WSJ , AP left out key information in reports on Mississippi lawsuit against insurance companies

In reports on Mississippi Attorney General Jim Hood's lawsuit against five U.S. insurance companies alleging deceptive trade practices for their denial of water damage claims caused by Hurricane Katrina, The Wall Street Journal made only perfunctory reference and the Associated Press none at all to a key element of the case. Hood claims that these companies are offering policyholders immediate funds to cover living expenses only in exchange for signing waivers stating that damage to their property was caused by flooding, which the insurers are claiming is not covered by their policies.

Hood's goal in the suit is at least twofold. He is first seeking a temporary restraining order “to immediately stop insurance companies from asking property owners to sign documents stating that their loss was caused by floor or water as opposed to wind, and to stop using water exclusions to deny or reduce coverage for hurricane damage or loss”; more generally, Hood is asking the court to declare void and unenforceable provisions that “attempt to exclude from coverage loss or damage caused directly or indirectly by water, whether or not driven by wind.”

The first two paragraphs of the Journal's September 16 article on the lawsuit read as follows:

Mississippi Attorney General Jim Hood filed suit against five big insurers in that state yesterday, unleashing protest throughout the industry as he seeks to force the companies to pay for flood damage from Hurricane Katrina despite flooding exclusions in standard homeowners' policies.

The suit, filed in state court in Jackson, seeks to override the exclusions. It comes as tens of thousands of Gulf Coast property owners struggle with the cost of rebuilding homes damaged by the wall of water that surged with the hurricane Aug. 29. Standard homeowners' policies typically cover wind and other storm damage, but not flood damage. Flood damage is covered by a government-backed flood-insurance program, but fewer than one in four Mississippi properties in areas most at risk of flooding are insured through the federal program.

Similarly, a September 15 AP article begins as follows:

Mississippi on Thursday sued insurers to force them to pay billions of dollars in flood damage from Hurricane Katrina, saying standard insurance polices have led homeowners to believe they are covered for all hurricane damage, whether from high winds or storm surges.

To deny coverage to those whose homes were wiped out by the storm surge, but lacked flood insurance, is “taking advantage of people in the most dire straits,” said Attorney General Jim Hood, who filed the lawsuit against five major insurers.

But here's the problem with the Journal's and the AP's constructions: They imply that the basis for the insurance companies' denial of claims is simply the language in the homeowners' policies. But Hood also alleges that the insurance companies are using these waivers to deny property owners the abiity to claim that the damage to their property was caused by anything other than flooding. He is seeking an immediate order to put an end to these waivers obtained through what he alleges is coercion -- conditioning the receipt of immediate cash, which victims are using to cover living expenses, on property owners' agreeing to sign. The Journal refers to the waivers only obliquely, and only at the end of the article, without noting how they could diminish or erase property owners' claims or how they are significant to Hood's lawsuit and to his argument that the insurance companies are not acting in good faith:

Mr. Hood's lawsuit seeks to prevent any insurer from requiring policyholders to sign documents acknowledging flood or water damage to receive claim payments. In its statement, Nationwide [Mutual Insurance Co.] said any suggestion that it had done this was “unfounded.”

Moreover, while allowing Nationwide to dismiss the allegations as “unfounded,” the Journal does not explain the basis for Hood's allegations that this is going on in the first place.

In contrast, other print media including The New York Times, The Washington Post, and the Reuters and Knight Ridder wire services prominently reported Hood's accusations that insurance companies are using these waivers as justifications for denying or reducing hurricane victims' coverage.

The New York Times:

He [Hood] is seeking a temporary restraining order to prevent companies from denying or reducing coverage based on water exclusions, or from asking property owners to sign documents stating that their loss was caused by water rather than wind. He said that people were being offered $3,000 in living expenses if they signed such forms.

''If they sign this form,'' Mr. Hood said, ''they are giving up their rights. What the insurance companies are trying to do is lock them into saying it was flood damage.''

The Washington Post:

The attorney general of Mississippi filed suit yesterday against insurers in the state, seeking to invalidate provisions of homeowner policies that exclude coverage for water damage.

Most homeowners' policies in Mississippi and elsewhere contain such provisions, but Attorney General Jim Hood called them “contrary to public policy” and “unconscionable.”

The suit also accused adjusters for the companies of trying to get property owners to sign documents agreeing that damage to their homes was caused by flooding and not by wind. Such a document might be used by a company to argue against paying a claim because its policy covered only wind damage.


Mississippi Attorney General Jim Hood sued five U.S. insurance companies on Thursday, saying adjusters have tried to trick Hurricane Katrina survivors out of millions of dollars in homeowner claims.

Adjusters for Nationwide Mutual Insurance Co. and other insurers asked policyholders to sign forms that acknowledged they sustained flood damage, which is not covered by homeowners' insurance, according to Hood.

Adjusters have cajoled victims to sign the forms, saying they are necessary to immediately receive a check for living expenses. The companies can use the sentence regarding flood damage against policyholders later, Hood said.

Knight Ridder:

Hood's lawsuit claims that insurers violate the state's Consumer Protection Act when they offer homeowners cash up front on a contingency basis, then have the owners sign documents that acknowledge flood damage, which may disqualify them from any payoff.