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Sunday, September 11, 2005

Katrina Insurance Fight

This article reminds us that a distasteful byproduct of modern catastrophes is brutal legal maneuvering over insurance coverage. (The WTC insurance fight is just the most recent example.)  The major issue with Katrina-related litigation will be denials of claims for damage based on water: owners will argue the damage resulted from wind-driven-rain; the insurers will argue it was flooding.  Because of the magnitude of the disaster, there will likely be a push toward class-actions, although the obstacles to that procedural device would appear at first blush to be formidable.

In any event, in the near future there will be quite a few associates at large law firms who will ask themselves: "Did I really go to law school to do this?"

Posted by Dave Hoffman on September 11, 2005 at 10:32 PM in Current Affairs | Permalink

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Comments

As long as we are having government regulated insurance, perhaps in the future, state regulators would look to ensure that areas at particular risk (e.g. NO for flood, LA for earthquake or NY for terrorism(?)) such coverage would be a mandatory offer. It would by no means make it cheaper, but it would at least ensure that homes and property be rebuilt, thus returning the economy and opportunity for self-sufficency back to normal as soon as practicable.

Just as a note on authority for such power, at least in NY, the insurance law mandates that out-of-state or instate auto policies which do not satisfy the minimum requirements for coverage are deemed to be raised up in order to comply.

Posted by: TomH | Sep 12, 2005 3:08:50 PM

I imagine that there will be court battles; but I also imagine that this is not the first time a hurricane caused flooding. So there's probably some precedent out there.

Posted by: Hillel Levin | Sep 12, 2005 6:51:48 AM

Eh, I think you overstate the distaste that people would bring to the issue. It's a complicated problem with important ramifications for real-world people. So was the 9/11 insurance issue ... so much so, that torts instructors continue to use it years later to make up exam questions.

The business isn't all that terrible either. Someone has to spread risk, and insurance companies do so much better than public actors. Did you not read the NYT editorial regarding Franklin's innovative establishment of fire insurance companies (albeit, supported by the innovation of fire departments)? Sure, it may be unsettling to make decisions that affect the well-being of people struck by tragedy, but these types of decisions are made every day by doctors, pastors, non-insurance lawyers, policemen, and many other professions.

http://query.nytimes.com/gst/abstract.html?res=F30D10FB3F550C708CDDA00894DD404482

Posted by: Jeff V. | Sep 12, 2005 1:46:07 AM

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