Return to Transcripts main page

Open House

Price Of The Aftermath of Hurricane Katrina; Insurance Claims For Hurricane Victims; Mississippi Attorney General Sues Insurance Companies

Aired September 17, 2005 - 09:30   ET

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

BETTY NGUYEN, CNN ANCHOR: It's cleanup Saturday in the French Quarter, but even the drier parts of New Orleans will not start to reopen until next week. The mayor says the situation will be assessed on a day-to-day basis.
People in New England are bracing for Tropical Storm Aphelia. It has packed speeds -- pack -- pick up speed, I should say, and heading that way after soaking low-lying areas of North Carolina with 18 inches of rain. The storm, packing 60 mile-an-hour winds, is less than 200 miles southeast of Nantucket, Massachusetts.

Vice President Dick Cheney will undergo surgery next week to remove an aneurysm in an artery behind his right knee. The elective surgery will performed under local anesthesia and will require a short hospital stay. A top aide says he'll be able to return to work shortly after that procedure.

Tony Harris and I will be back at the top of the hour.

Remember, to locate a child displaced by Hurricane Katrina, all you have to do is call the 1-800 number on your screen. It's 1-800- 843-5678. That's 1-800-THE-LOST.

"OPEN HOUSE" starts right now.

GERRI WILLIS, HOST: Do you own a home? And if you do, is it insured? And do you know what your policy is really covering?

Good morning, I'm Gerri Willis. We'll tell you what you need to know about insurance and flooding in the aftermath of Hurricane Katrina this half hour on CNN OPEN HOUSE.

More than $60 billion worth of aid is already going to the region to help rebuild after the most devastating hurricane ever to hit the U.S. But that's not counting $2 million in insurance claims expected to get filed over the next several months. That's an unprecedented amount of money expected to flow into the region.

Right now, homeowners are looking for immediate relief. They're slowly coming back to the area, facing absolute devastation.

Allan Chernoff picks up from Biloxi, Mississippi.

(BEGIN VIDEOTAPE) ALLAN CHERNOFF, CNN CORRESPONDENT: The scope of the devastation here is almost unimaginable, miles and miles along the Gulf Coast just like this, flattened homes, debris, homes that people had worked so hard to buy, maintain, and improve just gone in an instant.

It's so sad to see a car flipped over like that, even sadder to see a child's toy laying in debris, never again to be used.

In spite of all devastation, many people here are still smiling. We met Daniel Jackson. His home was flooded entirely, all the contents worthless now. He told us, I feel I'm a blessed man to have survived Katrina. You can't help think, Would I say that if it happened to me?

Another person said, It's only stuff.

But these people are going to need tremendous financial assistance to get back on their feet. The state's attorney general says he's going to try to force the insurance companies to pay for the damage.

(voice-over): In a lawsuit filed Thursday, Mississippi's attorney general charges insurance companies with illegally trying to get out of paying compensation to Katrina's victims.

JIM HOOD, MISSISSIPPI ATTORNEY GENERAL: If we don't get this stopped, what insurance companies are trying to do, it's going to bankrupt the Gulf Coast in Mississippi, Louisiana, and parts of Alabama as well.

CHERNOFF: Named in the lawsuit are State Farm, Nationwide, Allstate, and other insurers. State Farm said, "The attorney general's action threatens to undermine the insurance industry's financial stability." Nationwide said it was "deeply disappointed with the attorney general's charges." Allstate said, "It's unfortunate that a lawsuit has been filed so early in the recovery process."

The industry's trade group says the policies are clear.

JEANNE SALVATORE, SENIOR VICE PRESIDENT, INSURANCE INFORMATION INSTITUTE: The insurance industry did not charge a premium for flooding. And flooding is not covered under standard homeowners' policies.

CHERNOFF (on camera): Residents here say if the lawsuit doesn't force insurance companies to pay, then their only other hope is a bailout from the federal government, Gerri.

(END VIDEOTAPE)

WILLIS: The implications from this lawsuit could have an impact on all of us.

