Coyote Blog

I am late in linking this, but it is an amazing story of what happens when we give politicians power over our lives.  The story is about Trent Lott's silly vendetta against State Farm insurance, which all started when State Farm took the ridiculous step of not paying off on flood damage to Trent Lott's home after Katrina just because ... yes, this is going to sound like a really weak excuse ... the policy did not cover flood damage.  Can you imagine?  Of course, it is clear that Lott knew this in advance, since he had sought out and obtained a separate flood insurance policy.  But still.  Don't they understand lèse majesté?

The Mississippian was "infuriated" by the insurance industry's
refusal to shell out for certain Katrina claims, most notably his own.
So Mr. Lott is spearheading a ferocious campaign of political revenge
that would make even Henry Waxman envious"”replete with investigations,
voracious trial lawyers, ambitious state attorneys general and threats
of punitive federal legislation. And like most personal grievances that
get morphed into policy battles, it's ending badly for consumers.

Mr.
Lott's beachfront property in Pascagoula"”one of three homes he
owned"”was swept away entirely by Hurricane Katrina's waters. Like many
Gulf Coast residents, Mr. Lott was soon reminded by his insurer, State
Farm, that his policy only covered wind damage"”not flood damage. The
senator surely knew that, which is why he'd also purchased federal
flood insurance. According to his flood policy that was in effect when
Katrina hit, he was covered up to $350,000 in flood damages, and he
presumably collected in full....

For his part, Mr. Lott has been busy cranking up the pressure in
Washington. Not that he didn't give fair warning. In July of last year,
he placed a call to Chuck Chamness, the CEO of the National Association
of Mutual Insurance Companies, to let the industry know what was
coming. Mr. Chamness later sent a letter to Mr. Lott, summing up the
call. The key passage: "Your comment that you will dedicate your next
term of office to 'bringing down State Farm and the industry' through
all means available to you, including legislation designed to harm the
property/casualty insurance industry, was very unsettling, to say the
least."

One addition to this story which I think occurred after it was written:  State Farm, for obvious reasons, decided they were going to exit the property insurance business in Mississippi.  The Mississippi legislature, in an act right out of Atlas Shrugged, is considering legislation designed to prevent them from exiting the business.  Judge Smales (of Caddyshack fame) summarized the situation for State Farm:  "You'll have nothing and like it."