Posted on 09/20/2005 1:09:29 AM PDT by WKB
Mississippi Governor Haley Barbour has commented to The Associated Press in Jackson that he would prefer to negotiate with insurance companies to encourage them to help homeowners without flood insurance rebuild their property, rather than resort to a lawsuit that could encourage carriers to leave his state.
The governor made a statement in response to a suit, filed last week by Attorney General Jim Hood, which sued major insurers on behalf of Mississippi residents whose homes were destroyed by water instead of wind. Hood said a standard homeowner's policy should cover hurricane damage, whether the loss came from wind or wind-driven water, such as storm surge.
Insurance companies contend homeowners should have bought additional flood protection. The governor said forcing the companies to pay for flood damage could bankrupt hem and drive them elsewhere.
"It's crucial that people who enter into contracts keep their contracts," Barbour told The Associated Press. "And that's what an insurance policy is�it's a contract."
The governor said insurance companies "must be held to these contracts." But he also said many people, particularly those who did not live in a flood plain, did not have flood coverage.
For those people, we are working very hard so that if they don't have insurance, or if they don't have coverage, that we can come up with a way to help them financially, help to make them whole," Barbour said.
Insurance Commissioner George Dale, sided with the governor. He asked the Mississippi congressional delegation to seek a bailout for those lacking insurance coverage.
"The insurance industry can take care of so many. The flood insurance program can take care of so many," Dale said. "But there are still others out there that do not fit under either of those. We cannot let them just absolutely be made bankrupt. It would kill our economy."
Ms Ping
The conservative, vs. the liberal sue happy response.
Yep and the wheel goes round.
Well, Jim Hood is a democrat but I don't know how liberal (extreme) he is.
This is going to prove interesting.
In one corner is the political... thousands of homeowners and voters who did not have proper insurance, many of whome will be bankrupt from the uncovered loss.
In the other, the factual... a contract is a contract. Insurors took on the risk based on the non-exposure to water damage claims. They simply cannot change an assumption and practice simply because the stakes are high. And if they did, they would open up themselves to all sorts of claims in other parts of the country. Water damage is typically excluded unless the result of a covered loss - a tree crashes into your roof and rain gets in: covered. Your roof leaks: not.
Looks to me like the taxpayers will have reimburse on a massive scale for the difference between whatever the insurance companies pay on the structures and the market value, and what do you do about contents coverage?
This whole insurance business makes me extremely nervous. Why would anybody in flood prone areas buy flood insurance going forward since the Federal Government will now be insurer of last resort, with no premiums. An insurance policy is a contract and is priced based upon specific sets of circumstances.
My sense is that we can help to make people whole, but unfortunately not for free. I certainly believe that some upper limit needs to be set - say the price of the least expensive accomodation - rather than replacement value. Perhaps this is what the negotiations will be focused on. Still I am sure that this will be the end of a number of local insurance carriers.
I think that I've got to side with the insurance co's on this one, MS. has a long history of floods and yet the people keep rebuilding in the same area.
I feel sorry for their loss, but I think the saying " The definition of insanity is, doing the same thing over and over again and expecting a different result", may apply here.
The majority of these people may not live in an actual flood plain, and therefore cannot purchase flood insurance.
You're right, in those cases its just an uninsured peril. Just a guess, but I would bet the insurance industry would prevail in court. You can't throw out contract law because a terrible calamity happens.
Well, I think the people that were caught unaware, were those that were not in a flood area.
I'm not in a flood area, in our state you need flood insurance to get a mortgage if you are in a flood area, but we've never had it because we're relatively high.
However, we live on a peninsula, and a thirty foot tidal surge would probably flood my home (the water wouldn't stay, probably drain off within 6 hours.)
The more interesting part to me will be "replacement cost" versus actual insurance coverage. After Florida's 4 hurricanes last year, we upped our coverage significantly, and also added a "replacement coverage" clause. Our insurance payment went up almost 50 percent, but part of that was due to our upping the coverage.
