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Open House

Attorney Says Court Ruling Will Force Insurers To Pay Wind Damage, Despite Presence of Water Damage; Building Treehouses

Aired August 19, 2006 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

TONY HARRIS, CNN ANCHOR: HARRIS: Good morning everyone. Now in the news, plans are set to bring JonBenet Ramsey murder suspect John Mark Karr back to the U.S. Karr is scheduled to leave Bangkok, Thailand in less than 18 hours.
Authorities say he's due to arrive in Los Angeles tomorrow evening. This programming note, "LARRY KING LIVE" will have an exclusive interview with the Ramsey's attorney Lin Wood and the University of Colorado professor who led police to Karr. That's Monday at 9:00 p.m. Eastern.

Lebanon's prime minister is announcing an Israeli raid today in the Bekaa Valley as a quote, "Naked violation" of the U.N. cease-fire agreement. Israel says it was preventing smuggled weapons from reaching Hezbollah. An Israeli diplomat adds that Israel reserves the right to conduct such operations as needed until an international security force is in place.

In Iraq, wire services report at least 13 people killed today in various attacks around the country. According to the Associate Press, a roadside bomb south of Baghdad killed four people. A large Shiite religious observance this weekend has the capital under tight security. The AP reports that seven Shiites were killed last night while walking through a Sunni neighborhood.

An illegal immigrant from Mexico finds safe haven in a Chicago church to avoid deportation. For now, government officials won't enter the church to get the woman who has taken up refuge there with her son. The woman entered the church Tuesday after failing to turn herself over to immigration to be deported to Mexico. Her seven-year- old son is a U.S. citizen.

Mesa, Arizona now. A 350-pound man leads police on a chase, then during a standoff, holds up a three-month-old baby that was in the car. Police convinced the man to put the baby down, then attacked with smoke.

You'll see it in a second here. And the police dog -- watch this -- they got their man and the baby is OK.

Your next check of headlines is coming up at the top of the hour. But first, OPEN HOUSE with Gerri Willis starts right now.

(BEGIN VIDEOTAPE)

GERRI WILLIS, CNN ANCHOR: A federal judge deals a big blow to homeowners recovering from Hurricane Katrina.

Plus, recovery along the Gulf Coast one year later.

And we'll show you how to relive your childhood with a tree house.

Good morning, everyone. I'm Gerri Willis. And this is OPEN HOUSE.

It was a landmark case that could have changed the way Americans are insured in the this country, but a federal judge, in Mississippi, ruled this week that Nationwide Insurance does not have to cover the majority of one family's extensive home damage from Hurricane Katrina, because their policies do not cover damage from flooding and storm surge.

It's a blow to the hundreds of homeowner who did not have flood insurance along the Gulf Coast. Richard Scruggs represented the family in this case. He's in Pascagoula, Mississippi.

Thank you for joining us.

RICHARD SCRUGGS, ATTORNEY: Thanks, Gerri, for having me on.

WILLIS: It's not been that long since you were on our program talking about this case. And you expressed a lot of confidence about the ability to win this case. From your perspective, what went wrong?

SCRUGGS: Well, it didn't go wrong. We actually did win the case. It wasn't as much money as we hoped to recover for the Leonards to completely rebuild their home, but it was a win. The plaintiff won the case. We had a win.

WILLIS: What's interesting about it, of course, is that the family lost their house. $130,000 in value. And they're being awarded $1200. That's not going to pay for dry walling the place.

SCRUGGS: No. You're right about that. But this family went into this case to try to clear their mind field for the other homeowners. That's what they did. The legal rulings that came out Tuesday essentially say that the defenses that the insurance company has been using, which is if you have any water damage, we're not even going to pay your wind damage. That's now out in the middle of the Gulf of Mexico because of this ruling.

WILLIS: Well, you know, that's probably debatable. But obviously the Leonards in this case were, what, 500 feet from the beach. They had five feet of standing water in their house. And I think it's a good question at this point for other families in the area who are really looking to you to have a win in this case, how do you come back after this?

