Daily News (New York)
Thousands of Hurricane Katrina victims whose homes were destroyed by floodwaters are likely to be left high and dry by their insurance companies.
That’s because most homeowner insurance policies cover damage from high winds, downed trees and even looters but don’t cover flooding.
“The fact that a levee failed and created a flood did not create a liability for private insurers,” said Robert Hartwig of the Insurance Information Institute of New York. “Many people who declined to purchase flood coverage will not have sufficient resources to fully rebuild.”
Flood insurance can be obtained only via the Federal Emergency Management Agency, which is under fire for botching rescue efforts in the hurricane’s aftermath. FEMA estimates just 40% of the homes and businesses in storm-shattered New Orleans and the Gulf Coast have it.
But even those policyholders may be shocked to discover the FEMA pays only up to $250,000 for a destroyed home and up to $500,000 for a business.
“There may be an assumption by folks that flood insurance will mirror their homeowner policies,” said Joseph Annotti, spokesman for the Property Casualty Insurers Association of America. “They often don’t.”
Homeowner advocates such as Douglas Heller of the Foundation for Taxpayer & Consumer Rights accused the insurance companies of “trying to wiggle out of their responsibility to their customers.”
“Katrina survivors have paid premiums all these years in preparation for this disaster, only to find their insurance companies playing language games about whether or not to blame Katrina for the damage,” Heller said.
Hartwig said insurance companies are very clear about their coverage. “If your home is damaged by thunder and lightning, we pay for it; if the roof gets ripped off, we pay for it,” he said. “It’s clear that most of the damage was done by flooding and we don’t pay for that, irrespective of how the flood occurred.”
FEMA – and by extension, taxpayers – could wind up filling the coverage gap with grants and federal disaster loans so survivors can rebuild, experts said.
A leading risk management company said the insurance industry could face claims of up to $60 billion, eclipsing Hurricane Andrew as the most expensive natural disaster in U.S. history.
“There are few events that rival Katrina,” said Kyle Beatty of Risk Management Solutions Inc. “The World Trade Center disaster is one.”
Processing claims could take months, if not years, because so many vital records have been destroyed.
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