Irma victims now may face insurance struggles

Complex policies, fine print create gaps in coverage for many with hurricane damage

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.

Credit: Curtis Compton

Credit: Curtis Compton

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.

Credit: Miguel Martinez

Credit: Miguel Martinez

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 Hurricane 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 Hurricane Sandy struck the Eastern seaboard.

“The day after Sandy, I did not know what I was covered for,” he said in an interview this 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, common to 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 this week. Next 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.”

FAQs on insurance coverage

Will federal flood insurance pay for temporary housing?

Living expenses, like temporary housing if flood damage makes your home uninhabitable, is not covered by a federal flood insurance policy. Some supplemental policies cover temporary living costs, but that varies among insurers.

Will federal flood insurance cover damage to my patio, septic system, pool, trees, swimming pool?

Outdoor property isn’t covered.

What does federal flood insurance cover?

It covers replacement costs of actual damages, up to $250,000 for a building. If you have separate coverage for contents, they are insured for up to $100,000. The amount varies based on actual damages and the deductibles you chose.

My workplace was destroyed. Am I eligible for unemployment insurance until it re-opens?

The Disaster Unemployment Assistance program provides payments to those whose jobs or self-employment are lost or interrupted as a direct result of a major disaster. Applications can be made at any Georgia Department of Labor center. Those who qualify may receive benefits for up to six months if they are unable to return to work due to damage from the hurricane. Note that those who are self-employed are also eligible for this program.

Will my car insurance cover flood damage?

If you have comprehensive car insurance, it will pay for flood damage to a vehicle. But if you only have liability insurance, you are not covered.

I have renters’ insurance; will it cover damage from Irma?

Regular renters insurance doesn’t cover flooding. But renters’ policies may cover damage from high winds and heavy rain.