SCRUGGS: Well, it's not a matter of coming back. It's a matter of building on a victory. And we understood that this house was not badly damaged by wind. Most of the next cases that are coming up in the next year are complete slabs, that were blown down by wind before the water ever got there. That's why this ruling, this week, was so important.

WILLIS: Let's talk a little bit about some of the findings of fact in this case which I thought were really interesting. The judge writing that he believed that Paul Leonard simply misunderstood his agent in what he was covered for. Do you agree with that?

SCRUGGS: Well, obviously I agree with my client, Lieutenant Paul Leonard. But I respect the judge's decision, he found otherwise. And I don't think he endorsed the agent's business practices exactly, but we didn't prevail on that aspect of the case. That's correct.

Let's talk about some of the business practices. Because it was interest that the agent did not recommend flood insurance. The family was very close to the beach. It's kind of shocking that he wouldn't have suggested that the family get flood insurance. What do you make of that?

SCRUGGS: It's counter intuitive that an insurance agent won't sell you coverage or won't promote coverage for a peril like flooding or storm surge, if that's what they include. The fact of the matter, though, is that the commission that the insurance agent makes on flood insurance is only about 40 bucks. It's not worth the paperwork. That's why they don't promote it.

WILLIS: Well, that's shocking. Let's talk a little bit about what happens now. Will you be bringing other cases against other insurers? And do you have, you know, a case now this ruling has come down?

SCRUGGS: Oh, absolutely. This was a win, again, Gerri. And the win, I can assure you that the -- the insurance industry's lawyers in New York and Washington are very concerned about the legal rulings that came down last week.

WILLIS: Let's talk about will you appeal this decision? And do you think you would have had a better outcome if there had been a jury in this case?

SCRUGGS: It's hard to say. I think judge -- the federal judge gave us a full and fair hearing. And I don't know what the outcome would have been with a jury. We'll never know that. All the next cases, though, will be jury cases. They'll all be houses that were completely destroyed, not even there. And that's why this decision is the one that's going to cause the insurance industry the most grief, and the most problems in the future, because they've been refusing to pay for wind damage if there was one millimeter of salt water in the home.

WILLIS: Will you appeal the judge's decision?

SCRUGGS: You know, I don't think we will. Right now my inclination is not to recommend that the Leonard's appeal the decision. There are so many rulings in there that are beneficial to the entire Gulf Coast community that I wouldn't want to jeopardize those with an appeal, quite frankly. And the Leonards went into it with that motivation, not to necessarily recover money for themselves, but to benefit the entire community. And they did that today.

(CROSSTALK)

WILLIS: We will certainly be following that as you pursue other case in the area. And keeping an eye on how this works out, because I know so many families are interested in the final resolution of this. Dick Scruggs, thank you for joining us today.

SCRUGGS: Thank you, Gerri.

(END VIDEOTAPE)

WILLIS: For the past year, since Hurricane Katrina, much of the attention in New Orleans and across the rest of the Gulf Coast has focused on the effort to rebuild parts of the region. And preparations to make sure they are able to withstand the next hurricane.

But an interesting thing happened along the way. A real estate market that once looked shattered, took off.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): It's been nearly a year since Hurricane Katrina. Nearly a year since tens of thousands of homes were destroyed. You might think Gulf Coast real estate would be in a slump. You would be wrong.

MICHAEL HEIDELBERG, REAL ESTATE APPRAISER: There has not been a declining market. Actually real estate values in this community have risen and increased in the last six to nine months.

WILLIS: This Pascagoula, Mississippi, real estate appraiser says Katrina left the Gulf Coast with empty lots, some buyers see as ripe for fancy new houses and the chance to step up to the beachside home they've always wanted.

The story is similar in Biloxi but with a twist. Here casinos are fueling the real estate recovery. Before the storm, casinos had to be built on the water. Now the state legislature has voted to allow casinos to move 800 feet inland. The casino industry is buying up property in that zone.

