Insurers Sued for Not Covering Homes Flooded by Katrina

By Matt Green

Published on September 29, 2005

Attorney General Jim Hood has filed a $3 billion class-action lawsuit against Allstate, State Farm and other insurers. The bad faith lawsuit contends these companies should pay for all hurricane-related repairs.

These companies' policies require them to cover only wind damage, not flood damage related to a hurricane. Hood says these companies misled policyholders by saying they covered hurricane damage, when they only partially covered it.

Insurance company representatives say the courts have upheld the legality of their policies and will continue to do so.

Unless homeowners bought flood insurance from the federal government or a private insurer -- and most didn't -- everything below the water line in their homes, including furniture, is likely uninsured.

Only damage from wind, such as that done to roofs, and items ruined by rain generally are covered by standard insurance policies.

About 275,000 homes were damaged beyond repair in Louisiana, Mississippi and Alabama. Yet in the latter two states, the Federal Emergency Management Agency estimates that only about 3 in 10 houses in the disaster areas have federal flood insurance. In some of the hardest-hit areas of the Mississippi coast, about 1 in 10 houses have flood insurance.

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