Irma vic­tims now may face in­sur­ance strug­gles

Com­plex poli­cies, fine print can cre­ate gaps in cov­er­age for some.

The Atlanta Journal-Constitution - - FRONT PAGE - By Car­rie Tee­gardin ctee­gardin@ajc.com Danny Rob­bins danny.rob­bins@ajc.com and Jen­nifer Brett jbrett@ajc.com In­sur­ers con­tin­ued on A12

Jill Ebrecht stood out­side her flooded Ty­bee Is­land home Thurs­day as work­ers hauled her soggy fur­ni­ture into her yard. Like many houses on Ty­bee, Ebrecht’s home was ex­ten­sively dam­aged a year ago by Hur­ri­cane Matthew. Now, Irma has left an­other trail of de­struc­tion.

“Matthew messed me up,” she said as she took stock of an­other round of be­long­ings de­stroyed by a hur­ri­cane. “Look at this.” Ebrecht has flood in­sur­ance, but she said her home­own­ers

in­sur­ance lapsed while she was on a lengthy trip to care for her el­derly father in Cal­i­for­nia. She has no idea at this point how much money she would get to re­build and re­fur­nish yet again.

For now, Ebrecht plans to stay nearby and live on the cheap.

“I’m go­ing to sleep out­side,” she said. “I like it.”

As the clouds cleared and the lights came back on across Georgia, thou­sands of peo­ple whose homes were flooded, crushed or blown apart by Hur­ri­cane Irma started to find out some­thing they didn’t want to learn: Their in­sur­ance poli­cies will not cover all the losses they sus­tained.

Most in Georgia who suf­fered dam­age are at the very be­gin­ning of the Byzan­tine process of fil­ing claims and study­ing the fine print of their in­sur­ance poli­cies — of­ten for the first time ever.

While some home­own­ers will be happy when their claims are set­tled quickly, oth­ers will find out they have no cov­er­age at all — es­pe­cially if their dam­age was caused by flood­ing. Some will find cov­er­age is ham­pered if their dam­age came from both high winds and flood­ing.

A few will spend months fight­ing with in­sur­ers and even go­ing to court to try to get what they be­lieve they are owed.

“There’s a ten­dency on the part of folks to be­lieve ‘I’ve been pay­ing my pre­mium for 20 years and now I need my car­rier to step up and cover this,’” said Eric D. Miller, an At­lanta at­tor­ney who han­dles in­sur­ance dis­putes. “The re­al­ity is, it de­pends on what’s in your pol­icy.”

‘Peo­ple just don’t know’

After a mas­sive hur­ri­cane, home­own­ers with dam­age of­ten hear for the first time about flood in­sur­ance. And usu­ally, they hear about it be­cause they don’t have it.

“Def­i­nitely more than half of the peo­ple who have dam­age will not have flood cov­er­age,” said J. Robert Hunter, di­rec­tor of in­sur­ance for the Con­sumer Fed­er­a­tion of Amer­ica and a for­mer ad­min­is­tra­tor of the Na­tional Flood In­sur­ance Pro­gram.

Flood dam­age is not cov­ered by a typ­i­cal home­own­ers pol­icy. Peo­ple who live in fed­er­ally-de­fined flood zones are re­quired to buy flood in­sur­ance if they have a mort­gage. But in big storms, flood wa­ters usu­ally flow far be­yond the zones on the of­fi­cial flood maps.

“A lot of peo­ple just don’t know their home­own­ers won’t cover them for flood,” said Robert W. Klein, di­rec­tor of the Cen­ter for Risk Man­age­ment and In­sur­ance Re­search at Georgia State Univer­sity’s J. Mack Robinson Col­lege of Busi­ness.

Statewide, about 86,000 Ge­or­gians have flood in­sur­ance. It’s still un­clear how many had flood dam­age from Irma and have no cov­er­age. In Texas, where Hur­ri­cane Har­vey caused ex­ten­sive flood­ing, only about 20 per­cent of those with dam­age had flood cov­er­age, Hunter said.

“The big­gest thing is peo­ple are told they don’t have to have (flood in­sur­ance) be­cause they’re not in a manda­tory flood zone, when in fact the flood zones are re­ally out­dated,” said Daniel Sch­warcz, a Univer­sity of Min­nesota law pro­fes­sor who is an ex­pert in in­sur­ance mat­ters. “A lot of peo­ple face tremen­dous risk (be­cause of that).”

