Insurance for Katrina Damage

SPENCER MICHELS:

Donald Kennedy's house in Mandeville, Louisiana– east of Baton Rouge on Lake Pontchartrain– got crushed by Katrina shortly after he had fled.

DONALD KENNEDY:

When I pulled up, I didn't recognize it was my house.

SPENCER MICHELS:

He was convinced it was a total loss.

DONALD KENNEDY:

I went to a catastrophe center and they gave me the name of my adjuster and a number. I called, left a message, and he called back… two days.

JESSE CURTIS:

Well, the first thing– let's just walk around and take a couple of looks.

SPENCER MICHELS:

The adjuster, Jesse Curtis, came to Louisiana from Florida, and when he saw Kennedy's house, he agreed: A total loss. So, he gave Kennedy a check for living expenses away from home.

JESSE CURTIS:

That's a clean $5,000.

JESSE CURTIS:

Most people that I encounter are usually happy to see me. They know I'm the guy carrying the checkbook.

SPENCER MICHELS:

With Kennedy's home, where there was no water damage, the adjuster's job was clear. Nearly all homeowners' insurance policies pay for damage caused by wind.

JESSE CURTIS:

The windstorm is pretty cut and dry. It's wind. If a tree falls through your house, the wind blew it over.

SPENCER MICHELS:

And Kennedy seemed pleased, at least for now.

DONALD KENNEDY:

It isn't over yet.

SPENCER MICHELS:

You don't know.

DONALD KENNEDY:

Right. But so far, things look okay.

SPENCER MICHELS:

But the tricky issue isn't wind, but water. If homeowners haven't paid specifically for flood insurance, they are unlikely to collect on water damage. And a Rand study estimates that only 60 percent of homes affected by Katrina have flood insurance. So, the decision over how damage occurred has become highly contentious.

In Mississippi, the state attorney general has filed suit, claiming that homeowners are being tricked by five insurance companies into signing papers that say they were victims of a flood in order to get emergency money. And a similar class action suit has been filed in Louisiana. Companies say the allegations are unfounded. Robert Phillips manages a State Farm catastrophe team.

ROBERT PHILLIPS:

If we're dealing with a hole through the ceiling or something like that, where the wind's knocked off shingles and you have water that's coming from the sky, then we're dealing with our homeowners' policy. But if it's rising water and it keeps rising up in your house, we're dealing with flood. So, you'll need two separate policies to cover those types of coverages.

ROBERT MARIONNEAUX JR., Louisiana State Senator:

The problem with that scenario as it relates to a hurricane is where does the wind damage stop and where does the floodwater begin?

SPENCER MICHELS:

Robert Marionneaux is a trial lawyer and a Louisiana state senator who sponsors consumer protection legislation. He predicts a flood of lawsuits against insurance companies.

ROBERT MARIONNEAUX JR.:

I would hope that the insurance company would step forward, not argue about whether it was wind or flood damage, make a reasonable assessment of the damage and pay the claim in reasonable short order. Is that going to happen? I doubt it. That's not the way insurance companies work.

SPENCER MICHELS:

Portia Andrew is wondering if and when insurance works at all. She sustained damage to her home and healing center in Hammond, near Baton Rouge, and she is sure that a barbecue restaurant she owns in New Orleans was damaged, as well. But she hasn't been able to get to New Orleans to find out. We went by the spot and took pictures, which we showed to her the next day.

PORTIA ANDREW:

Right now, I can't see the water damage, but I do know water was in that area.

SPENCER MICHELS:

It looks better than you thought, maybe, huh?

PORTIA ANDREW:

Oh, it does. It does. I thought it was much worse. I'm sure there's some damages inside.

SPENCER MICHELS:

Without money, Andrew sees no way to repair and restock her restaurant, so she may well lose the business. Faced with damage on several fronts and having to sleep outside until electricity could be restored, Andrew got the runaround when she tried to file an insurance claim with a company whose offices were in the mostly destroyed St. Bernard Parish.

PORTIA ANDREW:

I never heard from them anymore. I'm very frustrated, very tired, feeling helpless. What am I gonna do?

SPENCER MICHELS:

Andrew and her husband, confused about what coverage they had and who was their carrier, cleaned up their healing center themselves but couldn't get the damage repaired.

PORTIA ANDREW:

I don't have any money. I don't have any money to get it fixed. So, I was waiting on the insurance company to come, and since they never showed up, we just praying that it won't rain.

SPENCER MICHELS:

The bulk of insurance claims is still to come since parts of New Orleans and environs are still unreachable. But consumers who feel cheated or– like Portia Andrew– ignored won't have many places to turn since Louisiana has almost no consumer advocate organizations.

ROBERT MARIONNEAUX JR.:

What I hope Katrina does is open the eyes of the public that we need someone out there in the legislature and in the courtrooms protecting consumers.

SPENCER MICHELS:

While the lawsuits begin and the Louisiana legislature holds hearings on insurance issues, the state's third-largest insurer, Louisiana Farm Bureau Mutual, sent its agents and adjusters into the field to continue their jobs. Malcolm Fitzhugh says most people have been understanding.

MALCOLM FITZHUGH, Louisiana Farm Bureau Mutual Agent:

Some things that we're finding, you know, aren't covered under the policies, like food loss and things like that. People are a little irritated. But for the most part, most people have been friendly. So, it's kind of like a knight in shining armor when you show up.

SPENCER MICHELS:

Insurance claims and payoffs will be in the billions of dollars. The upcoming battle over what's covered and what is not will play itself out in the courts, but that may be too late for many victims of the hurricane.