I spoke to attorney Dick Scruggs. He's organizing major litigation against insurance companies on behalf of Katrina victims. Dick, tell me about the basis for your lawsuit.

DICK SCRUGGS, ATTORNEY (on phone): The basis for the lawsuit is that all of the policy owners, the homeowners who had homeowners' policies on the coast, for several years now have been required to have a hurricane endorsement and pay an additional premium for it.

And the lawsuit is going to be that the insurers have accepted premiums and represented in the policies to the homeowners that they have hurricane coverage. But then they're now saying that it's just a flood, which isn't covered (ph) in policies. So that instead of storm surge ...

WILLIS: Let me interrupt you right there, Dick. I don't think a lot of people are going to recognize that you're actually a very famous trial attorney. You were responsible for getting tobacco companies to give up a lot of money for taking care of people who had health issues related to smoking.

Now you're taking on the insurance industry. But I've got to tell you, you're talking terms of art. The insurers are saying, we've been very, very clear that we don't cover water damage. How do you think that you, at this point, can get them to do anything different?

SCRUGGS: Well, I hope that they do the right thing and reconsider their position. If not, we'll let a jury reconsider it for them, and then they'll end up paying a great deal more than just the policy owners.

What we're seeking is all hurricane-related damage, whether it be storm surge or wind or a combination of both, which is what it usually is.

WILLIS: Let me ask you this question. I know a lot of people out there, they believe that if insurers are going to be forced to pay for this disaster, then it's really going to come out of our pockets, consumers' pockets, because we will have higher premiums. Is that the case?

SCRUGGS: No, it's not the case, unless the insurance companies get away with convincing Congress or the public that they need to increase the premium. In fact, they have already increased the premiums far more than they need to cover the losses from Hurricane Katrina.

It was an article in the Reuters recently where the spokesman for the insurance industry's association said they had $435 billion available for Katrina, but didn't expect the damages to exceed $40 billion...

WILLIS: Right. Let me interrupt you here again if I can, Dick. It's not unusual for premiums to go up in the wake of a big disaster like Katrina. And I know a lot of people worry that they'll be on the hook for more. In the -- tell us what -- how the storm surge -- and that's the key phrase here that you're using -- is going to make the difference here. SCRUGGS: Storm surge is something that is caused only by a hurricane. And everybody that has a policy that we're representing has something called a hurricane endorsement. And everyone knows who writes insurance for that and who -- all the homeowners know that the principal danger from a hurricane is storm surge.

Then why sell them a hurricane endorsement, at an additional premium, and claim that storm surge is something like a flood, which is a totally different animal?

WILLIS: Well, Dick, I'm sure that the lawyers, the courts, maybe even juries deciding this maybe in coming weeks, coming months, coming years. Thanks for being with us today. We appreciate your time, and we wish you luck with your own home in Pascagoula, which we understand was damaged in this storm.

SCRUGGS: Yes, it was totally devastated. And thank you for your interest in the story.

WILLIS: We talked to insurers targeted in the suit. Basically, they say that the suit is a threat to the industry's financial health and could hurt efforts to pay future homeowner claims. They say the federal government is responsible for providing flood insurance.

For more, I spoke directly with the industry's advocate, the Insurance Information Institute, which says insurers have not collected premiums from consumers to pay for flood losses.

Bottom line, insurers say they have no responsibility for your damage caused by flooding. But there may be a recourse. More on that a little later in the show.

Coming up, making sure the home is protected if disaster strikes. The critical information about your policy you need to have.

And later, looking at different types of damage. We'll break down what's covered and what is not. That's just ahead on OPEN HOUSE.

(COMMERCIAL BREAK)

WILLIS: It will be a while until the insurance industry figures out what to pay or not to pay. In the meantime, exasperated homeowners are waiting for immediate assistance, an instant stipend end check of $2,500. How is that helping anyone? Once again, here's Allan.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): Biloxi residents Seng Thai venting to his neighbor.

SENG THAI, BILOXI RESIDENT: What they tell me is flood, it's no wind and storm bring it in. How'd the water get into the house six feet high, eight feet high? And now, as you said, nothing's covered.

