Monthly Archives: June 2007

Congress proposes reforms to federal flood insurance

Here is a copy of the Congressional Research Service report on proposed reforms of the National Flood Insurance Program.  Don’t worry, it’s short, and the last few pages are a table summarizing provisions.  Some of the proposed changes make good sense: raising the limit of flood insurance policies and contents coverage, allowing FEMA to charge actuarially sound rates for commercial and non-primary residences (primary residences will continue to be subsidized across risk classifications, however); dramatically increase the penalties for lenders that don’t require flood insurance in flood plains; and new lines of coverage including business interruption insurance. 

But look at the list of concerns identified with the NFIP, and see how the proposals fall far short of addressing all of them: 

  • increased need to borrow from the U.S. Treasury; the need for the program to bring in sufficient premiums to cover the federal outlays of funds used to pay claims;
  • substantial premium cross-subsidies among classes of policyholders;
  • outdated flood maps that will form the basis for making decisions about where and how to rebuild the Gulf Coast, and the need to modernize them to more accurately reflect flood risk nationwide;
  • costly impact of repetitive loss properties;
  • allegations of uneven compliance with mandatory flood insurance purchase requirements when the property is located in federally designated special flood hazard zones (SFHA);
  • inadequate management and oversight of private insurance companies (Write Your Own insurers) that write insurance policies and adjust claims for the NFIP, vendors that supply services to the program;
  • inadequate education, training, and technical assistance for private insurance agents and adjusters; and
  • federal government long-term exposure to potential changes in weather-related risk, which could have significant implications for the nation’s growing fiscal imbalance.

One of the biggest of these is repeat losses on the same property, where owners keep getting a de facto subsidy instead of relocating.  This was supposed to have been changed in the last reform, but the problem continues.  Also not completely addressed is cross-subsidies among classes of policyholders — FEMA still won’t be able to charge actuarially sound rates for primary residences. Also, the NFIP owes the Treasury some $20 billion, and the program generates insufficient capital to create its own reserves, much less repay an enormous sum like that.  The report acknowledges debt forgiveness has to be considered, but that is not in this bill at present.

You might also notice inadequate supervision of the Write Your Own companies is listed, probably as a sop to those who insist private insurers ripped off the Treasury by transferring their obligations for wind damage to the taxpayers by wrongly paying out flood damages.  Yet the bill itself doesn’t appear to address that concern.  I wonder why not?


Filed under Industry Developments

Guest blogging

I continue my guest blogging at today and tomorrow, if you’re shocked by my meager output here I have a number of posts up at PoL. 

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Dale announces settlement of 532 Nationwide Katrina claims

Looks like Mississippi Insurance Commissioner George Dale is not taking the pig-and-lipstick insult lying down.  Dale has upped the ante on the Scruggs Katrina Group, announcing the settlement of a bunch of Katrina claims by Nationwide.  Here is an additional story from the Clarion-Ledger with information about further State Farm settlements in Mississippi.

Lord knows I am no fan of coasting, taking it easy or giving anything less than maximum effort, but between blogging, projects for Appleman’s on Insurance and . . . seems like there was something else . . . oh yes, a full time law practice, there’s not a lot of juice left in the tank at present.  I saw some other items in my Bloglines feedreader that I want to address, but that will have to wait until tomorrow.  So today, only this post, unless something major breaks on the order of Dickie Scruggs challenging George Dale to a duel.

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Filed under First Party Insurance

Scruggs among top contributors to North Dakota politics: it doesn’t take much

As many of you know, I am a NoDak in exile and keep tabs on what goes on back in paradise, a word I use in all sincerity because I had a great time growing up in NoDak. This item intrigued me: it says Dickie Scruggs is among the top six contributors to North Dakota Democrats.  His contribution: $10,000.  Politics is pretty cheap in NoDak, if any of you are thinking of making a run for U.S. Senator, that’s the place to go.  If you weren’t born there, of course, that is going to be a huge handicap because it will be assumed you are crazy and know little to nothing about what really matters in life, but the voting population is less than half a million, and with some effort you could meet nearly everyone and convince them you’re not some wacko with weird big city ways.  Below are some guidelines.

