LAKESHORE, Miss. -- A lot of people believe their homes were destroyed by tornadoes generated by Hurricane Katrina rather than the storm's killer surge, but John Trowbridge makes a more compelling case than most.
Trowbridge's modest two-story home near Waveland was demolished along with two neighboring homes while other houses of the same style and age in the neighborhood remained standing, despite taking about 8 feet of water. That led virtually every insurance adjuster and engineer who inspected the scene to conclude that a tornado touched down and caused the devastation, Trowbridge and his attorney say.
Yet his carrier Nationwide has paid him only $515.62 (after subtracting a deductible of about $2,000) and denied his request for additional payment, saying it was not liable because Katrina's storm surge caused at least some of the damage. "Loss resulting from water or water-borne material is not covered even if other perils contributed, directly or indirectly to cause the loss," Nationwide's adjuster wrote in his denial letter.
A spokesman for Nationwide said he could not comment directly on the case, citing both privacy issues and the pending litigation.
Trowbridge and his wife, Judy, are among thousands of homeowners battling their insurance companies in the ongoing wind vs. water debate that is still a prime topic of conversation among Katrina survivors and is seen as a major barrier to the ability of many people to rebuild in southern Mississippi.
Like bereaved victims passing through various stages of grief, many homeowners have followed a predictable pattern in their dealings with insurance carriers: Optimism that their claim will be honored, outrage when it is denied, bargaining that is usually fruitless, mediation and finally litigation.
'My blood pressure goes up'
We are now well into the litigation phase, as plaintiffs' lawyers have signed up perhaps 1,000 or more clients in south Mississippi alone, and cases are beginning to wend their way through state and federal court. Dozens if not hundreds of cases are pending as well in Louisiana, where frustrated homeowners have filed suit against insurance companies, levee boards and the U.S. Army Corps of Engineers over damage related to Katrina.
"Every time I hear the name Nationwide my blood pressure goes up," said Trowbridge, 51, a supervisor for Lockheed Martin at NASA's Michoud assembly facility in New Orleans.
Trowbridge's house was one of an estimated 134,000 that were destroyed or badly damaged in Mississippi, and several lawyers say many of the owners are turning litigious as they conclude they have few other options if they want to try to get more out of their insurance carriers.
"They are going to lose every single one of those suits once they get to trial," state Attorney General Jim Hood said of the insurance companies. "Those juries are not going to have any mercy on them."
Hood, who filed suit against major carriers on behalf of homeowners less then three weeks after Katrina swept ashore, called on the insurance companies to "come to the table" and negotiate an agreement offering an interpretation of their policies that is more favorable to homeowners.
"Otherwise they will continue to get hammered by juries for 10 years out," he said. "I want the insurance companies to do their part, nothing more."
The insurance industry contends that damage from storm surge is properly excluded as a type of flooding, which generally is covered only by separate flood insurance offered by the federal government that offers a maximum payout of about $250,000 for structural damage. Many homeowners who lost their homes in the storm were not required to carry flood insurance, and even some who had the coverage are suing for compensation for damage they say was caused by wind.
Lawsuit 'threatens ... industry's financial stability'
Hood's lawsuit "threatens to undermine the insurance industry's financial stability and its ability to respond not only to its obligations arising out of Katrina, but also its ability to respond to other claim obligations in Mississippi and elsewhere in the U.S.," said Dick Luedke, a spokesman for State Farm, the largest insurer of homes in the state.
The suit "is challenging the validity of contracts in Mississippi, and that threatens the foundation of the economy in that state and has enormous ramifications for every resident of the state," he said.
In addition to the case filed by Hood, litigation against the major insurers is moving ahead on several fronts.
Richard "Dickie" Scruggs, a well-known Mississippi plaintiffs' attorney who lost his own Pascagoula home to the hurricane, has filed lawsuits against five major insurance companies on behalf of seven clients, including Sen. Trent Lott and Rep. Gene Taylor, who both lost their homes. Scruggs has advertised heavily and says he has been retained by 850 clients who are prepared to sue in what amounts to a virtual class-action case.
Click to read previous related story, 'No assurances on insurance'
In one of the first decisions issued so far in the Katrina lawsuits, U.S. District Judge L.T. Senter denied Allstate Insurance Co.'s motion to dismiss one of Scruggs' cases and said Allstate would be liable for damage caused by wind and rain "regardless of whether a later inflow of water caused additional damage that would be excluded from coverage."
Another lawyer, Richard Phillips, has filed a separate class-action lawsuit against State Farm Fire and Casualty Co., contending that the carrier is improperly excluding losses caused by a combination of wind and water.
Trowbridge's attorney, Randy Santa Cruz of Bay St. Louis, is taking a slightly different approach, using engineering reports and meteorological data in an effort to prove on a case-by-case basis that his clients' homes suffered substantial wind damage before the storm surge hit.
Santa Cruz said insurance companies including State Farm and Nationwide are "badly misinterpreting" their own policies.
"I think it's an organized scheme on their part to avoid paying claims," he said. "They have to pay damage that would have occurred in the absence of a storm surge. They can't tell me there wouldn’t have been any damage without a storm surge. They have the burden to prove the existence of their exclusion."
