Mississippi Attorney General Jim Hood's lawsuit, filed afterHurricane Katrina to compel insurers to pay for what carriers argueare excluded flood damage claims, remains mired in a jurisdictionaldispute.

Shortly after Mr. Hood filed the suit in state court on Sept.15, insurers moved to have the suit heard in U.S. District Court inJackson, Miss.

"Since one of the main issues involved was the National FloodInsurance Program, we felt the federal venue was appropriate," saidState Farm spokesman Phil Supple.

In addition to State Farm, the suit names Allstate, Nationwide,USAA and the now defunct Mississippi Farm Bureau as defendants.

Federal Judge Tom S. Lee is hearing the suit, and there islittle indication when he will rule on the jurisdictionaldispute.

Jacob Ray, spokesman for Mr. Hood, said since there are nofederal issues of law involved, the state court remains the mostappropriate jurisdiction.

In the suit first filed in Chancery Court of Hinds County,Miss., first judicial district, the attorney general alleged thatcertain contract provisions seeking to exclude some water damage,whether or not driven by wind, are unenforceable.

The insurance industry maintains that policy language excludingflood damage covers rising waters, even if they were driven by thehurricane.

With more than half of the Gulf Coast homeowners whose homeswere severely damaged by flood having no flood coverage or verylittle coverage, the suit has become part of the national debateabout natural catastrophe risk coverage.

Earlier this week, the National Association of InsuranceCommissioners debated a plan that would in essence eliminate theflood exclusion in favor of a scaled down national flood programand homeowners policies reflecting the added risk.