To the horror of many of the victims of Hurricane Katrina who lost their homes in the storm, the insurance industry uniformly denied these folks’ property damage claims. Insurers contended that damage to houses in Louisiana and Mississippi was caused by surging flood waters and not by high winds. The insurers said their policies covered only wind damage. The New York Times reports today that
State Farm Insurance said yesterday that it had reached an agreement with [Mississippi] state officials to pay hundreds of millions of dollars to owners of homes along the coast that were wrecked by Hurricane Katrina. The agreement settles lawsuits filed by 640 homeowners and allows thousands of others to reopen damages claims that State Farm previously closed. The agreement does not apply to New Orleans.
State Farm and other insurers continue to deny claims to New Orleans victims because they contend that the property damage resulted not from wind damage but from the water surge after the levees broke. Interestingly, Senator Trent Lott is among the homeowners along Mississippi’s coast who lost his home in the storm, was denied coverage by State Farm, and will benefit from the settlement. Senator Lott formerly was a proponent of just about any “tort reform” legislation promoted by the insurance industry to deny or limit victims’ rights to sue for damages. Senator Lott changed his tune when he needed to sue in order to obtain justice. It’s amazing how hypocritical our politicians are when it comes to tort reform. Like former Senator Rick Santorum, they are all for tort reform until it effects their families. Senator Santorum’s wife sued her doctor for medical malpractice and the good Senator testified in her trial. He subsequently voted to deny or limit the rights of other Americans to seek justice in a trial by jury against negligent doctors. The primary reasons that State Farm settled with the Mississippi victims are they lost the first case to go to trial ($2.5 million punitive damage verdict) and they were facing a criminal investigation by Mississippi Attorney General, Jim Hood. As part of the settlement, State Farm demanded that Mr. Hood drop his criminal investigation and that he abandon a civil suit against State Farm and other insurers.