I’m a Senator. Don’t Screw With Me. Posted by: Dale Franks
on Friday, February 23, 2007
Recently, McQ wrote about Mississippi Attorney General Jim Hood, and his attempts to extort more insurance coverage in Mississippi. Turns out, that's only the tip of the iceberg. It's not just a "Democrat" problem. According to the Wall Street Journal, Republican Sen. Trent Lott is hip-deep in this, as well.
One big question when Democrats took over Congress was which industry would be first to feel the new majority's populist rage. Oil? Pharma? Banks? Corporate America just got its answer, direct from the angriest man to have been empowered in the past election: Republican Sen. Trent Lott.
The Mississippian was "infuriated" by the insurance industry's refusal to shell out for certain Katrina claims, most notably his own. So Mr. Lott is spearheading a ferocious campaign of political revenge that would make even Henry Waxman envious—replete with investigations, voracious trial lawyers, ambitious state attorneys general and threats of punitive federal legislation. And like most personal grievances that get morphed into policy battles, it's ending badly for consumers.
Mr. Lott's beachfront property in Pascagoula—one of three homes he owned—was swept away entirely by Hurricane Katrina's waters. Like many Gulf Coast residents, Mr. Lott was soon reminded by his insurer, State Farm, that his policy only covered wind damage—not flood damage. The senator surely knew that, which is why he'd also purchased federal flood insurance. According to his flood policy that was in effect when Katrina hit, he was covered up to $350,000 in flood damages, and he presumably collected in full.
So, Sen. Lott didn't have flood coverage from State Farm. Since State Farm didn't offer it, he obtained it from the government.
Apparently, that wasn't good enough for the senator.
State Farm, however, refused to cough up, inspiring Mr. Lott to embark on a campaign ripped straight out of the Democratic playbook. First was to pay a call to the favorite mob squad of the left, the plaintiffs' bar. Quicker than you can say "tort reform," Dickie Scruggs, the legal kingpin who engineered Mississippi's tobacco shakedown, was representing Mr. Lott in a high-profile lawsuit against State Farm.
Mr. Lott probably didn't have to do much special pleading, since Mr. Scruggs is his brother-in-law, and had also suffered Katrina damage. Mr. Scruggs is also a pal of Mississippi Attorney General Jim Hood, who within a few weeks of Katrina had filed a lawsuit against insurers over their "unconscionable" decision to not pay for damage they didn't cover.
So, despite the fact that Sen. Lott didn't have flood coverage from State Farm, he wanted State Farm to cough up the cash anyway. For damage that his policy didn't cover, and for which he had already obtained alternate coverage. So, he goes to a trial-lawyer kingpin, and sues State Farm.
But, Sen. Lott is a powerful politician. He has recourse to other avenues of revenge than a silly lawsuit. He can do much more than that.
For his part, Mr. Lott has been busy cranking up the pressure in Washington. Not that he didn't give fair warning. In July of last year, he placed a call to Chuck Chamness, the CEO of the National Association of Mutual Insurance Companies, to let the industry know what was coming. Mr. Chamness later sent a letter to Mr. Lott, summing up the call. The key passage: "Your comment that you will dedicate your next term of office to 'bringing down State Farm and the industry' through all means available to you, including legislation designed to harm the property/casualty insurance industry, was very unsettling, to say the least."
Mr. Lott has proven as good as his word. Since Katrina, he's slipped legislation into a Homeland Security bill requiring the inspector general of that agency to investigate insurers. He's put forward a bill requiring insurers to "state clearly" on their policies' "front page" what they don't cover. He's dropped another bill that would compel insurers to release more information about vehicles damaged by Katrina. Word is he's even been looking into the industry's tax rates.
But his big bomb came last week, when he introduced legislation that would end the insurance industry's exemption from certain federal antitrust regulations. Mr. Lott suggests this is to keep big insurance players from conspiring to do evil things, though the reality is that the exemption mainly benefits small insurers who use it to pool statistically reliable data. So in his wrath, Mr. Lott may end up kneecapping many of the hundreds of small insurers who offer some real competition to the so-called conspiring giants.
Sen Lott doesn't need hulking thugs to rough up anyone upon whom he wishes to impose his will. He simply uses the majesty of the law to force others to do his bidding.
This is not just unfair. It is unconscionable. Sen. Lott should be ashamed. Especially since his selfish and immoral pursuit of of State Farm is bearing fruit that will harm the people of his state.
Lost among all the politicians' war-whooping over the State Farm capitulation, is the effect this extortion has had on the private insurance industry. In recent weeks companies from State Farm to AllState have stopped writing policies in parts of Mississippi, which will result in consumers having fewer insurance choices, if they can find insurance at all.
Naturally. This outcome was so obvious that anyone could've predicted it. Not that it bothers Sen. Lott, of course. He got what he wanted. The regular citizens of Mississippi can go hang.
It would serve him right if insurance companies simply left Mississippi, refusing to write insurance policies there for any reason. And explain very carefully to their former customers that Sen. Lott and his ilk are the reason why. At would serve him more right if the voters turned him out of office at the earliest opportunity.
He’s put forward a bill requiring insurers to "state clearly" on their policies’ "front page" what they don’t cover.
Lott had a policy to cover him for wind damage. Would it be sufficient to put a disclaimer on the front page of the policy stating that the policy did not cover any other type of loss? Or would the Senator require State Farm to actually list all other possible casualties that are not covered by his wind damage policy? If so I hardly think one page would be enough.
The primary damage mechanism of a hurricane that far inland is wind, and even the "flood" is not caused so much by excessive rainfall as it is by the wind driven storm tide.
State Farm tried to push a position that all the damage was cause by "flood", and wind was in no degree responsible. Gov’t pushes harder.
And in this case it’s pushing far too hard.
But if State Farm had attempted a reasonable settlement, admitting some fraction of the damage was caused by wind, instead of an all-or-nothing approach, then they wouldn’t be in this mess, would they?
The headline would better be, "He’s a Senator, don’t screw over him and his constituents."
Why aren’t there slab claims a block further inland?
It’s an irrelevant question.
Why do many insurance policies treat flooding from broken pipes as being different from flooding from rising rivers?
Beacause when people say they don’t have flood insurance, they are thinking of waters rising in over-filling watersheds.
The flooding in Katrina was due to wind, not rain, and hence, the smart and just thing for State Farm to have done was to pay a fraction of the "flooding" damage in areas where the wind driven storm surge hit.
They went for all or nothing, and now they may well end up with nothing in the other direction.