Analysis of Katrina Opinion re: MRGO Claims
A Louisiana federal court issued a decision this week that may affect thousands of claims in the ongoing Hurricane Katrina litigation. After a 19 day bench trial for five flood victims that filed suit against the United States Army Corps of Engineers (ACOE), U.S. District Judge Stanwood R. Duvall awarded $719,000 in the In Re Katrina Canal Breaches Consolidated Litigation.
The ruling concerns only two areas of New Orleans: St. Bernard Parish and the Lower 9th Ward neighborhood, and is further restricted to claims arising from flooding caused by the Mississippi River Gulf Outlet (MRGO). The claimants alleged the government failed to properly design, construct, operate and maintain the MRGO, a 76-mile man-made ship navigation channel that connects the Gulf of Mexico to the Port of New Orleans Inner Harbor Navigation Canal. The claimants further alleged that the design of the MRGO (with the surface width being wider than the bottom width), along with the inevitable widening that would occur from waves in the channel, allowed the MRGO to act as a "funnel" for the Hurricane Katrina storm surge. Additionally, the salt water that was allowed to enter the MRGO from the Gulf allegedly killed off the storm-slowing plants and vegetation, further contributing to the "funnel" effect for the storm surge. The issues surrounding the MRGO have led many to refer to it as "The Hurricane Highway."
.jpg)
Claimants in the In Re Katrina Canal Breaches Consolidated Litigation advanced essentially two claims. The first claim concerned the levee breaches. In January 2008, the Court ruled that the ACOE was immune from suits based on the levee breaches because of the immunity provided by the Flood Control Act of 1928, 33 U.S.C. § 702(c), which provides that "no liability of any kind shall attach to or rest upon the United States for any damage from or by any floods or flood waters at any place." After the January 2008 decision, only the MRGO claims remained.
In its decision in favor of the plaintiffs this week on the MRGO claims, the Court rejected the government’s claims of immunity based on the Flood Control Act, because unlike the levee, the Court found that the MRGO was not designed for flood control, but rather was designed as a shipping channel.
The Court rejected the government’s claims of immunity for the failures of the MRGO under the Due Care Exception to the Federal Tort Claims Act (FTCA). In its November 18, 2009 Order, the Court held: "Due care was clearly absent in the Corps’ actions as to the maintenance and operation of the MRGO. This exception is unavailable to the Corps."
The Court also rejected the government’s claim of immunity under the Discretionary Function Exception to the FTCA. This exception "insulates the Government from liability if the action challenged in the case involves the permissible exercise of policy judgment." Berkovitz v. United States, 486 U.S.531, 537 (1988). The government had claimed that all of its actions with respect to the maintenance of the MRGO were shielded by the Discretionary Function Exception. In its November 18, 2009 Order, the Court held, "In the event the gross negligence of the Corps in maintaining the MRGO would be regarded as policy, then the discretionary function exception would swallow the Federal Tort Claims Act leaving it an emasculated statute applying to automobile accidents where government employees are involved or medical malpractice where a government physician is involved. This was clearly not the intent of Congress."
The lead plaintiffs attorney, Pierce O’Donnell, told multiple media outlets that after this initial trial, there are "roughly 100,000" Hurricane Katrina claimants with the same claims as those that were ruled on this week that could be eligible for the same type of financial award from the government. However, a government appeal in the case is likely. In interviews, O’Donnell has said he is asking the government to work out a "universal settlement" with all of the claimants he represents.
In order to have preserved a claim against the ACOE related to Hurricane Katrina, claimants must have filed a Form 95 with the ACOE by August 29, 2007. Claimants then have 6 months after denial within which to file suit.
In Canada, the right of subrogation is a product of the common law, although it may be modified by statute or contract. Unlike in the United States, Canadian common law provides that an insurer may sue only in the name of the insured in relation to a subrogated claim .That rationale has its roots in the need to provide a process by which the insurer would be able to exercise its subrogated rights. Historically, insureds were required to take all steps within their power to reduce a loss for which they had received indemnity, including exercising legal remedies against third parties. Since those remedies were personal to the insured, however, they could only be exercised in the name of the insured as a matter of procedural law. The common law did not provide a method whereby a person could be compelled to commence an action against another; therefore insurers had to apply to the Chancery Court to compel an insured to allow his or her name to be used for legal proceedings against third persons in order to reduce the loss.
The tenet still holds true today, and is illustrated by an exception to the rule discussed in the Ontario Court of Appeal case of 
