Insurance Worries for Business Owners in the Wake of Gustav

Gustav victims face insurance worries
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9/6/2008 8:14 PM Comments70 Recommend19

As victims of Hurricane Gustav's fury turn to their insurance companies for help in recovering from the wind and water inflicted damage to their property, some are coming away with smiles while others may have a shock in store.
That's because some people will find their homeowners' insurance policies have a hurricane deductible that is a percentage of their home's insured value rather than the traditional $500 or $1,000 deductible.
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Louisiana is among 18 states and the District of Columbia to allow hurricane and windstorm deductibles in policies.
The impact from the hurricane deductible could be big since the average claim for the 1 million claims filed for Rita and Katrina was $15,000.

Insurers indicated last week they expect their Louisiana losses from Gustav to total between $4 billion and $10 billion, including $1 billion to $2 billion for insured offshore oil and gas operations, Donelon said That would put it more than Rita, which caused $3 billion in insured losses, and Katrina, which had $19 billion in insured losses, Donelon said.
Opelousas Mayor Donald Cravins Sr., an insurance agent, said the hurricane deductible is "the real problem people are facing with insurance." "People are going to sustain substantial out-of-pocket losses," Cravins said. "It's going to have a pretty serious effect in terms of people individually." Gary Thompson, a partner at the Washington-based Reed Smith law firm and a member of its insurance recovery practice group, said insurance companies took advantage of the climate after Katrina and Rita to push for higher hurricane and windstorm deductibles.
"The insurance companies were singing their sad song that they had to pay out a lot of money and said they really needed the higher deductibles if you wanted them to continue writing insurance in your state," said Thompson, who has been extensively involved in litigation against insurance companies from Katrina claims. "It was a not so subtle threat that if it (the deductible
increases) was not approved, they were going to pull out." But some are satisfied with their insurance companies responses so far, including Lacey Williamson of Arnaudville.
Williamson lost her air conditioning unit and her mobile home's skirting as well as a shed to Gustav. "It also lifted part of my roof and it rained through my windows," said Williamson, whose home was insured by Foremost, part of the Farmers Insurance Group.
Williamson, her husband and their two small daughters moved into a camping trailer at her mother's house while waiting for electricity to be restored and repairs to their home. They also purchased a generator to power an air conditioner for the trailer.
On Thursday morning, Williamson one of more than 60 people who visited a Farmers Insurance mobile claims office in the parking lot of the Lowe's store in Opelousas. That afternoon she had a check in hand to help out until her claim was settled and said she was happy with her insurance experience so far.
"They put my (homeowners) claim in for me," said Williamson of her visit to the mobile office. "They also paid for part of the generator and all the gasoline." Jessica Lacombe of Port Barre, another Foremost policyholder, also filed a claim with the mobile office Thursday, saying she was relieved to get the process started.
"The carport and porch got wind damage and we also had water damage inside (her mobile home)," she said. "Since them, we've been staying with people who have generators, trying to stay cool." Farmers Insurance Group of Companies has more than 375 people in the state as well as mobile claims offices to help their policyholders.
"Our goal is to get them filing their claims as soon as possible to get them back where they belong," said David Bishop, a spokesman for Farmers.
Other insurers, such as State Farm Insurance and Allstate, also have dispatched mobile response units and hundreds of personnel to the state.
Brooke Cluse, spokeswoman for State Farm, said the company had 125 reaction teams in the state before Gustav hit and there are now more than 1,300 State Farm agents, staff employees in Louisiana. Catastrophe claims offices are being set up and by Monday, offices for Acadiana will be located in Alexandria, Houma, Lafayette, Lake Charles, Morgan City, New Iberia, Cluse said.
"We have handled over 14,000 claims so far," Cluse said.
State Insurance Commissioner James J. Donelon said that while his office has not received any complaints so far about insurance problems, it is getting a "steady stream" of inquiries from people.
"These folks are looking for how to get in touch with their agent or how to get in touch with their company to access an (insurance) adjuster and folks asking how named storm (hurricane) deductibles work versus the standard $500 deductible that they are used to," Donelon said.
Donelon said that for example, his home in Metairie, insured for $200,000, had a $24,000 loss from Hurricane Katrina and his policy had a 2% named storm deductible..
"It wasn't 2% of my $24,000 loss," he said. "It was 2% of my total insured value so that my deductible ended up being $4,000." Donelon said that since then, his insurance company had increased their statewide deductible to 3% of the insured value and they also increased the replacement value of his home to $300,000.
The Consumer Federation of American estimated that Gustav would result in roughly 100,000 claims for wind damages by homeowners and 75,000 federal flood insurance claims.
"Families will have to dig deeper into their pockets because insurers have been steadily increasing hurricane coverage deductibles and imposing other policy limitations," said J. Robert Hunter, director of insurance for the consumer federation, in a statement. "This liability shift to consumers may take some by surprise since disclosures are often buried in renewal paperwork that consumers may not understand or even read." Hunter, a former Federal Insurance Administrator and Texas Insurance Commissioner, said that not all insurance companies handle claims badly, so policyholders should go into the claim process with an open mind.
"Be vigilant, though, or you run the real risk of being shortchanged," he said.