Katrina Victims SOL

[Mephisto]

A federal judge in Mississippi ruled in favor of the insurance companies who have been trying to get out of payment to customers claiming that their insurance coverage didn't include flood damage. It seems that wind damage is covered, but not damage caused by a flood surge initiated by the high winds. Another victory for big business!

Yet another boot in the butt for victims of a natural disaster who hoped that their government (federal, state and local) had their best interests at heart.

Judge rejects claim for Katrina flood damage
Claim for wind damage granted; both sides declare victory

Tuesday, August 15, 2006; Posted: 9:45 p.m. EDT (01:45 GMT)

PASCAGOULA, Mississippi (CNN) -- A federal judge Tuesday rejected a couple's insurance claim for Hurricane Katrina-related flood damage in a case sure to resonate with homeowners ravaged last year by the storm.

Senior District Judge L.T. Senter Jr. said the insurance policy of plaintiffs Paul and Julie Leonard of Pascagoula, Mississippi, specifically excluded flood damage.

However, Senter ruled that the couple could collect compensation from Nationwide Mutual Insurance Co. for wind damage -- a total of $1,228.16. The Leonards said their Gulf Coast home incurred more than $130,000 in wind and flood damage on August 29, when Hurricane Katrina raked the Gulf Coast.

http://www.cnn.com/2006/LAW/08/15/katrina.lawsuit/index.html

 

[senorpogo]

So you're saying that it is the insurance companies duty to cover damages caused by forces that are clearly and explicitly not covered in people's policies?

 

[richardm]

So you're saying that it is the insurance companies duty to cover damages caused by forces that are clearly and explicitly not covered in people's policies?

Indeed; I would suspect - and I am just guessing - that flood damage was explicity not covered because it was deemed a likely occurrence, and thus the premium to cover it would be much higher. So it would be even more unfair to expect the insurance company to stump up.

Unless there is some weaseling involved....

By the way, I've seen "SOL" used as an abbreviation before. What does it stand for?

 

[JamesDillon]

The NY Times article on this makes it sound like a pretty reasonable decision.

“The judge rejected the most extreme position offered by both sides,” Mr. Scales[, a professor of insurance law at Washington and Lee University,] said. “The position that storm surge or hurricane flooding is covered was never very plausible. But it was just as implausible that if there is any water involved, the insurers don’t have to pay anything.”

Of course, without having seen the actual insurance policies in question, neither you nor I are well prepared to speculate as to the merits of the ruling. The fact that it's bad for Katrina victims doesn't make it legally incorrect.

 

[HarryKeogh]

By the way, I've seen "SOL" used as an abbreviation before. What does it stand for?

s*** out of luck

 

[senorpogo]

Indeed; I would suspect - and I am just guessing - that flood damage was explicity not covered because it was deemed a likely occurrence, and thus the premium to cover it would be much higher. So it would be even more unfair to expect the insurance company to stump up.

Unless there is some weaseling involved....

By the way, I've seen "SOL" used as an abbreviation before. What does it stand for?

According to the CNN article: "Senior District Judge L.T. Senter Jr. said the insurance policy of plaintiffs Paul and Julie Leonard of Pascagoula, Mississippi, specifically excluded flood damage."

Again, it would be interesting to see the policy, but for the judge to say it "specifically excluded"? Sounds open and shut to me.

Also, isn't flood insurance a very difficult thing to get? I remember hearing that - in Ohio at least - you have to live in certain areas that are determined "flood areas" to even be able to get flood insurance. Maybe it's just an Ohio thing or maybe I'm completley wrong. Or maybe both.

 

[Mephisto]

So you're saying that it is the insurance companies duty to cover damages caused by forces that are clearly and explicitly not covered in people's policies?

Sounds like they were mislead to me. Who bears the blame for that?

"The lawsuit also said the insurance agent told the Leonards they did not need to purchase additional flood insurance, which is offered separately by the federal government."

I live in a high desert state with a miniscule (well, it used to be) annual rainfall. Maybe I should purchase flood insurance and act-of-God insurance just in case.

