One of the biggest challenges ahead in 2006 is whether the longstanding flood exclusion in homeowners policies will be washed away by a wave of litigation spurred by last year's record hurricane season. At stake are billions of dollars in potential claims for water damage caused by Hurricanes Katrina, Rita and Wilma.
The chief antagonist is Mississippi Attorney General Jim Hood, who filed suit in state court seeking to have insurers cover homeowner losses from Hurricane Katrina regardless of whether the cause was purely from wind or hurricane-related water damage.
(There is a jurisdictional dispute going on in federal court that is keeping the proceeding out of state court at the moment. But even if Mr. Hood's suit is tripped up on procedural grounds, the attorney general warned that thousands of individual policyholders might pursue their own claims in court, arguing their case before juries unlikely to be sympathetic to insurers.)
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