If these folks have held property for awhile and not adjusted their insurance, their coverage is going to be far lacking from what it will cost to rebuild, especially at today's cost of building materials. If MS stiffens their building code (maybe they use Miami/Dade code already, I have no idea), it definitely adds even more to the cost of rebuilding.
But his government filed suit to make the insurance companies pay regardless of what the contracts say. The press will spin this against the "evil" insurance companies. Maybe they can compromise, maybe pay what the premiums would have been over a period of 20 years or something.
A child can predict a storm will eventually ravage a Gulf Coast home.
Building or buying a home on the coast is a choice. That choice carries a very high risk the rest of us should not be asked to finance.
Many of these same areas have been slammed by hurricanes, over and over again.
That's what the FBI would call a clue.
I have been a multiple lines insurance agent for 36 years. If the insurance industry pays for claims for which they are not legally liable, that will leave the companies without the financial means to pay for claims in other areas of the country for people who paid for coverage. That simply would not be morally right.
I worked as an administrator for a insurance company called American Spirit about 13 years ago, they left Texas because of tornadoes here, they got upset after paying out on a few claims. A lot of us Lost our jobs when they bolted. They had the lowest premiums of any carrier in Texas.
When Hurricane Hazel went through the only thing left was a slab of concrete, and a piece of pumbing pipe sticking 20 feet in the air with a bathtub attached to it.
Insurance companies denied the claim because of flood waters.
Two weeks after the storm, a farmer in Conway, SC about 20 miles inland, found a shirt that he had sewn his name, address and phone number in and called him. They made the insurance company pay, with the shirt as evidence that it was wind and not water that had destroyed the house.
We had the same problem here in Southern Maryland when Isabel struck. The Insurance people screwed around with everyone. They like to receive premiums, but they sure hate to pay out. The storm surge got a lot of people homes.
There is a difference between a flood and a wind driven storm surge. Tides arent floods.
"The insurance industry can take care of so many. The flood insurance program can take care of so many," Dale said. "But there are still others out there that do not fit under either of those. We cannot let them just absolutely be made bankrupt. It would kill our economy." (Quoted from above article.)
Well, folks those of us who have paid hazard/flood insurance premiums for years should cancel our policies; then we can get free federal bailout coverage like the rest of some irresponsible folks. Private hazard/flood insurance is for dummies.
Did they meet their insurance contracts or did they default on them? Hopefully you found something with a more stable company.
It is really tough to insure entities in known high risk groups - homes on flood plains and tornado alleys; young male drivers; overweight, smokers; electronic stores in poor neighbourhoods, etc. However, I do not see Government insurance or insurance mandates being the answer.
Learned from Texas?
They did meet their contracts before they left and gave ample warning to their clients to get new insurance.
No one was suing them but still they left Texas totally because they claimed it was to high risk due to tornadoes.
Yes I found other employment.
Forcing the insurance industry to pony up for coverage they didn't offer will simply raise the cost of property insurance for the rest of us.
Do you mean you now have insurance that covers "reproduction" as opposed to "replacement?" Most insurance policies cover replacement...but that simply means typical replacement..ie. if you have hardwood floors or tile, you don't get reimbursed for the price of these, just the cost of generic flooring, carpet or vinyl. Houses with alot of architectural detail and older homes with historic value should definitely look into reproduction insurance.
If this lawsuit were to succeed, every contract every written -- past, present, and future -- in the United States would be practically void.
A close friend of mine in Gulfport was the only homeowner in her entire neighborhood that had private flood insurance. Her home had 4 feet of water in it at the height of the storm surge and will have to be substantially renovated due to the water damage, and of course all the contents of the first floor were ruined.
