Open CRS has a recent CRS report on the federal response to the Great Flood of 1927.
The Maryland Daily Record has a good piece covering a Maryland class action involving the defective installation of mobile homes, in which the plaintiffs' counsel are trying to defeat diversity jurisdiction based on the Class Action Fairness Act (CAFA). Kind of a legal version of a man bites dog story.
The defendants removed the class action to federal court under 28 U.S.C. sec. 1332(a).
At the risk of oversimplification, the plaintiffs' argument appears to be that for class actions, 28 U.S.C. sec. 1332(a) no longer is applicable and diversity jurisdiction must be found under the "minimal diversity" test of 28 U.S.C. sec. 1332(d).
Under 1332(d), plaintiffs argue that the "principal defendant" cannot be a citizen of the forum state. Here, the principal defendant is an unincorporated association, which would be diverse under the test of sec. 1332(a), but which is arguably non-diverse under the test of 1332(d).
For more on the Class Action Fairness Act of 2005, you can start by browsing the CAFA Blog written by McGlinchy Stafford of Mississippi. The CAFA Blog has links to case summaries and articles about the Act, as well as the complete text.
DRI's magazine, For the Defense, has an article on CAFA in the Oct. 2005 issue: "The Class Action Fairness Act of 2005 -- Navigating Through Its Sea of Uncertainty," by Steven M. Puiszis. Perhaps his firm will post a copy of the article on their website.
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.
The history of flood insurance follows the history of flooding in the United States. The basic incompatibility of floods with insurance became clear long ago. This was alluded to in the recent AEI seminar on Katrina Insurance Liability, which I Tivo'd on CSPAN2, and I thought it would be useful to see what relevant resources are available on the web.
The USGS has a useful summary of significant flooding in the U.S. in the 20th Century. (Be sure to scroll down and read about why it is a bad idea to drive a car into flood waters.) Some historical perspective from the New Orleans Times Picayune blog. NPR has a webpage on the history of Disaster and Response in the United States. Here's a page on Flooding in New England. See also The Nation's Response to Flood Disasters - A Historical Account, by James Wright; the Wikipedia entry on the Great Flood of 1927; and the Wikipedia entry on the Great Flood of 1993. Who is exposed to flooding? Just about everybody.
There is a online course on the National Flood Insurance Program, which includes a historical summary:
A follow up article on the Mississippi coverage suits which are brewing.
[Later: Newsday reports that Mr. Scruggs has filed his first lawsuit. However, F. Gerald Maples, Esq. has already gone into Mississippi federal court to battle insurers. (Comer v. Nationwide Mutual Insurance, et al., No. 05-CV-436 in the U.S. District Court for the Sourthern District of Mississippi.)]
The article reports that Dickie Scruggs himself had flood insurance on his house that sat 150 feet away from the Gulf. So I guess he himself wasn't misled by his homeowner's insurance policy.
The article also discusses a legislative fix for the homeowners who failed to purchase flood insurance:
The Hurricane Katrina and Hurricane Rita Flood Insurance Buy-In Act would permit property owners who did not live in floodplains but were devastated by the hurricanes to be covered under the National Flood Insurance Program by paying the equivalent of 10 years of premiums, as well as a 5 percent penalty.
U.S. Representative Charles Melancon, the sponsor of the bill, claims that this isn't a give away:
This is not a give-away," he said. "People have to buy in at a fair price and will be required to stay in the program as long as they own the property. It’s a fair deal."
This is clearly incorrect; it is a give-away. No real insurance program would allow folks who have already suffered total losses of their houses to retroactively buy insurance for those losses in return for a retroactive premium that is only about 2% of the coverage provided. Despite what Congressman Melancon says, people are not going to be required to buy in "at a fair price."
It may be excellent national policy for Congress to provide assistance to these hurricane victims in order to make these areas of the country economically productive again, I don't know. I don't see how it is good policy to sell the program by misleading the public about what is going on; it will only obscure the policy issues at stake. E.g., maybe everyone in the nation who lives in a flood plain should be required to buy flood insurance, not just the people who are retroactively buying into the program after their houses are destroyed by flood.
(Also, as a nation, why would we want to provide universal flood insurance for beach houses, but not universal health insurance? Are beach houses more important than people?)
There is more in the Flood Insurance Buy-In Act, as described in the news article linked to above:
The proposed act would limit flood coverage to the amount of wind-insurance coverage the property owner had at the time, with amounts not to exceed the current National Flood Insurance Program ceilings of $250,000 for residential structures and $500,000 for nonresidential structures.
Why would the amount of flood coverage be tied to the amount of wind-insurance coverage the property owner had at the time? The result would seem to be that a property owner who had $250,000 of wind-insurance coverage or more could get $250,000 of flood insurance, but a property owner who had no wind-insurance would get nothing. As a matter of public policy, I don't understand this. Since this is a give-away of public funds, why not help those who were so poor or so improvident that they had no insurance at all?
Lastly, the Flood Insurance Buy-In Act, according to the article, would provide the following:
The bill also protects current National Flood Insurance Program policyholders by specifying that money for claims payments must come from a separate appropriation. The bill further protects current policyholders by prohibiting the National Flood Insurance Program from considering the buy-in claims when setting future premiums.
That there must be a separate appropriation underscores that this is a give-away, pure and simple, and that the people who buy-in are not going to pay a fair premium. This Buy-In Act will make the NFIP insolvent, which is what the drafters are worried about.
That the bill would prohibit the NFIP from considering the buy-in claims when setting future premiums underscores that we are not dealing with an insurance program here, but with grants of public money.
[Later: Happened to see Rep. Melancon speak at a science committee hearing on CSPAN. When he thanked the representatives of the National Weather Service for their work in predicting the track of hurricanes, he became so choked up that he couldn't continue. At that point I realized I was a little harsh in my review of the proposed buy-in act. On the other hand, now I'm worried that the legislation is being written and might possibly be passed based more on emotion than on sound public policy. And also, they need some help from experts to get this right. Meanwhile, the Washington Post is following the flood insurance issue and giving it the prominence that it deserves.]