Posted on 02/23/2007 4:30:45 AM PST by PolishProud
One big question when Democrats took over Congress was which industry would be first to feel the new majority's populist rage. Oil? Pharma? Banks? Corporate America just got its answer, direct from the angriest man to have been empowered in the past election: Republican Sen. Trent Lott. Like many Gulf Coast residents, Mr. Lott was soon reminded by his insurer, State Farm, that his policy only covered wind damage--not flood damage.
(Excerpt) Read more at opinionjournal.com ...
The insurance companies have a point. There is a difference between a flood and a storm surge.
The real issue is what the insurance companies meant BEFORE the storm hit when they sold flood insurance. If they can prove that they did not include "storm surge" as flooding, then they shouldn't have to pay.
That gets us to "hurrican coverage." If they sold hurrican coverage and specifically exempted "storm surge" from THAT, then they should not have to cover it.
Do they offer "storm surge" insurance? I'd say that NOT selling such coverage would indicate they had not considered it separate from either hurricane or flood insurance.
Most insurance policies specifically exclude damage due to floods. Owners can also buy flood insurance, but for considerably higher cost. Where is the fraud?
Lott is a political scumbag. He was paid for his loss by the flood insurance & now he wants to be paid a second time by Allstate. He is nothing but a greedy thief who wants to profit from his loss.
Lott paid for coverage on his home for storm damage. His home took the brunt of the storm being in the right front quadrant and sustained considerable damage. Then, the rising water from the storm surge came and washed away the evidence giving the insurance companies their chance to defraud Lott and others. What the insurance companies are doing is despicable.
If this passes I want my flood insuance refunded now. I live on the Gulf coast in TX, south east Harris county. You are bloody fool if you do not have seperate fllod insurance policy. Now my premiums will certainly go up to pay for these idiots and the greed and lack of forsight.
I live by a beautiful river. That river floods, and a portion of my property is within the 100-year line. That portion of the property has been under water twice in the last ten years.
I don't think I'm going to put a Million-dollar house down on that portion of the property. But if I do decide to do so, I will not come crying to you to bail me out when it gets flooded.
I agree completely. I live 860 feet above sea level, in an area that hasn't flooded for 54 years, and the flood level 54 years ago was a foot below my basement floor. Yet my (required) flood insurance rate is four times that of my homeowners insurance rate. This is so that my flood premiums can cover people like Lott who live 6 feet above sea level. Just as those who live in glass houses shouldn't throw stones, those who live on the ocean should pay for their own insurance. Don't expect me to help pay for it.
Lott was paid in full since he had National Flood Insurance. He's trying to double-dip.
It looks like the problem is that he built a house worth considerably more than $350,000.00 on the waterfront, therefore he could not insure it for the full value under the subsidized federal flood insurance program.
If a house cannot be insured, you should really think long and hard about building it. If you want to take the risk, and you have the money, then take the risk. But if you take the risk and lose, don't come whining to Congress about it.
The sad thing is that this effort on Lott's part will raise the rates on everybody who owns a house in a flood plain, most of which are modest and built responsibly. These people will be soaked to subsidize the super-wealthy who have the money to build mansions on the beach.
Generally one assumes a flood is caused by an over-accumulation of rain mixed with gravity. In this case the damage was caused by an over-accumulation of wind which overcame the forces of gravity and as such it is not technically "flood" damage, but is wind damage.
It's kinda like taking out a tornado policy and then a tornado comes to your town and picks up a neighbor's car and deposits it on top of your otherwise un-damaged-by-the-wind home and then the insurance company refuses to pay for the damage caused to your home because the policy did not cover damage caused by automobiles.
The article states that Lott had flood insurance for $350,000. He's trying to double-dip and get paid twice -- once by State Farm and once by National Flood Insurance.