Kim Beckum evac­u­ated to At­lanta and hadn’t yet seen her fam­ily’s house on St. Si­mons Is­land. But she knows a big cleanup is wait­ing for her. Neigh­bors sent her pic­tures show­ing the dam­age. “We have three to four inches of wa­ter through­out the house,” Beckum said.

Beckum and her hus­band, Henry, live in the Langston Cot­tage, a home her grand­fa­ther built in the 1940s. With the price of flood in­sur­ance ris­ing, Beckum’s father de­cided years ago to can­cel the pol­icy. He fig­ured they could use the money they saved on pre­mi­ums for re­pairs if the house ever got hit. When Hur­ri­cane Matthew slammed the coast last year, their dam­age was from trees that fell on the house. That was cov­ered by their home­own­ers pol­icy. But this time it’s wa­ter, and that pol­icy won’t kick in.

Beckum said she’s ready to start rip­ping up car­pet and bleach­ing the walls to com­bat mold as soon as they get back to the is­land. She’s thank­ful the roof is in­tact and the dam­age is not more ex­ten­sive.

“A lot peo­ple fared a lot worse,” she said.

It’s not clearcut

Thou­sands of claims have al­ready rolled into State Farm, the state’s largest writer of home­own­ers and auto in­sur­ance, and ad­justers are on the ground in Georgia, Texas, Florida and other states hit hard by the re­cent storms to start as­sess­ing dam­age and pay­ing claims. “This is when our cus­tomers need us most, and we are here for them,” said State Farm spokesman Justin Tom­czak.

But some prop­erty own­ers with home­own­ers and flood in­sur­ance aren’t home free when it comes to get­ting all the dam­age taken care of.

Claims re­lated to downed trees may seem some of the most straight­for­ward. But if a tree doesn’t dam­age your house or car, clean­ing it up is usu­ally on your dime. And if your neighbor’s tree hits your house, that’s usu­ally on you, too. In a city of trees like At­lanta, the dam­age from fall­ing limbs and an­cient oaks and pines can be a fact of life.

John Kiefer’s home in De­catur was se­verely dam­aged twice dur­ing a seven-month pe­riod in 2009 when trees were knocked down by high wind. He said his in­sur­ance com­pany promptly paid both claims, but it then dropped him, claim­ing he had ac­cu­mu­lated “three strikes” against his pol­icy.

The rea­son? He had con­tacted the com­pany two years ear­lier when a tree from his neighbor’s yard fell on his fence. The neighbor’s in­sur­ance ul­ti­mately took care of the claim, but that didn’t mat­ter to his in­surer, Kiefer said. “Even though I only had two claims with them, they con­sid­ered that strike three,” he said.

The Na­tional Flood In­sur­ance Pro­gram, in place since 1968, has long faced is­sues of its own. Crit­ics point to a va­ri­ety of con­cerns, in­clud­ing the Fed­eral Emer­gency Man­age­ment Agency’s ad­min­is­tra­tion of the pro­gram at a deficit that now reaches $23 bil­lion.

“There were big prob­lems in get­ting the claims set­tled” after Hur­ri­cane Katrina in 2005 and Su­per­storm Sandy in 2012, Hunter said.

Ac­cord­ing to a Front­line in­ves­ti­ga­tion last year, gov­ern­ment au­di­tors asked FEMA to im­pose stricter over­sight of the pro­gram in 2009, but lit­tle was done in that re­gard.

Even when the claims process goes well, the pay­out through the fed­eral pro­gram for a dam­aged house is lim­ited to $250,000.

Gale Whit­ting­ton, who has both flood and home­own­ers in­sur­ance on the Ty­bee Is­land house she has lived in since 1970, re­ceived $50,000 for dam­age to her home and $15,000 for its con­tents after Hur­ri­cane Matthew last year. Sub­mit­ting claims wasn’t a has­sle, she said. “I haven’t had any prob­lems, ex­cept they don’t pay enough,” said Whit­ting­ton, whose re­pairs from Matthew were al­most fin­ished when Irma hit.

She plans to re­build this time. Her new home will be el­e­vated, and she’ll stay with her daugh­ter on the main­land dur­ing the process. It will take time for her to find out how much she’ll get from in­sur­ance to pay for the new house, but it’s un­likely to cover all of her losses.

“I’m not even sure how long it takes to build a house,” Whit­ting­ton. “I guess we’ll see.”

The flood in­sur­ance is­sue also is highly per­sonal for Phil Goldfeder, who was serv­ing in the New York State Assem­bly when Su­per­storm Sandy struck the East­ern seaboard.

