Good Editorial in Todays Clarion Ledger

Here is a well reasoned opinion on the impact of the current legal mess and it’s impact on coast residents seeking justice.

“Katrina lawsuits: Coast residents want justice

The Clarion-Ledger

For Mississippi Hurricane Katrina victims, hope for recovery from the storm took a sickening turn with the charges lodged against attorney Dickie Scruggs.

State Farm Fire and Casualty Co. is seeking to have attorneys with Scruggs’ “Katrina Litigation Group” representing policyholders thrown off a key case because the insurer claims the lawyers have behaved unethically.

Scruggs withdrew from most of his firm’s Katrina cases after his indictment on charges he tried to bribe a judge for a favorable ruling in a dispute over legal fees.

The newly formed group, which includes members of Scruggs’ legal team, is now handling hundreds of cases on behalf of Coast policyholders in “wind vs. water” disputes, alleging the insurer failed to honor claims.

State Farm claims that Scruggs and members of his team have committed “highly unethical acts,” such as illicitly obtaining internal claims records, and have “irreparably perverted the litigation process.”

Scruggs’ indictment has muddied the water for policyholders. The more cases are delayed, the longer the recovery can take – if homeowners don’t just give up or move away. About 14,902 families still are in temporary housing units in Mississippi.

In clarionledger.com’s Forums, under Katrina-related issues, Mississippi Insurance Forum, readers commiserate. Says one: “‘Ain’t life grand?’ For some people, maybe, but nothing’s grand for the people on the Coast that were ‘slabbed’ by Katrina, ‘stabbed’ by their ‘good neighbor,’ and forced to live out a horror story that even Hitchcock would find frightening.

“Life’s not going to be grand for anyone in our state until we get to the bottom of this mess … Unfortunately it’s going to take a long time – longer, I fear, that folks with valid claims can hold on.”

Mississippians have the “want to” for rebuilding. The legal disputes need to be resolved.”

Insurance Weather Modeling – Others Have Questions Too

Last week I posted a couple of different links to stories on the use of weather modeling in setting insurance rates. I shared some questions that are stuck in my mind on the reliability of the long range forecast. Given the magnitude of coastal insurance rate increases since Katrina struck, the issue of whether consumers of insurance are being treated fairly on price and the use of weather modeling to justify drastic price increases was addressed last week as well in the Boston Globe.

HOME INSURANCE rates are skyrocketing on Cape Cod, the islands, and in other coastal areas. Driving the increases are concerns by insurers that a major hurricane could wreak the kind of devastation that hurricanes have brought to other parts of the country. Some companies have simply stopped insuring in shore areas, forcing homeowners into the state’s FAIR Plan, the insurer of last resort.

But Massachusetts need not simply accept this price spiral, because the state has options for making insurance more affordable. One is for state officials to take a closer look at the models of hurricane devastation that insurers use to justify their higher rates.

Companies hold these “black box” models closely, but a legislative commission recommended earlier this month that state officials seek access to them. The panel called for a new “independent public entity” to study the reliability of the models. Two members – state Senator Robert O’Leary of Barnstable and state Representative Eric Turkington of Falmouth – went further, calling for the state to create its own model or require that any private model be open to review by the attorney general. Such efforts make sense; rates for a product that homeowners have little choice but to buy ought to be based on defensible criteria.”

“Claims Dumping” – A Primer

There is an informal brotherhood of those slabbed and/or destroyed. Among that brotherhood all know at least one person whose house was destroyed by wind but was only paid their flood coverage (if they had it). We are not professionally trained licensed engineers but in some cases the cause was most evident, such as in the picture of this house in Lakeshore which was also flooded but not subjected to wave action.

This is a picture of the house across the street also smashed and flooded. The window in the house was removed by the owner as they salvaged some of their contents from the interior. In both cases the contents of these houses stayed with the house instead of being swept from it like so many others.

This picture finishes the story, notice the house down the street left standing. All the homes on the street were built within a year or so of each other by the same builder. Also notice the hole in the roof of the house down the street that stood. How is it that the majority of the houses on this street stood while three houses in close proximity of one another were reduced to rubble? A tornado or mini tornado is the cause. There was a line of snapped trees that lined up perfectly with the woods across the field from the destroyed houses on this street and through to the woods on the other side. I personally know of at least one such resident who was only paid on their flood policy instead of their private wind policy. That’s right ladies and gents, the bill was on you, the taxpayers.

How’s the Weather – Model?

Today we begin with the weather forecast but not just any weather forecast mind you. First off is this story from Reuters which proclaims our property and casualty insurance rates in the US will remain high due to the massive hurricane that is surely coming to destroy us all. As a result, the article concludes our P&C rates will continue to increase. So proclaims the popular press which by the way has never met a scientific story on global warming and Hurricanes they failed to butcher.

So what’s so complicated about the long range weather forecast? Easy, these high priced models that are periodically publicly released (and butchered) aren’t really worth the paper Reuters wrote the story upon:

One big problem is that catastrophe models are not reliable predictors of when or where a monster hurricane is going to strike, according to Karen Clark, vice chair of AIR Worldwide, one of the leading modeling firms.

“A model is just that—a model. It is still based on many simplifying assumptions, with a high degree of uncertainty,” she said. “It can tell you, given where you have your insureds, what the maximum probable loss would be should a storm of a certain strength hit a certain area, but the question of frequency is more vexing.”

However, she noted that “while there is no consensus at all on climate change and the frequency of hurricane landfalls, most scientists agree that when storms do hit these days, their intensity is likely to be greater and will cause more damage.”

So here, in the National P&C Underwriter, an insurance industry trade publication, we discover a deeper truth about these climate models and as borne out by the last two Hurricane seasons which have also come complete with prediction of coastal doom; namely that weather models are notoriously unreliable predictors of when or where a windstorm may strike.

This basic fact does not stop insurers, especially those in reinsurance from paying big bucks for weather forecasting as most have their own in house forecasting units like this one. We submit that despite the limitations of weather modeling there has to be good reason the insurance industry keeps such a close eye on the weather. However, insurance seems to be one business that profits handily even when they completely miss on the extended forecast like these past two years.

Sop