MAYOR A. J. HOLLOWAY, BILOXI, MS.: It's real estate anywhere near casino operations. So, you know, and then it trickles on down, too. All prices of all land has actually gone up.

WILLIS: The National Association of Realtors said the medium price for existing homes in Biloxi and Gulfport area is up nearly 10 percent from last year. New Orleans faces a different situation. In some parts of the city, homes are still unlivable. And homes that are selling in these areas are going for low prices.

While the market may be slumping inside city limits, areas uptown known as the "sliver by the river," that received almost no damage, as well as areas just outside New Orleans, are booming. FRANK TRAPANI, N.O. METRO, ASSOC. OF REALTORS: The real estates market is excellent, if you are looking the purchase. We've got quite a number of people that have made the decision to relocate because of the storm.

(END VIDEOTAPE)

WILLIS: Now, if only the rest of the country could follow those price trends.

Coming up on OPEN HOUSE, a big battle over guns and you're right to defend yourself.

Plus, sending your kids off to college? We'll let you know what type of insurance you're going to need.

And tree houses aren't just for kids anymore. "Weekend Project" shows you how to get started build that tree house you always wanted.

But first, your "Tip of the Day."

(BEGIN VIDEO CLIP)

WILLIS (voice-over): Trees can cause serious damage to your home if they become up rooted in a storm. First step, notify your insurance agent. Resist the urge to climb up on your roof to check for damage. Instead, inspect the underside of your roof from your attic. If you then deem it safe to go up on the roof, put on a pair of non-skid shoes and position yourself above the tree, never below.

Cut away the small branches first, using long handled pruning shears. Never use a chainsaw when working on a roof or when using a ladder. Instead, use a bow saw to cut the main part of the tree away into controllable pieces.

Most important, if the tree falls on a power line, don't attempt to remove it yourself. Contact your local power company and let the professionals hand the situation. And that's your "Tip of the Day."

(COMMERCIAL BREAK)

WILLIS: The housing market just keeps slowing down. The latest figures this week show that new home construction continues to tumble. Housing starts are now 13 percent below where they were a year ago.

The slowdown in construction and sales is also putting the breaks on rising home prices. Home prices rose just under 4 percent in the second quarter. And, in 20 percent of the country, prices are falling. Especially in places like Detroit, Cleveland, and Buffalo.

There's a battle in this country over gun laws. In the last year, 15 states have passed laws allowing homeowners to shoot in self- defense when they think they're in danger. Supporters say the laws are much-needed protections for the innocent, while gun control advocates say it's all about shooting first and asking questions later.

I spoke with Peter Hamm from the Brady Foundation in Washington and Ashley Varner with the National Rifle Association.

(BEGIN VIDEOTAPE)

WILLIS: All right. Ashley, I want to start with you. I don't understand why is this law necessary? Don't we already have the right to protect ourselves in our own home?

ASHLEY VARNER, NATIONAL RIFFLE ASSOC.: You would think so, but it's not necessarily the case. In many states across the country there's actually state statute or case law that says if you are attacked by a criminal, you should first try to flee the area and run away before you can actually stand and fight back to protect yourself.

Now, we believe that's wrong. And the NRA feels the law should never put a victim in a position of not being able to fight back. And there have been cases where this has happened.

WILLIS: All right. Ashley, let's let Peter respond this to this. Because I think this is an interesting point. This argument that it's not enough to require people to run away first, they need to have extra protection as potential victims. What's wrong with that thinking?

PETER HAMM, BRADY FOUNDATION: Because what the NRA has been pushing here in these laws you've been talking about are a very dangerous solution to a non-existent problem. You know, we've been asking the NRA since April of 2005 to give us the name of the individual who's in jail in this country somewhere for acting in legitimate self-defense. And they can't because there's no such person.

WILLIS: Let's let Ashley respond.

HAMM: Sure.

