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Mississippi takes on insurance fight familiar to Florida

Mississippi Attorney General Jim Hood promised last week to block State Farm from refusing to write new homeowners and commercial insurance policies in the state.

By TOM ZUCCO
Published February 24, 2007

Mississippi Attorney General Jim Hood promised last week to block State Farm from refusing to write new homeowners and commercial insurance policies in the state.

Besides referring to State Farm's "robber baron mentality" and launching a criminal investigation, Hood wants to require any company that writes automobile insurance in Mississippi and also writes property policies in other states to offer property insurance throughout Mississippi.

Sound familiar? That's what the Florida Legislature did last month.

But it amounts to a small victory, analysts say, because as the law applies in Florida, State Farm, Allstate, Nationwide and other large insurers aren't affected because they already write homeowners insurance in Florida and aren't required to sell more.

Any legislative action that forced a company to sell more property insurance than it could handle, Florida Attorney General Bill McCollum said Friday, would likely lead to a fight. "As for forcing State Farm, or anybody else, to write insurance, we don't do that," McCollum said. "It would be quite a legal battle if we tried."

What really has Mississippi burning over State Farm is an issue that Florida has already addressed: wind versus flood damage.

No private insurer in America covers flood damage; that must come from The National Flood Insurance Program. But up to 80 percent of properties damaged by Hurricane Katrina in Mississippi were uninsured for flood. And when the insurance companies denied flood claims or paid only small amounts for total losses, homeowners sued and Hood went on the attack.

Florida has been there and done that. After similar lawsuits following the 2004 hurricanes, the Florida Legislature in 2005 tweaked state law to read: "... when a loss was caused in part by a covered peril and in part by a noncovered peril... the insurer's liability shall be limited to the amount of the loss caused by the covered peril." The short interpretation: property insurers would clearly be off the hook for damage caused by flood.

"That definition has been the key to allow State Farm, and other carriers, to continue doing business in Florida," said State Farm spokesman Justin Glover.

But as long as hurricane catastrophe models tell insurers (and reinsurers) that sooner rather than later, Florida will suffer massive hurricane losses, insurance companies will continue to scale back.

Starting today, the fight shifts to Washington, D.C., where McCollum and Gov. Charlie Crist will lobby lawmakers for the creation of a national catastrophe reinsurance fund.

"It would make the federal government the reinsurer of last resort," McCollum said, "and spread the risk over many states."

A similar proposal last year died in committee.

Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.

[Last modified February 24, 2007, 02:03:06]