Flood damage excluded? Pay anyway

Standard homeowners’ policies exclude coverage of flood damage unless it is purchased at a substantial additional premium, a fact well known to most property owners in high-risk areas. Mississippi lawyer Dickie Scruggs, a familiar figure to readers of this space, had the foresight to purchase flood insurance for his Pascagoula home, now partly destroyed by Hurricane Katrina. Now he wants the world’s insurers to pay billions for the properties they didn’t collect a premium for insuring, as well — perhaps scores of billions, if the principle is to extend to Louisiana. “Mr. Scruggs said he plans to urge Mississippi Attorney General Jim Hood to try to override flood-exclusion clauses in homeowners’ policies in that state in the interest of public policy, a move that could force insurers to pay many billions more toward rebuilding costs.” (Theo Francis, John D. McKinnon and Peter Sanders, “Paying for Flood Damage Looms as Big Challenge”, WSJ, Sept. 8)(sub). An operative with the Mississippi Trial Lawyers Association says he hopes that “people on the Coast and their friends statewide ratchet up the political pressure” to make the insurers pay. (Anita Lee, “Claims Dispute”, Biloxi Sun-Herald, Sept. 9). Megan McArdle thinks it’s all a brilliant way to scare insurers away from offering even conventional coverage in the future (Sept. 8). See also Point of Law, Sept. 9. More: Martin Grace Sept. 8, Sept. 8 again, Sept. 13.

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