Friday, September 16, 2005

Picking an innocent deep pocket is the American way

Mississippi and Alabama are considering filing suit against insurers to pay for flood damaged homes. Only problem is homeowners insurance doesn't cover flood damage. Such coverage is normally only available through a federal high risk insurance pool which charges high premiums and provides limited benefits with high deductables.

Both these states have reputations as mass tort plaintiffs' heaven on earth. Jurors there may vote Republican but in court income redistribution regardless of real liability is the name of the game.

Almost a certainty just the threat of such litigation will transform the homeowners insurance market there. Insurers will create high risk captive subsidiaries charging premiums truly reflective of the actuarial exposure. In the face of such potential political and legal abuse why should shareholders, and policyholders elsewhere, subsidize irresponsible Mississippi and Alabama homeowners who didn't buy federal flood insurance?

Aeosop-like fables like the "Ant and the Grasshopper" should be mandatory stories to read at storytime in Mississippi and Alabama kindergartens.


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