CHERNOFF: An insurance adjuster told Thai it was a flood, not a hurricane, that caused the bulk of damage to his home. Thai's policy does not include flood coverage.

THAI: The hurricane this morning, it's six feet high above the cover. Below, it's not covered, which is everything below is damaged, the whole thing.

CHERNOFF: The same devastating news is being heard up and down the demolished streets of Biloxi. Many homeowners here did not buy flood insurance because the area is not designated as a flood zone.

Thai's insurance company, Nationwide, tells CNN it can't speak about individual claims, for privacy reasons. But industry regulators confirm standard homeowners' policies exclude damage from flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind.

Nationwide says for flood coverage, homeowners have to have flood insurance through FEMA. Less than 5 percent of Biloxi's resident have such insurance.

BOBBY MIGUES, BILOXI RESIDENT: You are standing into the kitchen area right here. This is the kitchen.

CHERNOFF: Bobby Migues has flood coverage. His insurer said only that portion of his insurance will apply.

MIGUES: If you look around and you see parts of my roof in trees, parts of my roof over here and there, parts of my roof is sitting way over there, OK? Which shows you that the wind had to take that roof.

My insurance company has let me down. They have let me down. Put my money together and pay me what I'm due.

CHERNOFF: FEMA's flood insurance has limits, home coverage only up to $250,000. Mississippi's insurance commissioner told CNN Washington must help.

GEORGE DALE, MISSISSIPPI INSURANCE COMMISSIONER: It's going to require some type of federal bailout by our government to be able to make these people whole.

CHERNOFF: President Bush heard such requests when he toured in Mississippi on Monday but made no promises. Meanwhile, people now without homes hope their insurance companies will make good on the policies they thought were protecting them.

Allan Chernoff, CNN, Biloxi, Mississippi.

(END VIDEOTAPE)

WILLIS: So what can you do? Our next guest is not just a hurricane survivor himself, the experience made him a leading consumer advocate, taking the insurance industry to task. Steve Kanstoroom joined me earlier to share his story and help you get prepared.

Let's get right to the advice, then. You say, for example, that people who are out there who have been hit by the hurricane, first thing to do, read that insurance policy. Now, Steve, I got to tell you, these policies are full of gobbledygook. What am I looking for when I'm reading it?

STEVE KANSTOROOM, HURRICANE VICTIMS' ADVOCATE: There's a couple key things. Number one is, what's your coverage? How many dollars worth of coverage do you have, and what type of policy is it? Is it a replacement cost value policy? Most of these policies out there have that language in it. And it's vital that the consumer understand that's what they're entitled to.

WILLIS: What does that mean?

KANSTOROOM: That means that they're entitled to the dollars to repair that loss as though it had never happened. That doesn't mean a dab of paint such that the rest of the wall doesn't match. That means as if it never happened.

WILLIS: So if you had those beautiful Brazilian hardwood floors, you get them all over again, is that what it means?

KANSTOROOM: That, what it means is, they're to be as they were prior to the loss. If they didn't have sewage in them before, they're not to have sewage in them now. If that means that they have to take the base up to get at the floor, that means, oh, well, they've got to take the base up to get at the floor.

WILLIS: So a full and complete job. The other thing you say, Steve, is, you say, document everything, because it's not the insurance company's responsibility to know what's in your house. It is yours, right?

KANSTOROOM: That's right. And it's your responsibility to tell the carrier what is damaged. And while the adjuster might do that for you as a courtesy, at the end of the day, the only one looking out for you is you. And the consumer needs to realize that. The sooner they understand that, the better.

WILLIS: Well, how often do people actually have a full list, and how do you about getting that if your house is already a mess?

KANSTOROOM: Well, it's not so much the list. While that's a very -- that's important, and it's very helpful for your contents, as far as the structure is concerned, it's important for the homeowner to know what that document is to entail. What's damaged? Is the living room damaged? Is the kitchen damaged?

I've been involved in claims where the adjuster left whole rooms off of the proof-of-loss form. The victim is obviously stressed from the horrific event. They might not even notice that until six months later when the contractor shows up, and then they've got troubles.

