Insurance Transparency Project

Uncovered Perils,

The statement above is the last line of an Anita Lee story on how State Farm, Scruggs and Mississippi came to terms over Katrina claims. What’s notable is that it was uttered not by Amy Bach(1), but by Sheila Birnbaum, the legal powerhouse who heads Skadden’s Mass Tort and Insurance Group, and whose sharp tongue, according to this piece, curled the hair of more than one Southern gentleman during negotiations.

I suspect she knows what she’s talking about in the above quote. The only words I left out for space were “…or any insurer….”

All the swearing may have been in vain as Judge Senter all but rejected the deal on Friday. More on that later.

But it’s interesting to read about the struggle involving legal titans Birnbaum and Richard Scruggs. Scruggs explains that it was Judge Senter’s earlier ruling that insurance claims couldn’t be tried as a group, but only one at a time, that left the plaintiffs’ side with “cruel choice” of getting paid quickly or seeking to punish the insurer, which would take years.

As Scruggs says: “This is not something that people can take or leave. This is a fundamental factor in people moving on with their lives. “

One key to talks was Attorney General Jim Hood’s agreement to drop his criminal probe. As Scruggs says:

“It’s very difficult to overcome the legal barriers and at the same time try to put a little oil in the water of people’s anger at the insurance industry, which is very well justified. People want to see somebody go to jail. They want to see them punished and not just pay what they should have paid a year and a half ago.

“And that’s a very legitimate feeling. And I share that. But the cruel choice, though, is to put a few people in jail if they are guilty, or have State Farm and the other companies who might be next, step up and do what they’re supposed to do. When the court made the decision that it was going to try these cases one by one, it gave us not much choice but to do it this way.”

Hood isn’t quoted on his decision to drop the grand jury. ITP isn’t a lawyer, but on a common sense level, it is not clear how the payment of civil claims ends a criminal investigation. I would ask ITP’s attorney, Buck, but he didn’t come home this weekend.

Now on the site, a link to all Katrina-related insurance decisions in Mississippi federal court. The more your read them, the more you are impressed with Judge Senter.
And now up in the key documents section is Swiss Re’s Natural Catastrophes and Man-Made Disasters, 2005. This annual research report is a wonderful resource for putting Katrina in context historically and even compared to other disasters last year. It also makes for oddly absorbing reading and will provide much material for the annual ITP party/final exam at the Last Exit. Readers with a sense of the macabre will want to take the ITP pop quiz on
the site at the bottom of this item.

(1) Executive director, United Policyholders, leading advocacy group.

TAKE THE ITP POP QUIZ:
1. Katrina was the worst nat-cat of all time in dollar terms

A. True.

B. False.

2. In 2005, Katrina ranked how high in terms of loss of human life.

A. First
B. Second
C. Third
D. Fourth

3. 73,000 people died in an earthquake in Asia Minor on Oct. 10, 2005.

A. True
B. False

4. 20 were killed at kite-flying festival in Lahore.A. True
B. False

5. The worst disaster since 1970, 300,000 killed in a Bangladeshi earthquake, involved no insured losses.

A. True
B. False

Answers: 1. A; 2. D; 3. A; 4. A; 5.A