Legislation providing for federal oversight of homeowners insurance contracts has been quietly introduced by Sen. Trent Lott, R-Miss., who remains embroiled with State Farm over his own Hurricane Katrina damage claim. The bill mandates additional language on the front page of policies, backed by Federal Trade Commission review.

The Homeowners Insurance Noncoverage Disclosure Act was condemned by the Property Casualty Insurers Association of America, which said the measure would “do nothing to enhance the ‘plain language’ requirements already on the books in almost every state.”

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

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

The latest bill, S. 1061, would require insurers to fully disclose property insurance coverage–as well as noncoverage–in plain language contained on the front page of each homeowners policy.

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

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

“Sen. Lott’s proposal will add another layer of costly and duplicative federal oversight of a function best left to the states–not to mention the confusion that dueling federal and state regulations 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 and ranking minority member of the Senate Judiciary Committee, to repeal insurers’ limited antitrust exemption under the McCarran-Ferguson Act. That bill would give the FTC oversight over insurance industry practices and programs.

The latest bill further requires the FTC to enforce this homeowners insurance disclosure requirement and establishes penalties for insurers that fail to comply through the FTC’s existing laws governing unfair or deceptive practices.

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

If he is unable to win support in Congress for repeal of McCarran-Ferguson, he could still seek FTC oversight–in addition to current state oversight–of insurance activities through this latest bill, several industry lobbyists indicated. Their comments were made on an anonymous basis out of concern it could complicate their relationship with Congress if they were identified.

They voiced worries that Sen. Lott, as an alternative to full repeal of McCarran-Ferguson, could use his power as Senate minority whip to slip his disclosure bill into another measure moving through Congress–possibly at a late point in the proceedings, when it would be difficult to muster opposition.

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

“Insurance policies are notoriously hard to read and understand because they’re primarily written in complex legalese,” Sen. Lott said in introducing his latest bill. “That’s why I believe every insurer should include a plain-English description of a homeowners policy, prominently displayed on the policy’s first page.”

Sen. Lott’s bill will require that this basic description be contained in a “noncoverage disclosure” box that states in bold font–twice the size of the body of the policy’s text–all conditions, exclusions and other limitations pertaining to the individual policy’s coverage.

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

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