One of my law partners asked me today what I’m going to blog about after the Katrina cases and controversy go away. To which I said, "I guess I’ll go back to doing what I did before." He said, "Which is what?" And I said, "I don’t remember." But if stories like this one from Congressional Quarterly are an indication, it’s going to be a while before I have to figure that out.
I have seen a lot written about the Katrina insurance battles, and done a lot of writing on it myself, so at this point I’m not easily impressed, but I found that the Katrina story by Victoria McGrane and sidebar by Shawn Zeller on the McCarran-Ferguson Act are very, very good work indeed. The link provided is on the Scruggs Katrina Group website, and the story is a little hard to read because it doesn’t quite fit on a computer screen (someone with more technical expertise than I possess may be able to solve that problem quite easily). Also, the settings on the pdf do not allow you to print out the story to read it.
The McGrane story was fair and balanced, and gave a good overview of the dispute. It shied away from legal discussions, as you might expect from a publication that covers politics on Capitol Hill, but I thought the points it made about how insurers had a disastrous showing in the public relations arena were certainly accurate. Some people quoted in the story said there was nothing that insurers could do about that, that you can’t fight compelling storylines with talk of contract law. Others said insurers could have played their hand much better, and I tend to agree with the latter observation.
I take issue with one indirect quote in the sidebar: "the use of so-called anti-concurrent causation clauses . . . blocked those whose homes were swept away by Hurricane Katrina from claiming insurance payments when both wind and water caused the damage." While that statement appears to be intended to apply only to the "slab" cases, where the entire home was destroyed, it is not true either in regard to homes that were swept away or those that were damaged but left standing. It was not the anti-concurrent language that prevented payment for flood, it was the flood exclusion. As I have said a number of times on this blog, the anti-concurrent language in homeowners policies — and it appears several places in the property coverage section of standard policies — merely works to preclude uncovered damage from becoming covered through legal arguments that some covered cause was the precursor, or worked in combination with the uncovered cause. It does not take covered damage out of coverage.
The effect of the anti-concurrent language is frequently misunderstood, on occasion intentionally so, it appears to me. For example, I looked back at my notes of Mississippi AG Jim Hood’s appearance before a House subcommittee earlier this year, and according to those notes, Hood, as purported evidence of insurer bad faith in Katrina claims adjusting, said that this kind of anti-concurrent language has been declared invalid in all 50 states. I am currently writing an article on anti-concurrent language in policies — where it came from, what it means and what courts have said about it — and I can assure you with 100 percent certainty that statement is wrong. Instead, the real issue has come down to whether insurers unjustifiably refused to pay for wind damage, not because it occurred in conjunction with a flood, but because they said they either couldn’t find sufficient evidence of wind damage or the policyholder had not proven wind damage. Whether insurers are right about that or not, it is a different legal argument than the anti-concurrent language.
I thought the story did a good job of explaining the McCarran-Ferguson Act and Trent Lott’s crusade against it (he pronounced himself shocked to learn it existed and that it provided a limited anti-trust exemption to insurers), including that larger insurers may not particularly care if the anti-trust exemption is revoked. However, the story didn’t really explain that many states have their own anti-trust regulations, that revoking the exemption from federal anti-trust laws does not necessarily mean states would lose power to regulate many aspects of insurance law, that states are going to scream like banshees and march on Trent Lott’s D.C. residence with torches and pitchforks before they give up their lucrative regulation of insurance companies, and that anti-trust law has little to nothing to do with the current Katrina disputes, which are and will continue to be matters of state contract law. I was disappointed the story didn’t laugh off Lott’s suggested legislation to make insurers write policies in plain language in large, crayon-like letters: the language of insurance policies is the way it is because of numerous common law court decisions on issues reflected in the drafting of policy terms. Simple language is not as simple as it may sound, it may actually be more complex. If you read insurance coverage cases, you know what I am talking about.