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Rising from Ruin is an on-going MSNBC.com special report chronicling two coastal Mississippi towns, Bay St. Louis and Waveland, as they rebuild after Hurricane Katrina.

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This project is evolving. Our daily dispatches coverage has been retired. Click here to see what happened in the area between mid October and January 1, 2006.

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BAY ST. LOUIS, Miss. -- First came Katrina to wipe out their homes, then came the insurance adjusters to deliver the really bad news.

Because most of the damage in Bay St. Louis and Waveland was caused by storm surge and flooding, the vast majority of homeowners and many business owners are being told they were uninsured or underinsured for their losses.

While homeowners insurance pays for wind damage caused by hurricanes, including damage from rain that comes in through broken windows and roofs, major carriers are unanimously refusing to pay for destruction caused by the massive wall of water that inundated the Mississippi coast and wrecked thousands of homes.

Only flood insurance offered by the federal government is covering the water damage, and few homeowners had it -- because few thought they needed it.

Since Katrina swept through the Gulf Coast Aug. 29, the multibillion-dollar issue of wind vs. water damage has been a topic of intense discussion from the Bay-Waveland area to Capitol Hill, where lawmakers are trying several strategies to save homes from foreclosure and speed the rebuilding process.

They hope to act in time to help people like Waveland resident Honey Spoon, 28, a single mother who closed in May on her first home only to have it destroyed three months later by Katrina. The manager of a popular Mexican restaurant in Bay St. Louis, she worked for years to improve her credit enough to buy a charming 1920s bungalow on 1.2 acres for $122,000.

Her mortgage company has suspended late fees for at least six months on her $850 monthly payments, but she is not sure what she will do when the grace period ends and already is talking about bankruptcy.

"I just want my house," said Spoon, who now lives behind the restaurant in a FEMA-issued trailer with her adorable 8-year old daughter. "I don't want handouts. I work to make an honest living. But I don't know what's going to happen."

Retired Marine Master Sgt. Pete Benvenutti, 80, had paid off the mortgage on his wrecked 107-year-old home in Bay St. Louis and is trying to figure out how to afford the $200,000 it will take to rebuild when he got only $50,000 from his insurance company.

"At 80 years old I'm not looking forward to a 30-year mortgage," Pete said.

Pat Murphy, a Waveland window salesman who leads a seven-piece jazz and blues band, can repair his storm-gutted home but likely will need $100,000 and a new mortgage when he was only a few years away from paying off the old one.

“I’ll be 57 in February,” he said. “This is not where I anticipated I would be at 57 years old. This is something everybody is going through.”

They and thousands of others are discovering that if they thought they had “hurricane insurance,” they were sadly mistaken.

“There is no ambiguity whatsoever -- I don’t know if I can make the statement any clearer than that,” said Bob Hartwig, chief economist for the Insurance Information Institute, an industry trade group. “It was common knowledge on the Gulf Coast … that flood is not covered, has not been covered and never will be covered under a homeowners’ policy.”

Many local residents and political leaders argue that Katrina’s enormous storm surge does not fit the usual layman’s definition of a flood.

“They are using the fine print in people’s policies to take financial advantage of them,” U.S. Rep. Gene Taylor, a Democrat from Bay St. Louis, said in an interview.

“A 30-foot wall of water that is pushed in by a hurricane is, I think, the flimsiest of excuses that those people could ever find for not paying on those claims,” said Taylor. “It was not a flood. It was a hurricane caused by wind, and they ought to pay.”

Hartwig argues that the language is clear and unambiguous. The standard homeowners policy approved by regulators in every state excludes any “loss caused by, resulting from, contributed to or aggravated by flood, surface water, waves, tidal water or overflow of any body of water, or spray from any of these, whether or not driven by wind," according to sample language provided by the trade group.

Nevertheless state Attorney General Jim Hood has filed suit against State Farm, Allstate, Mississippi Farm Bureau and other carriers, trying to force them to pay up for damage from Katrina. He argues that homeowners bought their insurance “for the primary purpose of insuring against any damage that could possibly result from hurricanes originating in the Gulf of Mexico.”

In a civil complaint filed in September in state chancery court, he argues that the flood exclusions are ambiguous, unenforceable and “procedurally unconscionable.”

An industry trade group responded that the attempt to “retroactively rewrite policies” would, if successful, “destroy the viability of every insurance policy in the state and undermine the integrity of every legal contract in the nation.” The industry is trying to move the case into federal court.

Private attorneys led by Richard Scruggs, who lost his own Pascagoula home to the storm, also have filed suit, trying to force insurance companies to pay. Other attorneys are taking a different tack, trying to negotiate by bringing in engineers to show that homes were damaged or destroyed by Katrina’s winds before the storm surged finished them off.

