Insurers Disappointed With Fed Court Decision

Insurers said they were disappointed with a federal judge's decision to send a suit filed by Mississippi's attorney general back to state court where insurers are less confident of a verdict in their favor.

On Tuesday, U.S. District Court Judge for the Southern District of Mississippi L.T. Senter Jr., sitting in Jackson, Miss., ruled that a March decision by U.S. District Court Judge Tom S. Lee was correct to order a suit brought on flood claims be returned to state court.

Insurers wanted the case to be heard in federal court, arguing that because it involves the federal flood program, it should be held at the federal level. The judges ruled that insurance is primarily a state issue and the suit belonged in the state court.

The suit was brought by Mississippi Attorney General Jim Hood against five insurers: Mississippi Farm Bureau Insurance Company, State Farm Fire and Casualty, Allstate Property and Casualty Insurance Company, United Services Automobile Association, and Nationwide Mutual Insurance Company. Mr. Hood is seeking to force the insurers to pay for the total loss of homes from Hurricane Katrina. He contends that waves caused by storm surge are not encompassed by flood exclusions in insurance policies, referring to the companies as “sneaky” in their adjusting of claims.

In a statement after the decision, Mr. Hood said he has been in discussions with several companies “with the aim of trying to resolve these issues without the expense and time of litigation.” He said he was hopeful that companies would “come forward and do what is right toward the policyholders.”

He threatened that unless companies come to an agreement, they can expect investigations from Congress and a demand from the American people for “national insurance reform and an American Insurance Bill of Rights.”

For its part, Raleigh Floyd, a spokesperson for Northbrook, Ill.-based Allstate, said: “We are disappointed with the federal court's decision. We are reviewing our options and feel that whatever court decides this issue, it will be consistent with past decisions upholding flood exclusion language.”

He said he could not comment on Mr. Hood's statement that insurers are in talks with him to reach a settlement.

Phil Supple, a spokesperson for Bloomington, Ill.-based State Farm, said the company is disappointed in the decision but is confident the state court will uphold the flood exclusions in insurance policies. He added that since Mr. Hood's filing of the suit the company has had periodic contacts with his office in an effort to find a “proper and appropriate way to resolve these issues.”

Columbus, Ohio-based Nationwide's spokesperson, Joe Case, said the company's attorneys are reviewing its options and the company remains committed to defending its contract language. He added that the company feels it adjusted policyholder's claims properly.

He would not comment on any contacts Nationwide has had with Mr. Hood.