The House Financial Services Committee will look into allegations of an apparent “failure of the insurance system” to deal appropriately with claims arising from Hurricanes Katrina and Rita.

Reps. Barney Frank, D-Mass., chairman of the panel, and Mel Watt, chairman of its Oversight Subcommittee, late yesterday announced the panel's plan for an inquiry.

The comments were prompted by a call for a thorough investigation of the industry's handling of Gulf Coast storm claims by Rep. Gene Taylor, D-Miss., in a letter to Rep. Frank dated Jan. 5.

Mr. Taylor is suing his insurer State Farm over a claim he submitted for damage to his home following Hurricane Katrina.

A federal court jury in Mississippi last week awarded $2.5 million in punitive damages against State Farm for bad faith handling of a Biloxi couple's hurricane damage claim.

“We have received from our congressional colleagues who represent the Gulf Coast serious allegations of a failure in the insurance system to serve the purpose for which it was intended,” said Reps. Frank and Watt.

“We believe these allegations deserve appropriate attention and our committee will be looking into these charges,” Reps. Frank and Watt said.

But a spokesman for the panel said the committee hasn't determined yet how it will deal with the issue, and that a decision won't be made until next month because the committee is still organizing.

Rep. Taylor has repeatedly criticized the insurance industry over the handling of hurricane damage claims. In his letter to Rep. Frank, he wrote, “Despite billions of dollars of federal assistance, south Mississippi's recovery is obstructed by the actions of private insurance companies.”

His letter called for the committee to investigate what he calls “the denial of claims wherever insurers could blame flooding” and “excessive premium increases, market withdrawals and other actions to force states to make concessions or assume more coastal risks.”

In his letter, Rep. Taylor noted that Sen. Trent Lott, R-Miss., whose home was destroyed by Katrina, had secured language in a Homeland Security Appropriations bill mandating a Government Accountability Office study of claims adjustment of wind and water claims relating to Hurricane Katrina.

The report is required to be delivered to Congress by April 1.

“I ask that you not wait until then to begin the committee's investigation,” Rep. Taylor wrote. “It is clear that the insurance companies have a conflict of interest when allowed to assign damages to the federal flood program rather than to themselves.”

This article originally appeared in The National Underwriter P&C. For the complete article, please click here

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House To Look At Katrina Claims Handling

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