 

[senorpogo]

"The lawsuit also said the insurance agent told the Leonards they did not need to purchase additional flood insurance, which is offered separately by the federal government."

I did. And glad to see you quoted what the plantiff's claimed, but not what the judge decided:

"Fletcher (the insurance agent) did not materially misrepresent the terms of the Nationwide homeowners policy to the Leonards, and Fletcher did not make any statements which could be reasonably understood to alter the terms of the Nationwide policy," Senter wrote.

So, again, I ask: you're saying that it is the insurance companies duty to cover damages caused by forces that are clearly and explicitly not covered in people's policies?

 

[Beerina]

According to the CNN article: "Senior District Judge L.T. Senter Jr. said the insurance policy of plaintiffs Paul and Julie Leonard of Pascagoula, Mississippi, specifically excluded flood damage."

Again, it would be interesting to see the policy, but for the judge to say it "specifically excluded"? Sounds open and shut to me.

Also, isn't flood insurance a very difficult thing to get? I remember hearing that - in Ohio at least - you have to live in certain areas that are determined "flood areas" to even be able to get flood insurance. Maybe it's just an Ohio thing or maybe I'm completley wrong. Or maybe both.

I thought it was you had to live in a federally designated flood plain before the bank could require you to get flood insurance. I was unaware you couldn't get it if you wanted it anyway (unless that is to prevent unscrupulous insurance salesmen from selling you useless insurance.)

 

[senorpogo]

I thought it was you had to live in a federally designated flood plain before the bank could require you to get flood insurance. I was unaware you couldn't get it if you wanted it anyway (unless that is to prevent unscrupulous insurance salesmen from selling you useless insurance.)

You may be right. Like I said, I wasn't quite sure.

 

[daredelvis]

I thought it was you had to live in a federally designated flood plain before the bank could require you to get flood insurance. I was unaware you couldn't get it if you wanted it anyway (unless that is to prevent unscrupulous insurance salesmen from selling you useless insurance.)

Quite right. It is cheap (relatively) if you are not in the 100, or 500 year flood plain. To me it was worth the $300 a year. Flood plains are not absolutes, and recent history has shown that (at least in the gulf states) not living in the flood plain is no protection against flooding (tropical storm Allison?).

Having bought insurance in the gulf state it is made very clear, and IMHO one would have to be a complete moron not to know that standard home owner's insurance does NOT cover damage due to floods. I am usually happy to jump on the "big business (especially an insurance company) is evil" bandwagon, but the plaintiffs were wrong here.

There is some question about houses that were destroyed by wind (covered by many policies) then flooded (not covered). Does the amount of time between events come into question? What if the house was flattened two hours, two days, or two months before the lot was flooded? I wonder what happens then.

Daredelvis

 

[TriangleMan]

Indeed; I would suspect - and I am just guessing - that flood damage was explicity not covered because it was deemed a likely occurrence, and thus the premium to cover it would be much higher.

Indeed. It would appear that in Mississippi companies have to file rate forms for each new line of business and get approval for rate increases. That likely means that the insurance commissioner's office would have reviewed copies of the policies involved and looked to see that the premium charge was appropriate. It was unlikely that flood was in the policies.

Looks like many homeowner's insurance companies are filing for rate increases of 50+%. Not too surprising, but will they be allowed to?

 

[TragicMonkey]

Okay, I spent some time in the insurance industry. Flood is not covered in 99.99% of homeowner policies. The reason is because flooding, unlike house fires, lightning strikes, or tornados, is going to affect a lot of houses all at once. Hurricanes do, too, but given decent construction and placement of trees, some houses will survive better than others. The risk is manageable. Flooding, however, is going to damage 100% of the houses, 100% of the time. Serious damage. Not "new roofs, remove a tree, replace some windows" damage. Foundation problems. Plumbing problems. Rotting frames. No insurer is going to undertake that risk as part of a regular policy.

