By Randy Schultz
Palm Beach Post Editorial
Sunday, July 16, 2006


On Aug. 5 of last year, in his weekly column to constituents, Sen. Trent Lott, R-Miss., praised Congress for passing legal reform that would "curtail frivolous lawsuits which threaten American jobs."

Twenty-four days later, Hurricane Katrina took out Sen. Lott's house in Pascagoula. Last December, Sen. Lott hired one of those rapacious trial lawyers - who also happens to be the senator's brother-in-law - to go after the insurance company that Sen. Lott believes owes him money for his destroyed home. Funny how lawsuits look less "frivolous" when you're the plaintiff.

Sen. Lott is among 3,000 Mississippi clients of Richard "Dickie" Scruggs, who was in court last week on behalf of Julie and Paul Leonard. Their losses from Katrina came to $130,000. The insurance company paid $1,300, claiming that almost all of the damage was from water, not wind. Mr. Scruggs counters that devastating winds came three hours before the storm surge, and that the Leonards' casualty agent told them not to bother with flood insurance. Mr. Scruggs makes the same argument for Sen. Lott, who once criticized Democrats for thinking that "the answer is a lawsuit. Sue everybody."

Florida has been through the wind vs. water legal debate. Here, the ruling in 2004 went against the insurance companies. But the Legislature fixed that in 2005 with a law that overrode the court. Why does Tallahassee wonder why Floridians are so mad about insurance?

Getting out of paying claims

The facts of the Florida wind-water case were slightly different, but the issue was the same.

In October 1999, Hurricane Irene caused damage to a Broward County home that amounted to more than half of the property's insured value. Under county rules, that meant the home had to be torn down and rebuilt under a tougher code. The owners had property and flood insurance, but they faced a big gap between what their claims paid and their cost. So, they sued to have their wind insurer - the Florida Windstorm Underwriting Association, the first version of Citizens - pay the balance.

The owners lost at trial. In June 2004, however, the 4th District Court of Appeal in West Palm Beach ruled for them. In its opinion, the court said that a company responsible for "even a fractional share" is "liable for the face amount" - in that case, the total insured value - because, under Florida rules, ambiguous policies go "in favor of the owner".

Repealing that decision was the insurance industry's top priority for the 2005 legislative session. As so often happens, when insurers discover that they might actually have to pay claims - mold, sinkholes, hurricanes - they try to get out of paying claims. Why do insurance companies wonder why so many of their customers are mad at them?

Start doing favors for consumers

Since Hurricane Andrew in 1992, here is what Florida has done for the property insurance industry:

The state created the hurricane catastrophe fund, which helps insurers pay claims in a bad storm year.

The state allowed insurers to form state versions, known as "pups," of their big-dog companies. Allstate Floridian, for example, can claim that it needs a huge rate increase to make up for storm claims, even as Allstate is bragging about how much money it's making.

The state created a system of arbitration for rate increases, rather than let the insurance commissioner decide. The companies win almost every time.

The state refused to create an Office of Public Counsel that would represent consumers during rate requests. The state has such an office for utility rate requests. For the most part, the state relies on the insurance industry for information when deciding what premiums should be. An Office of Public Counsel, staffed with trained specialists, could challenge the industry's numbers.

The state refused to enact a "loyalty clause" that would have prevented insurers from dropping policies if a customer had paid premiums for three years and done nothing to breach the contract with the company.

And, of course, the state negated that appeals court ruling the industry hated.

It took personal tragedy for Trent Lott to lose his political dislike for lawsuits. How much more will it take in Florida for the many groups worried about insurance costs - Realtors, small businesses, retailers, chambers of commerce - to understand that they outnumber even all the insurance lobbyists in Tallahassee and to make the Legislature understand why so many people are mad?

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