As the Houston Chronicle illustrated in their 1st anniversary of Ike coverage, not only do the taxpayers get stuck with the wind claims insurers dump on the NFIP they also get stuck for the bill for the living expenses these all perils contracts should cover but never do. As a between the lines reader stated in an email:
What this article leaves unstated is that these lengthy disputes over causation ultimately cost federal taxpayers billions of dollars unnecessarily. The federal government pays for trailers, housing vouchers, subsidized loans, tax deductions, grants, and other benefits to assist displaced residents who are engaged in legal disputes with their insurers or who have unintentional gaps in their coverage despite buying all that was recommended by their insurance agents. Meanwhile, because of the delay in the housing recovery, the federal government subsidizes local governments, schools, hospitals, and businesses for extended periods of time until the local tax and consumer base can be restored.
Gang does any of this sound familiar? One key difference is without expedited claims Texas homeowners are having to go after both the NFIP and their wind insurer to be made whole on the coverage they were sold that in theory should fully cover their losses but rarely does without having to sue.
Life in a trailer in his driveway is a daily reminder of Hurricane Ike for Michael Amoroso.
After waiting months for a response from the National Flood Insurance Program, he was declined a bigger payment that he had hoped to use to rebuild.
For Amoroso and other homeowners like him, the storm did more than damage their property. The unrepaired houses and pending insurance claims are a daily test of their will.
“For months they didn’t even return my phone calls or e-mails,” said Amoroso, who plans to sue for more funds. “I am so fed up.”
A spokesman for the Federal Emergency Management Agency, which runs the national flood program, declined to comment on specific policyholder disputes.
The state insurance department has received about 4,500 Ike-related complaints so far, with policyholders upset about issues like claims delays, unsatisfactory settlement offers and unfair denials. Of those complaints, the department determined about 2,000 were justified and forced insurers to give an additional $35 million to policyholders.
As of July 30, Texas insurers had between 33,000 and 34,000 claims still open, according to state data. That’s about 4 percent of total claims filed and doesn’t include flood claims, according to the state insurance department.
I’ll skip the meaningless industry spin part of the story because the number of claims settled is meaningless. The real stat and the one you’ll never get from an insurer is the dollar amount of claims still open as we continue:
At the heart of many disputes is whether the damage at issue was caused by flood or wind. Flood damage would be covered by federal flood insurance. But wind damage would be covered by windstorm insurers such as the Texas Windstorm Insurance Association.
The windstorm association, which got 92,000 claims, has about 2,500 claims pending. About 750 of them are in litigation, including a number over how the association handles claims for loose shingles.
The association still receives about 25 new claims a week, said Jim Oliver, director of the association. Some claims are open because of disputes, but others haven’t received full payments because they’re still making repairs or the claims are new, he said.
The National Flood Insurance Program couldn’t say how many it has pending, but said it has paid out 33,000 claims totaling more than $2 billion.
Chip Merlin, an attorney whose firm represents more than 400 policyholders with Ike-related claims, said he’s seeing more disputes than he expected still open a year after Ike. Many of the disagreements, he said, involve less than $10,000.
“I’m surprised at the number of small disputes going on where the insurance company just says ‘We’re not paying,’ ” he said.
After Hurricane Katrina ravaged New Orleans four years ago, he said, insurers seemed more willing to settle smaller disputes.
“I would expect the settlement to be quicker,” he said. “My big fear is people are going to start giving up and start taking in 20 to 30 cents on the dollar.”
Amoroso hopes suing will get him a $250,000 payout from the flood program, which has so far sent him $104,000, minus his deductible.
Meanwhile, he’s considering razing his home and rebuilding with an SBA disaster loan, something he hopes to repay with insurance proceeds.
Calling in an ‘umpire’
Kemah resident Alison Putman first hired a public adjuster, who she says helped her get $985 from the windstorm association and about $147,000 from her flood insurance, after her deductible.
Ike flooded Putman’s one-story home, broke windows and ruined most of her family’s belongings.
She says she needs more to rebuild and deserves about $100,000 from the windstorm association and $250,000 from flood insurance. She’s opted for an appraisal process in which she and her insurers hired separate damage appraisers to review the offer and choose a third appraiser to act as an “umpire” to make a binding ruling.
Oliver declined to comment on Putman’s claim since it’s in appraisal. But association documents show it believes her home had only about $3,500 worth of damage caused by wind.
Meanwhile, Putman also plans to rebuild with the help of disaster loans.
“The whole ‘hurricane recovery’ process has been draining,” she said. “The overwhelming feeling is of a total loss of control.”
I’ll note the denial of small claims actually fits the industry trend IMHO since those claims are far less likely to ever go to court due to the economics inherent to litigating a case in the court system.