Video: Insurance struggle goes to court

By Correspondent
NBC News
updated 7/10/2006 7:19:39 PM ET 2006-07-10T23:19:39

In taking his case to court, police Lt. Paul Leonard says he just wants his insurance company to play fair and help rebuild his storm-damaged home.

“I felt like they'd be on my side,” Leonard says. “Well, I don't know that they are.”

Leonard's home, in Pascagoula, Miss., suffered extensive water damage to the lower floor during Hurricane Katrina.

Leonard says he was promised before the storm by his insurance agent that his homeowner’s policy would cover everything.

“I was told by my agent that I had a policy that would protect me for hurricanes, because I asked specifically for that,” he says.

But Nationwide Mutual concluded that most of the damage was caused by flooding, and because Leonard did not have a separate flood insurance policy, the insurer denied most of his claim.

“We think the facts clearly show that the coverage that the Leonards purchased did not cover flood, but the damage was primarily flood,” Nationwide Mutual Spokesman Joe Case says.

This groundbreaking trial over wind versus water damage, and which policies cover what could affect thousands of other families along the Gulf Coast who were denied their insurance claims, and have also filed suit.

Leonard’s Attorney, Richard Scruggs, says insurance agents were given free reign to interpret the policies for their customers, who are now suffering.

“It's been devastating, it's still settling in there now,” Scruggs says. “People are being denied and unable to rebuild their homes.”

But, an insurance industry spokesman says if the courts redefine the flood policies now, it will have a devastating impact on policy holders.

“Coverage would become very expensive, if it were available at any price at all,” says Robert P. Hartwig, chief economist with the Insurance Information Institute.

An emotional fight over billions of dollars in losses along the Gulf.

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