Fashion tip: get used to wearing jeans, solid color dress shirts or blouses are OK, plaid is better.

Choice of campaign vehicle: club cab pickup is mandatory.  Do not wash pickup too often: too flashy.

Headgear: male candidates should have cowboy hat handy, I am willing to serve as paid consultant to tell you when it is appropriate to wear it and when you should merely have it nearby, it’s too complicated to explain here.  For women, no headgear is necessary, but always don baseball caps with "fun" slogans and sayings when they are presented to you. 

Accent: Norwegian accent is best. High Plains nasal intonations work — if you can fake a Canadian accent without using "Eh" or saying "beauty" or "hoser,"  that will be close enough. 

Drink: Soda is "pop." Do not forget this. Repeat: do not ask for "soda."  Avoid potential faux pas by drinking only coffee or alcohol, both are very popular beverages.

Meals: breakfast, dinner, supper.  There not only is no free lunch, there is no lunch at all.  You must drop "lunch" from your vocabulary. UPDATE: A reader was perplexed by this and asked whether NoDaks don’t eat at noon. The noon meal is called dinner, supper is the evening meal.  Breakfast is eaten in the morning, or according to the advertising of certain restaurants, anytime.  Thus, there is no lunch, and I might add, also no "brunch."  SECOND UPDATE: Someone else asked me why this is.  I don’t know, it has never occurred to me to wonder why, it just is a fact of life in North Dakota like lots of wind, lots of cold and lots of mosquitoes.   Wondering why would be crazy, like asking my dad why I had to haul hay bales or drive tractor when I was a kid — that’s just the way it is.  By the way, you must master this thought process or you will not make it in NoDak at all, much less be elected senator.

Tips on driving on gravel roads: speed up when a vehicle approaches, it will build an air pocket that will deflect flying rocks and keep your pickup from getting pelted.  When vehicles approach at high speed in the middle of the road, do not pull further to the right, you may lose control in the soft gravel of the shoulder. Instead, drive fast down the middle of the road yourself — they will probably eventually get over to their own side.  Hold the wheel casually with three fingers of one hand to show passengers and other driver you have no fear: avoid the two-handed white-knuckle death grip at all costs, it will brand you as unfit to drive and to lead.    

Political affiliation: Republican is best, moderate to conservative Democratic also works well (both senators and the state’s lone U.S. Representative are Democrats).  Pro-farm subsidy is mandatory,  as is pro-Second Amendment stance and demonstrated ability to use guns.  The local definition of moderate to conservative may surprise you — state’s heritage is being stepped on and mocked by the powers that be, and most residents are descendants of semi-serfs who fled oppressive regimes: radical populist talk goes over very big.   

Where to be seen: county fairs, high school and college sporting events, duck hunting season, fishing derbies, demolition derbies (people drive old cars and crash into one another in a big dirt arena), tractor pulls, rodeos, parades, senior citizen centers, American Legion posts, lutefisk suppers.  If the idea of eating lutefisk — codfish soaked in lye — shocks you, rethink political plans. Remember that secretly, no one else really likes it either, it is merely a cultural artifact.  



Filed under Miscellaneous

Guest blogging

By the way, I am guest blogging this week at  If you don’t regularly read the site already, you should, it’s one of my favorite stops on the Web.  

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Allstate and Scruggs settle

Last week when the Scruggs Katrina Group put out an announcement announcing it would have an announcement the next day, this is probably along the lines of what I expected: Scruggs and Allstate have entered into a settlement of Katrina claims, although the terms are so secret we don’t even know how many cases it involved, or really, whether they were cases or just inchoate claims.  Read about it here in this story by Anita Lee of the SunHerald.