Taylor has introduced a bill that would essentially allow people in the affected area to buy flood insurance retroactively, giving them coverage nearly up to the amount of their homeowners insurance if they agree to keep the property insured for flood in the future.

Officials of the National Flood Insurance Program are strongly opposed, saying it would discourage homeowners nationwide from buying flood insurance.

But Taylor said he is optimistic that Congress will act on his bill or similar proposals intended to bring direct relief to homeowners who carried insurance, lived outside the so-called “flood plain” and are being denied coverage by their carriers.

“I see this as the real make-it-or-break-it issue -- whether or not I can help these people hang on to the homes and have something there to rebuild their lives,” he said.

Flood insurance is surprisingly cheap (as low as $233 for $100,000 in coverage), but even many insurance agents acknowledge there is widespread confusion about it. In the New Orleans area, some 60 percent of homeowners had flood insurance because they lived in a known flood hazard zone.

But in Bay St. Louis and Waveland the situation was different. Only about 15 percent of southern Mississippi homeowners had flood insurance because lenders only required it in the “special flood hazard area,” generally for those homes closest to the Gulf or in low-lying areas.

The flood hazard area is determined by FEMA, which oversees the flood insurance program and issues maps describing the so-called 100-year floodplain and other hazards that determine whether lenders will require flood insurance.

People on higher ground were not required to have flood insurance and generally did not, reasoning that they did not need it because their house stayed dry during Hurricane Camille in 1969, which made a direct hit on Bay St. Louis and until now was the benchmark for the area.

Business and homeowners commonly describe their status outside the federal special hazard area by saying they lived in a “no flood” zone. Many say they were told by their insurance agent that they did not need flood insurance.

“A number of insured are very confused about all this,” said Dave Treutel Jr., a prominent Bay St. Louis insurance agent. “My philosophy has always been, if you are in the three coastal counties, you are in a flood zone.”

Yet he did not carry flood insurance on his Old Town office building, which took on six feet of water.

Why not? “Because in the 300 years since d’Iberville and de Bienville landed, there has never been water on that bluff,” he said, echoing a sentiment heard frequently in an area still reeling from what one resident called “a 1,500-year storm.”

Murphy, the Waveland band leader, is a fifth-generation Hancock County resident who calls himself “about as local as you can get.”

He has known his insurance agent since they attended St. Stanislaus High School together some 40 years ago. He has been doing business with the agent, whom he declined to identify, for 25 years and still considers him a friend, although “there are things that need to be said. There was miscommunication.”

Just last year he met with the agent and bumped up the coverage on his 2,750-square-foot structure to $225,000 plus $70,000 for the contents. His insurance company has offered him $16,000 for roof damage and additional living expenses.

Some people are not quite certain whom to blame or what to do. Taylor and others say the federal flood maps were partly culpable because they vastly underestimated the potential flood zone. New advisory flood maps published by FEMA after Katrina would put thousands more homes in the special hazard area, meaning that lenders will require flood insurance in the future.

“The insurance agents are not the bad guy in this thing,” said Pete Benvenutti’s son Chuck, an accountant and local civic leader. “I’m not sure there is a bad guy.”

He and others say they are just hoping for the type of aid that was extended to victims of the 9/11 terrorist attacks, or previous disasters like flooding in the Midwest and California earthquakes.

“Maybe we don’t need to blame anybody,” Chuck Benvenutti said. “Maybe we need to say, 'Guys, we in south Mississippi need a hand. We need some help from our family in the rest of the nation.' Otherwise we will allow thousands and thousands of homes to go into foreclosure. We are not talking recession, we are talking depression.”

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this thing would badly damage insurance agencys but what of the folks that pay their prememim on time? the companys issued the policys now they are being shady with fine print...can they be trusted in the fucture..i dont thank so..these companys should be expelled from mississippi....contact jim hood ms. attorney general...stick togather mississippians

Wind or Flood. . .this is not a new issue. . .When Camille hit the same problem arose. . . My insurer offerd to settle for about 50%. . . (I lost my home 1 1/2 blocks form the beach on Terrace in Waveland.) You could sue. . .then you get to pay the attorney 1/3 of what you recieve. . . . . .one year to the day (you must sue or settle in one year). . . I settled for 75%. . .

Everything said here is true. We were told we had no need whatsoever for flood insurance. We just refinanced in June and I was told we were not in a flood plain and probably would not even qualify for this type of insurance. Our insurance agent won't even talk to us and we were offered less than 9,000.00 dollars to repair our soon to be bulldozed 175,000 dollar home.We can't find a home to live in because we can't PROVE that we will have our "old" house paid off. We've paid on our homeowners and wind and hail policies, without a single claim, for well over 11 years. When do we and others like us get some relief??? Unfortunatly bankrupty may be our sole option. Where is all the donations that have benn given to our area? How can we all get some help before what's left of our lives also gets demolished? 'Hope' right now, really seems be a four lettered word of the worst kind.

