Industry Geared To Fight Hood
Industry representatives say insurers have no intention of settling a suit by the Mississippi attorney general and making payments to homeowners' policyholders who did not purchase flood coverage.
Speaking Wednesday in Houston, Attorney General Jim Hood called on insurers to settle a suit he has filed against them for not covering homes damaged by storm surge in the state.
Mr. Hood said homeowners should not be penalized for not purchasing flood insurance when their homes were not in a flood zone. He said policyholders were under the impression that by purchasing hurricane insurance they would be covered for any events resulting from the hurricane.
The industry has said otherwise, arguing that a flood event is not covered under a homeowner's policy and requires the purchase of flood insurance under the National Flood Insurance Program.
Flood insurance is required in flood zones designated by the program where an individual plans to buy, build or improve a structure, and is voluntary elsewhere, according to the NFIP's Web site. It is available to any property owner whose community participates in NFIP.
Julie A. Rochman, a spokeswoman with the American Insurance Association, said that, "Clearly, Mr. Hood believes that insurance contracts stand for nothing." She said the contracts "have been upheld by the courts and no amount of hoping, or wishing, or threats will prevent us from defending those contracts vigorously."
Mr. Hood argued that if the insurance industry did not settle with him, it would have to suffer a flood of state court litigation by individual policyholders.
Joe Annotti, vice president of public affairs for the Property Casualty Insurers Association of America (PCI), said insurers will live up to the terms of their agreements and pay every covered claim, "but they will not be bullied into covering claims that are not covered."
He added that if Mr. Hood's challenge became a reality, a precedent would be set "that would undermine the entire insurance process in the state and possibly the nation."
Roger Schmelzer, senior vice president of state and regulatory affairs for the National Association of Mutual Insurance Companies, said, "I have not heard of a single company in the industry that has said they would consider settling."
The attorney general's suit currently is in federal court in a jurisdictional dispute. The industry feels the matter, which involves the National Flood Insurance Program, is a federal issue, while Mr. Hood argues it is a state matter. Mr. Hood acknowledged that if the courts should remand the case to Mississippi, the state would win. If the industry is able to keep the matter in federal courts, however, the state would lose.
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Mississippi Insurance Commissioner George Dale said a proposal is in the works responding to complaints the insurance department received from policyholders who said they were never advised by their agents about flood insurance. The proposal would require agents to have in writing a policyholder's refusal to purchase flood insurance. The regulation would apply to the three coastal counties of Hancock, Harrison and Jackson County. Mr. Dale said the proposal would be similar to a requirement already in place for motorists who refuse to purchase uninsured motorist coverage. The requirement will be taken up by the legislature in early January.
Point/Counterpoint
Mississippi Attorney General Jim Hood argued that if the insurance industry did not settle with him, it would have to suffer a flood of state court litigation by individual policyholders.
Insurers will live up to the terms of their agreements and pay every covered claim, "but they will not be bullied into covering claims that are not covered."
Joe Annotti, VP
Property Casualty Insurers Association of America
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