OT - Katrina and Insurance Claims

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If you were wondering how claims are handled in these situations, here is an insight into the process. From experiences that I have been seen,
the insurance company will try anything to wriggle out paying a claim.
TMT
http://www.washingtonpost.com/wp-dyn/content/article/2005/09/11/AR200 ...
Claims Mark Recovery's Beginning But Deciding How Much Damage Is Attributable to Floods May Get Tricky
By Justin Gillis and Amy Joyce Washington Post Staff Writers Monday, September 12, 2005
HATTIESBURG, Miss. -- As the immediate humanitarian crisis eases in the
Gulf Coast states, people are turning their attention to recovery, and for the vast majority, the key to recovery is an insurance claim.
Insurance adjusters are flooding the region to cope with claims expected to number in the millions. Homeowners across a huge swath of the country now confront the most important financial moment of their lives -- getting an insurer to keep its promise to make them whole after a disaster. Some are likely to be caught up in a contentious debate over how much of the hurricane's damage should be attributed to flooding.
As an insurance man crawled around a roof the other day in the broiling
Mississippi sun, Eddie A. Holloway stood below in the kitchen, pointing
to strips of paint and plaster hanging from a giant hole in the ceiling
of a rental house he owns in Hattiesburg.
The house, in a poor section of town, was rendered uninhabitable by the
storm, and the tenants fled. "They're gone," he said, and so is his income on the property, perhaps for weeks or months.
State Farm adjuster Curtis Rasmussen, fresh in town from Utah to handle
claims, crawled down a trembling stepladder toting a digital camera to show Holloway the damage. Hurricane Katrina had stripped the roof bare,
and a new one would be required. On this modest house alone, 70 miles from the Gulf of Mexico, State Farm will be writing a check for thousands of dollars.
The scene will replay again and again across the region. Everywhere but
New Orleans, insurance adjusters are thick on the ground already -- stuffing hotels, grabbing anything that resembles office space, firing up generators and pointing satellite dishes skyward in a desperate attempt to get Internet access in a region where many people still lack
electricity. They are buoying spirits across three states with immediate $2,500 and $5,000 checks to cover living expenses.
But the process of adjudicating several million claims has barely begun, and Hurricane Katrina is already posing a vexing set of insurance problems that will reach all the way to Washington. For starters, much of the damage along the Gulf Coast was caused by a surge
of water that rose as high as 30 feet, the biggest storm surge ever recorded in North America. That surge was technically a flood, even though it was produced by a hurricane, and it is not covered by standard homeowners' insurance.
Flood insurance has to be bought separately from the federal government. Many people in New Orleans had it, and they are likely to be made whole, though the payments are expected to send the government's flood-insurance program into the red.
In Alabama and Mississippi, by contrast, many people did not have flood
coverage, and that is sowing the seeds of a potentially vast conflict involving angry consumers, insurance companies, banks that write mortgages, state regulators and lawmakers in Washington.
A huge fight may yet be averted if insurers succumb to political pressure to attribute most of the region's damage to wind instead of flooding -- a policy that regulators say could put some insurers at risk of bankruptcy.
If the insurers enforce their policies as written, politicians are going to find themselves coping with unhappy constituents throughout the Gulf Coast who did not realize their damage would not be covered. There is already talk of massive lawsuits and the need for wholesale changes in the way federal flood insurance works.
"I had $60,000 worth of contents, and I thought I had it made," said Dorice Mitchell, a 40-year resident of Pascagoula, Miss., who lost many
of his belongings when his house flooded. He walked away from a State Farm catastrophe center empty-handed last week after learning his policy won't help him. "They said it ain't worth a dime. No flood insurance. I'm going to be living in apple crates."
Because the task of assessing damage has barely begun, nobody has a clear idea how large insurance payouts will be. Preliminary forecasts run as high as $60 billion, which would make Katrina far costlier than Hurricane Andrew, the monster 1992 storm that walloped southern Florida, Louisiana and Mississippi and led to insurance payments of more than $20 billion in today's dollars. Andrew was a "dry hurricane" that did not produce anything like the flooding associated with Katrina.
Insurance companies will not offer estimates of their exposure, saying it is simply too early to tell. But in this college town in southeastern Mississippi, it is possible to get a preliminary sense of the financial scope of the disaster.
Katrina did not fall below hurricane strength until the eye was near Laurel, Miss., 30 miles northeast of Hattiesburg and 100 miles from the