WILLIS: Well, and that's the flip side, is all this is happening to people when they're, you know, least well prepared to really deal with it, and to influence somebody who's coming into the house. What do you do? Do you take them room to room by hand, almost, to make sure that they're seeing absolutely everything they should?

KANSTOROOM: Well, you certainly want to point out the damage that you're aware of, and you certainly want to point out any complexities that you're aware of, or special values that you have.

In a storm like this, the insurance industry, they don't have the adjusters to work these losses as you would hope that they would. And the -- if you're fortunate enough to get a seasoned adjuster, someone with construction experience, you're way ahead of the game.

WILLIS: OK.

KANSTOROOM: Often that's not the case. And oftentimes, they just, they don't have the experience, especially in the states that are affected here.

WILLIS: Well, that's really not good to hear. In your case, were you ever made whole for your claim?

KANSTOROOM: For my flood claim, I was. I was offered $85,000 and told that that's all I was entitled to. I knew better. I read the -- not just the policy, I read the regulations. And my $85,000 claim that they just said, For sure, this is all you're entitled to, was actually a quarter of a million dollars that I received.

Took a lot of work. But that's what I received.

WILLIS: Do you think that victims will get treated better this time around?

KANSTOROOM: No, not without immediate steps on Congress, I don't. The adjusters are already calling me, saying, Steve, the same adjuster practices that have plagued victims from the prior storms, they're happening right now in Katrina. I was on Capitol Hill just yesterday explaining that to some of the representatives there.

WILLIS: Well, Steve, we really appreciate your being with us today. Good luck in your quest. Thank you so much.

KANSTOROOM: Thank you.

WILLIS: If you've been affected by Hurricane Katrina and would like more information on filing an insurance claim, here are some numbers you can call, the Louisiana Department of Insurance at 800- 259-5300, the Mississippi Department of Insurance at 866-856-1982, and the Alabama Department of Insurance at 334-269-3550.

Now, for general in homeowner's insurance information, or for more on insurance reform, contact the Hurricane Insurance Center at 800-942-4242, or Americans for Insurance Reform at 888-450-5545.

Coming up, my tips on what you need to do now to get the very best settlement from your insurer. We'll look at what kind of damage qualifies for insurance coverage and how to hold your adjuster's feet to the fire.

That's just ahead on OPEN HOUSE.

(COMMERCIAL BREAK)

WILLIS: We've come at you with a lot of information today. So if you are hit by a hurricane, let's recap what you need to know.

First, keep your wits about you. The burden is on you to document your losses. Take your adjuster by the hand to see every bit of damage your home has sustained.

This is a difficult time, but you need to make a log of your damaged possessions, including electronics, furniture, and clothing, to give to that adjuster. Don't forget to estimate their costs, and take pictures if you can.

Understand that adjusters have leeway in determining whether your damage is due to wind or to water. Some experts say it's even impossible to tell the difference. Remember, if the adjuster decides your loss is from flooding, and flooding alone, you'll get no money at all from your home insurance policy, unless you also bought flood insurance.

However, signs of damage that are typically covered by the standard homeowner's policy include roof damage, broken windows, fallen trees, wet attic insulation. You'll have to have flood coverage, though, to repair a foundation that has moved or shifted, water damage that's left rings on the walls, walls that are bulging from the floor up, or furniture that is wet from the bottom up.

Finally, don't be shy to complain if you're not getting what you want. Call your state insurance commissioner or the attorney general if you're not being treated fairly. Your adjuster may make it seem like a poor settlement is your fault, because you picked a poor insurer. Not true. Your policy is there to protect you, and situations like the one you're in right now.

If you don't get satisfaction from state agencies, hire an independent insurance adjuster. They're not inexpensive, but they will become your advocate.

Insurance is a tough topic. The key thing is to understand your policy and to know what you're paying for. If you have more questions or more comments, please e-mail us at openhouse@cnn.com.

We'll be back next week. "CNN LIVE SATURDAY" is next.

(COMMERCIAL BREAK)

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com