Which is why there is separate, government-sponsored flood insurance. It is recommended for everyone, regardless of whether you live in a flood-prone area or not. Why? Because if a flood does hit, you're screwed. Your house will be very, very, very damaged. Without flood insurance, you are likely looking at financial disaster ranging up to total and utter ruin. It is in the interests of the people to have access to flood insurance. Which is why the government strongly encourages you to participate in the cheap, guaranteed-available flood insurance program. It is cheap because nobody is running it for profit. It's a necessity run for the benefit of all who have the brains to take advantage of it.

As far as "big business" goes, this is completely the fault of the homeowners. If they had bothered to read their policies, they would have seen, very clearly and unequivocably set out, what is and is not covered. The insurers don't have leeway to do fine print and weaselly wording here: every state regulates insurance quite heavily, and one of the things all fifty states demand is a clear and complete coverage explanation in the policy. It is a legal contract. The homeowners are supposed to read it. The state spends a lot of time regulating the insurer, and the insurer spends a lot of time working for compliance, just so the homeowners will get a fair deal. If the homeowners cannot be bothered to read their policy, it's their own damn fault.

Of course, these jerks probably knew damned well they weren't covered, but were too cheap to pony up the awesome sum of a couple hundred bucks a year to protect their most valuable asset, and they hoped they could cheat their insurer to cover their cheap fraudulent butts. The pity is that the insurers will have to raise the rates of all their customers to cover the expenses of these idiotic court cases.

If you own a home, people, get flood insurance.

 

[senorpogo]

God bless the Internet.

I love that you can be presented with just about any topic and you'll probably find someone who has experience plus a working knowledge of that topic.

 

[Metullus]

A federal judge in Mississippi ruled in favor of the insurance companies who have been trying to get out of payment to customers claiming that their insurance coverage didn't include flood damage. It seems that wind damage is covered, but not damage caused by a flood surge initiated by the high winds. Another victory for big business!

Yet another boot in the butt for victims of a natural disaster who hoped that their government (federal, state and local) had their best interests at heart.

Judge rejects claim for Katrina flood damage
Claim for wind damage granted; both sides declare victory

Tuesday, August 15, 2006; Posted: 9:45 p.m. EDT (01:45 GMT)

PASCAGOULA, Mississippi (CNN) -- A federal judge Tuesday rejected a couple's insurance claim for Hurricane Katrina-related flood damage in a case sure to resonate with homeowners ravaged last year by the storm.

Senior District Judge L.T. Senter Jr. said the insurance policy of plaintiffs Paul and Julie Leonard of Pascagoula, Mississippi, specifically excluded flood damage.

However, Senter ruled that the couple could collect compensation from Nationwide Mutual Insurance Co. for wind damage -- a total of $1,228.16. The Leonards said their Gulf Coast home incurred more than $130,000 in wind and flood damage on August 29, when Hurricane Katrina raked the Gulf Coast.

http://www.cnn.com/2006/LAW/08/15/katrina.lawsuit/index.html

There has been quite a bit of talk about this issue amongst my friends and acquaintences in Louisiana.

I have purchased Home Owner's Insurance from three different companies for two different houses in SE Louisiana over the years. In every case damage from flooding was explicitly excluded from coverage, and in at least two cases (I cannot recall the third and I no longer have the policy) the policies and the annual renewals included a cover letter reiterating the fact that flooding was not covered (flooding to mean water coming into the home from outside), but that insurance was available as a seperate policy (my current coverage in California does the same thing regarding Earthquake Coverage).

The policy that was in effect for my mother's house in Louisiana at the time of Katrina was explicit in this regard as well.

The problem that many people face is that even if one has flood insurance it will not cover all of the damage - there are, as I recall, limits to the coverage. If one loses one's house to storm surge it is likely just plain gone. And flood insurance will not provide enough money to rebuild or, in some cases, cover the oustanding loan balance. This in fact happened to my aunt & uncle.


ETA: Okay, so TM got there first, and better, once again...

 

[KillerBob]

Even if the insurance agent did tell them they were covered, the homeowner obviously committed the cardinal sin of any business transaction: not getting it in writing.

I've never even heard of a homeowners policy here which doesn't explicitly state that flooding is not covered.

Maybe it's just me, but a flood is a flood, whether it's from accumulated rain or storm surge. If the water level comes up into your house, it's a flood. I think that trying to argue that it's a wind damage claim, because the storm's winds pushed the water, is intellectually dishonest.

