been dismissed from this case because the judge ruled that its policies had language that clearly excluded all flood coverage no matter the cause. Still a part of the case are Allstate Corp., St. Paul Travelers Companies Inc. and other insurers.