Allstate won't pay Katrina flood claims

MarketWatch ^ | Sept. 20, 2005 | Alistair Barr

[george76]

Insurer's operating chief responds to Mississippi suit...

Allstate Corp. won't pay flooding claims stemming from Hurricane Katrina, Chief Operating Officer Tom Wilson said on Tuesday, in a direct challenge to a lawsuit filed last week by Mississippi Attorney General Jim Hood.

Controversy has emerged surrounding the devastating flooding that followed the storm. Standard homeowners' insurance policies typically exclude flooding, partly because a national, government-run program covers those risks. However, many homeowners hit by Katrina may not have bought this extra coverage.

Mississippi's Hood sued Allstate and four other leading insurers in the state on Sept. 16, arguing that their flood exclusions should be voided and that they should pay flood claims.

"Exhibit one for us will be just the national flood-insurance programs -- advertising programs, which they put on very aggressively every year," he said. "People know this is a separate coverage, so we're not having many issues with our customers."

Allstate's Wilson did concede that there will be "issues" when assessing what damage was caused by wind and what was the result of flooding.

[theDentist]

From their website: "Allstate is doing everything it can to help customers with their claims, with the goal of getting them back on their feet as quickly as possible."

NO WONDER Police are taking guns from empty homes. They're afraid homeowners will come home, pick up Mr. Saturday Night Special, and pay a visit to their Allstate agent.

[diogenes ghost]

"That suggestion of off the top of my head". Well I shudder to imagine what you might come up with if you used a bit more of it.

[MineralMan]

"My father always said, "Your in good hands with Allstate, until you try to collect on your policy"."

---

Your father was accurate. I no longer insure anything with Allstate. When I was living in California, my house was struck by lightning. All the wiring in the house was destroyed, along with every appliance, my two computers, and all phones.

I called my Allstate agent, who said I wasn't going to get a cent, because lightning never struck houses in that part of California. I sent him the newspaper clippings and the fire department report, along with a letter.

He then said it would be at least 6 weeks before a claims agent could inspect the damage. In the meantime, I was in a house without electricity. I asked him what I was supposed to do about that. He said I should check into a hotel, and Allstate would pay up to $30/day. This in a vacation area on the California coast, where the cheapest motel was over $80/day.

I got temporary power, and lived off extension cords. I then called an electrical contractor and had the entire house rewired, which took a couple of weeks. I paid the contractor with a check.

Eventually, about 6 months and a million phone calls and letters later, Allstate paid about half the bill for the rewiring job. They claimed I hadn't used one of their approved contractors. They were wrong. My contractor was one of the two they always used, and we had done the job in the least expensive way possible.

No claims adjuster ever appeared at my home. Allstate refused to pay for the computers, because "I might have been using them for business purposes."

Anyhow, a friend of mine there is an attorney, so I talked to him about the situation. Three days after he contacted the insurance company, I had a check in hand that covered all the damages, the attorney's fees and a bit extra. It took over 6 months to get a cent from Allstate on a claim that was fully covered under my policy. I switched insurance companies the day the check finally arrived.

Consider carefully when choosing a homeowner's insurance company. Ask around. Some are horrible.

[ladtx]

Lighten up. My point was that there could be an opportunity for Allstates smaller competitors here.

[colorado tanker]

Your 48 makes sense to me. I don't live in a flood plain, so I don't know if people who don't live in a flood plain can even buy the insurance. I know I probably wouldn't even think of it.

Allstate has a pretty crummy reputation in the auto insurance area for denying valid claims. My wife had to sue an Allstate insured in a clear case of liability where the other driver jumped a median and sideswiped her. I've heard they're also bad about not using OEM parts on auto repairs. Don't know how they are about homeowners insurance.

[Sthitch]

The free market would insure a building in a flood zone, they would just be charged market prices for the insurance. This could be off-set by the purchase of flood insurance by people not normally at risk, and currently not eligible for flood insurance.

I once had dinner with an Nationwide executive and we talked about this issue. There is little chance that his house would be subjected to flood waters, but if it were, there is nothing that he could do to protect it. The actuaries on his $2 million home would say that flood insurance should add $10 a month to the cost of his insurance bill. That is nothing compared to what he pays his own company for all other forms of insurance on the house.

[ShutUpandSing]

Is storm surge considered the same as a flood?

That’s what I’d like to know. Surge is more like a tsunami. Are all the homes and businesses in the gulf on federally designated flood plains?

