Insurance companies basically sell security. A consumer is willing to pay insurance premiums in the expectation that if something bad happens—a house burns down, a car crashes—the company will pay for the loss that otherwise might financially ruin the consumer.
I had homeowners (wind/hail) through USAA, I also purchased my flood coverage through USAA. After Katrina I had a slab and pilings left. The National Flood Insurance policy paid off fairly quickly. Concerning my Wind/Hail coverage, USAA sent me a letter saying “Where there is no coverage, no payment can be made”. I decided to fight them. I attended the State Ins. Dept. sponsored arbitration, where USAA offered my about ten cents on the dollar. I signed an impasse statement and did not accept their offer. I hired my own experts (structure and weather) and kept the pressure on USAA. Approaching the 3 year anniversary of Katrina, USAA sent me a check for the full insured value of my home with no explanation. I lost the interest on the payment for three years
Now for the complete denial. This from team USAA last October:
“This ruling is a good decision for USAA as well as for Mississippi homeowners,” said USAA spokesman Paul Berry. “Each key position USAA put forth was affirmed by the court.”
Those positions are:
• The court endorsed USAA’s claims-handling policy in Hurricane Katrina. USAA paid for damage caused solely by wind but did not pay for damage caused by storm surge.
• The court affirmed USAA’s legal argument that a jury should decide what losses, if any, were caused by wind, and what losses, if any, were caused by flood………USAA already has paid the Corban’s for damage caused solely by wind and for damages covered by their flood policy….
If that is the case then why did they tender in March? That koolaid they serve over San Antonio must be laced with Mescaline.
sop
Sop I assume this is your story and I really am sorry for your loss and the fight you had to go through to be make whole, however help me here. If you were left with a slab, how in the hell did they make a determination of what was wind and what was surge?
And If USAA was the carrier on both was there not a coordination of coverage clause so that you should have been made whole up front and then the carriers/plans fight it out as to who owned what part? That is routine in the commercial world
Ig,
This is not complicated. Prove the loss is excluded or else pay up.
USAA had the burden of proof and had a fiduciary duty to not place its own interests above NFIP’s interests.
So if the hurricane caused a total loss, they should have to adjust the flood and wind claims at the same time.
To deny wind coverage they have to prove the loss was all due to flooding. If they can’t prove it was all flood then they have to apportion the loss in a way that is fair to the insured and to taxpayers/NFIP.
This all should have been done within a month of the storm. Neither the facts nor the law have changed since then.
Brian
Maybe my comment come across wrong…That is what my point was. When you have coordination of coverage clause the full loss is paid as soon as the proof of loss is established. The policy holder is made whole. The carriers then fight it out as to who owes what between themselfs. You can bet your sweet bebby that the cordinated total dollar of the loss so the policy holder didnt get more that the insured value
I was just wondering how they could come up with a number as to what was wind and what was flood
Never assume Ignatious, I was paid very quickly by flood and was made whole via wind by January 2006. I was one of the lucky ones.
In the arena of financial blogging and blawging on the topic of insurance we’re the ultimate Santa Claus.
Your observations go to the heart of the debate currently raging in DC on the re-authorization of NFIP, especially where it interfaces with other coverages.
The current WYO system is broken beyond repair. After Katrina insurers used NFIP as a personal piggy bank of sorts paying their losses on top of the programs. The GAO has found the current WYO system contains inherent conflicts of interest in fact. Those conflicts were laid bare by Katrina and get to the heart of the false claims act suits against team insurance that we cover in detail here.
To the extent the combined perils that are a hurricane can be modeled and predicted with a fair degree of reliability I think all the combatants agree a single multi peril policy is possible from actuary standpoint. The question is do we open the treasury cookie jar again for insurers via a backstop or do we cut the middle men out. There are other proposals beyond the two main ones but I do not think Ron Klein’s Homeowners Defense Act, for example has gained much traction.
We have more coming on this topic including a post that will run tomorrow.
sop
I don’t think I’ve encountered a “coordination of coverage clause” dealing with wind and flood. In fact, the Anti-Concurrent Causation Clause (“ACC”) is just the opposite of what Ignatius suggests. Your suggested approach makes the most sense, but that was not done in Katrina. I don’t think it ever will be, as long as the insurance companies can dump their losses on the NFIP so easily.