OLEAN -- Some readers thought my recent column on corporate abuse and the practice of putting profit growth above all other considerations was a bit harsh. Well, try this one on for size.
Big insurance companies with nationally recognizable names are refusing to pay off policies in the states hit by Hurricane Katrina on the grounds the policy wording covered only wind damage, not flooding. The huge insurance firms insist most of the mind-boggling damage was caused by the huge surge of water Katrina produced in wiping out New Orleans and other cities along the Gulf Coast.
Maybe that's so, but how many policyholders who bought and paid for that coverage on their homes and businesses do you think believed they were insuring against obvious hurricane damage from both sources, wind and water? My guess is a very large percentage. Hurricanes, after all, gather strength by sucking up water from the oceans below and almost always produce flooding. That's what a hurricane is -- wind and water.
The situation is so bad the attorney general of one of the states hit hardest, Jim Hood of Mississippi, has already sued the following companies for "unfair or deceptive trade practices" in trying "to exclude coverage for storm surge damage": State Farm Fire and Casualty, Nationwide Mutual Insurance, Allstate Property and Casualty, Mississippi Farm Bureau Insurance and United Services Automobile Association.
What's worse, Hood accuses, is that some insurers are apparently trying to trick policyholders by offering them a quick, smaller check for temporary "living expenses" if they sign a form stating their damage is from flooding. The form may look standard and imply total reimbursement -- when in reality, claims the AG, it is a waiver which will exempt the company from future payment.
The companies are denying this, but Hood wants a court restraining order anyway.
The Insurance Information Institute, their trade group, insists the companies have never sold anything but wind damage insurance relating to hurricanes, and told USA Today the firms have "never collected a penny" in flood insurance premiums in the affected states. Insurers point out that in coastal areas one usually has to get flood insurance through federal or state government programs.
Forcing insurers to pay off the policies, says the Triple-I, would be "destabilizing" and lead to the bankruptcy of many small insurance firms in the four states.
We're not talking chump change here, folks. If the insurers can avoid paying off the policies, they can save about $60 billion. According to Mississippi Insurance Department, the typical words in such homeowner policies for hurricane loss state there will be no payment if the cause is due to "any other cause or event contributing concurrently or in any sequence to the loss."
These are weasel words. Try them out on friends and family. You'll be made to repeat them several times before understanding ensues.
This burgeoning controversy produces deja vu among those who have covered hurricanes. A similar contretemps enfolded Florida homeowners after Hurricane Andrew caused more than $25 billion worth of damage in 1992. So many private insurance companies tried to cancel policies and simply withdraw from doing business in Florida that Gov. Lawton Chiles had to call three special sessions of the state legislature.
The state government eventually imposed a moratorium on the flight and policy cancellations, and established a state catastrophe fund. Despite the actions, just two years after Hurricane Andrew, Florida -- one of the largest states in population -- ranked 47th in terms of personal coverage and dead last in commercial insurance coverage.
The hurricane insurance controversy continued unabated even before Katrina came along. Last year's Hurricane Ivan spread havoc in the Florida Panhandle, and homeowners in Escambia and Santa Rosa counties last May filed class actions suits against Allstate, State Farm and USF&G for refusing to pay claims.
Congress should look into this subject. Homeowners desperately need more government regulation of the insurance industry -- not the vaunted deregulation that big industrial sectors are always pressing for. Deregulation sure helped the airlines, didn't it? They're going bankrupt faster than travelers can keep track of, and sure, bad luck and rocketing jet-fuel prices have something to do with it, but so did their gouging, over-pricing and shortsighted greed.
One reason the insurance industry is so nervous about establishing precedent in the wake of recent Florida and Gulf Coast monster hurricanes is they are likely to continue in such size, and maybe in frequency. Despite what you hear from the corporate flack merchants and government hacks and conservative talking heads, the science indicates global warming -- and the government's stubborn refusal to face the issue -- is going to take its toll in several areas, including hurricane strength.
Hurricanes draw their energy from the warm surface waters of oceans. That's why they occur in warm seasons and form in the tropics. When these ocean water temperatures go up, as they have been, the rise increases the energy available to the big storms.
Severe flooding and storm surges will become commonplace. Carbon dioxide levels rise. Solar radiation once stopped by earth's atmosphere now reaches the planet. Glaciers are melting. Sea levels are rising. Water is expanding as it warms.
Specific hurricanes cannot yet be blamed on global warming, but a recent study published in the respected scientific journal "Nature" just weeks before Katrina held that rising sea surface temperatures and more powerful storms seem to go hand in hand. As described by Elizabeth Kolbert in the Sept. 19 issue of "The New Yorker" magazine:
"A researcher at the Massachusetts Institute of Technology reported that wind-speed measurements made by planes flying through tropical storms showed that the 'potential destructiveness' of such storms had 'increased markedly' since the nineteen-seventies, right in line with rising sea surface temperatures." Kolbert further wrote that just two months before the demise of New Orleans as we know it occurred, a dire report by the Association of British Insurers forecast losses from hurricanes in this country, typhoons in Japan, and big storms in Europe, owing to climate change, were likely to increase 60 percent in the decades approaching.
Ironically, the National Association of Insurance Commissioners was supposed to meet in New Orleans before Katrina had her way. One of the studies that was supposed to be presented there indicated even before that catastrophe weather-related losses in this nation have been rising "significantly faster" than economic growth, or population, or premiums. Something's going on.
I know many honest insurance men. I do business with some of them. I have even had pleasant transactions with some of the companies listed above during my lifetime. But leading people to believe they are covered for a major tragedy and then telling them they aren't after it occurs is more than despicable. It is a weakness in our society, a hole in our culture. When I plunk my money down for a car, I expect it will be delivered or that I can drive it off the lot.
Insurance is trickier. It is not "tangible" in terms of a product. It is -- when all is said and done -- a promise. To break that promise on the back of amorphous phrases and initial flummery is beyond the pale.
Finally, I confess I may have a distrust of practitioners stemming from a childhood incident. At 14, I was mauled by a huge German shepherd named Toro who had slipped his chain. I can show you some scars. As a neighbor trained a .22-caliber rifle on us, I went round and round with the German shepherd and finally subdued Toro with maneuvers I had learned on a junior varsity wrestling team. Adult help arrived. I was bloody but in relatively decent shape. A doctor patched up the bites. I was given numerous shots.
The very next day, recuperating and home alone, I answered the doorbell to find the dog owner's insurance man brandishing papers and a blank yellow pad. He wanted me to set down my story in writing, and then to sign the printed text paper. I said, just a minute, and called my father at work. He said, don't sign anything, and instructed me to read the black-type paper, then call him back. I did. It was a waiver of claim that protected the owner from a tort suit. My father was furious. He raced home in his car and read the riot act to the nervous insurance man, who kept babbling apologies. We never did sue the owner. My father was content he paid the medical bills. And we didn't demand the dog's death, either.
But I remained leery of the trade. Until now, I figured I was just being paranoid.
| Niagara Falls Reporter | www.niagarafallsreporter.com | Sept. 20 2005 |