Insurers Avoided Lott Whip

Lawmaker Had Targeted Industry

Posted December 10, 2007 at 6:44pm

At least one sector of the Washington establishment will be happy to see Sen. Trent Lott (R-Miss.) leave Capitol Hill come January: the insurance industry.

After his Pascagoula, Miss., home was destroyed in 2005 by Hurricane Katrina, Lott went on a very public and personal crusade to punish the insurance industry, which was viewed as having shortchanged hundreds of distraught homeowners.

In an infamous July 2006 phone call to National Association of Mutual Insurance Companies head Chuck Chamness, Lott vowed to “bring down” State Farm and the insurance industry, according to The Wall Street Journal.

But despite Lott’s clout, the Mississippi Republican leaves the Senate with almost none of that agenda enacted.

“We didn’t see much action other than one hearing,” said Robert Hunter, the insurance director for the Consumer Federation of America, who spoke with Lott several times and supported his reform agenda.

“He’s in a powerful position,” Hunter added. “But he’s not in the majority.”

Legislation that Lott co-sponsored with Senate Judiciary Chairman Patrick Leahy (D-Vt.) to subject the insurance industry to federal antitrust laws has not budged from committee since March.

In April, the Commerce, Science and Transportation Committee, on which Lott sits, held a hearing on two other Lott measures to require insurance companies to explain in “plain English” what is excluded from coverage and to compel auto insurers to disclose information on severely damaged cars. But not much has happened on the bills since then.

And in October, the Senate Banking, Housing and Urban Affairs Committee approved legislation already passed by the House to overhaul the National Flood Insurance Program, but without a provision to include optional coverage for wind damage. Lott is still weighing how to deal with the wind coverage issue.

Lott and his spokesman say the battle to reform the industry lives on. Indeed, the former Majority Leader could prove to be a powerful foe for the insurance industry from a potential K Street perch.

“[Insurance companies are] going to hear from me for the rest of my life,” Lott pledged in an Oct. 26 (Southern Mississippi) Sun Herald article, a month before his retirement announcement.

“When Sen. Lott announced his retirement, he emphasized that there was still work to be done in the Senate,” Lott spokesman Nick Simpson said. “Clearly, his legislation dealing with the insurance industry’s actions following Hurricane Katrina are a high priority of his.”

Simpson added: “He continues to work with many Senators to pass his reforms and will continue his legislative push until his final day in Congress and beyond.”

Since Katrina struck the Gulf Coast in August 2005, Lott’s political battle against insurers has played out against the backdrop of a legal fight.

In December 2005, Lott filed suit against State Farm for failing to reimburse him for damage the company said was done to his beachfront home from water, not wind. Along with hundreds of other homeowners, including Rep. Gene Taylor (D-Miss.), Lott hired famous trial attorney Richard “Dickie” Scruggs, his brother-in-law, to sue State Farm. Lott agreed to settle for an undisclosed sum in May 2007; Scruggs was indicted for bribery in a Katrina-related case two days after Lott announced his retirement.

Though the two events — Lott’s retirement and Scruggs’ indictment — are unrelated, both are boons for a beleaguered insurance industry that has been on the defensive in the Gulf Coast and Washington, D.C.

But insurance companies are still loath to antagonize the soon-to-be ex-Senator.

“We look forward to working with the newly appointed Senator from Mississippi,” was all State Farm spokesman Phil Supple would say about Lott’s Senate departure.

Echoed Chamness, “While we have disagreed with the Senator’s views of our industry, with [the retirement] news we offer our best wishes in his future endeavors.

“NAMIC looks forward to working with the next Minority Whip in the Senate, and the next U.S. Senator from the state of Mississippi,” he said.

Insurers may be sanguine because they appear to have won the first round in their post-Katrina battle with Congress over repeal of an exemption to federal antitrust laws contained in the 1945 McCarran-Ferguson Act.

When Leahy first introduced legislation to repeal the exemption in February — with Lott and Majority Leader Harry Reid (D-Nev.) as co-sponsors — NAMIC set up a war room to mount a full-scale assault against the measure.

The industry argues the legislation would actually hurt small insurers by driving them out of business if they aren’t allowed to share loss data. Insurers say it would not directly affect large insurers like State Farm that can rely on their own statistics. They produced various academic papers to support their position.

“They were scared,” Hunter said. “They worked hard on it. They ginned up all kinds of phony reports.”

“I think the very strong opposition of the insurance companies was enough to convince [Lott] not to push too hard.”

Leahy’s committee held a March 7 hearing on the antitrust exemption, at which Lott testified. But since then, the bill has stalled.

According to sources familiar with the issue, Lott and Leahy recently spoke about moving the antitrust bill after Lott’s departure. The sources pointed to the bill’s co-sponsors, including Reid, as evidence that the measure was far from dead.

There is no word on Lott’s other bills stuck in the Commerce Committee since April.

The Senate Banking Committee approved a measure to reform federal flood insurance in October. But the measure excluded House language to add coverage for wind damage, which several Gulf Coast lawmakers support.

Lott’s spokesman said he still is trying to decide what approach is best.

But Taylor, Lott’s friend in the House who sponsored that chamber’s flood bill, is worried the Senator’s departure will hurt the cause.

“Although our State’s delegation in Congress will remain very strong and effective, Senator Lott’s retirement will have a significant impact,” he said in a statement. “You simply can’t replace that kind of experience overnight.”