Yesterday State Farm Insurance announced that they would no longer underwrite home owner's insurance in the state of Mississippi.
If you are unfamiliar with the insurance industry's issues in Mississippi let's take you back prior to Katrina. If you were not aware, your home owner's policies do not cover flood damage. If you live in a flood plain, you may buy flood insurance that is backed by the federal government which keeps the premiums low.
However, many in Mississippi did not have flood insurance so when Katrina hit the state attorney general threatened lawsuits to force the insurance companies to pay off for flood damage; something never factored into the original premiums.
As a result, State Farm, who underwrites 30% of the state's insurance, has decided that it's not worth doing business in a state when "We've reluctantly come to the conclusion that it is no longer prudent for us to take on additional risk given the uncertain legal and business climate"
So congratulations to the AG, he's single handedly going to increase the home owner policies for millions of homes in Mississippi astronomically by 1) create an environment where there is less insurance competition and 2) Give insurers incentive to increase policies rates so that they may be able to cover contingencies for which they may be forced to pay for but not covered in the original policy.
When is a contract not a contract?
2 comments:
I'll tell you when a contract is not a contract. It is when State Farm finds out it has written its contract in a way that exposes it to liability that it thought it did not have.
Insurers control the language of the policy and have heavily influenced the evolution of the basic structure of judicial decisions interpreting insurance policies for hundreds of years, back to the English common law.
Under that law, insurers bear the burden of proving that the claim is not covered because the damage was caused by an excluded loss. The insurer has to prove this by competent evidence to the least difficult to meet standard in the law: preponderance of evidence, or more likely than not.
State Farm failed to prove by competent evidence to this burden of proof that MS homeowners' losses were more likely than not caused by flood damage, and MOST IMPORTANT OF ALL, the percentage of damage attributable to the excluded risk (flood) versus the covered risk (wind).
All this is not some newfangled trial lawyers theory, as some critics suppose. It is the fundamental grain of caselaw that has evolved over literally centuries.
So here is the answer to your question.
A contract is not a contract when the insurer doesn't want to uphold its part of the bargain.
I live in a flood plain in Ohio and we were informed that we had to have flood insurance for that exact reason.
By the way, thank you so much for the link to my blog! That is very kind of you!
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