VICKSBURG - If an insurance policy bought by the owner of a home or business says, specifically, that hurricane damage is a covered loss, that should be that.
So says Attorney General Jim Hood, who has named a bevy of insurance companies as defendants in suits filed in federal court.
If the federal government defines an area as flood-prone and offers taxpayer-subsidized insurance policies to owners of property in that area, then owners of property outside the identified flood zone should be compensated if they sustain flood damage.
So says Gov. Haley Barbour, who has been to Washington to see President Bush and to ask, in person, for such relief.
Some dismiss both actions as grandstanding, but they're wrong. People need advocates, and Barbour and Hood, one a died-in-the-wool Republican and the other a died-in-the-wool Democrat, are going on the offense for victims of Hurricane Katrina, specifically the nearly 340,000 who have filed insurance claims.
Hood's argument is essentially this: If a policy says it covers hurricane damage, it should cover all hurricane damage including the storm surge of ocean water pushed ashore by high winds or by water overflowing from creeks, rivers and streams pushed out of their banks by a hurricane's downpour.
The insurance industry's response is this: For decades, flood insurance has been a "separate buy" through a taxpayer-subsidized program. Even policies that say they offer hurricane coverage almost always exclude, in writing, water flowing over land and into homes and other buildings. Tacitly, they are saying consumers should have known this or have been savvy enough to figure it out for themselves.
Their additional argument is that their cost of underwriting - the price paid for policies - did not include the risk of flooding, and that paying for damage they did not collect enough money to cover will bankrupt them.
Hood is counting on an ancient rule of contract law: Any unclear language is to be construed against the person who wrote the contract; in this case the insurance companies. People who may have had property insurance but no specific flood policy must certainly hope he prevails.
For Barbour's part, he's also relying on an old legal maxim. It's the one that says even where there's no duty to act, if someone does act and does so negligently, then liability arises.
The federal government chose to draw lines defining which areas were in a likely flood plain, excluding all others. Katrina, of course, showed no deference to the federal maps and at least 50,000 buildings not expected to got very wet.
Because the federal government led these property owners to believe they did not need flood coverage, the government has a responsibility to "make them whole" since the advice turned out to be bad, Barbour said.
Toward that end, he, and, separately, U.S. Sen. Trent Lott and District 4 U.S. Rep. Gene Taylor, are asking Congress to act, providing up to $4 billion in direct aid from U.S. taxpayers.
Because such relief is unprecedented, it's not clear how Congress will respond. The amount being sought might pale in comparison to the tens of billions already allocated to recovery from America's most costly natural disaster, but paying up once means Congress will be called on again and again to do so in the future. It could also be a problem for insurance companies, since fewer consumers would tend to buy private coverage on the assumption the public treasury would be tapped for catastrophic losses.
Finally, a kind word for the insurance companies. They've been made out the villains in all this, and that's not at all fair. Reputable private companies have already paid out nearly $2 billion to their customers and many agents no doubt made clear the risks their clients were taking if they failed to buy the separate flood policies. Most people who live in coastal areas or along rivers are, in fact, aware of the federal program. This is especially true when there's a mortgage on the property. Lenders are savvy. They always require their financial interest to be fully protected.
And there's also a learning opportunity. In Mississippi, a statute says car insurance customers who choose not to buy coverage against uninsured motorists must sign a separate waiver affirming their decision.
It doesn't now, but the same written waiver law should apply to any and all areas where there's the slightest chance of overland flooding.
People should be free to accept that risk, but need to fully understand what they're doing in advance. It's too late when an adjuster, standing on their slab, says, "Uh, sorry … "
