Legislation providing for federal oversight of homeownersinsurance contracts has been quietly introduced by Sen. Trent Lott,R-Miss., who remains embroiled with State Farm over his ownHurricane Katrina damage claim. The bill mandates additionallanguage on the front page of policies, backed by Federal TradeCommission review.

The Homeowners Insurance Noncoverage Disclosure Act wascondemned by the Property Casualty Insurers Association of America,which said the measure would “do nothing to enhance the 'plainlanguage' requirements already on the books in almost everystate.”

The bill is likely to be discussed at a hearing on insuranceissues scheduled for April 11 by the Senate Commerce Committee,which includes Sen. Lott.

Among those scheduled to testify are Mississippi AttorneyGeneral Jim Hood, who convened a grand jury to hear testimony aboutinsurance industry handling of Hurricane Katrina claims, and J.Robert Hunter, director of insurance for the Consumer Federation ofAmerica, another frequent critic of the industry. Mr. Hood is alsosuing State Farm over his Katrina claim.

The latest bill, S. 1061, would require insurers to fullydisclose property insurance coverage–as well as noncoverage–inplain language contained on the front page of each homeownerspolicy.

However, the greater concern to the industry is the portion ofthe legislation giving enforcement authority over the provision tothe FTC.

June Holmes, interim CEO of PCI, said giving home insuranceoversight to the FTC is redundant and unnecessary.

“Sen. Lott's proposal will add another layer of costly andduplicative federal oversight of a function best left to thestates–not to mention the confusion that dueling federal and stateregulations would cause for consumers,” she said.

Sen. Lott is also jointly sponsoring legislation with Sen.Patrick Leahy, D-Vt., and Sen. Arlen Specter, R-Pa., chairman andranking minority member of the Senate Judiciary Committee, torepeal insurers' limited antitrust exemption under theMcCarran-Ferguson Act. That bill would give the FTC oversight overinsurance industry practices and programs.

The latest bill further requires the FTC to enforce thishomeowners insurance disclosure requirement and establishespenalties for insurers that fail to comply through the FTC'sexisting laws governing unfair or deceptive practices.

Sen. Lott, when he introduced his latest insurance measure, saidthe bill would save consumers money and time associated withinsurance policy disputes.

If he is unable to win support in Congress for repeal ofMcCarran-Ferguson, he could still seek FTC oversight–in addition tocurrent state oversight–of insurance activities through this latestbill, several industry lobbyists indicated. Their comments weremade on an anonymous basis out of concern it could complicate theirrelationship with Congress if they were identified.

They voiced worries that Sen. Lott, as an alternative to fullrepeal of McCarran-Ferguson, could use his power as Senate minoritywhip to slip his disclosure bill into another measure movingthrough Congress–possibly at a late point in the proceedings, whenit would be difficult to muster opposition.

The insurance industry is united in opposition to theMcCarran-Ferguson repeal measure, and Sen. Bill Nelson, D-Fla., aformer Florida insurance commissioner, recently said he believedthe industry “would fight to the death” to retain it.

“Insurance policies are notoriously hard to read and understandbecause they're primarily written in complex legalese,” Sen. Lottsaid in introducing his latest bill. “That's why I believe everyinsurer should include a plain-English description of a homeownerspolicy, prominently displayed on the policy's first page.”

Sen. Lott's bill will require that this basic description becontained in a “noncoverage disclosure” box that states in boldfont–twice the size of the body of the policy's text–allconditions, exclusions and other limitations pertaining to theindividual policy's coverage.

“Consumer groups have estimated a provision like this could havesaved consumers anywhere from $55 billion to $65 billion inHurricane Katrina's aftermath,” Sen. Lott said. “Having a clear,concise description of every policy serves the best interest ofconsumers, insurers and taxpayers.”

Sen. Lott is suing State Farm over his claim for HurricaneKatrina damage to his summer beachfront home in Pascagoula, Miss.,which was swept away by the 2005 storm, leaving him with just afoundation slab. The insurer has made a settlement offer in thecase, which is scheduled for trial in September.