BestWeek: State Farm Settlement Shows Search for Water-Proof Policy Could Be Futile.

OLDWICK, N.J. -- The anticoncurrent cause clause was designed to serve as the homeowners policy equivalent of Hoover Dam, an impenetrable wall that would control insurers' exposure to massive storm claims and guarantee all of the water was kept safely on the other side, according to an exclusive story in the January 29 edition of BestWeek.

But in light of State Farm's settlement with Mississippi Attorney General Jim Hood--a deal that could leave the personal lines giant on the hook for $500 million in new Hurricane Katrina claims in a state where it already has paid out more than $1.1 billion--it appears the clause proved more like a little Dutch boy with his finger in the dike, each new lawsuit poking another hole in the defense system meant to keep the floodwaters at bay.

Legal experts say insurers soon will be forced to pick up the chalk used by federal judges to outline the corpse of anticoncurrent causation policy language. They'll need it when they go back to the drawing board.

"Once Judge (L.T.) Senter ruled that the clause was ambiguous, State Farm was in trouble," said Seth Chandler, co-director of the Health Law and Policy Institute at the University of Houston Law Center, referring to a May 2006 opinion by the U.S. District Court judge. In that decision, Senter ruled State Farm's policy language--which declared the insurer would not cover flood losses even if "other causes acted concurrently or in any sequence with the excluded event to produce the loss"--was ambiguous and unenforceable.

Also in BestWeek, Best's Global Insurance Composite Index finished the week of January 25 up 7.57% from a year ago. The composite index reflects the performance of 184 insurance stocks. The week's top performers were 21st Century Insurance; National Interstate; Tower Ltd.; Tower Group; and Hub International. The bottom five performers were RenaissanceRe Holdings; Benfield Group; Amlin; China Insurance International and Scor S.A.

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