Opposing view: Expand federal program

Covering wind and water damage would aid taxpayers, policyholders.

By Gene Taylor

After Hurricane Katrina, insurance companies paid for wind damage as far inland as Tennessee, 300 miles from the Gulf Coast, but denied wind damage claims in coastal areas where five hours of destructive winds were followed by the storm surge.

State Farm instructed its adjusters that "where wind acts concurrently with flooding to cause damage to the insured property, coverage for the loss exists only under flood coverage." Other companies implemented similar policies.

Homeowners who paid high premiums for decades were left with unpaid claims for wind damage. While denying their own claims, companies were generous with taxpayers' money, paying federal flood insurance claims in full without proving how much damage was caused by flooding.

When insurers did order damage assessments, the reports were rigged. One engineering firm was fired and then rehired by State Farm only after promising to rewrite reports that found wind damage. Managers at another firm changed the on-site assessments of engineers who concluded that damage was caused by wind.

In Louisiana, adjusters billed the downstairs flood insurance claim for damage to upstairs contents that should have been on the wind insurance claim. Allstate used different cost estimates for identical building materials — exaggerating the cost when figuring the flood insurance check while underestimating the cost for the Allstate payment.

A year and a half after Katrina, federal courts ruled that insurance companies have to prove that damage was caused by flooding in order to exclude wind coverage. Only then did State Farm and Allstate offer settlements for the wind damage that preceded the storm surge. The delay took advantage of the desperation of disaster victims. Many settled for less than they were owed; others had given up and relied on government assistance.

Congress has provided more than $30 billion for housing repair grants, FEMA trailers, rental assistance, subsidized loans, tax deductions and other housing assistance. Many of those costs should have been covered by insurance.

The best way to protect taxpayers and policyholders from insurance company fraud is to allow the National Flood Insurance Program to offer both wind and flood coverage in one policy.

The insurance industry will not cover flooding and does not want to offer wind coverage in hurricane-risk areas. It has dumped $600 billion of coastal risk into state wind pools and other state-sponsored insurers of last resort.

The Multiple Peril Insurance Act would benefit every taxpayer in America by ensuring that more disaster costs are covered by insurance premiums instead of by costly and inefficient disaster assistance programs.

Rep. Gene Taylor, a Democrat from Bay St. Louis, represents coastal Mississippi.

Original published in USA Today on August 29, 2007, Hurricane Katrina's 2nd anniversary. Also read USA Today's opposing editorial.


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