Were the Great New Orleans Flood and Hurricane Katrina separateevents?

Much is riding on questions like this as the insurance industry,regulators and plaintiffs' attorneys fight over claims liabilitiesfrom the weather events of late August in the Gulf Coastregion.

The first salvo came yesterday in the form of a lawsuit filed inthe Chancery Court of Hinds County, Mississippi by the state'sattorney general, Jim Hood.

Mississippi seeks a restraining order to stop insurancecompanies through their adjusters from having property owners signliability waivers acknowledging their damage was caused by floodand not wind-driven rain. The state argues such provisions areunenforceable and unconscionable.

The insurance industry reacted immediately, and with some degreeof alarm.

Ernst Csiszar, president of the Property Casualty InsurersAssociation of America, based in Des Plaines, N.Y., said thelawsuit was about politics. "It threatens the validity of anycontract now in effect," he said.

Robert Hartwig, chief economist for the New York-based InsuranceInformation Institute, said it was noteworthy that not oneinsurance regulator supported Mr. Hood's lawsuit, including hishome state commissioner, George Dale.

Mr. Dale told National Underwriter yesterday that he would obeywhatever courts said, but did note that the potential ramificationsof the suit could be troubling.

Mr. Hartwig said the wind versus flood issue rarely came upafter big hurricanes. "In fact, these claims usually run prettysmoothly. Whether it is flood or just flood and wind, adjusters arevery experienced at it," he said.

The problem with Katrina is that many of the affected residentsdid not buy flood insurance, he added.

Mr. Hood is not arguing that the flood exclusion is invalid, buthas questioned its interpretation.

"The provisions at issue attempt to exclude from coverage lossor damage caused directly or indirectly by water, whether or notdriven by wind," Mr. Hood said in a press release.

In such disputes, the call should always be in favor of thepolicyholder, he said.

In a similar vein, Ken Suggs, president of the American TrialLawyers Association, painted the insurance industry as heartlessbureaucrats who even before the storm subsided were a disowningliability.

"The description by some in the industry of the damage from thestorm surge as "The Great New Orleans Flood" is ridiculous," hesaid. "It contradicts the scientific assessment of the NationalClimatic Data Center, and appears to be the first part of a 'spin'campaign designed to provide cover for denying claims fromvictims."

Mr. Hood's the lawsuit, which has not been joined by otherstates, is a legal attack on an industry that follows in thefootsteps of his predecessor, Mike Moore, who gained a nationalreputation suing the tobacco business.

In Alabama, according to a Reuters report, Attorney General TroyKing said it would be premature to initiate such a suit. InLouisiana the Attorney General's Office referred questions aboutpossible legal action to the Department of Insurance. A spokesmansaid there are no plans for a suit and it is not the task of thatagency to file legal actions.