Property-casualty insurance groups offered gracious farewells following the news that Sen. Trent Lott would be leaving Congress before year's end. But most industry lobbyists no doubt were breathing a sigh of relief, given the animosity the Mississippi Republican displayed after complaining about how he and his constituents were left out to dry on Hurricane Katrina homeowners claims.
As reported by our Washington bureau chief, Dave Postal (click here for his full story), Sen. Lott promised to “bring down” the industry for its poor handling of Katrina claims where evidence of both covered wind and uninsured flood damage was present.
Sen. Lott's threat–which came during a July 13, 2006 phone call to Chuck Chamness, president and CEO of the National Association of Mutual Insurance Companies–was not an empty one.
Indeed, Sen. Lott had led the charge in the Senate to repeal the industry's cherished antitrust exemption. But with its prime sponsor on his way out the revolving door–no doubt, to a lucrative life as a D.C. lobbyist–the bill is likely to be forgotten. (That is, unless the industry is embroiled in yet another controversy that prompts calls for federal oversight.)
Many of our readers have suggested to me that State Farm was insane to reject Sen. Lott's wind claim. The denial, these cynics say, stirred up a hornet's nest, prompting Sen. Lott–normally an ally of insurers on business-friendly issues such as tort reform–to become the industry's worst nightmare.
The two parties ended up reaching a settlement back in April (click here for that story), long after the industry's reputation was dragged through the mud in Congress and its antitrust exemption placed at risk.
Critics say that just goes to show that State Farm should have spared the industry the wrath of Sen. Lott and just settled the claim up front.
But I say that State Farm showed guts by standing by their policy and refusing to pay for what they considered to be uncovered flood damage. (Sen. Lott, unlike many who lost their homes in Katrina, had flood insurance–but its limit was way too low to allow him to rebuild.)
Had State Farm paid off the claims of politically-influential policyholders such as Sen. Lott, despite their conviction that he was not entitled to coverage, that would have amounted to bribery. The industry would have been hit even harder once such blatantly preferential treatment was inevitably exposed.
It's too bad State Farm didn't see the legal process through and defend their position in court, but I can understand why with all the negative publicity tarnishing their reputation, they might decide that it wasn't worth the trouble.
In any case, Sen. Lott gave no indication that he would let up on the industry just because his own claim was behind him. At a late September hearing, he noted that he was devastated by the insensitivity, unfairness and greed of the property and casualty industry.
These are odd words coming from a staunch Republican, who normally insist that Big Business can do no wrong. Is the insurance industry any more “greedy” than oil companies? Auto manufacturers? Starbucks? After all, insurers did pay tens of billion in Katrina claims.
What do you folks think?
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