Mississippi
Attorney General Jim Hood last week warned that insurers can do the smart thing
and settle the state’s suit seeking to compel coverage for Hurricane Katrina
wind-driven water damage claims, or face a flood of individual actions.
Speaking
before a conference in
“Imagine
the onslaught of a mass of lawsuits” dealt with one case at a time, Mr. Hood
said. A jury made up of people within the community would not be sympathetic to
the carriers, and “insurers would get hammered in individual suits,” he added.
The
attorney general said he brought his suit contesting carriers’ assertion that
they are not responsible for water damage to homes after listening to the
plight of the
He
said policyholders were under the impression they had purchased insurance
covering them for losses from a hurricane, only to discover insurers refused to
pay for losses that involved water damage.
To
be covered totally for this event, he said, a policyholder would have had to
purchase three forms of insurance—homeowners, hurricane and flood insurance.
However,
he explained, many homeowners believed that since they were not in a flood zone
and were not required to purchase flood insurance, their losses from a
hurricane would be covered.
Mr.
Hood argued that flood insurance only covers events from flooding or tidal
waves as the result of standing water rising over its banks. In this case, 90
percent of the losses were the result of storm surge, or wind-driven water that
blew up to nine miles inland, far beyond what is regarded as a flood zone.
Since
storm surge is not specially excluded from the policy, he said, it is included
and should be covered.
Mr.
Hood said the issue is currently on appeal in federal court over the issue of
jurisdiction related to flood, but he expected the case to be returned to state
court within two weeks.
He
said he is not seeking to alter the nature of flood insurance, but does want to
protect those who thought they had insurance for this event and prevent an
economic meltdown.
Mr.
Hood commented that
He
said the area had just recovered five years ago from 1969’s Hurricane Camille,
and “now it is all gone.”
Mr.
Hood added that if a settlement is not reached soon, residents without adequate
shelter will begin to leave as winter approaches, making the conditions for
economic recovery worse.
He
was extremely critical of the industry for its attempts to paint the residents
as “those dumb rednecks who did not have enough sense to buy flood insurance.”
In
fact, he added, many people, including professionals, were “duped [by the
carriers] into believing that if they had hurricane coverage then they would be
covered.”
He
said the industry is pretending that if it does pay the flood losses it would
go broke, when in fact the losses would cost insurers between $2 billion and $4
billion—a fraction of the $38 billion profit it has reported, according to Mr.
Hood.
The
total net income for the property-casualty industry for 2004 was close to $40
billion, according to National Underwriter Highline Data.
“But
like other boneheads,” the industry would rather fight over the issue, he said,
instead of being “smart and coming together” on a settlement.
“This
is not a scheme to extort money,” he added.
He also called for the revamping of the National Flood Insurance Program, saying that the maximum limits of payment are inadequate, and insurers need to have more of a stake in the program.