Miss. attorney general seeks to block State Farm from barring new business in state

Published 12:28 am Sunday, February 18, 2007

Mississippi Attorney General Jim Hood said Friday he will seek legislation aimed at blocking State Farm Insurance Cos. from refusing to write new homeowners and commercial policies in the hurricane-battered state.

Hood’s plan would require any company that writes automobile insurance in Mississippi and also writes homeowners policies in other states to offer homeowners and commercial properties throughout Mississippi.

Hood said his plan is modeled after actions taken by Florida. Florida’s legislation primarily deals with preventing policy cancelations and non-renewals, but Hood said a model could be crafted to force companies to write new policies.

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“We’re looking at a robber baron in the face that is trying to make an example of Mississippi,” Hood said of State Farm.

State Farm, Mississippi’s largest homeowner insurer, said Wednesday it has had enough of the “untenable” legal and political climate in the state and is suspending writing new homeowners and commercial policies. The company said the suspension would begin Friday and continue until the business climate in the state is more palatable.

State Farm spokesman Phil Supple said Friday that Hood’s rhetoric, including his comparison of State Farm to a “robber baron,” is a “remarkable response to what was purely a business decision.”

“It does underscore the legal and political challenges we face in Mississippi,” Supple added. “We’re not trying to pick a fight. We’re trying to serve our existing customers.”

Hood said he his urging Gov. Haley Barbour to issue an executive order that would force the insurer to continue writing new policies until the Mississippi Legislature can deal with the issue.

Barbour said he would not.

“Having considered my statutory and constitutional emergency powers including the statute you cited in your letter, I have no authority to force a private company to sell its products in the State of Mississippi,” Barbour responded in a letter to Hood.

Hood is a Democrat and Barbour is a Republican, and both are seeking re-election this year.

Barbour has criticized Hood for suing insurance companies since Katrina. State Farm’s announcement about not writing new policies comes two weeks before candidates’ qualifying deadline in Mississippi.

Hood’s plan prompted criticism from other Mississippi officials, who say the Florida legislation it’s based on is driving insurers out of that state.

“Florida did something similar and we’re seeing companies leave Florida daily,” said Lee Harrell, Mississippi’s deputy insurance commissioner.

Bob Lotane, spokesman for the Florida Office of Insurance Regulation, said the portion of the Florida legislation that Hood cited as a model for Mississippi takes effect on Jan. 1, 2008.

It will have a “very limited effect” on insurers in Florida, Lotane said, because there are few companies that refuse to write homeowner polices in Florida while writing them in other states and selling a large number of auto policies.

Robert Hartwig, vice president and chief economist for the Insurance Information Institute in New York, an industry-funded group, said Hood’s proposal isn’t likely to succeed in compelling State Farm to continue writing new homeowner policies.

Automobile insurance isn’t profitable enough to offset losses in the sale of homeowner insurance in a hurricane-vulnerable region so the company may be inclined to stop selling auto policies if they also must sell homeowner policies there, Hartwig said.

“The only losers in this situation are consumers facing fewer options for automobile insurance,” Hartwig said.

A spokesman for State Farm Insurance Cos. said earlier that the decision to stop writing policies in Mississippi was due, in part, to the wave of litigation the company has encountered since Katrina, which struck on Aug. 29, 2005.

That litigation has included a recent federal jury’s $2.5 million punitive damage award to a couple who sued State Farm for refusing to cover the Katrina’s storm surge damage to their Biloxi home.

U.S. District Judge L.T. Senter Jr. later reduced the award to $1 million, though he said State Farm acted in a “grossly negligent way” by denying the claim filed by policyholders Norman and Genevieve Broussard.

Hood sued State Farm and several other major insurers less than a month after Katrina for the companies’ refusal to cover more than $2 billion in damages. The company and Hood reached a settlement in which State Farm agreed to pay about $80 million to some 600 policyholders.

Policyholders’ attorneys had accused State Farm of pressuring engineers to change their conclusions about whether wind or water was responsible for storm damage so claims could be denied. Insurers say their policies cover damage from wind but not rising water, including wind-driven surge.