Dean Starkman’s very fine writing about the insurance industry’s response to Hurricane Katrina, Insurance Transparency Project blog, continues to be an invaluable resource for SLABBED. In fact, it was my search for something he’d written that led me to the Columbia Journalism Review where I found (much to my delight) SunHerald’s Lee, Times-Pic’s Mowbray: Still on it
One of the true pleasures of reporting on the insurance industry’s response, or non-response, to Hurricane Katrina was meeting, and reading the reporting of, the principal Gulf-area papers’ reporters on the insurance angle, Rebecca Mowbray of the Times-Picayune and Anita Lee of the SunHerald of Gulfport and Biloxi, Miss.
It is heartwarming to see them still on the case, four years later. It is heartbreaking to read what they are reporting.
Mowbray: “Report dubs FEMA poor watchdog”
That one, from September 22, is about how the government fails to supervise the private insurers who administer the federal flood program under a “private-public partnership” (always a good idea to check your wallet when you read those words):
That’s for expenses, people. Insurers under this program bear no risk. What financial product comes with a 66% load?
The story says the government also does a poor job of preventing insurers from assigning damage that was actually caused by wind, which insurers must pay, to flood, which is paid by, guess who? And you wonder why the government doesn’t work.
Oh, don’t get me started. But do read this fascinating 2007 Mowbray story on how Allstate spent government money like it was going out of style, but when its own money was involved, treated nickels like manhole covers. And this was in the same house.
And here’s one from Lee yesterday: “Wind Coverage Counts”
This one reports on a landmark ruling by the Mississippi Supreme Court, which, after four years of litigation, finally ruled that wind policies cover damage caused by, um, wind.
I’ll explain. When Katrina hit in the predawn hours of August 29, 2005, wind howled for hours, doing untold damage, and then, around mid-morning, the massive wind pressure that defines a hurricane displaced the Gulf water up onto shore and over what was left of the houses. This was called a storm surge.
These facts are not seriously in dispute. So who pays? Well, logically, you might split the difference because, really, who know what caused what damage?
But no. You see, state insurance regulators, in their captivity, allowed insurers to include something in homeowners’ policies called the “anti-concurrent causation clause”—swear to God—that said in, effect, that if an uncovered cause (water) also does damage, even hours or days later, then the insurer is not responsible for any of it. Say, as happened in many cases, the wind blew those houses away, leaving only a slab, and the water washed over the slab, insurers could and did claim that water contributed. Claim denied. Don’t believe me? Here’s the language in the policy, from the Mississippi ruling (my emphasis):
In insurance law, ties are supposed to go to policyholder, because, among other reasons, they don’t write the contract and must accept whatever language the insurer provides. And a federal judge in Gulfport, L.T. Senter, ruled the language “ambiguous,” and threw out the clause in a clear rebuke to the regulators who allowed it. But the conservative-dominated Fifth Circuit Federal Court of Appeals in 2007 overturned Senter and upheld the contract. The tie in that case went to the insurers. And as Countrywide and The Wall Street Journal editorial page will surely tell you, a contract is a contract.
The trouble is, insurance law is different precisely because of the asymmetry of power and information inherent in insurance contracts. Insurers already have the money. Policyholders’ only serious recourse is the courts.The latest ruling deals with a separate case brought in state court, which had sought a guidance from the high court on the policy language before proceeding with the trial.
The Mississippi high court opinion is well worth reading and found in a link to Lee’s story. It makes the commonsense point that:
Once it’s a loss, it’s not undone by something else.
All this pettifogging may seem obscure, but that’s kind of the point. These are details you only care about if you are fighting for your house.
There’s much more. Lee’s story lays out the reactions and details, including a key one—that the Mississippi ruling trumps the federal appeals court since insurance contracts are governed by state law—and notes the Pyrrhic nature of the victory for those who settled based on the federal court ruling.
The Times-Pic and SunHerald’s Katrina reporting demonstrates the critical importance of independent local news coverage. The Audit thanks them for staying on this story.
The slabbed and SLABBED, in turn, thank Dean Starkman for staying on this story and for the recognition of Anita Lee and Rebecca Mowbray.
[contact-form]
Great post Nowducit.