Isn't the insurance companies there to help people recover from when bad things hit? You'd think they were just a gimic to make money???

Shame on the attorneys and Congressmen who raise hopes for the uninsured. The home owner policies have excluded flood and wave action wheather wind driven or not for at least forty years. This seems to be the same type of self serving hype from attorneys and Congressmen that surfaces after every storm Shame!!

Maybe Insurance companies should just cover EVERYTHING and then we just pay the extra 4 or 5 times what the rates are now. That seems fair. Oh wait, then people will complain because they cant afford insurance.

Like any other contract, you should always read and understand what you are paying for BEFORE you purchase. Not after and certain not after the storm.

Look, I empathize with the plight of these folks, but the fact is simple - a hurricane may flood your house if you're within a few miles of the coast.

If you're in a "X" flood zone (no special risk) then the insurance is DIRT CHEAP. You can't get replacement value on a mansion (the amount is capped which you can buy) but its NOT EXPENSIVE.

I pay less than $400 a year, and I live on an inland waterway which COULD take surge damage. Opal and Ivan tried - and got VERY close - to flooding me. I am not required to have flood insurance, but you can bet I do have it, because I live where a hurricane can hit me.

EVEN INLAND you need it if you're within 50 - and perhaps 100 - miles of the coast unless you are on known high ground. Why? Because inland flooding caused by torrential rains is a common problem with hurricanes.

Folks, we're talking about very inexpensive insurance if you're not in a special risk area. I don't understand how anyone who lives anywhere near the coast thinks they don't need this.

You do.

I pray that the insurance companies do the right thing by all their customers here and give the people what they paid for in their premiums, so that they can get on with their lives.

There is NO excuse for anyone living in the coastal counties of MS to not have had flood insurance. Hurricane Andrew in the 90's should have been enough of a wake up call for anyone on the coast. Now the people want the rest of the country to underwrite there poor decisions - is that fair to the rest of us? It's regretable that some will have to get & pay new mortgages to repair their damage but it was a choice they made & they have to live with the results of that choice. National Flood Insurance was CHEAP in these areas - everyone living there should have had it & they have no one to blame but themselves for the fact that they didn't. The people in these areas need to quit trying to make others responsible for there flawed planning.

dont expect...new york aid...because WE live in mississippi....they dont judge us in the same manner it seems...but we are americans too

In this great country I fine it irrehensible that we give so much in foreign aid but when it involves taking care of our own these companies are splitting hairs. Everyone affected by the hurricaine should be compensated by their insurance companies and then aided by the government. In order to continue to have faith in insurance companies and our government we must all foresee the increased premiums lest this happen to those of us yet unaffected. Shame on these insurance companies!!

Thanks Marty and MSNBC.COM for helping to keep us informed on the insurance side of this story. It effects us all along the coast. Hopefully my story regarding Katrina will help others. My home on Lafitte Dr. Waveland, was totally destroyed along with all of my neighbors. My adjuster asked me if by chance a tree had fallen on my property, was the tree a good size tree, was the root ball still attached to the ground, and did it fall into the house? In fact all of the above was true. She turned in the claim. Then she called about a month later to say that all the claims, south of the tracts in Waveland, had been reworked due to eyewitness accounts during the storm. She said that the findings were that a tornado had ripped through Waveland, south of the tracts, destroying the homes, prior to the surge. My insurance company(Wind & Hail Policy) paid the limit of my policy. I feel remarkably fortunate. I hope this information helps everyone on my street, in my community, in the town of Waveland and beyond. God Bless you all.

We have lived here for 23 years and had flood insurance on the two different houses we owned. In June of this year we started to build our new house and we immediately purchased Builder's Risk insurance. We were told it covered "everything", was not even mentioned to us that flood and earthquake had to be ADDED on. As you can guess after the fact we were told by the agent, "oh, you didn't add that on"? Our fault? Guess so, but from now on we will get a lawyer involved with anything to do with insurance. If you want to keep up with what is happening on the coast of Mississippi check out wlox.com, sunherald.com, katrina.passchristian.net, and arloandjanis.com. For those concerned about the pets here that have lost there homes , hssm.org


it's so easy for others to say- living in MS without proper insurance was a choice. Obviously living for most people - where you grow up, having a mortgage and family, job security- sure, it's all a choice to have these things, but for most people -no matter where they live- moving is not an affordable or realistic option. It is quite true that the insurance companies since Katrina have altered the "settlements" due to: was it hail vs wind vs flood vs tornado ect..., therefore leaving thousands of honest, bill-paying, hard-working Americans (who just happen to live in MS) without a home. It's sad to hear other Americans give us the "you get what you deserve" attitude. No one here is asking for a handout, we only want a Realistic settlement for our homes!! Thank you to MSNBC for sharing this with the rest of the nation.

