Could Lawsuits Bankrupt the Insurance Industry?

Today a Mississippi couple filed a lawsuit against their insurance company for their refusal to reimburse them for the damage done to their home by Hurricane Katrina. The family is arguing that their home was damaged by the 145 mph winds before the flooding occurred. Most home owners policies don't contain flood insurance, they must by purchased separately from the government. The couple was upset last week when the insurance company didn't come to inspect their home and they just received a letter that stated that they weren't receiving any money due to the flood damage.

If this couple wins their case, you can expect to see several thousand other lawsuits filed, shortly there after. This could very well ruin the insurance companies and at very least change the insurance policy structure forever.

Since thousands of home were damaged by flood waters I think that it would be fair to say that the demand for flood insurance is going to go through the roof, once people start to rebuild. This means that the price for flood insurance to drastically raise from it's already high price. Do you think that the government would ever turn over the sale of flood insurance to a private company, and if so do you think their would be a reduction in the rate of flood insurance?