Mississippi Blinding

It's been an eventful week for the Lott clan. On Monday, Sen. Trent Lott (R-MS) announced that he'd be retiring late this year. The next day, FBI agents raided the law office of his brother-in-law, Richard "Dickie" Scruggs. Yesterday, Scruggs, his son, and three associates were indicted for bribery.

-- Paul Kiel atTPM Muckraker, Nov. 29, 2007

A search warrant was executed this week in the law office of Mississippi lawyer Dickie Scruggs. Barely a day later, he also was indicted on charges of bribing a state trial judge. Conservatives and liberals, alike, are chortling over what they imagine to be the imminent downfall of one of America's most successful, and richest, trial lawyers.

No surprise, really. Both sides see the event through partisan prisms that tend to blind one to the whole truth, whatever that turns out to be.

Republican neocom fanatics who reflexively side with corporate interests against individuals view "plaintiffs' lawyers" as bogeymen out to undermine America's capitalist foundation. As for Democratic Party liberals, it seems they can't see beyond the fact that the sister of Scruggs' wife is married to U.S. Senator Trent Lott, which makes the two men brothers-in-law. On no discernible evidence other than that, a good number of Lott critics are suggesting the Scruggs indictment explains why, just two days beforehand, the senior Mississippi senator announced that he intends to resign his seat before January rolls around.

Color us skeptical. It may be, as alleged, that a third man, also a lawyer, who supposedly offered a bribe to a Mississippi state judge was acting for Dickie Scruggs. Or, it may be that he wasn't. It may be that this other lawyer offered a bribe. Or, it may be the judge was fishing for a personal campaign contribution, as is the widespread practice among judges in that state.

With no proven facts to speak of yet, what we're left wondering is what does the known history of each side in this drama suggest about their motives and capabilities? On that score, we're ready to give more than the legal presumption of innocence to Scruggs. We give him the benefit of a doubt.

The most likely reason for Senator Lott's resignation, as it seems to us, has nothing to do with Scruggs or his family ties. It's more in harmony with Lott's character and political history that he simply doesn't want to wait an extra year to pig out on lobbyist fees.

It's the political ties we find more intriguing. Dickie Scruggs and his law firm, as we have noted before, are among the leading litigators battling property insurance companies over their penurious -- some juries would say, even fraudulent -- handling of Hurricane Katrina claims. Scruggs undertook to represent well over a thousand devastated hurricane victims in Mississippi -- including that self-same brother-in-law, Trent Lott, who was the scourge of trial lawyers himself until he needed one. The Scruggs firm also led the way in knitting together a number of other law firms to form what's now known as The Katrina Group.

As Newsweek noted a few years ago, Scruggs has a long history of representing the little guy against the insurance industry and their corporate clients. He made his bones suing tobacco companies, then represented thousands of blue collar ship-builders afflicted with asbestosis. More recently, the intrepid lawyer added the health insurance industry to his list of targets.

One can surmise there are plenty of huge, well financed corporations out there who would happily contribute whatever it takes to see Dickie Scruggs brought down. If that isn't reason enough to reserve judgment at the news of his indictment, consider this:

• The indictment was engineered by U.S. Attorney Jim M. Greenlee in the Northern District of Mississippi. Greenlee has been a "loyal Bushie" U.S. attorney throughout the entire period Karl Rove Bush's lapdog, Alberto Gonzales, was busy politicizing the Justice Department.
  
• Allegations of Justice Department "selective prosecution" and "targeting" of prominent Democratic party supporters across the nation have been at the heart of investigations by both the House Judiciary Committee and the U.S. Senate Judiciary Committee.
  
• It's already a matter of record that the Justice Department has been using "criminal prosecutions to help Republicans win elections" in Mississippi by selectively prosecuting Democrats. Although he's given to both parties, Scruggs is best known for being one of the largest individual contributors to Mississippi Democratic Party candidates.
  