Mississippi AGs have already set precendents that personal responsibility is meaningless .. they were the first to sue (and win) the tobacco companies for alleged costs to society imposed by smokers (hint: there are none-smokers more than pay for any alleged costs)
Folks who don't smoke thought it was such a great idea.....well this just proves it wasn't, because just as everyone knows that smoking is not the healthiest habit in the world, everyone knows that there are inherent dangers living on the gulf coast (or the east coast for that matter)
1-800-659-2955
U. S. SMALL BUSINESS ADMINISTRATION
FACT SHEET - DISASTER LOANS
MISSISSIPPI Declaration #10178/#10179
(contiguous AL #10179 and LA #10179)
Result of damages caused by Hurricane Katrina that occurred August 29, 2005 and continuing.
Filing Deadline for applications for Physical Damage
to homes, personal property, businesses: October 28 , 2005
Filing Deadline for applications for Economic Injury: May 29, 2006
Types of Disaster Loans:
§ Home Disaster Loans. Loans to homeowners or renters to repair or replace disaster damages to real estate or personal property owned by the victim. Renters are eligible for their personal property losses.
§ Business Physical Disaster Loans. Loans to businesses to repair or replace disaster damages to property owned by the
business, including real estate, machinery and equipment, inventory and supplies. Businesses of any size are eligible. Nonprofit organizations such as charities, churches, private universities, etc. are also eligible.
§ Economic Injury Disaster Loans (EIDL). Loans for working capital to small businesses and small agricultural cooperatives to assist them through the disaster recovery period. EIDL assistance is available only to applicants with no Credit Available Elsewhere - if the business and its owners cannot provide for their own recovery from non-government sources.
Credit Requirements:
§ Repayment. SBA's disaster assistance is in the form of loans. Applicants must show the ability to repay all loans.
§ Collateral. Collateral is required for all physical loss loans over $10,000 and all EIDL loans over $5,000. SBA takes real estate as collateral where it is available. Applicants do not need to have full collateral; SBA will take what is available to secure each loan.
Interest Rates:
By law, the interest rates depend on whether each applicant has Credit Available Elsewhere. An applicant does not have Credit Available Elsewhere when SBA determines that the applicant does not have sufficient funds or other resources, or the ability to borrow from non-government sources, to provide for its own disaster recovery. An applicant which SBA determines can so provide for its own recovery has Credit Available Elsewhere. Generally, SBA determines that over 90% of disaster loan applicants
do not have Credit Available Elsewhere.
§ Interest rates are determined by formulas set by law, and may vary over time with market conditions. Currently (for disasters which occurred on or after August 1, 2005) the applicable interest rates are:
No Credit Available -- Credit Available Elsewhere
Home Loans 2.687% -- 5.375%
Business Loans 4.000% -- 6.557%
Non-profit Organizations 4.000% -- 4.750%
Economic Injury Loans 4.000% -- N/A
Loan Terms:
§ The law authorizes loan terms up to a maximum of 30 years. However, for businesses with Credit Available Elsewhere, the law limits the loan term to a maximum of 3 years.
§ SBA determines the term of each loan in accordance with the borrower's ability to repay. Based on the financial circumstances of each borrower, SBA determines an appropriate installment payment amount, which in turn determines the actual term.
Loan Amount Limits:
§ Home Loan amounts are limited by SBA regulation to $200,000 to repair/replace real estate and $40,000 to repair/replace personal property. The actual amount of each loan, up to these maximums, is limited to the verified uninsured disaster loss.
Refinancing of existing mortgages on homes is eligible in some cases up to the amount of the loan for real estate
repair/replacement. Loan amounts may be increased by up to 20% for devices to mitigate against damage to the real property of the same type as the disaster.
§ Business Loan amounts are limited by law to $1,500,000 for real estate, machinery and equipment, inventory and all other physical losses. The actual amount of each loan, up to this maximum, is limited to the verified uninsured disaster loss. Refinancing of existing mortgages or liens on real estate and machinery and equipment is eligible in some cases up to the amount of the loan for real estate and machinery and equipment repair/replacement. Loan amounts may be increased by up to 20% for devices to mitigate against damage to the real property of the same type as the disaster.
