The Mississippi AG has sued the insurance industry to cover flood claims. (W$J Sept 16). According to the article the suit seeks specifically to overturn the flood exclusion. An interesting fact is that five insurers account for 70 percent of all homeowners policies written in the state. If the suit succeeds, the Mississippi AG needs to ask how many will be operating in the state next year. He could also ask Florida about the massive backlog of applications to sell homeowners insurance in Florida. (See also Ted Frank’s post at Overlawyered and Doug Simpson’s interesting exploration of the law on flood insurance exclusions.)
Update: Here is the pleading. The basic allegations are that flood exclusions are against the Mississippi common law and are thus unenforceable. The AG further alleges that the exclusion is unconscionable because they are contracts of “adhesion, unduly and unreasonably complex in their provisions and language an difficult to understand by the average consumer and policy holder ….” Mississippi, however, is a prior approval state. This means that all policy forms as well as rates must be approved before they can go into effect. If the state approves the form, can the courts claim the form is unconscionable? That is a rhetorical question, but it is one that will have to be answered by the time this is finished.
As an aside, I am not talking about cases where the damage was caused by wind and the insurer is improperly trying to decline coverage. The cases the Mississippi AG are trying to prevent are based on a different fact scenario. The cases where the industry is at risk are combination of wind and flood damage where the insured has actual flood damage and no flood insurance. The homeowners policy does not cover this flood damage and the insurers should not have to cover a loss they have not priced and have properly excluded.
up-update: This article in the Clarion Leger quotes the Mississippi Insurance Commissioner George Dale as saying “ ‘he respects Hood's effort, but he also is concerned about having an insurance market when the rebuilding begins. He said when after Hurricane Camille in 1969, only one company continued writing policies in the area.
"Contractors got to have insurance; they can't build without insurance,"”