I lived in the New Orleans area for 26 years. EVERYONE knows the difference between flood and hurricane insurance. To claim otherwise is being dishonest. Accept that you screwed up and stop asking the rest of the country to bail you out.

It is unfortunate what has happened to the many thousands of people in all of the affected areas, but trying to blame you insurance company for your loss is absolutely ridiculous. I have worked in the insurance industry for several years and encounter this same type of reaction whether it is a major series of losses or one single loss by one individual. Yes, the coverages should be fully explained to customers and the customer need to understand what is covered and not covered, a majority of time this is the case. Even then it is very common for the insured to believe they are covered for something they are not after a period of time. All homeowners policies are clear on what is and is not covered and if there is a question on that, it is the responsibility of the insured to understand this. No home policy is written to cover the losses most people incurred in regards to the tidal surge, this is strictly the domain of flood policies. This coverage is not expensive considering what it covers, all homeowners should consider it if they are within bodies of water that could overflow into their homes, floodplain or not. Once again, I do feel for everyone and their losses, but unfortunatly what is not covered can not be paid for by the insurance industry.

Shame on the Attorny General. As a lawyer he should be able to read acontract and to understand the consequences of this suit. Ifthey win(very unlikely) all that will happen is that the insurance companyies will go bankrupt, which means that legitimate claims will go unpaid and that there will be an exodus from the private market so that people will not be able to afford insurance if they can even find someone to provide it. You can't blame the insurance co. for a failure to properly plan. People living near water need flood coverage, period.
I'm sorry for these people who have experienced this tragedy but it wasn't unpredictible and people must take some responsibility, you are not required to have life insurance or even health insurance but most people are reasonable enough to know they should get it. Flood insurance is on average cheaper than either one!

There is no reason whatsoever to pay people insurance claims for insurance they did not have. Flood insurance is, and has been heavily promoted by ads on TV and elsewhere, a separate policy. If people CHOSE to take the RISK by not buying the insurance then they need to accept that they made a bad decision, and live with the results. That's the RISK they took and the rest of us shouldn't have to pay for it. What's next, Vegas losses ?

I agree completely with Patty Hancock (msg sent 11/25/05 @ 10:56:09am)!!! It's a *@#! shame that we can rebuild places like Iraq but can't take of our own at home...We send our own sons daughters abroad at what cost but what do we offer their families??? Somewhere the priorities got skewed!

The flood insurance program has been in existence for a very long time. You can't expect insurance companies to pay for damage that was specifically excluded from their coverage.

If you live in a coastal area and did not sign up for the flood insurance program, you can't expect others to pay for your mistake. If we go back and rewrite contracts after the fact, why would anyone bother buying insurance? They can just get it after the disaster.

I think it's just terrible what the insurance companies are doing to these people who have lost everything. These insurance adjustors need to get out there and see how devasted the hurricane hit areas are. It's time for a major change of heart in the insurance industry.

It is unfortunate that so many people find themselves is dire straights because of the force of nature. However, hurricanes are a common event along coastal areas. Those that choose to live in those areas have a personal responsibility to adequately cover their own bases. Don't look to the rest of us to make good on a choice gone bad. I am definitely not down on paying higher insurance premiums because of those among us that want to live in a beachfront community rather than slog around in a foot of snow every winter. Cry me a river.

As a homeowner, you need to be prepared for anything. Just because someone tells you you don't live in a flood plain or you don't have tornados or earthquakes doesn't mean it can't happen. We have flood insurance and we live in Phoenix Arizona for christ sakes!! We don't live near a coastline or any body of water for that matter nor do we get much rain. But I am not about to take a chance on losing my home if we get a huge storm. Apparently many underinsured or uninsured made the decision to place their homes at risk in certain instances and now they want everyone to make an exception and give them what they haven't paid for. Sorry about your loss but that's the chance you took.

It is wrong for Representative Gene Taylor to even suggest retroactive federal insurance! That means citizens of disasters in other areas of USA, with out coverages will pay for those that did not have insurances! The many poor and homeless, or those in apartments and do not own homes will be forced to pay!

It is a sad shame that the people who had a choice, to have, or not have, insurance...or a choice, to live, or not live in a hurricane area have such devastating problems, but, it is not my responsibility to pay! The represenative Taylor should see that ALL USA citizens are protected! Representative Taylor should see that ALL people have homes, and insurance! Representative Taylor should try to pass laws that protect every one EVERY ONE from, hurricanes, tornadoes, rain, earth quakes, wind, flood, damage from poor construction, and or neglect! Representative Taylor is grand standing on peoples misery and suffering, of which no one had any controll! But, why should people living in ghettos of USA cities, be asked to pay for homes, when they themselves do not even have one?

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