Mississippi Attorney General Jim Hood sued five U.S. insurance companies Thursday, saying adjusters have tried to trick Hurricane Katrina survivors out of millions of dollars in homeowner claims as disputes over losses started to hit the courts.
Adjusters for Nationwide Mutual Insurance Co. and other insurers asked policyholders to sign forms that acknowledged they sustained flood damage, which is not covered by homeowners’ insurance, according to Hood.
Adjusters have cajoled victims to sign the forms, saying they are necessary to immediately receive a check for living expenses. The companies can use the sentence regarding flood damage against policyholders later, Hood said.
“They say they are not responsible,” Hood told reporters in the still-closed Hinds County Courthouse. “I want the insurance companies to pay what they actually owe the people of Mississippi.”
The suit, filed in county chancery court, asks for a temporary restraining order to stop the use of such forms.
Nationwide, identified by Hood as a primary defendant, flatly rejected his assertions.
“The allegations made by the Mississippi attorney general are unfounded. Our company is absolutely not asking policyholders to acknowledge damage is flood-related in order to receive a check for living expenses,” Nationwide said in a statement.
The company said policyholders are told up front their homeowners’ insurance does not cover flooding.
“If these long-recognized and relied-upon exclusions were to be deemed null and void, it would have a significant negative impact on insurance policyholders across the country,” the company added.
Hood also sued Mississippi Farm Bureau Insurance, State Farm Fire and Casualty Co., Allstate Property and Casualty Co. and United Services Automobile Association.
Hood said more defendants could be added.
Mississippi Insurance Commissioner George Dale, who last week warned insurers to carefully determine the cause of damage in each case, responded to the lawsuit by urging against a rush to judgment against providers.
“We need to be aware that, if we make insurance companies pay claims for which they did not collect any premiums, it could lead to the bankruptcy of several insurance companies,” Dale said.
The difference between types of damage is important. Damage caused by wind, or water falling into a structure through a hole, typically is covered. Damage from rising water, however, usually would be covered only by the National Flood Insurance Program, which is run by the U.S. Federal Emergency Management Agency.
Hood called the adjusters’ moves “unconscionable.”
“If the insurance companies do not back their policies, it will bankrupt southern Mississippi,” he said.
Denying legitimate insurance claims based on a piece of paper would further victimize survivors, he added.
Class-action attorney Richard Scruggs has also launched litigation against Allstate, State Farm, Nationwide and other property and casualty insurers, saying the companies are trying to minimize their losses by misclassifying the hurricane’s destruction as flooding.
“These homeowner policies clearly provide for comprehensive coverage for any and all hurricane damage,” Scruggs said in a statement. “The intentional effort by these insurance companies to avoid meeting their policy obligations is devastation on top of devastation.”