• Barely three weeks ago, the Jackson Clarion-Ledger and other news sources began reporting that Scruggs was funding "a new attack ad on Republican insurance commissioner hopeful Mike Chaney." Last July, he gave a quarter of a million dollars to "Mississippians for Fair Elections, a PAC 'created to raise awareness about the role the insurance commissioner plays'" in Mississippi government.
• Last June, Scruggs filed a 100-plus page complaint in the Southern District of Mississippi, accusing State Farm Insurance Co. of a "racketeering enterprise" to suppress or destroy engineering reports it received from its own chosen expert evaluators that found insured homes had been damaged by high winds rather than flooding water. The allegation is the legal equivalent of nuclear war, potentially subjecting State Farm to treble damages and a host of other severe punishments.
  
• Just one day before the indictment was made public, Scruggs filed an amended complaint [pdf format] in the ongoing litigation. As described by Biloxi reporter Anita Lee "a team of policyholders' attorneys led by Richard 'Dickie' Scruggs" added new allegations that State Farm had actually financed the start-up of an engineering firm which then wrote hurricane damage reports with conclusions dictated by State Farm:

  The owner of an engineering firm hoped to make up to $1.5 million over three months by adjusting Hurricane Katrina claims for State Farm, borrowing $150,000 and establishing a line of credit with State Farm Bank to set up shop on the Mississippi Coast in September 2005, according to records filed late Tuesday in federal court.

  Because of the arrangement, Forensic Analysis & Engineering Corp. was beholden to State Farm, which wanted to minimize its Hurricane Katrina losses for wind damage, the lawsuit says. Another vendor that adjusted Katrina claims, the independent adjusting firm E.A. Renfroe & Co. Inc., at times owed 80 percent of its income to State Farm, the court records say.

• The 73-year old Calhoun County, Mississippi, judge, Henry Lackey, who claims a Scruggs intermediary tried to bribe him waited less than 48 hours before hitting the interview circuit to share his story with Rupert Murdoch's Wall Street Journal.
  

Not to mention (though we will) the indictment was handed down just a couple of weeks before Scruggs was scheduled to host a large fund raiser at his home for Hillary Clinton's campaign.

It may be difficult for folk living in a normal state, or even a politically subnormal state like Florida, to believe that the federal and state judicial systems in a place like Mississippi could be so bent that the weight of the law might be brought down on someone just because they belong to the wrong political party. But the erudite international lawyer and Harper's Magazine blogger, Scott Horton, has some familiarity with the depths to which his native South can sink.

He's been exposing the through-and-through corruption of Alabama's system for much of the past year, now. Here's a sampling. It isn't easy reading but it is eye opening.

Horton has occasionally remarked that things in neighboring Mississippi are much the same. As he wrote a few weeks ago:

In the last several months, we have looked in some detail at the prosecution of Democratic Governor Don E. Siegelman in Alabama. There is now substantial evidence that this prosecution was politically motivated, involving a number of key figures in the Alabama G.O.P., Karl Rove, U.S. attorneys in Birmingham and Montgomery, and political appointees at the Justice Department in Washington.
* * *
[W]hile studying the Siegelman case, I have been looking over a series of cases in Mississippi which are remarkably similar to the Siegelman case in many ways. At this point I believe, based on documents and evidence which have come to me, that the Mississippi prosecutions will also shortly be exposed as being politically motivated and directed. In any event it is clear that they were designed to, and did, have a key role in influencing elections in Mississippi for the benefit of the Republican Party.

"For five years Washington has had a Department of Political Persecutions where the Department of Justice used to stand," Horton also has written.

It is some measure of the damage done to the Justice Department under the Bush administration that one can even entertain the thought Scruggs' indictment may be politically inspired. But we know, now, that the Justice Department has perverted justice elesewhere for just that reason. The likelihood that's its happening again in Mississippi is too plausible to be dismissed.

