Less than a month after Hurricane Katrina made landfall near the Louisiana-Mississippi state line, the first legal actions were taken on behalf of the storm's victims. In Mississippi, the state attorney general filed a complaint and a motion for a temporary restraining order against the insurance industry. In neighboring Louisiana, plaintiffs in a class action suit are seeking the right to recover insurance proceeds from their insurers for losses resulting from high water.
"All that the people have left is hope and I'm not going to allow an insurance company to wrongfully take that hope away," said Jim Hood, Mississippi's attorney general. "Although some insurance companies are trying to do the right thing, I won't allow the others to take advantage of people hurt by Hurricane Katrina."
Hood filed a civil action in the Chancery Court of Hinds County, Mississippi, First Judicial District. The complaint asks the court to declare that certain insurance contract provisions are void and unenforceable, as they "are contrary to public policy, are unconscionable, and are ambiguous." The provisions at issue exclude from coverage loss or damage caused directly or indirectly by water, whether or not driven by wind.
Hood argued that the issuance of such policies violates the Mississippi Consumer Protection Act and asked that the court enter a temporary restraining order to immediately stop insurance companies from asking property owners to sign documents stating that their loss was caused by flood or water, as opposed to wind, and to stop using water exclusions to deny or reduce coverage for hurricane damage or loss. Hood also is seeking a preliminary and permanent injunction with regard to the same matters.
"I'm hopeful that, next week, we will be able to stop unscrupulous insurance adjusters from requiring people to sign away their rights to 'flood damage' claims in exchange for a significantly smaller amount that will be used for immediate living expenses," Hood said. "I want to encourage the people to continue to fight, and I'll do everything I can to make sure that insurance companies pay what they owe."
The American Insurance Association has characterized the suit as groundless. "The attorney general must well know that, for more than 35 years, flood insurance principally has been the responsibility of the federal government under the National Flood Insurance Program," said Cecil Pearce, AIA's Southeast Region vice president. "This program has been available to Mississippi homeowners and businesses in flood-prone areas. What the attorney general's lawsuit attempts to do is retroactively rewrite private insurance contracts for those individuals and businesses that chose not to buy flood insurance from the federal government's flood insurance program."
The class action suit filed in the 19th Judicial District Court on behalf of businesses and homeowners in Orleans and Jefferson Parishes, seeks "a speedy, favorable resolution that all shall have the right to recover insurance proceeds from the homeowners' insurance company as a result of high water."
The suit, which names 16 insurance companies as defendants, asks the district court judge to rule that the high water that flooded thousands of homes was caused by man-made neglect and wind damage, rather than a so-called Act of God through rising water.
The underlying cause for the high water was the result of several breaches in the levees, according to the complaint. The complaint cites a public confirmation by city officials that the reason for the water was a breach in the 17th Street Canal flood wall, reported to be two city blocks wide. Also quoted was a Time article, in which Army Corps of Engineer officers suggested that the failure might have been caused by leaks in the barriers, which might mean that the levees had been poorly constructed or maintained.
Furthermore, the complaint states, 60 percent of New Orleanians elected not to purchase flood insurance, despite the fact that the city is situated mainly below sea level, because they had been assured of the efficacy of the extensive levee and flood protection system, which includes flood walls, canals, and pumps.
"If the insurance companies are successful in denying coverage to the residents, it is estimated that it will cost the property owners approximately $20 billion of their own money to rebuild their businesses and homes," argued the plaintiff's attorneys, the McKernan Law Firm of Baton Rouge.
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