If it rained a lot, trash clogged up the area storm drains, and water came up into my home, could it be claimed that my home suffered "trash damage" instead of flooding?

My home sits on land that is considered low risk for flooding and my mortgage doesn't require that I carry flood insurance. But since we live within a few miles of Galveston Bay, I know that anything bigger than a category 3 has a pretty good chance of pushing water into our home, so I would never dream of being without flood insurance despite what any insurance agent tells me.

One of the most important aspects of home ownership is doing your homework to know all of your risks and responisibilities.

 

[KillerBob]

The problem that many people face is that even if one has flood insurance it will not cover all of the damage - there are, as I recall, limits to the coverage. If one loses one's house to storm surge it is likely just plain gone. And flood insurance will not provide enough money to rebuild or, in some cases, cover the oustanding loan balance. This in fact happened to my aunt & uncle.

Read the policy, check the amounts, and make sure you understand it.

Obviously I can't speak for your aunt & uncle, but in my parents case, I pointed out to them that they were renewing a flood policy that no longer covered them for the full value of their home. The property value had steadily gone up, but their flood policy had stayed at the same coverage amount because they weren't checking it each year and their lazy agent wasn't noticing it either. So if there had been a flood and the house was completely destroyed, they would have come up short in their coverage.

In our case, I've always made sure that I have more flood coverage than my property's current value, just to be sure. For me, the difference in premiums for just enough coverage versus $30,000 over my current value is only 20 or 30 dollars a year, IIRC.

 

[Metullus]

Even if the insurance agent did tell them they were covered, the homeowner obviously committed the cardinal sin of any business transaction: not getting it in writing.

I've never even heard of a homeowners policy here which doesn't explicitly state that flooding is not covered.

Maybe it's just me, but a flood is a flood, whether it's from accumulated rain or storm surge. If the water level comes up into your house, it's a flood. I think that trying to argue that it's a wind damage claim, because the storm's winds pushed the water, is intellectually dishonest.

If it rained a lot, trash clogged up the area storm drains, and water came up into my home, could it be claimed that my home suffered "trash damage" instead of flooding?

My home sits on land that is considered low risk for flooding and my mortgage doesn't require that I carry flood insurance. But since we live within a few miles of Galveston Bay, I know that anything bigger than a category 3 has a pretty good chance of pushing water into our home, so I would never dream of being without flood insurance despite what any insurance agent tells me.

One of the most important aspects of home ownership is doing your homework to know all of your risks and responisibilities.

I would be frankly astonished if any homeowner on the Gulf Coast post Camille did not know the limits of their coverage. I know a lot of people that did not really worry about it - "It'll never happen to me..." - and I know folks in St. Bernard Parish wo carried no insurance whatsoever (they owned their homes out-right) because the money was better spent on other things. These folks are now among those whose property is now worthless and who cannot rebuild.

They are also complaining bitterly about the unfairness of it all.

 

[KillerBob]

I would be frankly astonished if any homeowner on the Gulf Coast post Camille did not know the limits of their coverage. I know a lot of people that did not really worry about it - "It'll never happen to me..." - and I know folks in St. Bernard Parish wo carried no insurance whatsoever (they owned their homes out-right) because the money was better spent on other things. These folks are now among those whose property is now worthless and who cannot rebuild.

They are also complaining bitterly about the unfairness of it all.

Which is exactly what I expect to see here someday. It's been 23 years since the Houston-Galveston area took a direct hit, so there's probably a lot of people here who've become lax. Or they've moved here since Alicia and have no idea what the destruction can be like.

It'll never happen to them...


Hopefully, Houston's little hurricane drill last summer will get the message through to some people, but I'm not holding my breath.

 

[Mycroft]

I thought it was you had to live in a federally designated flood plain before the bank could require you to get flood insurance. I was unaware you couldn't get it if you wanted it anyway (unless that is to prevent unscrupulous insurance salesmen from selling you useless insurance.)

If you don't live in a flood plain, then it's easy to get and very inexpensive.