[vaudine]

Anyone living in an area with the possibility of flooding should carry flood ins. If they didn't, don't pay on flood damage. The problems will really arise over what is flood and what is other damage.

We live in a zone that is supposed to be ripe for a quake, although all we have ever had is tremors. I insisted on quake extra coverage and my husband doesn't want it because it is 35-40 dollars a year extra. We do have it, because I insisted. For that price, why take a chance and be sorry later.

vaudine

[ops33]

I remember asking my Father that question after his house was damaged by Hurricane Hugo. He told me that wind driven water comes from above the ground and flood comes from ground level. Still not sure what all that means. But his insurance company, USAA, said his water damage was from wind driven water and paid up. His next door neighbor's insurance company said that his water damage was from flood and didn't pay up. Of course, my Dad had flood insurance so he was covered either way, but it does show there is quite a lot of gray area in interpreting what caused the damage. I cannot help but thinking that a lot of insurance companies tell their adjustors to keep a close eye on the bottom line.

As a postscript, Allstate tried to bail out of the homeowners insurance market in Florida after Andrew but the state Insurance Department wouldn't let them abandon their policies.

[HereInTheHeartland]

The insurance companies must be allowed to only pay what is in the policy.
If the they can sued and made to pay for stuff that isn't in a policy the all bets are off. Premiums will skyrocket for everyone due to the insurance companies having a more open ended liability.
Premiums are set based on expected losses and payouts. People need to know what is covered and what isn't. If they don't like the coverage that they have; then change it.
If they can't insure against a risk, they should have understood that when they purchased the home.
Just another example of personal responsibility.

[Skip Ripley]

When I was a claims rep, the rule of thumb was if it (flood) fell from the sky, it was covered. If it came up from the ground, it wasn't.

Therefore, I would think damage claims from storm surge, wind and rain through an opening caused by wind would be paid. Levee breaks and river floods would not be.

I was an auto adjuster for Allstate for a couple of years. They used to encourage me to circumvent the state laws in a number of different areas, particularly concerning the use of aftermarket replacement parts (as opposed to OEM)

[Euphemy]

They had Hurricane coverage, and for *some* reason thought that they were protected from a hurricane's damage, and even more farfetched, they believed that all that water was from a hurricane's storm surge. Imagine their surprise when their insurance companies informed them that they hadn't lost their property to a hurricane, but to a flood.

Many of these houses weren't on a "flood plain" and had never had flooding. I can see that many people paid their premiums believing that they were covered from the thing they were at risk of - a hurricane.

I'm not well versed in the national flood insurance program since I don't live in a flood plain, but it's my understanding that one can't just get national flood insurance by paying a premium, it's not even offered unless the whole community agrees to certain federal stipulations concerning exsisting and future building codes.

Is there a difference between a "flood" and a "storm surge"?

[A CA Guy]

Why did they have President Palmer giving out 800 numbers in commercials for Allstate to flood victims?

I think Jack Bauer will have to check this out.

[Texasbound]

"Is storm surge considered the same as a flood?"

Yes, storm surge is considered a flood.

"Are all the homes and businesses in the gulf on federally designated flood plains?"

Maybe not all, but a good number. You can order flood maps from FEMA or NFIP - I don't remmeber which.

[blu]

But for the winds of the hurricane, the water would not have surged.

"Hello, God? See, Allstate won't honor my claim, so I'm going for the ultimate deep pockets. And since Mother Nature claims you are her boss...."

[Lazamataz]

Mississippi's Hood sued Allstate and four other leading insurers in the state on Sept. 16, arguing that their flood exclusions should be voided

Sorry. You buy what you buy, and you don't get no mo.

[Ben Mugged]

Good thing you switched. Allstate has a bad habit of cancelling coverage right after they pay a claim.

[Euphemy]

Rocky wrote: Everyone on the Gulf Coast is informed by their insurance company, neighbors, the press... that homeowner's insurance does NOT cover flooding (rising water). You must have flood insurance for that.


Exactly, but is a wind driven wall of water the same as "rising water"? And can floods occur without hurricanes? Can hurricane storm surges occur without hurricanes?

[devane617]

What if I am one of the people that "DID" pay the flood premiums? Suddenly even those that choose not to pay gets covered. Lawsuit heaven...The lawyers win again.

[TaxRelief]

Good for Allstate!