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Last Updated: Friday, 3 August 2007, 10:05 GMT 11:05 UK
Insurers win Katrina court case
Flooded houses in New Orleans in 2005
The flooding caused billions of dollars of damage to property
A US federal court has ruled that insurers do not have to pay for the flood damage in New Orleans following Hurricane Katrina in 2005.

Residential property insurance excludes flood damage, which is covered by a federal programme.

New Orleans residents and Xavier University argued that the insurers should pay because the negligent design of a dam caused the flooding.

The court said the insurers were not liable even if there was negligence.

New Orleans flooded after levees and flood walls in the canals and drainage systems holding back the Mississippi River were breached in the wake of Hurricane Katrina.

The flooding cost hundreds of lives and caused billions of dollars worth of damage.

The insurers involved in the case were Allstate, Travelers and the mutual insurer State Farm.

Further appeals

The court's decision overturned an earlier ruling by a lower court.

"We are pleased that the court concluded that policy exclusions for flood damage are unambiguous and enforceable," said Michael Siemienas, a spokesman for Allstate.

But the case will go on to further appeals, according to James Garner, a lawyer representing Xavier University.

"The issue will be argued again on 12 September in the Louisiana State Court of Appeals and, ultimately, at the state supreme court," he said.

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