Update on Coverage Suit By Mississippi Attorney General Jim Hood

There has not been much detailed press about Mississippi Attorney General Jim Hood's suit since it was filed on September 15. However, a news report recently mentioned that it had been removed to federal court and that there is a battle over whether it should be remanded. The controversy over remand focuses on "Exhibit A" to Jim Hood's lawsuit.

The suit, styled Jim Hood, Attorney General for the State of Mississippi v. Mississippi Farm Bureau Insurance, et al., was removed to the U.S. District Court for the Southern District of Mississippi on Sept. 16, which was the day after the suit was filed. That was quick work.

In federal court, it has Case No.: 3:05-CV-00572-TSL-AGN.

The ground for removal was federal question jurisdiction, under 42 U.S.C. sec. 4072, a statute which gives federal courts original jurisdiction over disputes involving the adjustment of flood claims under the National Flood Insurance Program.

The notice of removal, filed by Allstate Property and Casualty Company, pointed out, in part, that "The form attached [to the Complaint] as Exhibit A, the use of which plaintiff seeks to enjoin, was developed pursuant to a federal directive as part of the United States Government's National Flood Insurance Program ('NFIP')."

Allstate also answered, and counterclaimed for a declaratory judgment that "neither Hood nor the State of Mississippi has the authority to direct how flood claims are handled pursuant to the . . . NFIP, because flood claims handling is exclusively a creature of federal law and regulation . . . ." The counterclaim also seeks a declaration of Allstate's rights and obligations under the "Other Insurance" clause of the Standard Flood Insurance Policy.

Allstate alleges in part that Hood attached to his complaint a form that relates to the payment of advances under flood policies, and that Hood contends that the State of Mississippi has the power and authority under state law to direct how flood claims are adjusted and seeks to enjoin Allstate from using the type of forms required by the NFIP in the adjusting of Katrina claims. Allstate contends that FEMA has exclusive authority under the NFIP to regulate flood claims handling practices and that any attempt by Hood or Mississippi to direct how flood claims will be adjusted by resort to state law is preempted by federal law.

As to the "Other Insurance" clause, Allstate alleges in its counterclaim that "Allstate is uncertain of its rights and obligations as a fiscal agent of the United States under the SFIP [Standard Flood Insurance Policy], and particularly the SFIP's Other Insurance clause, and seeks a declaration from this Court as to whether Allstate's homeowners' policy consitutes 'other insurance that provides flood coverage' within the mean of . . . . [the SFIP's other insurance clause]."

On Oct. 5, Attorney General Jim Hood moved to remand to state court. His argument in part is that his lawsuit had nothing to do with flood insurance under the NFIP, and that Exhibit A to his Complaint is not a federally adopted or approved form. He argues that the defendant insurers do not even allege in their Notice of Removal that Exhibit A is a FEMA form, nor does FEMA's website indicate that forms like Exhibit A are FEMA forms. He argues that his suit deals only with the denial of claims under the standard homeowners' policies issued by the defendants, and therefore there is no federal question jurisdiction.

The defendants have not yet filed their opposition to the motion to remand.

It seems to me that there is going to have to be some discovery before the jurisdictional question can be decided. The parties appear to be in sharp conflict about what "Exhibit A" is and who was utilizing it, and the form on its face raises serious questions about its authenticity. It is unlikely that a federal judge will want to decide a jurisdictional issue in an important case like this, with literally billions of dollars at stake, based on guesswork and assumptions founded on a questionable document. I think the court will set an abbreviated discovery schedule and a hearing date, to get to the bottom of it.