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Pressuring Policyholders to Sign Waivers Was Illegal, Lawsuit Claims

Mississippi Attorney General Files Suit Against Insurers Over Denial of Katrina Claims

BILOXI, MS -- October 7, 2005 -- Mississippi Attorney General Jim Hood has filed a lawsuit against five insurers because their policy provisions attempt to exclude Hurricane Katrina losses that are the result of flooding. The insurance companies also required hurricane survivors to sign unfair waivers in order to receive living expenses, the lawsuit charges.

The insurance policies exclude from coverage "loss or damage caused directly or indirectly by water, whether or not driven by wind." The companies used this language to argue that homes were destroyed by flooding, not by the 145-mph winds. Therefore, any losses would be covered by government flood insurance, which most Mississippi residents do not have, and not by the insurance companies. To further promote this result, the waivers stated that hurricane losses were indeed caused by flood or water.

The lawsuit asks the Chancery Court of Hinds County to stop the insurance companies from pressuring their policyholders to sign the waivers. It also asks that claims not be denied based on the provisions concerning flooding and water. These provisions are unclear, illegal, and "unconscionable," the suit says.

"I'm hopeful that ... 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 which will be used for immediate living expenses," Attorney General Hood said (Jurist, September 15, 2005). "... All that the people have left is hope and I'm not going to allow an insurance company to wrongfully take that hope away."

Insurance Company Reserves

The property/casualty insurance industry's surplus is $401.8 billion, according to figures from the Insurance Information Institute. This is the amount that the insurance companies have left after they set aside funds to pay claims filed by policyholders.

The surplus is over six times the estimated liability from Hurricane Katrina damage, which is put at $40- $60 billion, according to an article by the American Association of Trial Lawyers (ATLA) . ATLA points out that the surplus should be used to meet financial commitments to policyholders affected by Hurricane Katrina if the industry exceeds the reserves it sets aside to pay expected claims. ATLA also notes that since 2002, the insurance industry has seen a 40 percent increase in its surpluses and a dramatic increase in profits.

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