WASHINGTON–The insurance industry's handling of Hurricane Katrina damage claims is due to come under federal lawmakers' microscope Wednesday at a hearing by the Oversight Panel of the House Financial Services Committee.

The session, which will be the first under the chairmanship of Rep. Mel Watt, D-N.C., is expected to include testimony from Rep. Gene Taylor, D-Miss., and Mississippi Attorney General Jim Hood, both of whom have voiced criticism of the industry's handling of claims in the most vehement terms.

Mr. Hood at one point convened a state grand jury to look into the claims-handling activities of State Farm. He dropped the investigation when State Farm proposed a class action Katrina damage settlement for homeowners in three coastal counties of Mississippi.

The settlement has been put on hold by a federal court judge and is due for a hearing Wednesday.

Although the witness list has not yet been made public, Robert Hartwig, the president of the Insurance Information Institute, is expected to testify on behalf of the industry.

Rep. William Jefferson, D-La., who represents New Orleans, and David Maurstad, director of the National Flood Insurance Program, are also expected to testify, as is David Paulison, Under Secretary for Federal Emergency Management at the Department of Homeland Security.

Rep. Taylor has been a fierce critic of insurers' actions in the wake of Hurricane Katrina, and he recently settled a lawsuit against State Farm over Katrina damage to his home by the Gulf of Mexico.

The congressman has complained that adjusters cited flooding as the cause of damages in Mississippi's three coastal counties whenever possible, placing the burden for recovery on the National Flood Insurance Program. Most windstorm policies exclude flood damage.

Testifying at a full Financial Services Committee hearing earlier this year, Rep. Taylor said that he would “lay out the case” for a Congressional investigation of the insurance industry.

“I am convinced that insurance adjusters billed the flood insurance program for some damage that should have been covered by private wind insurance,” he said at that hearing.

Mr. Hood has also been in conflict with insurers, most notably State Farm, over their handling of post-Katrina claims. He has filed suit to have policy flood exclusion language invalidated.

In the past few weeks, Mr. Hood has also called on state lawmakers and Mississippi insurance commissioner George Dale to prevent State Farm from halting the writing of new property insurance policies in the state.

“One of the main reasons I settled our state court litigation against State Farm was to keep them writing homeowners policies in Mississippi, to stabilize our insurance markets, and to help our coastal residents and businesses rebuild,” he said at the time. “Mississippi should not allow State Farm to breach its promise and continue to profit from others in our state.”

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Congress Begins Scrutiny of Katrina Claims

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