Insurers accused of deceiving Hurricane Katrina survivors

-September 19, 2005

Five U.S. insurance companies – Nationwide Mutual Insurance, Mississippi Farm Bureau Insurance, State Farm Fire and Casualty, Allstate Property and Casualty and United Services Automobile Association – are being accused of trying to deceive Hurricane Katrina survivors out of millions of dollars in damage payouts.

According to the claim made by Mississippi Attorney General Jim Hood, representatives for the firms had been asking people to sign forms saying they sustained flood damage, which is not covered by their policies. Hood said the firms are demanding policyholders to sign the forms in order to gain an immediate check to cover living expenses. All five companies have strongly denied the accusations.

The suit was filed on Sept. 15 in state court in Jackson, Mississippi and says the insurers should pay homeowners for flood damages because Katrina’s winds caused the flooding. In the suit, Hood said insurers typically cover damage from wind and Katrina’s winds caused a devastating storm surge that should also be covered. Hood said clauses that leave out coverage for flooding losses are “unreasonably favorable” to insurers and “oppressive” to policyholders, calling the insurance companies’ representatives “unconscionable.”

Should Hood win the lawsuit over Hurricane Katrina claims, the state’s insurance commissioner said smaller insurers in Mississippi could go bankrupt and others may flee the state, but Hood said, “I want the insurance companies to pay what they actually owe the people of Mississippi.” Storm Modeler Risk Management Solutions Inc. estimated insured losses may be between $40 billion and $60 billion, making Hurricane Katrina the most costly U.S. disaster ever.