Gulf of Mexico. The storm caused damage in a dozen states and reached Canada before it weakened into insignificance. Katrina cut a devastating path deep into central Mississippi, paralyzing the state government in Jackson for days.
In regions so far inland they rarely see damage from tropical storms, Katrina killed dozens of people, snapped electrical poles off at the ground, drove tree limbs deep into houses, ripped open roofs, knocked down barns and traumatized tens of thousands of people. As of Saturday,
more than 427,000 households in Louisiana and more than 162,000 in Mississippi remained without power, according to the U.S. Department of
Energy.
Throughout the region, governments were struggling over the weekend to restore basic services. Hundreds of thousands of people were still living in shelters. Frenzied utility crews sweated in the hot sun, swatting away bugs, to rebuild the region's electric grid.
State Farm, the nation's largest insurance carrier and also the largest
in the afflicted states, grabbed an old furniture store in Hattiesburg right after the storm to set up a catastrophe center, and more than 100
adjusters are already operating out of it. State Farm, Allstate and other insurers have also stuck vans with claims processors in the parking lots of malls and Home Depot stores across the region.
The companies, whose policies generally reimburse people for temporary living expenses caused by a disaster, are writing instantaneous checks for policyholders forced out of their homes. "For some of them it's a total surprise," said Daniel McNamara, who lives in Connecticut and heads a Metropolitan Life Insurance Co. catastrophe team operating at the Home Depot parking lot in Hattiesburg. "They're tickled pink."
Under a tent in a parking lot in Pascagoula last week, policyholders waited to see State Farm representatives. Shondra Jefferson, traumatized from watching people drown in the storm, left her 15-minute
meeting with State Farm clutching a $2,500 check. "My funds are depleted," she said. She plans to use the money to patch her roof and clear debris.
Consumer advocates who monitor insurance issues say this initial phase of disaster response usually goes well.
"The insurance industry has learned that while the TV cameras are rolling, it's good to put on your nice shirt and write some additional living-expense checks for people," said J. Robert Hunter, former Texas insurance commissioner and director of insurance at the Consumer Federation of America in Washington. "It's nice theater. And in fact, they owe the money. The trouble comes months later."
State Farm's temporary center in Hattiesburg will be ground zero for handling claims from 13 Mississippi counties, not including the six closest to the Gulf of Mexico. Randy May, who arrived from Denver after
the storm to head the operation, said his territory includes 24,000 homeowners with State Farm policies. By Friday afternoon, 8,505 of those policyholders had already called to report claims, and 12 percent
of the cases were classified as having severe damage.
The insurers pride themselves on rapid response to catastrophes. When Holloway, dean of students at the University of Southern Mississippi in
Hattiesburg, called State Farm to report damage to several of his rental properties, he heard back from Rasmussen, the adjuster assigned to two of his houses, within two hours. "I was totally surprised," Holloway said. "I'm most grateful for the immediate response."
Still, settling claims is often a laborious process that can involve haggling over contractor estimates and over the value of a home's contents, assuming they were destroyed. Particularly near the coast, many people lost the very records that would let them document the value of their contents. And demand for contractors will be sky high in
the disaster zone, slowing work.
The biggest debates are likely to come over whether homes near the coast were destroyed by wind or flood.
Of the estimated 400,000 flooded properties in three coastal counties of Mississippi -- Hancock, Harrison and Jackson -- just 21,600 had flood-insurance policies, said George Dale, the Mississippi insurance commissioner.
Though some flooded residents of Louisiana also lacked flood coverage, that state is in better shape, according to figures from the Federal Emergency Management Agency. As of September 2004, 376,681 flood policies were in force in Louisiana, compared with 41,946 in Mississippi and 41,336 in Alabama.
"All these people pay high insurance to live on the coast," Dale said. "They think, 'Well it has never flooded before. I'm paying enough already -- I don't need it.' "
Hunter, of the consumer group, said most coastal homes probably suffered some wind damage before floodwaters destroyed them. But he said insurers have a financial incentive to attribute as much of the damage as possible to flooding, since they do not have to pay flood claims.
Hunter called on state insurance departments to pressure the companies to use windstorm modeling or other techniques to try to calculate how badly homes in a given neighborhood were damaged by wind before the water hit.
"What I'm afraid you'll see is, the policyholder has a $100,000 house and the insurance companies will say, 'It's 5 percent wind damage,' " Hunter said. " 'Here's $5,000; take it or leave it.' "
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Where did it say that? What I read is that they are already paying living expenses tokeep people going.

