With hundreds of thousands of buildings damaged by Hurricane Katrina, homeowners, consumer advocates, the insurance industry and government officials are squaring off in what is shaping up to be a showdown over who, if anyone, will foot the bill for helping consumes back onto their feet.
Last week, Mississippi's top prosecutor broke the conflict open when he filed a lawsuit against several major insurance firms. Attorney General Jim Hood's suit challenges policies that exempt companies from paying for damage caused by flooding. Hood also accused some companies of offering money to people to entice them to sign forms saying that flooding, instead of other elements, brought about the damage to their homes – a pact that could later render null and void those clients' claims for full compensation.
Though perhaps the most powerful, Hood is not the only one attempting to make companies shoulder more of the financial burden in reconstructing Gulf Coast communities. Consumer advocates began warning early on that insurers might try to squirm out of obligations to their customers. Furthermore, say activists, the industry might paint itself as a victim of Katrina's wrath, but most major companies have plenty of cash to reimburse their devastated customers and still turn a healthy profit.
"The fact that the insurance industry should even be questioning their obligation to pay these claims is the height of corporate irresponsibility," Joanne Doroshow, executive director of the Center for Justice & Democracy, said in a press statement. "What is so morally outrageous about this is the fact that the property-casualty insurance industry made more money last year than ever in its history."
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