A federal district court judge affirmed an earlier decision that a suit brought by Mississippi's attorney general against insurers for flood losses stemming from Hurricane Katrina should be heard in state court, where carriers perceive they will be at a disadvantage.

U.S. District Court Judge for the Southern District of Mississippi, L.T. Senter Jr., sitting in Jackson, Miss., ruled on Tuesday that a March decision by U.S. District Court Judge Tom S. Lee was correct in ordering that a suit brought on flood claims is a state issue and belongs in the state court.

The suit, brought by Mississippi Attorney General Jim Hood against five insurers, seeks to force the carriers to cover losses from Hurricane Katrina. The attorney general argues that despite the flood exclusion in the policies, insurers should pay claims because the water was wind-driven, which is a covered occurrence.

Judge Senter's ruling is procedural, and does not rule on the merits of the suit.

In his March decision, Judge Lee said while there are federal interests in the case, the subject is ultimately a state-oriented issue and should return to Chancery Court of Hinds County, Miss., where Mr. Hood filed his suit on Sept. 15, 2005. Judge Senter agreed with Judge Lee's ruling.

Robert P. Hartwig, vice president and chief economist for the Insurance Information Institute, said that while there is a perception the industry would be at a disadvantage, the carriers need to have faith that the state courts will follow precedent and ultimately rule in favor of the companies.

"State courts are going to have to seriously consider precedent that a federal court has already set in its own district," said Mr. Hartwig.

The five companies involved in the suit are Mississippi Farm Bureau Insurance Company, State Farm Fire and Casualty, Allstate Property and Casualty Insurance Company, United Services Automobile Association, and Nationwide Mutual Insurance Company.

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Federal Judge Affirms Sending Flood Suit Back To Miss. Courts

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