Monday, December 06, 2004

Insurance Struggles "Worse Than Ivan"

Bollman isn't satisfied with the false equivalency of giving each side their say, no matter how silly or incredible it may be.

Amber Bollman distinguished herself, once again, as one of the very best journalists at the Pensacola News Journal with her Sunday report, in the PNJ's latest Hurricane Ivan insert, about the gathering insurance crisis throughout Northwest Florida. The title of the article is Insurance Not Enough For Many. It is a model of excellent reportage covering a complex and controversial issue.

What Ms. Bollman does so well is to put a human face on the gathering insurance crisis in Escambia and Santa Rosa counties, while deftly adding context and balance. As truly balanced as the article is, one cannot read it without concluding that the Florida insurance industry is engaging in widespread bad faith practices that are sure to damage the local economy and the lives of thousands of local residents for years to come -- unless state insurance regulators step in fast.

If they don't, we are in for protracted court litigation. That will add many years and millions more dollars to the full recovery of Northwest Florida from the ravages of Hurricane Ivan. How much more delays in rebuilding the Florida Panhandle will cost in lost tourist revenues is anyone's guess. Physical beauty was our chief tourist attraction. But how many tourists will want to visit this area if insurance settlement practices keep it looking like a war zone for years to come?

A Personal Face
Ms. Bollman's article begins:
Debbie Berger's home didn't stand much of a chance against Hurricane Ivan. The overwhelming storm surge that crashed through most of the homes in her Villa Venyce neighborhood gutted the bottom floor of the house. Wind mangled expensive storm shutters on the second floor and ripped off most of the roof.

* * *
Berger thought she was fortunate enough to be well-insured. Flood, wind, along with any added coverage that her agent offered - she bought it all.

But like countless other Panhandle residents - many of whom learned after Ivan that their homeowner's coverage was not what they expected it to be - Berger is doing battle with her insurance company, which she says is dragging its feet and failing to make the required payouts.

Until the checks arrive, Berger cannot begin to raze her home, which Santa Rosa County officials declared more than 59 percent destroyed, or start to rebuild.

"You almost begin to wonder why do I even have this insurance if I'm not going to be able to collect what I've paid for," Berger said.

That's a question many people are asking.
The story is typical, as Bollman's article later illustrates. Doesn't this sound familiar?
"I bought everything," said Berger, who is now living in a two-bedroom apartment with her husband, 16-year-old son and 20-year-old daughter. "I said whatever insurance you've got, I want it. And still, we can't get this taken care of."

The process of trying to settle her insurance claim, she said, has been more taxing on her family than the hurricane itself.

"When I saw my house, I thought, 'It's OK. We're covered. We can get through this and put things back together,'" she said. "But this has been the part that's really stressed me out. This is what's holding us up and keeping us from getting our lives back to normal.

"In a lot of ways, the insurance companies have an advantage because most people fall into one of three categories: they don't know their policies and don't know what they're entitled to, or some do know but they don't have the financial resources to be able to hang on and wait out the insurance companies. Or there are a few, like me, who are lucky enough to have the money to stay afloat long enough to fight for what they should be receiving."
Bollman adds another face to personalize the hardships being experienced by local residents:
Carolyn Davis of Pensacola Beach... had homeowner's, windstorm and flood insurance policies on her Ariola Drive home. Knowing that someday a hurricane would hit, she had set aside enough money to cover her $9,600 deductible. If anyone had enough insurance coverage and was financially prepared for a disaster, it should have been Davis.

But her insurance company offered a settlement of $80,000 even though she was getting repair estimates of up to $250,000.

Davis was heartsick. She thought there was no way what her insurance company was offering could be true. And that is why, in her mind, struggling with her insurance company has been worse than Hurricane Ivan.

"I could handle the hurricane," she said. "It's the insurance settlement process that is just unfair. I hear it over and over. All my neighbors are in the same boat."
The Other Side's Story

Reporter Bollman's account fairly includes excuses, explanations, and pleas for patience from the usual gallery of industry flack-catchers. First, she quotes Florida's "Financial Officer" Tom Gallagher, who's supposed to be in charge of regulating the insurance industry. "Obviously, I wish more money had been paid out, and more people would have their claims resolved, but we all have to be a little patient," he said.

Next, she quotes insurance industry spokesman Sam Miller. In behalf of the Florida insurance industry he promises, "We're going to pay every one of these claims."

