Many residents of the Gulf Coast who were denied coverage for flood-related damage last year will no doubt be watching very closely the results a newly opened federal court case.

According to the AP, the "groundbreaking" case could decide whether hundreds of homeowners will receive payouts for losses incurred last year from storms Katrina and Rita.

At the heart of this trial is the question of whether some hurricane-related damage was caused by wind or post-storm surge flooding, as well as whether insurers misled consumers into not buying sufficient coverage.

(Homeowner's policies often cover for wind damage but do not cover for damage from flooding.)

Plaintiffs in the case argue that insurance agents encouraged them not to buy flood insurance--that they were assured their homeowner's would cover for flood destruction. They argue that agents have a disincentive to inform homeowners about flood insurance because they typically don't make a big commission on such policies.

They also claim that insurance companies erroneously labeled wind damage as flood damage in their claims investigations, allowing them to deny coverage to many of last year's Katrina and Rita victims.

The potential fallout, if the plaintiffs have their way, is that insurers will be forced to pony up hundreds of millions of dollars for previously denied claims.

We'll keep you posted.