“The day after Sandy, I did not know what I was cov­ered for,” he said in an in­ter­view last week. “I wasn’t sure if I had flood in­sur­ance or how much I was ac­tu­ally cov­ered for.”

As it turned out, Goldfeder had flood in­sur­ance be­cause his mort­gage re­quired it. In due time, he was able to recover from the wa­ter that rose six feet in his home. But many in his Queens dis­trict were with­out that in­sur­ance and were ru­ined.

Goldfeder said one area of his dis­trict was par­tic­u­larly eye-open­ing. In Breezy Point, some home­own­ers were cov­ered by their in­sur­ance be­cause their homes were dam­aged by fire, while oth­ers nearby got noth­ing be­cause their homes were flooded.

The sit­u­a­tion led him to pro­pose a se­ries of bills, in­clud­ing one that would es­tab­lish a state-run pro­gram of flood in­sur­ance for New York­ers.

The pro­posal did not be­come law, but Goldfeder, who left the state assem­bly last year and now is as­sis­tant vice pres­i­dent for gov­ern­ment re­la­tions at Yeshiva Univer­sity, said he re­mains hope­ful.

“I would rather have a state pro­gram that un­der­stands the is­sues in­stead of FEMA, which has no clue,” he said.

A sur­pris­ing clause

In many in­stances, the big­gest sur­prise for home­own­ers when they deal with their poli­cies after a hur­ri­cane is learn­ing that they aren’t even cov­ered for wind dam­age. That’s be­cause the dam­age oc­curred along with flood­ing and thus can be ex­cluded from cov­er­age un­der what’s known as an anti-con­cur­rent cau­sa­tion clause, which are com­mon in home­own­ers poli­cies.

Sim­ply put, such clauses state that an in­sur­ance car­rier will not pay for loss if a cov­ered event — typ­i­cally wind — oc­curs at the same time as an event that’s ex­cluded, usu­ally flood­ing.

The in­sur­ance in­dus­try be­lieves the clauses, which be­gan ap­pear­ing more than 30 years ago in re­sponse to ad­verse court de­ci­sions, keep pre­mi­ums in check by al­low­ing carriers to com­pen­sate pol­icy hold­ers only for cov­ered events.

But in­dus­try crit­ics say they are a way for com­pa­nies to dodge some of the big­gest po­ten­tial pay­outs after dis­as­ters.

The clauses, typ­i­cally deep in a pol­icy’s fine print, are en­force­able in all but four states — Cal­i­for­nia , North Dakota, Wash­ing­ton and West Vir­ginia — and have be­come a sta­ple of the in­dus­try.

“Peo­ple usu­ally don’t read their poli­cies,” said Jay Fein­man, a Rut­gers Univer­sity law pro­fes­sor who is co-di­rec­tor of the school’s Cen­ter for Risk and Re­spon­si­bil­ity. “But even peo­ple who are some­what knowl­edge­able would think, ‘OK, yeah, I’m not cov­ered for flood, but wind, that shouldn’t be a prob­lem.’ Lots of peo­ple in the hur­ri­cane sit­u­a­tion now are go­ing to find out that their home­own­ers (pol­icy) is not go­ing to do much for them.”

One of the bills in­tro­duced by Goldfeder after Sandy would have barred in­sur­ers from us­ing anti-con­cur­rent com­pen­sa­tion clauses in New York, but it faced stiff op­po­si­tion from the in­sur­ance in­dus­try and didn’t pass.

“When it comes to pri­vate com­pa­nies, there has to be a good-faith ef­fort to re­solve prob­lems,” Goldfeder said. “What we saw after Sandy was most were work­ing harder to find ways to say no.”

Although the New York leg­is­la­tion failed, Mary­land law­mak­ers ap­proved a mea­sure in 2013 re­quir­ing in­sur­ance com­pa­nies writ­ing home­own­ers poli­cies in the state to ex­plain anti-con­cur­rent com­pen­sa­tion clauses to pol­icy hold­ers.

Home­own­ers have suc­cess­fully chal­lenged in­sur­ance com­pa­nies over anti-con­cur­rent com­pen­sa­tion clauses in court, but win­ning such cases — in essence, show­ing that the two events were sep­a­rate — presents its own chal­lenges.

Jeff Raizner, a Hous­ton at­tor­ney with a long record of su­ing in­sur­ance com­pa­nies, said com­pa­nies typ­i­cally deny claims based on anti-con­cur­rent com­pen­sa­tion clauses with the idea that most prop­erty own­ers aren’t will­ing to fight.