Yeah, sure.

Unlike so many of her lesser colleagues, Bollman isn't satisfied with the false equivalency of giving each side their say, no matter how silly or incredible it may be. She gets up from behind her desk and ventures out to discover the truth. And that truth turns out to be pretty ugly.

The Gathering Crisis

As Bollman reports, despite the soothing, propaganda-like statement from the insurance industry spokesman --
[B]y no stretch of the imagination does that mean all, or even a majority of, claims will be resolved.

Clay Morrison, a public insurance adjuster who is hired by homeowners to perform independent damage assessments and challenge insurance carriers on their behalf, said the [state's December 8 claim reporting] deadline isn't enough.

"That means you will have something in your hand by (Dec. 8), but who knows what you're going to get," he said.

In many cases, Morrison said, the initial offer from insurance providers is only the beginning of a lengthy back-and-forth dispute that can take months, further frustrating already exasperated homeowners.

* * *
For many it could be the kind of nightmare that undermines communities, said Pensacola attorney Bob Kerrigan, who spearheaded a free legal advice hot line for residents in the aftermath of the storm.

"The working poor are going to be hurt the worst," he said. "I'm talking about people making $30,000 or $40,000 a year, have a family, had a pretty nice home and won't be able to afford to fix it. They will lose their stake in the community, maybe even be on the verge of homelessness."

Almost 12 weeks after Ivan unleashed its fury on the Gulf Coast, hundreds of Panhandle residents still are waiting to begin the rebuilding process. Windows remain broken, flood-damaged appliances sit ruined and useless, and many homes are still in shambles.

For many, it's entirely a matter of when a much-needed insurance check will arrive - and even then, whether it will be big enough to cover the cost of necessary repairs.

"A lot of people feel very, very neglected," Kerrigan said. "Homeowners feel like they've been paying their premiums and doing everything they were told they needed to do, and now when it's time for the insurance companies to do their part, they're dragging their feet and trying to get out of it in any way they can."

Insurance Company Abuse

Bollman's report also is distingished for the deft way she gives the reader a quick description of the many ways insurance industry abuse is causing personal hardships, for --
* Homeowners who were not offered flood insurance, or in some cases, were advised against purchasing it because they did not live in designated flood zones.

* Residents whose wind policy carriers will not make payments, claiming instead that the damage was all caused by flooding.

* Homeowners who are receiving settlement offers that do not meet the prices being charged by contractors to repair the damage.
Bollman follows up with a succinct analysis of what this likely will mean in the coming months:
While many homeowners undoubtedly will come to terms with their insurance companies and settle, some local attorneys are predicting a barrage of Ivan-related lawsuits to hit the court system in coming months.

Samuel Bearman, an attorney who handled between 50 and 100 insurance cases after Hurricane Opal in 1995, said he's expecting even more as a result of Ivan.

"People are coming to me with situations that sound like classic examples of insurance abuse," he said. "And the sad part is that most of these consumers are people who, before the storm, thought they would be taken care of and their losses would be covered."
Again to her credit, Bollman seeks the other side of the story and reports it straight:
Despite such examples, Miller, executive vice president of the Florida Insurance Council, said insurance horror stories have been exaggerated.

With more than 2 million wind loss claims filed statewide, Miller said, only about 30,000 insurance complaints have been filed with the Department of Financial Services.

"To me, that's a sign that we're doing a pretty good job," he said.
What? 30,000 complaints out of 2 million claims "filed"? Bollman doesn't editorialize -- and she shouldn't -- but if that sounds like a "good job" to you, think again. You know there are many more complaints to come. Many of those 2 million claims to date have yet to be investigated by adjusters. Many of those who have met with an adjuster probably won't risk filing a complaint until they hear back from their insurance companies. A much better measure would be how many complants have been filed after receiving the insurance company's initial response to the claims made.

Even on its own terms, though, three complaints out of every 200 claims made is a terrible record. Unlicensed roofers have been sent to jail for better records than that. Moreover, one may be justly suspicious of state-wide statistics like those being quoted by industry mouthpieces, as the anecdotal evidence in Bollman's article suggests.
Since Ivan's landfall, however, Morrison can barely drive away from a client's home without being flagged down by people looking for help.

