MS Attorney General to Sue Insurance Companies

[DFWdem]

http://www.sunherald.com/mld/sunherald/12658408.htm

Mississippi's attorney general and the state's top trial lawyer are both pursuing lawsuits against insurance companies to force them to pay Coast homeowner claims from Hurricane Katrina.

Hood names in the lawsuit Mississippi Farm Bureau Insurance, State Farm Fire and Casualty Co., Allstate Property and Casualty Insurance Co., United Services Automobile Association (USAA) and Nationwide Mutual Insurance Co.

Nationwide issued a statement saying the flood exclusion is well-established and, if voided, would have a "significant negative impact" on policyholders across the country. Allstate agreed, adding that demanding payment for flooding when premiums were not collected to cover such an occurrence would violate the Constitution and basic concepts of fairness.

"We do not believe that litigation is the answer to helping victims of Hurricane Katrina who suffered losses caused by flooding," said Allstate spokesman Michael Trevino. The company is encouraging Hood and other political leaders to develop financial assistance programs to assist with recovery.


The insurance companies are attempting to skip out on their obligations, claiming that a 30 foot storm surge is actually flooding. The storm surge was wind-driven. I don't think the insurance companies are going to win this battle. If they don't pay these claims, almost every person who pays a mortgage and lost their home will go into default. I know I wouldn't pay my mortgage in such a case. Go ahead, reposses my foundation since that's all that's left. I think the banking industry will lobby Congress hard to make the insurers pay since they will suffer if these claims aren't paid. Big banks versus big insurance companies - this should be good. Also, Dickie Scruggs, Trent Lott's brother-in-law and primary attorney in Mississippi's lawsuits against tobacco companies in the 90's, is suing on behalf of homeowners. Say what you will about Trent Lott, but I think he'll do his part to see that his brother-in-law is successful. It may be one of the few things he actually gets right in all his years in DC.

[ohio_liberal]

1. Someone enlighten me, please?

Why is flood insurance not a part of regular homeowner's insurance? I know it's always been this way, but why? :shrug:

[mduffy31]

5. It is a federal program

Flood insurance is a federal program I believe. Insurance companies were losing too much money d/t floods. I can see that after this Hurricane insurance will become a federal program also.

[MadHound]

2. I hope the AG wins, but I have grave misgivings if they do.

If the MS AG forces insurance companies to pony up(as they should), then a lot of these insurance companies will be staring bankruptcy in the face. They have been hit with a couple of things, first, ever increasing pay-outs for mega disasters, and the markets, where insurance companies make the vast bulk of their profits, haven't been very profitable lately.

I can easily see the insurance industry, having this ruling go against them, go crying to the government to bail their asses out, and Bushco will be very obliging. Which means that you and I, the taxpayers in this country, will be handed the bill for filling these insurance claims. Just gotta love that corporate welfare:eyes::grr:

I do hope the AG is successful in his cause, but it will be you and I who foot the bill.

[ret5hd]

3. insurance companies have insurance too...called re-insurance.

they wont go belly up.

[MadHound]

8. Yes, there is reinsurance, and retrocession

Both the market for both products has been declining quickly, and many insurance companies have foregone reinsurance. In addition, the same strains that have hit the insurance industry also hit the reinsurance and retrocession industry.<http://www.marketwatch.com/news/yhoo/story.asp?source=blq/yhoo&siteid=yhoo&dist=yhoo&guid={9CFC74BC-CDF6-4346-80D3-FE03A3FF2F38}> Massive natural disasters, stagnant markets, etc.

I still think that if this ruling goes through, we're going to see either a lot of insurance companies going under, or a massive government bail-out, which will be taken out of our taxes.

[DFWdem]

7. I have no doubt we taxpayers will pay

But we'll end up paying even if they don't pay out these claims. You know the insurance companies will run to the gov't for assistance regardless of whether they pay these claims or not. That being the case, I'd rather they pay them. Many of these homes were not in a flood zone and as such were not eligible to be covered under the National Flood Insurance Program (NFIP). I'm originally from the MS Gulf Coast and many of the areas that were hit by the storm surge have never flooded before, even from previous hurricanes.

[elehhhhna]

4. water from outdoors which comes in under ones doors, etc.,

is defined as flooding. Could be rain, storm surge, techtonic plate shift causing massive thaw--whatever. If your plumbing floods the house that's a different deal.

It's always been that way--that's why flood insurance is available.

I suspect some of the fires in NO last week were conveniently started in buildings w/o flood insurance, btw.

[Village Idiot]

6. Welcome to the world of actuarial science and risk management.

[ProfessorGAC]

9. It Would Appear That These Firms Did Both Poorly

Underestimated the risk, both impact and probability. Overestimated return and revenue.

If they take a big hit, the damage done will be their own fault.
The Professor

[samplebytes]

10. Trent Lott

Didn't Lott lose one of his houses? Perhaps he didn't have
flood insurance. :)