Of course, that isn’t what last week’s announcement was about, it was about the fact that the Scruggs Katrina Group has filed a lawsuit alleging that at any moment we can expect an attack from Mars, that State Farm officials are advance agents of our future Martian overlords and blend in by wearing latex people suits, and that the "Like A Good Neighbor" TV commercials will soon feature a reptilian spokesthing that will demand obedience to the new Martian order.  Wait a minute. . . . It seems the complaint actually alleged that State Farm has been engaging in racketeering, fraud and federal crimes. Well, that’s somewhat different.  Still on the fringe, but different. 

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Filed under First Party Insurance

State Farm’s anti-concurrent position

Some of you may recall this post from last month about the Palmer v. State Farm case in federal court in Mississippi, in which I expressed some confusion as to the apparent differences between State Farm’s position in that case on the effect of its anti-concurrent policy language, and its stated position in other cases.

So what is the right position? The one in the other cases. Here is a pdf of a State Farm motion to alter or amend Judge Senter’s memorandum opinion denying State Farm’s earlier motion to dismiss in Palmer.  The new motion, in essence, clarifies that the earlier assertions of State Farm’s position in the Palmer motion to dismiss were not consistent with the company’s real position and were in error.   Even though the new motion does not seek to change the result of Senter’s ruling, but only amend it to reflect what the insurer says is its true position on the anti-concurrent language, the Palmers are having none of it and oppose the motion, calling it "blatantly disingenuous."  Here is a pdf of their response brief.

Again, as you may recall, I wrote a short piece about the anti-concurrent language including a mention of the Palmer case for RiskVue, and you can see what I wrote at a link at this post.  I also have mentioned that I am working on a much longer piece about anti-concurrent language in insurance policies, with a focus on Katrina litigation, that will appear in another venue not too far in the future. 

I consider few things in insurance coverage more stupifyingly complex than issues involving causation, and that is saying something in a field with more than its fair share of issues that can twist your brain into a pretzel.  I have spent an enormous amount of time researching and working on this future article, and one of the amazing things about so-called concurrent causation is that hardly anyone can agree on what it is, much less on the right way to analyze it in the context of insurance contract interpretation, and still less on what the proper result should be.  This takes me back to my law school days when Prosser and Keeton’s famous chapter on Proximate Causation was assigned reading in Torts class, and I read it something like 11 or 12 times trying to figure it out, leading my friends to conclude I had lost my mind.  I got an A in the class, so I think I understood it at least in part.  As a work of legal philosophy, the chapter has few parallels, and it even has a certain degree of humor about it.  Far from being unapproachable, it attempts to bring abstraction down to concrete reality and practicality as best it can.  The authors probably have done a better job of explaining the concepts of causation in the law than anyone else ever has, and yet the chapter seems written with the melancholy understanding that if you asked 100 people who had just read it what the chapter said, you would get 50 different answers, and the other 50 people would either laugh in your face or just look at you and walk away.       

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Filed under First Party Insurance

Lott: ‘I’ve already offended everybody’

Some people have a way with words; for others, words have their way with them.  You decide which category Sen. Trent Lott falls into.  Here’s a story from the Sun Herald about his latest, and here is the money quote:

"I don’t worry about offending anybody anymore, " said Lott, "because I’ve already offended everybody." 

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Allstate, Weiss settle bad faith case on appeal

You may recall the Weiss v. Allstate Katrina case, which resulted in a $2.8 million bad faith jury verdict. I have blogged about this case here, here and here. According to this Associated Press story, the parties have settled the case, which Allstate appealed to the Fifth Circuit.  Terms of the settlement were not disclosed.

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Filed under First Party Insurance

New coverage blog

I recently became aware of this fine coverage blog written by the Lewis Johs firm on Long Island.  This is a new blog with some excellent posts on New York coverage cases.  I’ve talked with the folks at Lewis Johs and they are good people with a good product, check it out.   

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