And this from Alternet

Don’t Let Insurers Shirk Their Duty

Condensed from an AlterNet article
by Nomi Prins

New laws must prevent abuse by companies that are squirming out of paying Katrina victims.

Katrina destroyed homes along 70 miles of the Mississippi Gulf Coast. Another storm's been brewing there ever since: a set of lawsuits against five major insurance companies for shirking post-Katrina claims. The lawsuits, filed by famed litigator Richard Scruggs, cover 4,000 families, including Scruggs's brother-in-law, Sen. Trent Lott (R-Miss.).

All that's left on the plot of land that was Lott's home is brown-twig lawn. His insurance company of 40 years -- the nation's largest insurer, State Farm -- refused to pay for damage. As with other homes, State Farm contended that the cause of the damage was flooding -- something the company was not required to cover. That was despite Lott's 34-year record of opposing corporate regulation.

State Farm didn't value that record any more than Lott's home, treating him like all policyholders: badly. This highlights one indisputable fact. Corporate America may generally discriminate against the less wealthy, but nature and insurance companies are equal-opportunity offenders.

Scruggs and other lawyers aren't suing just about refusal to pay; the suits allege national, systemic fraud and consultant-concocted ways of shirking claims and stretching payment periods.

Scruggs also has evidence of dual engineering reports from firms used to evaluate homes for claims. The story goes: Give us (the insurance company) a report we like (that says we don't have to pay), or keep coming back until you do. That kind of collusion never favors consumers. With tens of billions of dollars of unpaid claims at stake, it's a strategy neither insurance nor engineering firms want illuminated in court.

The result is that a disaster in 2006 or later will hit policyholders with greater losses than last year. Meanwhile, insurance company profits have nearly doubled from $22 billion to $43 billion, in the past six years. Even with Katrina, the industry posted its largest surplus in 2005.

Enter federal intervention. In June, Sens. Lott and Mark Dayton (D-Minn.) proposed the "Honesty is the Best Insurance Policy" bill, which would force insurers to write policies in plain English. The bill has an uphill climb, given the power of the insurance lobby.

Other problems linger. A glaring one in the Katrina suits is what constitutes wind damage versus flood damage. Blaming floods is the industry's "get out of payment free" card. But for the decimated coastal homes, it's a seismic leap to proclaim the cause was spontaneous flood, rather than wind-caused storm surge.

Another dilemma is the lack of federal oversight of the industry, leaving the states as hostages of the insurers. While many insurers pulled coverage from Louisiana, Alabama, and Florida, remaining ones hiked premiums. When Mississippi Attorney General Jim Hood commenced investigations after Katrina, insurance firms threatened to bolt.

It's one thing when a major senator has his house blown down and instigates necessary legislation. But, for lasting reform, we need more federal and state supervision and fewer leniencies with reinsurance and insurance company price hikes and reneged claims.

We're a country bordered by sea with dense populations near water. Intense weather is always possible. But the role of insurance companies is to insure. Regardless of weather, they should be held accountable to that promise. That's what the companies signed up for.

Nomi Prins is senior fellow at the public policy center, Demos.