Washington–Democrats introduced legislation in the House late today that would give victims of Hurricanes Katrina and Rita retroactive coverage under the federal flood insurance program.
At the same time, it was learned that the Republican leadership of the House Financial Services Committee has drafted legislation that would provide victims of the flood no financial support.
The draft bill obtained by the National Underwriter calls for a Government Accountability Office study of how flood insurance claims can be processed more efficiently.
The Republicans measure also "encourages" the Federal Emergency Management Agency, which administers the flood insurance program, and state regulators to consider developing alternative dispute resolution programs to "settle any insurance coverage disputes."
It is unclear whether insurance underwriters will support the Democrats' bill, but representatives of mortgage lenders are likely to do so and will meet tomorrow in Washington to draft a joint position, according to an official of one consumer lending trade group.
The Democrats' bill was drafted by Rep. Gene Taylor, D-Miss. A key co-sponsor is Rep. Barney Frank, D-Mass., ranking minority member of the House Financial Services Committee, which has oversight of FEMA.
Dennis Kelly, director of media relations for the American Insurance Association, responded to the bill introduced by Rep. Taylor by saying that, "This bill does not directly affect private sector property insurance contracts. It affects the National Flood Insurance Program, and Congress is responsible for changes to the NFIP."
David Winston, senior vice president for federal affairs for the National Association of Mutual Insurance Companies, said that, "While NAMIC understands Congressman Taylor's frustration that many of the hardest hit victims were not in flood zones, NAMIC believes a better way to solve this problem is for Congress to provide the adequate funding for new, updated flood mapping, that better identifies those areas in which homeowners should be required to purchase flood insurance."
The bill being introduced by Rep. Taylor would give victims of Hurricanes Katrina and Rita the option of paying 10 years of back premiums for flood insurance, which would be subtracted from their settlement. The insurance would cover up to the amount of the damage or $250,000, whichever is less, Rep. Taylor told a town hall meeting with constituents in Gautier, Miss., yesterday.
He told constituents he would seek support of Mississippi's Senate delegation, Republican Sens. Thad Cochran and Trent Lott, this week.
Under the bill, payments up to the $250,000 flood insurance program limit pertain only to "structures," not contents.
Despite Republican opposition to such a measure, the fact that mortgage lenders have loans outstanding on properties that no longer exist may provide the impetus for a government bailout.
The American Trial Lawyers Association put out a release adding fuel to the fire Tuesday that said, "Homeowners insurance should help them begin to rebuild their lives–that is why they paid thousands of dollars in insurance premiums, after all.
"Yet, instead of helping residents, some insurance representatives are tricking victims into signing waivers that will make it easier for insurance companies to deny their homeowners claims, according to a lawsuit filed by the Mississippi Attorney General Jim Hood," the release continues.
ALTA adds that, "After living through what should have been the worst of the trauma, the victims of Hurricane Katrina shouldn't have to suffer all over again because insurance industry executives don't want to dip into huge profits to honor their contracts."
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