Mississippi on Thursday sued insurers to force them to pay billions of dollars in flood damage from Hurricane Katrina, saying standard insurance polices have led homeowners to believe they are covered for all hurricane damage, whether from high winds or storm surges.In other words, the AG, in a move sure to gain him political favor in the eyes of Mississippi voters, is seeking to compensate homeowners who (a) didn't bother to read their insurance policy, or (b) thought they could beat the odds by skipping on the flood insurance.
[Attorney General Jim Hunt] asked a Chancery Court to void provisions in the policies that attempt to exclude from coverage losses or damages directly or indirectly caused by water, whether wind-driven or not. He said he would seek a restraining order next week pending a full hearing.
Only about 30 percent of the houses in disaster-struck portions of Mississippi and Alabama had flood insurance, according to Federal Emergency Management Agency estimates.
Allstate Property and Casualty Insurance, one of the companies named in the lawsuit, said in a statement that it was unfortunate the litigation had begun so early in the recovery process.
"The fact is flood insurance protection has been offered by the federal government for nearly four decades precisely because flood damage is not covered by private insurers like Allstate," company spokesman Michael Trevino said.
Chicago-based Property Casualty Insurers Association of America, an industry group, said the lawsuit threatened to undermine the viability of every insurance policy in the state and the integrity of every legal contract in the nation.
Chief Executive Ernie Csiszar said the action was also unfair to consumers who have paid the federal government for flood insurance.
"This would establish a dangerous precedent and expose insurance companies to potentially billions of dollars in claims costs for a risk in which not one dollar of premium was collected," he said. "This lawsuit is about politics, not fairness or justice."
If the AG succeeds, what reputable insurance company would be willing to continue to do business in Mississippi at a price its customers could afford? Not that the state would allow these companies to increase premiums to a level commensurate with the risk they're being told they must undertake.