VARNER: That's not true.

WILLIS: Are there cases out there where people have gotten in trouble over this?

VARNER: Yes, actually, it's happened in Washington State, in Illinois, Ohio, New York. People have been charged with a crime. Now, when it has gone to jury, many times these people are able to get off, and they are vindicated because the jury understands the horrifying position they were put in. And they had a split-second decision to make. But these people should never have been charged with a crime merely for defending themselves.

WILLIS: All right.

Peter, let's talk about this issue a little more broadly now.

HAMM: Sure.

WILLIS: I mean, what does it take to make you happy? Should people not have guns at all, or do you think ... HAMM: Oh, heavens ...

WILLIS: What kind of protection should they have?

HAMM: That's not what this issue is about. Here's the situation. And we're making progress because now the NRA has at least named the states where this has happened, although they still don't seem to want to name the individuals.

But what we have here is a situation where since nobody is in jail for having acted in legitimate self-defense, this law is already only helping people who probably ought to be in jail. I mean, witness the man in Florida who shot his next door neighbor for coming over to complain about how much garbage he was putting out in front of the house.

In Lexington, Kentucky, they just finished a trial where a drug criminal got off with only manslaughter, instead of murder, for killing another drug criminal who he owed a lot of money to and claimed to the jury in the trial that he was in fear for his safety. I don't think that that's necessarily a good thing to do, to pass a law that really only helps people who are pretty sketchy to begin with.

WILLIS: Ashley, I think that's a great question. Is this now just a blanket that people can use any time they want to?

VARNER: No.

WILLIS: It seems like the definition might be so broad that you could use to it get away with literally murder.

VARNER: Actually it very clearly states that you must be in a place where you have a legal right to be. If you're committing a crime, you don't fall under the castle doctrine bill. If you feel that your life is in danger, and you are truly an innocent victim of attack, you should be able to fight back and to protect yourself.

This is about self-defense. This is about a woman walking down the street after a movie, being dragged into a dark alley. Are you going to tell that woman that she should first ask the man if he wants her purse, or if he really wants to rape and kill her? She does have that kind of time. She needs to know the laws on her side.

WILLIS: Peter, I want you to respond to that very issue.

HAMM: Yes.

WILLIS: Because I think it's an interesting question.

HAMM: Sure, sure. We should definitely, if you are in a situation where you are in legitimate fear for your safety, you should use deadly force if necessary to counter that threat. But it does not mean that a woman who is walking down the street, who sees as man walking down the street, should go ahead and shoot him because he might be up to no good.

WILLIS: Peter, I'm going to have to cut you off there. Ashley, thank you for joining us.

VARNER: Thank you.

WILLIS: Peter, we enjoyed your comments as well. Thanks to both of you for your time.

VARNER: Thank you very much.

HAMM: Thank you very much.

(END VIDEOTAPE)

WILLIS: Time to send the kids to college. And time to find out if you have the right type of insurance to cover them. We'll tell you everything you need to know.

And, reliving your childhood, how to build a tree house in "Weekend Project," when we come right back.

(COMMERCIAL BREAK)

WILLIS: Having a tree house is what many kids, and well, let's face it, some adults dream about. Building one can be a nightmare, and dangerous if you don't know what you're doing.

So we spent a day with a team of experts who told us everything you need to know from picking the right tree to picking the right materials.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Most houses are found on the ground, unless you're building a different kind of house, a tree house.

(on camera): I guess the first step in building a tree house is finding a tree to build it in. How do you do that?

JONATHAN FAIROAKS, TREE EXPERT: We look. Here are the trees. I call these the twins.

WILLIS: They're big.

FAIROAKS: They're big.

WILLIS: How tall are they?

FAIROAKS: About 120 feet, Red Oaks, good choices. Good sturdy trees. Good healthy trees, in a relatively open area here. We look at the foundation. You can see the tree has wonderful root flairs. That's this part where the roots turn into trunk.

