Mississippi homeowners could see premiums rise up to 25 percent thanks to Hurricane Katrina-related subrogation litigation being brought by the Mississippi attorney general, according to a recent report by Milliman.
The subrogation litigation is being brought by the Mississippi attorney general and will cost homeowners up to $55 million annually, Milliman Inc. said in a March report.
Mississippi property insurers already paid $13.8 billion in covered losses on 515,000 Katrina claims, and the federal government stepped in to help homeowners who did not have enough insurance coverage to rebuild, adding more than $2.1 billion of grant assistance from the state Homeowners’ Grant Assistance Program (HAP) program to nearly 20,000 homeowners in four counties that faced uninsured (not wind) losses.
Nearly 14 years later, the Mississippi attorney general’s office is working with outside plaintiffs’ attorneys to extend Katrina litigation and file lawsuits against insurance companies—without notifying the homeowners who initiated the claims.
Milliman’s January 2019 report (“Mississippi Homeowners Insurance: Potential Impacts from Subrogation Litigation“) says the attorney general’s series of lawsuits, beginning in 2015, against individual insurers alleges “tortious underpayment of insurance claims, in part due to the known existence of HAP.”
“The basic allegation in each complaint is that insurers underpaid, partially denied, or denied wind claims by classifying them as flood claims,” the report states, noting that insurers did so with the knowledge that the HAP program would likely reimburse damage identified as flood “because of the insufficient flood insurance on the properties, and that the existence of HAP would lower the chance that policyholders would take action against their insurers for underpaying or denying the claims.”
The report said the Mississippi Attorney General circumvented the statute of limitations that applies to policyholders by making the state plaintiff, “and hopes to recover funds from insurers to redress HAP’s expenditure of funds that allegedly should have been paid as windstorm claims.”
Milliman said the complaints it studied addressed 15,798 claimants who were paid more than $233 million in insured windstorm losses and subsequently received more than $1.19 billion in HPA flood grants.
Because homeowner insurers in Mississippi charged no premium for the flood peril and did not anticipate additional damages for flood at the time of policy issuance, a “retroactive increase to the ultimate liability for Katrina losses could change actuarial projections of prospective future loss costs from similar catastrophic windstorm events in Mississippi,” Milliman said.
The report finds that the typical coastal county policyholder could see premium increases between $10 and $487 per annual policy due to the anticipated impact of future litigation—a rate increase that ranges from 0.5 percent to 25 percent.
APCIA, which engaged Milliman to analyze the potential impact of these lawsuits on Mississippi homeowners insurance premiums, responded to the report’s findings in a press release.
“Turning back the clock and reopening settlements from 12 years ago might pad lawyers’ pockets, but it would also disrupt the insurance marketplace and harm consumers and the economy,” said APCIA Southeast Region vice president Ron Jackson.
Source: American Property Casualty Insurance Association, Milliman
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