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The tidal wave of litigation in Mississippi against insurance companies that rejected Hurricane Katrina claims has surged into federal district court with a class action. It comes on the heels of several other actions, including hundreds of individual state court suits, another filed on behalf of Mississippi by its attorney general and the creation of a mediation system by the Mississippi Insurance Department. The class action is aimed at a single insurance company-Illinois-based State Farm Fire and Casualty Co.-and a single type of policy. The policies are all-risk homeowners’ policies, in that they pay on any loss unless it is specifically excluded. On the policy’s face, State Farm calls it one of the broadest forms available. Guice v. State Farm Fire and Casualty Co., No. 1:06-CV-1 (S.D. Miss). But State Farm did not find it broad enough to cover lead plaintiff Judy Guice’s house when, last August, wind and water reduced it to a concrete slab and steel girders. An adjuster wrote to Guice, a Biloxi, Miss., solo practitioner, that they would only cover damage “specifically caused by wind,” such as that to her off-premises barn. But they refused to cover the loss of her house, because it was caused not only by wind, but also by floodwater. Wind and water damage is covered, said class action counsel Richard Phillips of Batesville, Miss.’s Smith Phillips Mitchell & Scott. For the water exclusions to apply,” said Phillips. “The company must prove the loss would not have occurred in the absence of water.” The policy states: “We do not insure under any coverage for any loss that would not have occurred in the absence of [water damage] . . . regardless of the cause.” The following clause excludes causes that are “concurrent or in sequence with the excluded event to produce the loss.” Phillips said that “[u]nder the terms of State Farm’s all-risk policies, it’s not a question of wind versus water-losses caused by wind and water are covered.” Richard Scruggs of The Scruggs Law Firm of Oxford, Miss., who is one of a number of attorneys who represent hundreds of individuals suing insurance companies for Katrina-related denials of claims, did not return repeated calls for comment. State Farm, which has not yet filed any papers in the suit, declined to address specific allegations. But company spokesman Fraser Engerman said, “[w]e evaluate every claim on its own merits, and based on the policies in force, we pay what we owe.” Phillips said that State Farm insures some 17,000 Mississippi Gulf Coast homeowners, about one in five, and that policyholders should not have to file thousands of individual lawsuits. The class seeks only equitable relief, a declaratory judgment and an injunction. AG takes action Mississippi Attorney General Jim Hood filed suit against five insurance companies in a state chancery court last September. The suit alleges, among other things, that the insurance companies’ denials of coverage for Katrina-related wind and water damages was an unconscionable violation of public policy. Calling standard provisions of homeowners policies ambiguous, the suit says that they should be construed against the insurers, thereby preventing irreparable harm to policyholders and the state. Hood v. Mississippi Farm Bureau Insurance, No. G2005-1642 (Hinds Co., Miss., Ch. Ct.). The insurance companies immediately removed the case to federal district court. Hood v. Mississippi Farm Bureau Insurance Co., No. 3:05-CV-00572 (S.D. Miss.). The state has moved to remand it back to state court. The Farm Bureau, and defendant Allstate Property and Casualty Insurance Co. did not return calls seeking comment. United Services Automobile Association declined comment. Another defendant, Nationwide Mutual Insurance Co. said in a press release that the “flood exclusions” were “well-established,” and that it judged every claim on its merits. State Farm is also a defendant in Hood’s suit. Mississippi Insurance Commissioner George Dale established a nonbinding mediation procedure for claimants and insurance companies.

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