§ Economic Injury Disaster Loan (EIDL) amounts are limited by law to $1,500,000. The actual amount of each loan, up to
this maximum, is limited to the actual economic injury as calculated by SBA, not compensated by business interruption
insurance or otherwise, and beyond the ability of the business and/or its owners to provide. The $1,500,000 statutory limit for business loans applies to the combination of physical and economic injury, and also applies to all disaster loans to a business and its affiliates. If a business is a major source of employment, SBA has authority to waive the $1,500,000 statutory limit.
Loan Eligibility Restrictions:
§ Uninsured Losses. Only uninsured or otherwise uncompensated disaster losses are eligible. Any insurance proceeds which are required to be applied against outstanding mortgages are not available to fund disaster repairs and do not reduce loan eligibility. However, any insurance proceeds voluntarily applied to any outstanding mortgages do reduce loan eligibility.
§ Ineligible Property. Secondary homes, personal pleasure boats, airplanes, recreational vehicles and similar property is not eligible, unless used for business purposes. Property such as antiques and collections is eligible only to the extent of its functional value. Amounts for landscaping, swimming pools, etc. are limited.
§ Noncompliance. Applicants who have not complied with the terms of previous loans are not eligible. This includes prior borrowers who did not maintain required flood insurance.
Refinancing:
SBA can refinance all or part of prior mortgages, evidenced by a recorded lien, when the applicant:
(1) does not have Credit Available Elsewhere,
(2) has suffered substantial uncompensated disaster damage (40% or more of the value of the property), and
(3) intends to repair the damage. Refinancing of prior debts improves the victim's ability to afford the SBA disaster loan.
Relocation:
Use of SBA disaster loans for relocating is subject to limitations. Generally, victims may relocate where they need to do so for reasons beyond their control. If the victim is forced by state or local authorities to relocate, the amount of eligibility is the replacement cost of the property which must be abandoned.
Insurance Requirements:
To protect each borrower and SBA, SBA requires borrowers to obtain and maintain appropriate insurance. Borrowers of all
secured loans (physical loans over $10,000 and economic injury loans over $5,000) must purchase and maintain full hazard insurance for the life of the loan. Borrowers whose property is located in a special flood hazard area must purchase and maintain flood insurance for the full insurable value of the property for the life of the loan.
Haley Barbour BTTT.
Jim Hood is a dangerous, ambitious pol.
Yes ma'am...Hood is terribly dangerous to MS and it's citizens.
I hope voters realize his ambitions, and take him to the woodshed.
Bumping Haley, too! ;o)
Insurance companies have clauses for just about every contingency they dont want to pay for. Its in the small print.
Not so. The policies are reviewed for coverages carefully by state insurance departments, and approved or rejected. Mind you, I am not saying all policies are equal, but there are certain coverages that are mandated in the contracts, which are mandated. In the case of storm surges that has been settled for years, both in the contracts and by case law.
I tend to agree. Living in a high-risk area is a risk/reward proposition. I'm not at all sympathetic to the idea of helping people rebuild as a result of something they could reasonably have been assured would happen. I do sympathize a bit if the insurance that the companies say they should have had was not, in fact, available to them...but otherwise....I'm thinking you take your chances and prepare the best you can.
right now i drive a car that has only liability insurance because I can't afford collision. I can't afford to replace it if I have a wreck either. and my reasonable expectation as a driver is that there is a good chance I'll have an acident at some point.
I really doubt the Fed is going to step in and replace my car (which is as large a part of my persona assets as the average coast homeowners house is of theirs).
file that under "stuff happens"
OTOH, THAT is bull. If a company is going to be allowed to deny a claim based on the contention that the damage was solely water damage, they'd better darn well be able to prove that claim unequivically.
Great story and it's obvious to me that that was wind destruction. Not flood. The insurance company was jacking them around.
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