December 5, 2005
Insurers Get ‘Decent Marks’ for US Hurricane Coverage
By Ed Leefeldt
NEW YORK -- Call it "the dog that didn't bark." Fears that insurers would turn their backs on victims of the worst U.S hurricane season ever have proved to be mostly unfounded.With property casualty insurance companies facing record payouts of more than $70 billion after Hurricanes Katrina, Rita and Wilma ravaged the Gulf Coast, concerns arose that insurers would come up short in their obligation to policyholders, or even go bankrupt, leaving damage claims unpaid.
But a survey of state regulators, realtors and hurricane victims shows, in most cases, that insurers get "decent marks." There were some exceptions.
"The insurance companies are trying, although not as fast as people would like," Louisiana Insurance Commissioner Robert Wooley told Reuters in an interview. With New Orleans flooded and 1,000 deaths reported, his state was hardest hit by the storms, which struck from late August into October.
Brian Doubleday, a real estate broker and owner of Realty Associates in New Orleans, said most of about 40 residents he spoke with "felt they'd been treated fairly."
Wooley said he has short-circuited complaints by giving senior claims adjusters office space in his building.
"If we have a problem, we just walk across the hall," he said.
Jim Hurley, a Texas Department of Insurance spokesman who tracks Hurricane Rita complaints, said insurers "are doing fairly well."
Out of 195,000 damage claims filed by hurricane victims, Hurley said, as of November 21, the state had received only 717 complaints against insurers.
However, many Gulf Coast residents remain unable to return home as they await settlement of their claims.
"We are still in limbo," said Dr. Bruner Bosio of Pascagoula, Mississippi, whose beachfront home was destroyed.
WIND OR WATER?
Initial progress was slow because it was difficult for adjusters to get to hurricane-hit areas. Once access was possible, insurers estimated that Katrina cost them more than $40 billion, Rita $15 billion and Wilma $12 billion.
Robert Meyers, president of insurance company services at GAB Robins North America Inc., which provides independent claims adjusters, said 60 percent of his Katrina claims were "closed" and he expects to have 85 to 90 percent of his Katrina and Rita claims reviewed by year end.
Mississippi's long-time Insurance Commissioner George Dale, who once rode out a hurricane in his coastal home, gives insurers "decent marks."
"The big issue here is 'wind or water,"' said Dale. If the wind came before the water, most homeowners had coverage. But if the storm surge hit first, coverage for a house is limited to flood insurance.
Flood insurance must be bought separately from a homeowners policy and generally is available only through a federal government-run program, where the maximum payout for a home is
Many residents are ready to sue over the wind-or-water issue.
James Ray, of Long Beach, Mississippi, owner of five car washes, has consulted an attorney. He and other residents will argue that the winds of category 5 Katrina destroyed their waterfront homes before the 32-foot storm surge came along.
"When you have this kind of damage, the morality of the insurance company goes out the window," he said.
LONG LEGAL BATTLES
Donna Thompson of Biloxi has sought the professional opinion of an engineer. She said the roof of her house was torn off and landed behind a relatively undamaged structure, proving that winds and not floods were to blame.
But because the evidence is gone, she knows she'll have a battle on her hands.
"We're thinking it's over two years until we get paid, and then we'll have to share it with the lawyers," Thompson said.
Mississippi class-action attorney Richard Scruggs and State Attorney General Jim Hood are representing state residents in lawsuits against major Gulf state carriers, including State Farm Mutual Automobile Insurance Co. and Allstate Corp.. They are asking that claims be paid even though their clients' policies exclude flood damage.
The state's insurance commissioner takes the middle road.
"I want to see claims paid, but I also want to see an insurance market here when we start to rebuild," Dale said.
Allstate Chief Executive Edward Liddy has already announced plans to cut back on issuing new policies in risky Gulf states.
Allstate was named in nearly half of the complaints filed in Texas, said Hurley. Many Beaumont residents say the company won't pay "cost-of-living" expenses to cover the time they had to leave their homes, which had no electrical power for nearly a month after Rita struck. The State of Texas has sued Allstate to pay those expenses.
A state court ruled in favor of Texas, but the decision now rests with an appellate court. Allstate spokesman Michael Trevino said company policy dictates there must be physical damage to homes, not just loss of power, before policyholders can be reimbursed for the cost of hotels and meals.