Insurers Should Not Be Allowed to Deny Hurricane Katrina Claims Based on Flood Exclusion

FTCR
September 8, 2005
Posted October 5, 2005

Consumer Advocates Provide Insurance Claims Tips For Katrina Survivors, Call on Elected Officials to Speak Out

Santa Monica, CA -- Insurance companies should pay claims for all Katrina survivors who have an insurance policy with hurricane coverage, advocates with the California-based nonprofit Foundation for Taxpayer and Consumer Rights (FTCR) said today. Some companies have begun informing policyholders that they will be denied coverage because their damage is from flooding rather than the hurricane. The majority of hurricane survivors do not carry flood insurance. According to FTCR, the strong wind of Hurricane Katrina was the obvious and principal cause of the storm surge and the primary reason for the flooding and should be covered by insurers under the homeowner/wind coverage policies that most homeowners in the Gulf Coast and New Orleans purchase.

FTCR said that in the wake of the nation's worst natural disaster and at a time when insurers' profits and reserves are at thirty year highs, the insurance industry should not force policyholders to have to go to court in order to have their claim paid.

"In a time of such extraordinary need, insurance companies are turning their back on hurricane survivors to protect and trying to wiggle out of their responsibility to their customers," said FTCR¿s Executive Director Douglas Heller. "Katrina survivors have paid premiums all these years in preparation for this disaster only to find their insurance companies playing language games about whether or not to blame Katrina for the damage. The fact that survivors may have to go to court to fight for their rights at a time like this is shameful."

FTCR provided a series of claims tips for Katrina survivors and is calling on government officials to step in and demand that insurers pay survivors' claims. The group also is collecting stories from Katrina survivors about their frustrations and problems with insurance companies at ConsumerWatchdog.org

The consumer organization provides the following basic tips for Katrina survivors:

- Contact your agent or insurance company as soon as you can and tell them that you sustained losses and will file a claim;
- Get a copy of your policy from your insurer if you do not have it;
- Ask your agent or insurer what the timeline is for filing a claim under your policy, to make sure you do not miss any deadlines;
- As much as possible, document your losses with photographs and video;
- Take careful notes of every conversation you have with your insurer, agent or insurance adjuster;
- Be an assertive policyholder: if you are having problems with your adjuster or the insurer, complain in writing, copy letters to the Department of Insurance and if you feel you are being unfairly low-balled or denied, contact an attorney.
- Do not sign any "releases" or waivers of your rights without first checking with an expert, such as an attorney with insurance experience, who is independent of the insurance company.

60% of Survivors May Not Have Flood Insurance

According to reports, as many as 60% of homeowners in New Orleans and the Gulf Coast do not have flood insurance and would be denied much or all of their claim, if customers are not allowed to claim the damage as hurricane damage. FTCR has heard from family members of military personnel who were originally told they did not need flood insurance on the coast of Mississippi and that their hurricane insurance would be sufficient to cover their risk, but are now be denied coverage because the storm surge is allegedly covered by flood not hurricane insurance. Similarly, homeowners from New Orleans who have contacted FTCR point out that the only reason the levees broke and their homes were damaged was because of Hurricane Katrina and if it was not a category four or five hurricane, their homes would not have been destroyed.

"To get out of paying claims by arguing that flooding caused the loss and not the hurricane is the moral equivalent of letting a murderer off the hook because it was actually the bullet that killed the victim," said Heller.

Insurer Profits and Surplus at Record Levels

Insurers' quick denials of Katrina claims is made even more shameful in light of the industry's record profits in recent years, FTCR said. The insurance industry's 2004 profits shattered results of the past three decades, according to insurance company data released earlier this year in a special report by A.M. Best.

Property and casualty insurers netted $40.5 billion in profits and increased the industry surplus to more than $400 billion in 2004, the data show. The statistics show that, for the first time since 1978, insurers profited from their policy sales (known as underwriting) even before accounting for $41 billion in investment earnings. Because insurers are allowed to invest policyholders' premiums and reap the returns, insurers make their profit from these investment returns and not from underwriting, as had been the case every year since 1978. In 2004, the industry had approximately $800 billion in policyholder premiums and surplus with which to invest.

"The customers who have built these profits for insurance companies deserve, at the very least, fair dealing from their insurer in this time of extraordinary need," said Heller.

Copyright © 2000-2004 FTCR


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