PCI: Mississippi AG’s Lawsuit More About Politics than Justice

A lawsuit that attempts to force insurance companies to pay for flood insurance losses under homeowners insurance contracts filed by Mississippi Attorney General Jim Hood will, if successful, destroy the viability of every insurance policy in the state and undermine the integrity of every legal contract in the nation, according to one industry trade association. On Thursday, Hood sued five insurers (see related stories in Southeast news).

“Our economy is based on the sanctity of legal contracts,” said Ernie Csiszar, president and CEO of the Property Casualty Insurers Association of America (PCI). “Insurance policies are legal contracts with specific policy terms and conditions that have been reviewed by regulators in each state. The flood loss exclusion in homeowners policies is clearly worded, has existed for decades and has withstood previous legal and political challenges. We’re outraged by this attempt to retroactively rewrite policies so that every risk will be covered, regardless of the cost to millions of American consumers.”

Csiszar pointed out that flood losses have been covered by the National Flood Insurance Program (NFIP) since 1968. According to Csiszar, the federal government has made flood insurance protection available to those who need it for nearly 40 years. Many individuals choose to purchase coverage because their mortgage lender requires it. However, it is not mandatory that all consumers purchase such coverage. Insurers have historically excluded flood damage from most standard homeowners insurance policies because of the potential for catastrophic, widespread, and repeated losses.

“This lawsuit is about politics, not fairness or justice under the law,” said Csiszar. “It threatens the validity of any contract now in effect. Will banks be forced to reduce the interest rate or principal due on mortgage loan contracts simply because an ambitious politician doesn’t think that prevailing rates are fair to his constituents? This issue goes well beyond insurance policies and every consumer and business should be concerned about the implications of the legal action.

“The Mississippi attorney general’s lawsuit seeks to override the decades-old exclusions and retroactively rewrite every homeowners insurance policy, not just in the areas affected by the storm, but across the United States,” continued Csiszar. “Such an action is unfair to the responsible consumers who have paid the federal government for flood insurance coverage over the years. This would establish a dangerous precedent and expose insurance companies to potentially billions of dollars in claims costs for a risk in which not one dollar of premium was collected.”

PCI indicated it would take all appropriate steps available under the law to protect the integrity of policy language.

Topics Lawsuits Flood Mississippi Homeowners