This is an assumption made by someone, not a fact of what has happened yet. I see no FACTS to base a decision or form an opinion.
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That is not only fact, it is long held policy and one of the first things you learn in insurance schools.. An axiom of the insurance business is that if the water comes DOWN you are covered. If the water comes UP you are not.
--
Glenn Ashmore

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wrote

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In the case of a Hurricane sideways is not unusual. In 1970 our house filled with water, not from a hole in the roof and not from rising water in the street. It blew through the brick veneer and around the windows. The weep holes at the bottom of the brick could not drain fast enough and the water came in from the bottom of the soaked walls. The top of the walls were dry. Pretty freaky.
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Sideways is good if it started out higher than the damage.
I have seen some real nits picked on this subject. One example: a water supply line broke where it enters a house at basement floor level. The water rose and flooded out the HVAC and everything in the basement. Coverage denied because it was rising water. OTOH, supply line breaks in the basement ceiling and floods the HVAC and everything in the basement. THEN you are covered because the water came from above the damage.
To carry it to extremes, if you could prove that the water came in as a big wave that crested in the front yard and fell on your house you would be covered but storm surges and tsunamis don't work like that. They flow along rising and pushing everything over.
In this case there will have to be some determination of how much damage was done by wind and how much by the surge. If you have seen aerial pictures of Gulf Port, that yellow line of framing timber marks the boundary. Everybody shore side of that line will probably be covered. Those within the debris field will have to be split between wind and flood damage. Those on the Gulf side will probably have to file for bankruptcy just as the laws change to screw them.
--
Glenn Ashmore

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Glenn Ashmore wrote:

Speaking from personal experience. During the Ice Storm that hit the Northeast in the late nineties, a culvert was blocked by ice and caused water to rise and flood back through my perimeter drain and into my basement. No, I did not have flood insurance. Not only did the insurance company cover all damage and personal belongings, they sent an adjuster and paid the claim in less than 2 weeks. This while they were handling thousands of other claims from the storm. I have had some unsatisfactory results from insurance companies also, (Sorry, it wasn't covered) but find they tend to be more lenient when large disasters are involved. I think we should give the Insurance companies a chance to show how they are going to respond before complaining. Also, only give first hand information, not hearsay, friend of a friend, always 'friendly' press or speculation. "Just the facts, Ma'm"
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Well, it looks like the bankruptcies are coming....ready to bail out the banks and insurance companies?
Mortgages go unpaid in storm-hit areas By John Waggoner, USA TODAY
Past-due commercial mortgage loans in the hurricane-plagued Gulf have risen sharply, says Standard & Poor's, the Wall Street credit rater. And that could mean problems for lenders.
Past-due loans in areas affected by Katrina have soared to $320.5 million in September, up from $53.7 million in August. "We expect that quite a few of those will become delinquent," says Larry Kay, director of structured finance ratings at S&P.
Lenders often package commercial loans into commercial mortgage-backed securities, or CMBSs. S&P makes credit ratings on CMBSs, including the likelihood of loan defaults. The effect of defaults on the overall CMBS market should be minimal, Kay says. Of the $320 billion in CMBSs that S&P rates, $2.25 billion is from Katrina-affected areas.
But the leap in past-due loans reflects problems lenders may have in commercial mortgages there. For example, lenders typically demand that borrowers in flood-prone areas have flood insurance. But federal flood insurance covers up to $500,000 in damage. Some businesses may have far more damage than that and may not have additional private flood insurance.
S&P identified 260 commercial loans in CMBSs secured by property in hurricane-stricken areas. Companies that service those loans hadn't been able to reach 15% to 20% of the borrowers, S&P says. Another 20% of borrowers reported significant damage, including a portion of the roof blown off or no roof at all.
Normally, the companies that service the loans have to advance delinquent payments to CMBS investors as long as they think the advances will be recovered. Federal and state authorities have urged lenders to use restraint with storm-stricken borrowers.
Securities backed by residential mortgages should suffer little effect from Katrina, S&P says. These bundled pools of mortgages, a favorite of pension funds and mutual funds, are widely diversified, and few have much exposure to Katrina.
About a third of commercial mortgages examined by S&P are secured by lodging properties, such as hotels. Some hotels will get business in coming weeks from government agencies, contractors and emergency workers. But the drop in tourist dollars could seriously hurt commercial borrowers: Convention travel brought $4.9 billion to New Orleans in 2004.
The Federal Deposit Insurance Corp., which regulates state-chartered banks, says it has no current data suggesting problems with commercial loans in hurricane areas. But bank analysts say it's a matter of time before defaults start rising. "There will be increased default rates in all types of loans," says Jefferson Harralson, bank analyst for Keefe Bruyette & Woods.
Some commercial and industrial loans, for example, are secured by inventories or ongoing business revenue, which may not be covered by insurance. "The banking industry has never relied more on insurance to fulfill loan commitments," Harralson says.
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But the article posted did not mention that. The OP drew that conclusion from it somehow and that is what I questioned. If the insurance company is not liable, they have no obligation to pay. If you live 6' below sea level and have no flood insurance, don't cry on my shoulder.
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On Tue, 13 Sep 2005 00:05:45 GMT, in misc.consumers.frugal-living "Edwin

