Wednesday, September 21, 2005
Three weeks after Hurricane Katrina, state Attorney General Jim Hood unleashed a storm of his own. Hood announced a Sept. 15 civil action against some members of the insurance industry last week, declaring that provisions excluding flood damage from the policies of hurricane victims are void and unenforceable.
A water surge fueled by Katrina's record-high winds pushed waves higher than 30 feet in some areas, flooding areas left dry by every hurricane in recorded history. Hood told reporters that surge damage has been estimated at $2 billion to $4 billion.
Many policyholders with no history of previous flooding had opted out of expensive flood options provided by companies, however. Policyholders who are covered for wind damage argue that hurricane winds drew in the floodwaters. Hood stepped in to ask the Hinds County Chancery Court to void provisions in the policies that attempt to exclude damages directly or indirectly caused by water, whether or not the wind was the ultimate source. The suit claims the flood exclusions amount to a "deceptive" trade practice.
"(These insurance companies') coverage position will deprive thousands of Mississippi Gulf Coast residents and/or property owners of the insurance protection they purchased and upon which they relied," Hood's office asserted in the suit.
Hood's action against Mississippi Farm Bureau, State Farm, Allstate and other companies punctuates a chorus of outrage from politicians, fueled by the fury of countless voters, against the insurance industry.
Rep. Jamie Franks, D-Mooreville, called the policy provisions "loopholes" in a statement and demanded that the companies "do the right thing."
"The policy says 'hurricane coverage,' and even though these companies took your money every month and led you to believe you were covered, now they deny you in your hour of need," Franks said.
Insurance Commissioner George Dale warned in an interview, however, that "if you wave a magic wand" and make insurance companies pay every claim, included those not covered, the result will be bankrupt insurance companies and policyholders with unpaid claims.
"Insurance companies purchase reinsurance. When those claims go beyond the amount of reinsurance that they've purchased, they're broke," said Dale, pointing out that a number of companies went broke in Florida after the monumental damage of Hurricane Andrew—which does not compare to estimated damage by Katrina.
Rep. Bobby Moak, D-Bogue Chitto, said last week that he was not too concerned about the possibility of bankrupting insurance companies this early. Moak said it was likely that the federal government would bail out the industry as it bailed out the airline industry in the months following the terrorist attacks of Sept. 11.
"(I'm not going to) stand here and say Mrs. Jones shouldn't receive payment on her three-bedroom house because companies and the insurance commissioner are worried about companies going bankrupt," Moak said. "Mrs. Jones paid her premiums."
Democrats also cried foul last week after a joint meeting of the House and Senate Insurance Committee on Sept. 12 focused on praise of tort reform, and how it's helped the insurance companies make money, rather than addressing the immediate needs of policyholders, who were not represented at the lawmakers' meeting with industry representatives.
"This is simply absurd," said Democratic Party Chairman Wayne Dowdy in a statement. "If you are in touch with Mississippi, your first concern is healing and rebuilding the southern part of this state."
The party complained that when Rep. Dirk Dedeaux, D-Sellers, tried to steer the meeting to address the loss of doctors in hurricane ravaged areas, he was told there were enough doctors and that the medical community would be back to normal in a few months without the committee's help. A Mississippi Democratic Party press release describes one insurance industry representative saying that the Legislature had already done its job: "You passed tort reform."
"I sincerely hope, and do honestly trust, there are other Republicans in the Legislature who are more focused on the plight of common Mississippians than on the plight of overly wealthy insurance companies," Dowdy said.
Dale emphasized that he is stuck between the insurance companies and the policyholders. Right after Katrina, he instructed the insurance companies that they cannot simply declare that a homeowner suffered water damage and thus isn't covered, without actually going in to survey the damage and prove that it was water, not wind.
Still, though, he stops short of declaring that all damages by the hurricane were ultimately caused by Katrina's winds. That leaves a gap in coverage—for the many policyholders whose homes and businesses have a water line—that Hood is attempting to close.
Dale, though, does not believe those insured have much of a case. "It's unfortunate. If you remember in 1979 Easter Flood, Northeast Jackson was under water. Nobody had flood insurance because not flooded there in 100 years. Many never even thought about flood insurance."
At a Sept. 19 town hall meeting U.S. Rep. Gene Taylor, D-4th District, said he will push for Congress to demand insurance companies to classify all damage due to storm surge as wind-driven.
Taylor said the insurance companies likely will be turning to the federal government for a bail-out, but should accept that condition if federal money is to be forthcoming. He also said homeowners should be allowed to retroactively buy into the national flood insurance program.
Dale added that, like North Jackson, the Coast will ultimately weather this storm, with or without insurance payouts. "The bottom line is that neighborhood is a viable neighborhood today," he said.
One of our mayor's primary supportors, Mr. Billy Mounger, is taking the insurance company's side in their efforts to keep from paying for flooding caused by the winds of Hurricane Katrina, it seems: Clarion-Ledger letter: Hood is an absolute today of the greedy plaintiff lawyers; and deceptively under cover of a populist appeal to unfortunate Katrina victims, his ulterior motive is to enrich his plaintiff trial lawyer friends to the detriment of everyone else! Bravo, Clarion-Ledger! Does this goober really think that the only purpose to this lawsuit could possibly be to enrich plaintiff's attorneys? I've seen it all now.