Mississippi Flooding

"The Mississippi case underscores something that Florida legislators should understand: by abrogating Florida's Valued Policy Law, they have created a huge disincentive to evacuate as a storm approaches, and thus have put tens of thousands of lives at risk."

There isn't much of a surprise in yesterday's Mississippi federal court ruling that Bill and Julie Leonard's Nationwide Insurance Co. policy, properly interpreted and applied to the facts of their case, excludes damage caused exclusively by flooding waters in Hurricane Ivan.

That's the bad news for home owners. The good news is the emphasis belongs on the word "exclusive."

The full text of Judge L.T. Sentner Jr.'s legal opinion in Leonard vs. Nationwide is available in pdf format here.

Today, Nationwide is crowing that it has scored a knock-out punch against all of its Mississippi customers. "We are very pleased that the court ruled in our favor and upheld the long-standing flood exclusion language which is foundational to traditional homeowner policies across the country," Nationwide says in a press release.

Insurance industry flak-catchers claim to be equally thrilled:

"In the insurance coverage debate over wind vs. water, Judge Senter’s ruling has taken much of the wind, literally and figuratively out of the plaintiff attorney’s argument," said Ernie Csiszar, president and CEO of the Property Casualty Insurers Association of America (PCI). "Judge Senter has made it very clear that the flood exclusion applies to storm surge."

Not so fast. It seems the Leonards' lawyer, Dickie Scruggs, says he's happy, too. Speaking of the Leonards, Scruggs told a South Mississippi television station, "The judge ruled in favor of this family."

So who's right? The Jackson (MS) Clarion Ledger comes close to nailing it down today when it editorializes, "The ruling... is a total victory for neither side... ."

The court's opinion is only 13 pages long. Most of it is very fact-specific. As the Mississippi Press is reporting:

The Leonards, who live two blocks north of the Mississippi Sound, said Katrina caused approximately $130,253 in total damages. They said $47,365 in damage was caused by wind. Citing that storm surge caused the rest of the damage, Nationwide paid the couple only $1,661.

Following a complete court trial, the judge ordered the insurer to pay the Leonards another $1,228.

If you analyze your court decisions using only dollar signs, that sure looks like the Leonards lost. But there is more to the court decision than just money.

The outcome of this case turned on the particular facts of the Leonards' purchase of a standard homeowner's policy and two legal principles of ordinary contract law which Judge Sentner applied. It's how the judge applied those principles that explains why attorney Scruggs can see some advantage for future cases, if not this one.

Insurance Agent Negligence?

As for how the Leonards found themselves without a flood insurance policy in the first place, it seems their insurance agent likely advised against buying it. At trial, however, the judge says the Leonards failed to introduce any evidence about whether that advice was, in effect, professionally negligent. As the court opinion states:

There is no evidence in the record to establish the standard of care applicable to an insurance agent who is asked about the advisability of purchasing flood insurance. Absent proof of this standard of care, there is insufficient evidence to support a finding that [the agent] Fletcher's statements to Paul Leonard indicating that he (Leonard) did not need to purchase a flood insurance policy breached a standard of care that governed Fletcher’s conduct as an insurance agent in these particular circumstances.

It's unlikely Dicky Scruggs will make the same mistake twice. He already has on file two to three thousand other lawsuits-to-follow in the wake of Hurricane Katrina -- including one for Republican U.S. Senator Trent Lott, a frequent critic of plaintiffs' lawsuits when they're brought by someone other than himself. Where the facts show another customer was left uninsured against flood damage because an insurance agent gave bad advice, the results of future trials could be dramatically different.