“They know what they’re do­ing and know it takes time, ex­pense and ef­fort to un­tan­gle th­ese is­sues,” he said. “It’s one thing if you’ve got a $1 mil­lion dis­pute. You’ll spend what’s nec­es­sary. But you get some small home­owner with a $50,000 case, that’s an­other story.”

More claims com­ing

Of­fi­cials from the Georgia Depart­ment of In­sur­ance toured some of the hard­est-hit ar­eas along the Georgia coast last week. This week the depart­ment will set up a “claims vil­lage” in Brunswick where the state’s largest in­sur­ers will be avail­able to meet with prop­erty own­ers and start pro­cess­ing their claims.

As of Thurs­day, about 50,000 Georgia claims re­lated to Irma had been re­ported to in­sur­ers. “That num­ber will prob­a­bly go up,” said Jay Florence, deputy com­mis­sioner at the Georgia Depart­ment of In­sur­ance.

State Farm said that as of Fri­day morn­ing, its Georgia pol­i­cy­hold­ers had al­ready re­ported nearly 9,000 claims for dam­age to their houses or cars. “A lot of trees came down and got on a lot of ve­hi­cles and houses,” spokesman Tom­czak said.

State Farm said it had the staff needed to promptly re­spond to the wave of claims. “Ad­di­tional re­sources have been de­ployed and will be on the ground for as long as it takes to help our cus­tomers recover,” Tom­czak said.

Florence said the state warned in­sur­ers to have enough staff avail­able to process the huge vol­ume of claims and urged the com­pa­nies to be le­nient to­ward peo­ple mak­ing late pre­mium pay­ments be­cause they were dis­placed by the storm.

Frus­trated con­sumers who are hav­ing dif­fi­culty get­ting claims pro­cessed should call the depart­ment for help, Florence said. “The re­al­ity is we can’t solve ev­ery prob­lem, but we’re a good fa­cil­i­ta­tor for mak­ing sure the in­sur­ance com­pa­nies are do­ing what they should,” he said.

The in­sur­ance com­pa­nies will be busy with com­plex claims, es­pe­cially with the mas­sive dam­age to Texas from Har­vey and to Florida from Irma.

“It’s go­ing to be a big deal,” said Miller, the At­lanta at­tor­ney. “It’s go­ing to be the kind of thing that is go­ing to go on well be­yond th­ese storms mov­ing through. Our weather is look­ing good here now, but the dam­age from th­ese things is go­ing to last for months and pos­si­bly years and the [in­sur­ance] carriers are go­ing to be deal­ing with that for quite some time mov­ing for­ward.”

The frus­tra­tion of deal­ing with an in­sur­ance claim is some­thing Cur­tis Lewis, a res­i­dent of Sa­van­nah’s Isle of Hope neigh­bor­hood, feels ev­ery time he looks out on Grim­ball Creek and sees the place where his 300-foot dock used to be.

The dock was de­stroyed last Oc­to­ber dur­ing Hur­ri­cane Matthew and has yet to be re­placed. That’s be­cause Lewis’ in­sur­ance com­pany won’t pay the $160,000 claim. The com­pany is cit­ing a section of his pol­icy that ex­cludes dam­age from wind-driven wa­ter.

Lewis, an at­tor­ney, ac­knowl­edged that he had no idea such an ex­clu­sion ex­isted un­til the dock was dam­aged. But now that he knows about it, he be­lieves he’s be­ing taken for a ride. His own ex­pert has said the only way the dock could have been dam­aged is from the wind, he said.

“It’s been very dis­ap­point­ing,” he said. “I paid a hefty pre­mium think­ing it was an above aver­age pol­icy. The way they’ve han­dled the claim has been sub­par.”

CUR­TIS COMP­TON / AJC

A home on St. Si­mons Is­land is sur­rounded by wa­ter fol­low­ing Hur­ri­cane Irma. Most in Georgia who suf­fered dam­age are at the very be­gin­ning of the process of fil­ing claims.

JEN­NIFER BRETT / JBRETT@AJC.COM

Jill Ebrecht has a huge cleanup job ahead of her fol­low­ing flood­ing from Trop­i­cal Storm Irma. She had been hold­ing up pretty well un­til she came across a small cat fig­urine, a gift from her late hus­band, Rick. Its dam­age broke her heart. “He was so kind, so warm,” she said, wip­ing away tears on a blaz­ing hot Thurs­day af­ter­noon. She was glad to find price­less heir­looms like her great grand­fa­ther’s chris­ten­ing gown.

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