Pardon me for being cynical, but I wouldn’t trust Rebecca Mowbray (or any of her colleagues at “the Times-Pick-Your-Nose”) any further than I could throw her (or them). Ms. Mowbray, like her colleagues below the status of “Editor”, are just slaves: “Yassa, Massa; Yassa, Baas!” I recently learned that the Editor-in-Chief of “the Times-Pick-Your-Nose”, Jim Amoss, with whom I graduated from Jesuit High School in New Orleans in 1965, “became”, after he left Jesuit, in 1969, when faced with the loss of his “Student Deferrment” (only good for 4 years) and re-classification to 1-A, a CONSCIENTIOUS OBJECTOR, ie. a goddamned “draft dodger”. Would YOU work for such a person? Ms. Mowbray does. This is the man who has been, and is currently, shaping “Editorial Opinion” in New Orleans since the early 90’s, a venue largely inhabited by beings who are INCAPABLE of any independent thought. Last night, I happened upon a book by Richard Sprague, entitled: “The Taking of America-1,2,3”, which contains a very useful analysis (I believe in Chapter 3) of how the “Political Control Group” which actually “runs’ our Republic controls our Media and our Legal System. I PROMISE you that what Mr. Sprague wrote about decades ago is what I have personally experienced for the past 4 years, on-the-front-line, fighting “the System”, with the Media and the Legal System. Nowdy, with all due respect, you are BLIND: If Judge Senter is so “great”, then why did he rule for the defendant insurance company in 9 of the 10 pre-trial motions, which will force the plaintiffs to try their case with their hands tied behind their backs? I could go “on”, but I’ve made enough enemies already, for whom I have a message, straight from “the heart”: You can keep “coming at” me, but if you do, and if you get within “range”, then you had better be prepared to DIE!.
No, pardon Ashton. Ms. Mowbray is an outstanding journalist and I am among the many who admire her talent and appreciate her effort to keep the Katrina insurance issues before the public.
I also stand behind my comment about Judge Senter and offer that none are so blind as those who do not see he is following the law.
Nowdy: I’m not going to belabor your disagreement with my comment(s), admittedly “strident”. Ms. Mowbray’s reporting has been “factual”, but one-dimensional (we only report the news; we don’t “make” the news) and unimaginative. Concededly, she is “on a leash” which her Editor(s) have around her neck, but which she wears voluntarily, because she wants to keep her job and her income. She and her Editor(s) have been sitting on a number of SCANDAL(s) which I first reported to them in October 2007, almost 2 years ago, without so much as a “Thank you; we’ll give serious consideration to reporting what you have imparted to us, and by the way, we have a few intelligent questions to ask you.” If Ms. Mowbray and her Editors refuse to be part of the “solution” to the problem, then I have to conclude that they are part of the problem, and accomplices and co-conspirators. Are you familiar with the Federal crime: “misprison of a felony”? And let me ask you a question: “Would YOU work for a cowardly SOB of an Editor who ought to be in Leavenworth for the crime treason?” P.S. The Sprague book I referenced, particularly the Media and Legal System “control” sections, in Chapter 3, is available @ “http://www.acorn.net/jfkplace/03/whole/toa”
One cannot disagree a 60% expense ratio is terrible. Insurance companies are “for profit” organizations and the federal government is not. Who sigend the contract as to what to pay private insurers for handling the NFIP? The government bureaucrats did. Whose fault is that? It is just another example of governmental incompetency.
I might also add another reason for such a high expense ratio is the rates are not adeqaute. If proper rates were being charged the ratio should be lower.
To “Supersalemgr”: You have identified another tentacle of the octopus which has been sucking on the teat of the American taxpayer for some time. I confess to having been a lawyer, by education, before I was disbarred, rather than a “businessman”. Overhead in my lawfirm hovered between 40% and 45%, and the “Executive Committee” would have gone “ballistic” had overhead ever approached 60%. However, with no oversight by FEMA, and no “incentives” to keep the ratio of “costs” versus “indemnity” low, the insurance companies have a “license to steal” from the American taxpayer. Any fraudulent practices could be very easily addressed by FEMA and the insurance industry by computer programs which the industry itself routinely uses to “cut” the bills (all computer-generated, with billing “codes” and meticulous descriptions of the “services” rendered, and the time expended for each task) submitted by the industry’s own lawyers. (When I was still in “defense practice”, I could expect my bills to insurance carriers to be routinely “cut” by @ 20%, regardless of the outcome of the case, and regardless of the tenure of the “relartionship” with the particular carrier, not to mention the “delay” in payment while the fees and expenses were negotiated. In other words, an “adversary” relationship over fees and costs with one’s own clients became routine, and had a deleterious effect on the professional satisfaction one was used to experiencing as a result of achieving superlative results for valued clients). Another “incentive” to eliminate FRAUD by insurance companies would be rigorous criminal prosecution for violation of 18 U.S.C. 1001 and 18 U.S.C.286 and 287 by the United States Department of “Injustice”. WHERE IS THE GODDAMNED FBI?
This recognition of Anita’s and Becky’s work on this topic is very well deserved. Dean Starkman, along with June Cross at Columbia have also done great work exposing abberant behavior from certain insurers here post Katrina. While the subject matter is inherently complex, the fruit (such as the gutting of FEMA insurer oversight) is very low hanging.
There are 17 days left on the current 1 month extension of the NFIP authorization.
sop
June Cross has a great book linked below concerning her life story. I think her unique life experiences prepared her to look at Katrina from the perspective of those it impacted in the context of social and institutional forces which sometimes escape other observers.
http://search.barnesandnoble.com/Secret-Daughter/June-Cross/e/9780670885558
http://search.barnesandnoble.com/Secret-Daughter/June-Cross/e/9780670885558