Contract Law Principles

As for the two principles of insurance contract law that were determinative of the Leonards' claim against Nationwide Insurance Co., these are unremarkable rules of law that have come down to us over the centuries as familiar legal principles of the common law. What's new is their application to hurricanes:

• When a property insurance policy contract explicitly excludes coverage for damage caused by a flood, a clear expression of that exclusion is lawful and the courts will enforce it as to all damage caused exclusively by flooding water. (Score one for the insurance industry.)
• However, when the insurance contract covers windstorms but paradoxically purports to exclude damage caused by a combination of wind and water during a windstorm, the policy exclusion becomes "ambiguous." Then, the court will reinterpret the policy "reasonably" to mean that the insurance company must cover that portion of combined damage during a windstorm which is attributable to the effects of wind, as shown by the evidence. As the Judge wrote:

  "The most reasonable interpretation for these conflicting policy provisions is that this policy provides coverage for windstorm damage, in accordance with its terms, and that coverage is not negated merely because an excluded peril (in this case storm surge flooding) occurs at or near the same time."

  (Score one for the homeowners.)

When you see a photo of the Leonards' home, as seen below in a screenshot from a local TV news program, the outcome of the case becomes a little easier to understand. Although other photos leave no doubt Katrina caused extensive damage to the interior of the Leonard's home, the judge found the admissible evidence and expert testimony showed comparatively little or no wind damage to the roof, windows, doors, or structural integrity of the house.

In the end, the Leonard decision stands for the proposition that under insurance contracts like those written in Mississippi, a windstorm insurer remains liable for windstorm damage even if it occurs in combination with flooding, but it is not liable for damage caused only by flooding.

That's essentially the same rule we live with in Florida.

The real winners of the Mississippi ruling may be all the expert witnesses who can now look forward to decades of steady income. With a premium placed on admissible court evidence about concurrent causes, they'll be busy offering opinion testimony for years about what their post-storm analysis shows in one case after another: which wall studs were wrecked by water and which were destroyed by wind, how far open a door was torn by wind and the extent to which that same door was opened wider by water, etc., etc., etc.

Unintended Consequences

One consequence of the Mississippi ruling doubtless is that more people than ever before who live within reach of hurricanes will buy flood insurance to supplement their wind coverage. That's good.

But another is that the disincentive for Mississippi homeowners to evacuate in advance of a storm has been greatly increased. That is very bad, indeed.

The artificial wind-versus-water distinction insurance companies write into their policies actually puts more lives at risk. Consider the predicament of every Floridian whose home is destroyed in a hurricane. Before July 2005, state-regulated windstorm carriers in this state were required by the century-old Valued Policy Law to pay policy limits when a home was totalled by a hurricane, even if there was evidence of a concurrent cause like flooding water. Having paid the homeowner, a windstorm company then could seek "contribution" (in effect, partial reimbursement) from any flood carrier for such damage as could be shown attributable to water.

Under the Valued Policy Law, there was no economic reason for a Floridian to stay at home if a hurricane threatened his house. Insurance claims were settled quickly and all the nasty expert witness fights over concurrent causes in Florida were left for the insurance companies to thrash out among themselves after the consumer was paid.

Insurance companies are good at thrashing out that kind of stuff between themselves. They do it all the time. Most also have on retainer a huge stable of experts accustomed to parsing causes in retrospect and testifying to whatever opinions the employing company may require.

Following the Florida state legislature's contemptible abrogation of the Value Policy Law last year, however, we're now in the same fix as Mississippians. It's the homeowner who has to come up with hard, admissible evidence in every "concurrent cause" case.

That means one of two things: either hire an expert witness after the storm to come up with an educated guess (called "opinion evidence") about what was damaged by which cause; or rely on eyewitness testimony to the sequence, cause, timing, and extent of destruction. Expert witnesses don't come cheap. After a large storm they may not come quickly, either, at least not for your average homeowner.

Consequently, the Mississippi case underscores something that Florida legislators should understand: by abrogating Florida's Value Policy Law in 2005 they created a huge disincentive to evacuate as a storm approaches.

Thus, the legislators who voted to amend the Valued Policy Law have put tens of thousands of lives at risk. It's the same disincentive now facing Mississippi residents as they consider, after the evidence-intensive Leonard ruling, what to do when the next hurricane heads their way.

