Katrina Claims Focus on Type of Damage

The insurance industry expects more than 1 million claims from Hurricane Katrina. Assessing the validity of those claims will be complicated. The initial winds and rain were followed by unprecedented flooding in many places. Much rides on whether damage was caused by wind or by flooding.

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SUSAN STAMBERG, host:

The insurance industry expects to face more than a million damage claims as a result of Katrina. The job of assessing those claims will be complicated. The early winds and rain were followed by unprecedented flooding in many places. NPR's Jim Zarroli reports that a lot of money will be riding on the question of whether homes were damaged by the powerful winds or by flooding.

Unidentified Man: What do you need?

Mr. MARIO FIOLA(ph) (Home Damaged By Katrina): We probably...

Unidentified Man: You want the sticker?

Mr. FIOLA: Yeah, if w--if you have that. Or...

JIM ZARROLI reporting:

Mario Fiola is showing an insurance adjuster the damage that his home sustained when Hurricane Katrina swept through his community of Diamondhead, Mississippi. At least six feet of floodwater poured into this neighborhood, obliterating many of his neighbors' homes and washing huge piles of debris into his yard. Two cars were flooded out and the carcass of a small plane he owned lies twisted amid some nearby brush. But Fiola believes the damage to the area was caused not by floodwater, but by one of the many tornadoes that preceded the storm. He points to the way shingles were torn from the house next door.

Mr. FIOLA: It's going to be up to the insurance company and we'll probably, you know, be negotiating, but the flood came after the tornado. The tornado did the basic damage. It's quite apparent.

ZARROLI: The question of how Fiola's home was damaged is more than an academic one. Most homeowner's policies cover damage from wind and rain storms. The damage from flooding is not covered. Flood insurance has to be purchased separately in policies underwritten by the federal government. Most people here in Diamondhead, like most people throughout the Gulf, were on high enough ground that they never thought to buy flood insurance. Lloyd Ramirez is president of the Diamondhead Property Owners Association.

Mr. LLOYD RAMIREZ (President, Diamondhead Property Owners Association): I don't think any of us knew. There has never been a time that any of us have ever seen any flooding. Streets--and people along here--I was astounded when they told me they had eight and 10 feet of water in their houses.

ZARROLI: If insurance companies can prove that a home was damaged by flooding and not wind or rain, they don't have to pay claims. Bob Hunter, insurance director of the Consumer Federation of America, says there are likely to be many legal battles in the years to come over how different homes were damaged.

Mr. BOB HUNTER (Insurance Director, Consumer Federation of America): In the case of Hurricane Katrina, if you don't have flood insurance, particularly, it's an important question. What happened? And when did it happen?

ZARROLI: But insurance industry officials say such concerns are overblown and disputes are likely to be rare. Gordon Stewart, president of the Insurance Information Institute, says the industry has developed techniques over the years for analyzing what damaged a building.

Mr. Gordon Stewart (President, Insurance Information Institute): Adjusters who've had experience with this--this is not a new thing, these coverages have existed side by side for a very long time. People are used to looking at a structure and, obviously, if the roof is blown off, the flood didn't do that.

ZARROLI: And Stewart insists that insurance companies will process claims fairly. Still, many homeowners are likely to be disappointed by the size of their payouts.

(Soundbite of packing sounds)

ZARROLI: April Carter is packing some glass plates in boxes. They're nearly all that survived when eight feet of floodwater washed through her Diamondhead home. Carter, who's a sergeant in the National Guard, says the floors, walls and electrical wiring in her house need to be replaced, and she hopes FEMA will come through for her if the insurance companies don't.

Sergeant APRIL CARTER (National Guard, Home Owner): The 30-foot surge came up out of ocean and just wiped out most of our coast, and I'm hoping that the government will help us that didn't have flood insurance and help us rebuild.

ZARROLI: Carter says she and her husband already have a second mortgage on their home and can't take out another. Unless she gets some help, she says, she may be forced to abandon her home to the bank, and she says many of her neighbors will do the same thing. Jim Zarroli, NPR News.

STAMBERG: You're listening to MORNING EDITION from NPR News.

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