In a lot of these cases, all that was left was the slab. It was not clear whether wind or water destroyed the house, it could very well have been wind. Also, I may be the only one on FR who feels this way, but to me it seems kind of silly for an insurance company to exempt itself from flood damage. Can they write policies that exempt them from fire damage? You said that our insurance system favors the stupid. What if two stupid people bought a house, then bought basic homeowners insurance. They might just think they were covered -- they have homeowners insurance, don't they? They don't even have to be that stupid, just ignorant.
Additionally, course of dealing is not in the company's favor - that is, the way they acted (and spoke) after Katrina.
I worked in a Personal Injury firm one summer in law school. From that, I learned that some PI lawyers are as sleazy as their reputation, but most are not. The true evil sleazebags are in the insurance companies.
Yes, I agree. Unless they specifically mentioned and exempted storm surge, then it has to have been covered either under hurricane coverage or under flood coverage.
They cannot have it both ways. You can't say it's "wind" when dealing with the flood policy, and then turn around and say it's "flood" when discussing the hurricane policy.
And if they don't specifically sell something called "storm surge" coverage, then they would have a hard time claiming they had "meant" to exempt it.
In my understanding, there is a demarkation between wind and flood damage. Flood damage is covered under the subsidized National Flood Insurance Program and other storm damage is covered by the storm insurance one buys privately, such as that offered by State Farm.
The NFIP payed Mr. Lott. It would seem to me that this means the damage he sustained is from a flood. Now he wants State Farm to pay him again for the same damage. These policies are specifically designed so that the damage is one or the other. So you have flood insurance and storm insurance, you are fully covered by one or the other.
The problem here is that Mr. Lott chose to build a house on the waterfront that was too expensive to be fully covered by the NFIP. Like so many government programs (many of which he supports), it denies benefits to the wealthy. Although limitations on coverage are perfectly clear, Lott decided to build his mansion on the beach anyway, and now wants to be compensated for his poor decision.
If Mr. Lott's losses were below the limitations of the NFIP, he would not be bothering State Farm at all. He would have taken his money from the Feds and been a happy camper. But, since his house was worth more than it was insured for, he has a loss, and is looking to have somebody else pay for that loss. What he really needed was gap insurance, in order to pay the flood losses in excess of what the NFIP would cover. This is not what he had from State Farm.
The question is, do we want to structure the National Flood Insurance Program to basically tax anybody unfortunate enough to live near a body of water in order to subsidize the beachfront mansions of the filthy rich? I say this not to engage in class warfare, but as a legitimate question of public policy. From an overall point of view, building mansions under water is costly and wasteful. If we subsidize that activity, we will get a lot more costly and wasteful behaviour.
Flood insurance is provided by a the subsidized National Flood Insurance Program. Other types of storm coverage are sold by private entities, like State Farm.
The reason for the demarcation is that flood coverage qualifies for the subsidy and the other insurance does not. So they have to be kept separate.
Now, you could say that from a free market, Milton Freeman point-of-view, this whole problem was cause by government interference in the flood insurance market. And if you said that, you would probably be right.
But the sight of Trent Lott, who has been promoting government interference in private markets all his adult life, complaining that the limits of coverage under these laws is not quite to his liking, is risible.
In that case Mr. Lott is clearly being disengenuous. If he accepted payment from a program which covers floods and his State Farm policy excluded flood damage and he is now claiming that the storm surge was not a "flood", then he has committed insurance fraud against the NFIP.
If he wants State Farm to cover this event, then he must return the NFIP money and seek his remedy solely against State Farm. In this case, since the NFIP has picked up benefits, I think it is pretty clear that the NFIP and State Farm both agree the damage was "flood" damage.
Sorry Lott.
Sometimes ignorance is expensive. I have made ignorant decisions in my life, and have paid dearly for them. But I did not go whining to the government every time I did.
"In this case the damage was caused by an over-accumulation of wind"
I take it that's a reference to Congress being in session!!!
The state legislature decided in 2006 that the judge had incorrectly interpreted the law, but their new legislation would not be retroactive.
It was a bad ruling that cost insurer millions of dollars. They have no choice but to try and fight.
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