My lender will not finance homes that are on a flood plain.
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Are we talking a real lender (only a couple of handfuls) or a broker? Most lenders will lend in a flood zone. They use the 100year flood plan that is given to them when the property is appraised. If the property is in question, all that is normally required is the property owner to carry flood insurance on the property. More common sense than anything. I think your broker might be handing you some.
--
Chris

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On Mon, 12 Sep 2005 20:52:53 -0400, in misc.consumers.frugal-living "Chris"

My lender is the US Government.
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Since when is the government handing out loans? Or is this some new welfare thing I am not aware of?
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Chris

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On Mon, 12 Sep 2005 21:29:40 -0400, in misc.consumers.frugal-living "Chris"

It's not welfare, it's a loan with a low interest rate. Funny how only in this country "welfare" is a bad word. We are so brainwashed in this country.
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I am open ears as to what program this is? Better yet what are the qualifications? Please do tell!
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Chris

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Chris wrote:

doesnt HUD give loans?
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HUD guarantees loans to the original loaner or mortgagee. Much like PMI that us working stiffs pay for, if needed. In other words, another source of welfare provided by our government.
This is, given his comments, as our disillusioned friend has, another handout from our government. Although the welfare poster may be correct, many government programs barley trust them to pay the mortgage they insure, yet alone the associated flood insurance. Nor do they trust the homeowner's intelligence to select a safe home, thus the strict guidance on their insurance. More or less when you are getting mortgage insurance from the government, they will assume your are an idiot and provide strict guidelines on the home you purchase. At less some savings for us working stiffs.
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Chris

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On Mon, 12 Sep 2005 23:45:00 -0400, in misc.consumers.frugal-living "Chris"

Yep it's welfare alright... CORPORATE WELFARE
You're just a racist, if you were worried about Welfare dollars and where they go you would focus on corporate welfare. Racism is ugly in any color.
Business and Industry Guaranteed Loans
The Business and Industry (B&I) Guaranteed Loan Program helps create jobs and stimulates rural economies by providing financial backing for rural businesses. This program provides guarantees up to 80 percent of a loan made by a commercial lender. Loan proceeds may be used for working capital, machinery and equipment, buildings and real estate, and certain types of debt refinancing. The primary purpose is to create and maintain employment and improve the economic climate in rural communities. This is achieved by expanding the lending capability of private lenders in rural areas, helping them make and service quality loans that provide lasting community benefits. This program represents a true private- public partnership.
B&I loan guarantees can be extended to loans made by recognized commercial or other authorized lenders in rural areas (this includes all areas other than cities of more than 50,000 people and the contiguous and urbanized area of such cities or towns). Generally, authorized lenders include Federal or State chartered banks, credit unions, insurance companies, savings and loan associations, Farm Credit Banks or other Farm Credit System institutions with direct lending authority, a mortgage company that is part of a bank holding company, and the National Rural Utilities Finance Corporation. Other loan sources include eligible Rural Utilities Service electric and telecommunications borrowers and other lenders approved by RBS who have met the designated criteria.
Assistance under the B&I Guaranteed Loan Program is available to virtually any legally organized entity, including a cooperative, corporation, partnership, trust or other profit or nonprofit entity, Indian tribe or Federally recognized tribal group, municipality, county, or other political subdivision of a State. Applicants need not have been denied credit elsewhere to apply for this program.
The maximum aggregate B&I Guaranteed Loan(s) amount that can be offered to any one borrower under this program is $25 million. A maximum of 10 percent of program funding is available to value-added cooperative organizations for loans above $25 million to a maximum aggregate of $40 million.
The following financial data is as of September 30, 2004: Obligations by State for 2000 through 2004
Memorandum of Agreement with Colson Services Corporation, a subsidiary of JP Morgan Chase Bank The agreement will provide greater opportunity for rural lenders to participate in Rural Development's Business and Industry (B&I) guaranteed loan program.
Program Administration
The program is administered at the State level by Rural Development State Offices. To obtain the addresses and telephone numbers of State Offices, visit the Rural Development Field Office locator. For further information on this program, please call the State Office servicing your State.
Available online forms can be found at www.sc.egov.usda.gov
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Do you know me? Must be. What race am I? Might I not be the same race as you?
You do know what they say about people who assume?
You did fail to mention which PROGRAM of welfare you qualified for as welfare from our government. Again, please do! It can only be assumed that if you are that stupid to think that the government gave you the loan, versus insuring the loan, you are truly a hindrance on the US.
Your quote of government help to small companies is admirable. What you fail to realize is that this is a system of grants and guarantees from our US government, to assist companies to hire people who would otherwise be on welfare. Or in your case, receiving welfare on a mortgage.
Or are you saying that people who provide for themselves and discredit others who do not, as racists?
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On Tue, 13 Sep 2005 01:08:27 -0400, in misc.consumers.frugal-living "Chris"

You're a boring neocon. Conversation over.
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