"Just about nobody has gotten their claims settled. Everybody you talk to is so afraid that they're not going to get enough money to put their lives back together the way they were before the storm," Morrison said. "Across the board, there is a real fear among homeowners that they are going to be ripped off. They just want to know that someone is looking out for them."

Value Policies and The 50% Rule

Where others have fallen short, Bollman succeeds, too, in clearly describing the real-world, personal hardships caused by bad faith insurance company application of the 50% Rule for flood zone structures.
After several rounds of phone calls to her insurance provider, Jeannie Taylor has been unable to get her wind policy to offer more than a few hundred dollars for her home on Perdido Bay, even though it was deemed more than 50 percent destroyed and will have to be razed and rebuilt.

Instead, the company is blaming the damage on flood.

"I had windows blown out, my roof is leaking in three rooms," she said. "I would think that would be enough to show that there was wind damage."

An issue that comes into play in Taylor's case, and in many others around the Pensacola Bay Area, is Florida's "valued policy law," a statute that requires insurance companies to pay the full policy limit if a building is deemed a total loss and damage was caused by a peril covered in the policy.

The law was taken up by the Fourth District Court of Appeal when a windstorm insurance carrier refused to pay the full policy limit to a Fort Lauderdale homeowner whose residence was destroyed by Hurricane Irene in 1999.

Jeannie Taylor looks out of her damaged home. She has been fighting with her insurance company over what will be covered by wind insurance versus flood insurance.

The company argued that it should only be responsible for paying for the amount of damage caused by wind.

The court ruled, however, that "If (the wind carrier) has any liability at all, even a fractional share of the total damage, under the VPL it is liable for the face amount (of the policy)."

According to attorney Matt Schultz, "Basically, the law says that if you carried windstorm coverage for your home, and the home was deemed a total loss, and any of the damage was caused by wind, they are required to pay you the value of the policy."

Morrison said knowledge of the valued policy law could potentially benefit scores of Pensacola Bay Area residents still struggling with their insurance companies.

"This is going to be the single-biggest factor in getting claims resolved," he said. "This pertains to so many people in the Panhandle, and not nearly enough people know about it."

Unrealistic Insurance Estimates

Reporter Bollman identifies yet another common insurance industry practice that borders on bad faith: unrealistic home repair estimates.
Another factor complicating the settlement process for thousands of area homeowners is the cost of making home repairs.

"In many cases, we've seen a great disparity between the amount of money insurance is offering and the amount it actually takes right now to get a contractor to do that work," Kerrigan said.

As the demand for services - such as roofing, fencing and construction - has spiked across the state, so have the prices of materials and labor.

Several key construction materials, including roofing shingles, have been in short supply as a result of the busy hurricane season, and in many instances their cost has surged, too.

According to a report from the National Association of Home Builders, scrap steel costs rose 80 percent in the last year. Steel mill products are up 43 percent, lumber 27 percent, and gypsum 20 percent.

According to the report, cement costs are likely to peak next spring as "Florida's post-hurricane reconstruction efforts move into full swing. With lean inventories on hand, the housing industry this year has been caught flat-footed by surging demand," the report states.

Morrison said the formulas used by insurance adjusters to calculate damages have not kept pace with the actual cost of supplies and labor.
It is to be hoped that at some early date the intrepid Ms. Bollman will follow up with an investigation of why and how insurance adjuster estimates come to be so unrealistically low. One explanation was discovered by U.S. Senator Paul S. Sarbanes (D-My.) in the aftermath of last year's Hurricane Isabelle. It is that too many insurance companies use outdated or faulty cost-calculating software. A related explanation, as Bollman quotes local attorney Robert Kerrigan saying, is that, "The state has created this situation."

Kerrigan told her, Bollman writes, that "Gallagher and other state officials have allowed insurance companies to write their own rules and dictate state law, including an ambiguous and awkwardly worded statute that defines hurricane coverage."

Amber Bollman has done the Pensacola News Journal proud with her superb article on the gathering insurance crisis in Northwest Florida. She covered the important and complex subject fairly, with keen insight, and in a way that combines the best of investgative journalism with compelling personal stories.

Let's hope the editors at the PNJ keep her on the beat.


Anonymous said...

Kerrigans right. Everything goes back to the Florida insurance department. The state is looking out for insurance companys and not the people who pay premiums.

Anonymous said...

I am a voter in addition to an insurance victim. I will remember who did what to me the next time we vote.

-- Gulf Breeze citizen/voter/homeless