Survivors continue fighting insurance companies

-September 20, 2005

An estimate by Risk Management Solutions says total economic losses from Hurricane Katrina will likely exceed $125 billion, with insurance companies paying $40 billion to $60 billion. Hurricane Katrina is likely to be the costliest United States natural disaster, but it may also end up being one of the most disputed as well.

Countless numbers of people have had to evacuate their homes while trying to cope with getting by, and Joanne Doroshow, the executive director of the Center for Justice & Democracy, said, “these people are exhausted.” The aftermath of Hurricane Katrina has become so contentious because of the difficulty determining if damage was caused by wind-driven rain or flooding and if the hurricane caused a storm surge or flood.

Billions of dollars in damage to homes and businesses in Louisiana, Mississippi and Alabama have been suffered, and “the notion of having to fight insurance companies on these claims is almost too much to bear,” according to Doroshow. Depending on how the insurers handle the claims will have a lot to do with how much financial responsibility the industry ends up taking.

Following a hurricane the question whether wind or flood was the cause of damage always takes place, but Doroshow said in the case of Katrina there will be a lot more lawsuits. The public-interest group, along with other consumer groups, has a hotline to document insurance complaints related to Katrina, and since it started Sept. 12, the hotline has received 85 calls.

Government-backed insurance usually covers flooding, while wind and rain damage are covered by private insurance policies. Katrina involved up to 140-mile-per-hour winds that leveled homes and businesses before flooding carried them away. These difficult insurance claims might end up taking longer to settle as a result, according to Ernest Csiszar, president of the Property Casualty Insurers Association of America.

Unlike other hurricanes, Katrina caused structures to drift away or to be leveled, which will make the cause of damage more difficult to assess. Due to the magnitude and devastation of Katrina’s damage, homes and businesses are still partially under water, and the damage is so severe some people will be out of a home for months, even years.

Last week, Mississippi Attorney General Jim Hood filed a lawsuit against five U.S. insurance companies accusing them of trying to trick Katrina survivors out of millions of dollars in damage payouts. Officials are asking insurers to give policyholders the benefit of the doubt in order to allow people the opportunity to rebuild their lives, but because of the severity of the situation, legal disputes are predicted in the future.