Insurance Help Hinges on Type of Damage

One of the biggest questions to come out of Hurricane Katrina is the extent of insurance coverage. We hear first from Christine Francis, a New Orleans resident who evacuated to Austin. Then, Melissa Block speaks with Ray Stone, the vice president of catastrophe operations with St. Paul Traveler's Insurance, a major homeowners' insurance company in Louisiana and Mississippi. And, Robert Siegel talks with George Currin, National Flood Insurance Program Group Supervisor at FEMA, about its role in settling claims for flood damage.

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ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MELISSA BLOCK, host:

And I'm Melissa Block.

Today we take a look at insurance issues facing victims of Hurricane Katrina. Private insurers could pay out as much as $60 billion in claims, making it the most expensive natural disaster in US history. Many homeowners are starting to come to terms with what is and isn't covered. We'll talk with a private insurer and to a FEMA official in charge of federal flood insurance.

SIEGEL: But, first, we check back in with Christine Francis. We spoke with her the first time right after the hurricane. She and 21 family members had left New Orleans before the storm in a car caravan. Now they're in Austin, Texas. Christine Francis is an IT consultant to the mayor of New Orleans. She's trying to navigate the insurance maze for nine family homes that are believed to be a total loss, homes located in the heavily flooded Ninth Ward and in eastern New Orleans.

Ms. CHRISTINE FRANCIS (IT Consultant to New Orleans' Mayor): It's a bit frustrating. I can tell you that of the nine homes, one of my relatives did not have insurance. So she will be completely dependent upon FEMA.

SIEGEL: It's a different story for her mother, who has a two-story brick home.

Ms. FRANCIS: She would receive compensation for the home but not the contents. One of my relatives had something that's called a deluxe policy; that includes the house and the contents.

SIEGEL: And more than two weeks after the storm, Francis says all of the homes are still surrounded by water, so no insurance adjusters have visited.

Ms. FRANCIS: The main problem is this particular catastrophe is different because even in Florida--Florida, you know, is considered a dry hurricane. It was very easy to go back in a day or two and, although houses were leveled, to go in and assess the damage.

BLOCK: Well, we put some of these worries from Christine Francis and others to Ray Stone. He's vice president of catastrophe operations with St. Paul Travelers Insurance. The company provides homeowners insurance in Louisiana and Mississippi.

Mr. RAY STONE (Vice President, Catastrophe Operations, St. Paul Travelers Insurance): I can't say that we have a large number of people who are surprised by what a homeowner's policy does provide coverage for.

BLOCK: A number of stories that we're hearing are from folks who own homes where they might be covered for wind damage but would not be covered for flood damage. Are you finding that as well?

Mr. STONE: Well, that's true. That--your typical homeowner's policy does not cover for flood damage.

BLOCK: And if I understand this right, the flood insurance, which comes through FEMA, there would be a number of people who would not have been required to have that coverage but who would still have been hit by this storm and by floods because it was so intense.

Mr. STONE: Very possibly, absolutely. Yeah, there are certain areas that it is absolutely required and required if there's a mortgage on the premises.

BLOCK: So there's going to be a gap there, it seems, for a number of people.

Mr. STONE: Yeah, it's very possible.

BLOCK: In New Orleans and in the parishes around New Orleans, so much of the damage and destruction of homes was from the flood walls and the levees bursting. Where does that fall? I mean, people are making the argument that that is not flood damage; that's actually wind damage from the hurricane.

Mr. STONE: Well, that's an issue that remains to be resolved. But, again, a typical homeowner's policy does not cover for damage from surface water, but, yes, we are aware that there is the issue surrounding what caused the damage to the levee.

BLOCK: Is that resolved on a case-by-case basis, where each person has to...

Mr. STONE: No, I think that that would...

BLOCK: ...fill that...

Mr. STONE: ...have to be on a much broader scope than on an individual, case-by-case basis.

BLOCK: I saw a statement from the insurance commissioner of the state of Mississippi, who is saying that insurance companies will have to prove that the damage was caused by water and not wind if they want to deny a claim--in other words, that the burden of proof is on the insurer, not on the person who's being insured.

Mr. STONE: Mm-hmm. Yeah. And we're aware of that as well.

BLOCK: And what do you think about that?

Mr. STONE: Well, I mean, we take every case and we inspect every loss to determine what exactly caused that particular loss. So it's nothing that we're unfamiliar with.

BLOCK: I wonder if I could get you to respond to this comment from a public insurance adjuster, Marvin Milton. This was in a Reuters wire story that ran. And he says, `Disaster victims must recognize from day one that your insurance company is not your partner, not your friend. The relationship may be cordial and productive, but it is often adversarial, a case of competing interests.' Do you think that's true?

Mr. STONE: No, not at all. Not at all. We're there to assist them, to be fair in the way that we adjust claims. And I find absolutely no merit in that comment.

BLOCK: Ray Stone, thanks very much.

Mr. STONE: OK, thank you.

BLOCK: Ray Stone is vice president of catastrophe operations with St. Paul Travelers Insurance.

SIEGEL: Now on to FEMA, where George Currin is National Flood Insurance Program supervisor. We also asked Currin about people without federal flood insurance, people who fear that their home insurance policies won't cover them--their homes filled with surface water, either from the storm surge or breached levees and flood walls.

Mr. GEORGE CURRIN (Supervisor, National Flood Insurance Program, FEMA): It's called a general condition of flooding. And if the water was due to that general condition of flooding, whether it came from the levee or it came from somewhere else and it entered their house, then it would be covered by flood insurance.

SIEGEL: With flood insurance--with the National Flood Insurance Program, how much can one insure for?

Mr. CURRIN: For the residents, $250,000.

SIEGEL: Housing costs are very, very high right now, and I can imagine there'd be a lot of beach-front property that's worth a lot more than $250,000 today.

Mr. CURRIN: Well...

SIEGEL: Can those people recover the value of their property?

Mr. CURRIN: That's why it's so important to register for disaster assistance because then there are other avenues of assistance over and beyond the $250,000 limit flood insurance.

SIEGEL: How common was it for people in the area affected by Katrina to have had national flood insurance?

Mr. CURRIN: I don't know exactly how common it was, but to give you an example, in Louisiana, there are 380,000 flood insurance policies. And people are still filing claims, and so we're waiting to see how many claims come in. So they need to file a claim with their agent, with their company, to make sure an adjuster gets lined up to look at their claim.

SIEGEL: What do you do if there's still water around your home and you can't get to it...

Mr. CURRIN: Sure. And it...

SIEGEL: ...because the neighborhood is still flooded?

Mr. CURRIN: That's right. And it may take a while, because there's water there, for even the adjuster to get there. So there's going to be special circumstances that are going to have to be dealt with on a case-by-case basis with each of the insureds. And the insurance companies are stepping up, and they're coordinating with the adjusters to assist the property owners with those circumstances.

SIEGEL: Mr. Currin, thank you very much for talking with us.

Mr. CURRIN: Yeah, thank you for your time.

SIEGEL: That's George Currin, who is the National Flood Insurance Program group supervisor at FEMA. He joined us from the capital of Louisiana, Baton Rouge.

BLOCK: This is NPR, National Public Radio.

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