Faced with a need to produce specific proof because insurance companies these days can be counted on to treat their customers like the enemy, a lot of people in Florida and Mississippi are likely to stay put in their homes and videotape the storm damage as it happens, rather than figure out afterwards how to find and pay for an expert witness.

Some of them may die, sad to say. Then, the insurance industry can produce more press releases boasting how they took the wind right of the sails of those customers, too.

Trent Lott Sues State Farm

"Within minutes of Senator John Edwards’ selection by John Kerry as his running mate, the Republicans started their predictable onslaught of attacks on his national security experience and high-profile career as a trial lawyer. * * * Trent Lott (whose wistful, public nostalgia for the days of Jim Crow cost him the Senate majority leadership) called him 'a suing lawyer – that’s S-U-I-N-G lawyer.'"

-- PERRspectives, July 8, 2004

U.S. Senator and former majority leader Trent Lott (R-MI) and his wife today filed suit against State Farm Insurance over its refusal to pay for property damage caused by Hurricane Katrina.
Anita Lee of the Biloxi Sun Herald has the story:

Lott's brother-in-law, nationally recognized litigator Richard "Dickie" Scruggs, filed the suit Thursday in U.S. District Court on the Lotts' behalf against State Farm Fire & Casualty Co., which holds more than 30 percent of the homeowner's insurance policies in Mississippi.

"I take this action reluctantly after months of good-faith efforts to resolve this matter," said Lott, whose wife, Tricia, also is a plaintiff. "There is no credible argument that there was no wind damage to my home in Pascagoula."

Lott also said in the written news release: "My hope is that this litigation will set a precedent for the thousands of other Mississippi homeowners holding policies for coverage against hurricane wind damage that are not being honored by their insurance companies for Katrina."

A State Farm spokesman essentially declined to comment. But, after all, what could the company say? 'We're very grateful for all of Mr. Lott's help over the years. He's played a key role in shielding lousy companies like us from large jury verdicts when we set out to screw people through our negligence or deliberate indifference. But what goes around comes around.'

Senator Lott, like many other right-wing Republicans in Congress, has dedicated an appreciable part of his political career to supporting laws that restrict or eliminate a jury's ability to dispense justice against fraudulent insurance companies, racist employers, deceptive Wall Street brokerage houses, negligent doctors, indifferent HMOs, discriminatory employers, tobacco companies, abusive meatpacking plants, deceptive used cars dealers, and unethical corporate boards -- among other miscreants in Corporate America.

He can't be thrilled to suddenly find himself on the other side of the docket, where the injured plaintiffs suffer from all that Mr. Lott and his colleagues have done to them.

Addendum
Victoria Kos has collected more gems about the evils of filing lawsuits, straight from the lips of now-plaintiff Trent Lott.

'Slow Rolling' in Mississippi

Does this sound familiar, Floridians? From the Dallas Morning News:

"Nobody has gotten anything," Mr. LePage said as he watched workers carry out once-beloved items from his home. "We're totally dissatisfied with the progress on the insurance. Anything to keep from paying."

Nearly three months after Katrina, frustrations are mounting for residents whose homes and possessions were laid waste by the storm. Like the LePages, most want to get on with their lives, but they've had difficulty reaching anything more than a recording at their insurance companies. They've had trouble getting meetings with adjusters, and they've yet to see money paid out on claims.

Many believe the insurance companies are quibbling over damage claims that should be paid, and lawsuits are mounting as a result.

"Here we are still waiting," said Mr. LePage's daughter Laura Ann, whose New Orleans East home was flooded with about three feet of water. "You can't do anything. You're just on hold, really."

Dicky Scrubbs, the Mississippi lawyer representing thousands of Katrina claimants, told the Morning News, "The delays are no accident. Insurers are practicing a technique known as 'slow rolling,' procrastinating in making payments in hopes that claimants grow tired, desolate and more likely to accept what is offered."