WILLIS: Why is that important?

FAIROAKS: It's the foundation. It's where the tree begins.

WILLIS (voice-over): Once the foundation is checked, it's time to snap in and check the branches. But, if you have the slightest fear of heights, hire a professional to do this for you.

FAIROAKS: We'll look for dead branches, branches that are poorly attached a poorly attached branch will come down in a V and tend to split away from the main part of the tree.

WILLIS: Look for U-shaped branches instead.

FAIROAKS: This is a good point of attachment. It's wide open. It's much stronger than this point of attachment here where these two sections come together. You can see this is sharp V.

WILLIS: Strength is key. Pounding nails into a tree is a big no- no.

FAIROAKS: You have a number of bolts or nails in one place, that creates wounds. The wounds tend to coalesce and then you have a dead section of the tree that's supporting your tree house.

We choose one point. We put one bolt in. And then we mount the tree house from that bolt. If we have to put another bolt in we try to go around to the opposite side of the tree and not on the same level.

WILLIS: And a healthy tree means a safe tree house. Speaking of which, let's take look.

(on camera): Wow, what a great view up here. This is amazing.

DAN WRIGHT, TREEHOUSE BUILDER: Yes, it makes you feel like a bird.

WILLIS: It does. It's great.

All right. You got to tell me how to do this, the construction. What's the most important -- the first thing you should think about?

WRIGHT: You should think about what's gonna hold up all of the weight you're putting in the tree. You need something to hold the main beams of the tree house up, and then you build your joists across that. And you're just building a deck at that point. And then any contractor has the knowledge and skills to build a tree house from there.

WILLIS (voice-over): Choosing the right tools is important. For a lightweight tree house, all thread rod are fine. But for heavier projects invest in what's called an artificial limb, like this one.

(on camera): Now, one of the things about building a tree house is this tree's living and growing. It's going to move over time. How do you account for that?

WRIGHT: If you look right down here, when we built this a few years ago, we left a space all of the way around.

WILLIS: Oh, yeah.

WRIGHT: The tree's going to increase in girth, OK? So after a while you have to come back here with a saw zaw (ph) and widen this hole to give it room to grow.

You've given it how much space to begin with?

WRIGHT: Well, a couple inches. In oak that is this mature is going to grow very slowly. If you use a soft wood tree it's going to grow faster.

A lot of times we get the question, if you build a tree house 10 feet high am I gonna come back in five years and it's 15 feet. No. Once you put a nail or a bolt in a tree, it's always going to be at that height because trees only grow from the tips of the branches and the tops outward.

WILLIS (voice-over): And here's our number one rule, if you're building a tree house, have fun. We sure did.

(END VIDEOTAPE)

WILLIS: As always, if you have an idea for a "Weekend Project," send us an e-mail to openhouse@cnn.com. And you can watch past weekend projects on our Web site. CNN.com/openhouse. Stick around, more OPEN HOUSE is next.

(COMMERCIAL BREAK)

WILLIS: Some insurance tips, now, if you're kid is heading off to college. Most homeowner policies will cover 10 percent of property that is outside the house. So, you may not want to load up your freshman with a lot of expensive items like a flat screen TV or an expensive stereo.

Keep in mind that if your child is renting an off-campus apartment it will not be covered under your policy. You want to invest in renters insurance, usually about $250 a year, for 15 grand worth of coverage.

And on healthcare, full time students under about 24 years of age are usually covered under your health plan. If your child is no longer on you plan most colleges off limited health insurance plans for students.

If you have any questions, send us an e-mail to OpenHouse@CNN.com. And you'll find more on today's guests and topics on our web site, CNN.com/OpenHouse.

As always, we think you for spending part of your Saturday with us. OPEN HOUSE will be back next week, right here on CNN. And you can also catch us on Headline News, every Saturday and Sunday at 5:30 p.m. Eastern Time.

Don't go anywhere. You're top stories are next on CNN Saturday. Have a great weekend.

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