"They do this limbo thing. Let it cool down, let these people get desperate. These people have no jobs, no insurance," said Mr. Scruggs, who is fighting his own battle with insurers over the loss of his Mississippi home to Katrina. "The insurance companies vacillate on making any commitment at all, hoping it'll all die down and the news channel will change subjects. This isn't their first rodeo."

A Biloxi evacuee we've met, who is now living in Gulf Breeze, tells anyone who will listen that his insurance company is refusing to pay.

"I evacuated to higher ground just a couple of blacks away," he says. "I actually saw my house ripped apart by wind. Three hours later, the flooding water moved what was left off the foundation. Now, the insurance company is saying it was all flood damage, no wind. They've refused to pay more than two thousand dollars."

One wonders what he would think to learn that his insurance company probably is making money off his misery. According to the Dallas newspaper:

Douglas Heller, executive director of the National Flood Insurance Program, says delays actually make money for the insurance industry.

"A month long delay in claims for 50 destroyed homes could bring in more than $30,000 in investment income to the underwriter," he said. Also, the "longer the delay, the more likely homeowners will settle for less."

To date, "only about 5,000 of the 225,000 possible claims have been settled for both Hurricane Katrina and Rita."

Mississippi Beating

Credit: Marshall Ramsey, The Clarion Ledger

Mississippi state Attorney General Jim Hood is taking an early beating from editorial writers in Mississippi newspapers for his recently filed lawsuit "in behalf of Mississippi residents and/or property owners in and around the Mississippi Gulf Coast."

Hood has sued multiple property insurance companies, among them a line-up of the usual suspects like Farm Bureau, State Farm, Allstate, USAA, and Nationwide. (Meanwhile, Oxford private attorney Richard ('Dickie') Scruggs also says he is preparing to file "thousands of lawsuits" for individual clients with similar complaints.)

Hood's lawsuit raises five claims. In three of them, he alleges that insurance company attempts to avoid coverage under an asserted provision excluding 'flood' coverage are against public policy, unconscionable, and ambiguous. The fourth claim asserts that for years the defendants have sold policies in Mississippi coastal communities on the representation that they "specifically contemplate full and comprehensive hurricane coverage... ."

The fifth claim is in some ways the most novel, fact-specific, and urgent for it alleges that adjusters sent into Mississippi are:

"at present utilizing forms and other documents requiring policyholders to acknowledge and concede...disputed factual issues to the benefit of the defendants [insurance companies] and to the prejudice of the polciyholders."

A current example of this is attached as "Exhibit A" to the attorney general's complaint. It's a form apparently presented to Mississippi policyholders which requires them to concede they suffered a "Flood loss."

Local editorialists around the state are coming down hard against Hood's lawsuit. The south Mississippi Sun Herald is particularly snarky, claiming the attorney general has gone "overboard," is 'not following the law,' and "is sending a dangerous signal to the entire private sector." Equally unimpressed are the Meridian Star and the Northeast Mississippi Daily Journal.

As it happens, Mississippi does not have a "value policy" statute, as Florida did until earlier this year and as other, many more progressive states still do. So far as the wind-vs-water issue is concerned, consequently, unlike the hundreds -- if not thousands -- of Ivan-related lawsuits in Florida, the Mississippi lawsuit appears to rest most heavily on what Hood alleges is the common law of the state of Mississippi. That, of course, has little if any relevance in Florida.

Insofar as Hood's suit depends on Mississippi common law, he may or may not be right. It will take extensive legal briefing, oral arguments, and no doubt years of appeals before anyone can be sure. But you can be sure right now of one thing: the Mississippi editorial writers don't have a clue what they're pontificating about.

Until the evidence is in and the law has been researched the newspaper chains in that state, and the few remaining independents, would better serve the public if they reserved judgment, did a more honest job of reporting the facts as Media Matters urges, and stopped jumping to judgment as fast as an old time Mississippi lynch mob.