'Fraudulent denial of claims'
Santa Cruz is also looking into reports that some engineering firms might have been pressured to change their conclusions to satisfy insurance company demands. In at least one case, an engineering report allegedly was altered to delete a reference to wind as the cause of damage to a Gulfport home and then signed with a forged signature, according to a complaint filed by homeowners Hubert and Joyce Smith. A lawyer for the engineering firm declined comment, saying the Smiths' complaint had not yet been formally served. A grand jury in Gulfport has subpoenaed insurance company documents, and Hood is investigating what his office described as the "the insurance industry's fraudulent denial of claims on the coast."
In Trowbridge's case, his wood-frame house was reduced to a heap of jumbled blue-gray lumber, insulation and assorted debris, while a half-dozen nearby homes of similar style and age were still standing and appeared structurally sound, although they had taken on up to 8 feet of water and needed significant repairs.
Only the homes of Trowbridge and two neighbors were destroyed so utterly that the experts who saw it concluded it must have been the result of localized intense wind activity.
"It is likely that tornadic activity occurred at or near the referenced address and caused substantial wind damage," said a report prepared for Nationwide by Conestoga-Rovers & Associates, an engineering firm. However, the report concluded that the house was destroyed by "a combination of forces consisting primarily of hurricane induced storm surge, wind-driven waves and the impact of floating debris."
Trowbridge's case is hardly unique. John "Corky" Hadden, 45, a financial adviser who owned a big home worth more than $500,000 in a prime Bay St. Louis location across from the yacht club, was left with little more than a slab and virtually no coverage from his homeowners' insurance. He, his wife and three teenage children are determined to rebuild on the same spot, where Hadden lived as a boy until the previous house was destroyed by Hurricane Camille in 1969.
Mediation ends in frustration
Just up North Beach Boulevard, Dr. Wesley McFarland, 82, and his wife, Rosemary, are staying part-time in a FEMA trailer on the now-vacant lot where they lived more than 50 years in a home that was worth more than $1 million with its contents, he said.
McFarland recently brought his case to a state-sponsored mediation hearing with a 42-page report he prepared, documenting what he called clear signs of wind damage to his former home. State Farm representatives offered less than 0.5 percent of what he sought. McFarland said, and the physician later appeared on a television advertisement paid for by Scruggs' law firm denouncing the mediation process.
Dr. Wesley McFarland and his wife Rosemary have little left of their home except for the front steps. (David Friedman / MSNBC.com)
The "slab claims" of Hadden and McFarland are among the most common type of insurance dispute being contested in Mississippi. State Insurance Commissioner George Dale, in a March 24 letter to State Farm, reminded the carrier that it cannot simply deny a claim for wind damage because the storm surge would have destroyed the home anyway. Instead, adjusters need to take into consideration accounts from witnesses and damage to neighboring homes and pay out whatever portion of the loss was due to wind, Dale said.
That offers a huge opening for plaintiffs like Hadden, whose lawyer, Santa Cruz, talks about sustained winds of 130 mph and witness' accounts of tornados in the beachfront area.
"The evidence is going to be pretty clear that there was extensive wind damage before the storm surge," Santa Cruz said.
For his part Hadden still seems to have a hard time believing that his claim was denied outright.
"I have been very careful about how I handle my financial situation," he said. "I met regularly with my insurance agent. I don't mind paying for small things but I wanted to avoid catastrophic losses. I felt like I had done everything by the book."
After the hurricane, Hadden was so confident about his insurance coverage that he actually spray-painted a notice on one of the surviving concrete-block pillars of his home: "All is well. Thank God and State Farm."
Molly and John "Corky" Hadden lost their beachfront home in Bay St. Louis to Katrina. Click ‘Play’ to see and hear Corky Hadden describe their legal battle with their insurer.
Those last three words have since been covered over with more spray paint. "State Farm in my opinion made a business decision to force people like us to take legal action to try to recover our money," Hadden said. "I think it's a terrible way to do business, and it's really one of the single biggest factors holding back the recovery of our coastline, the way that we've been treated by the insurance companies."
McFarland, a large, outspoken man who still works three days a week as a physician at NASA's Stennis Space Center, is also furious about his treatment by State Farm. "These people sold me something," he said. "I expect them to pay me what they owe me. If it takes two years, four years or more, we'll wait."
Trowbridge, in a baseball cap and windbreaker, still stares at the scene of his home's wreckage with a mixture of sadness and disbelief. He remembers the name of virtually every insurance agent, adjuster and engineer he has encountered since he first saw the destruction two days after the storm. He and his wife, Judy, immediately turned around and drove 100 miles to Hattiesburg and then another 230 miles to Birmingham, Ala., to find a working phone and file their claim.
After weeks of calling and waiting to hear an answer, the Trowbridges finally were told just before Thanksgiving that their claim was denied. Trowbridge, angry but determined, called the adjuster's supervisor in Memphis, Tenn.
'Happy Thanksgiving,' and goodbye
"I said, 'Can't we negotiate about this? Offer me something, please. Deal with me.' He said their lawyers had decided they could win in court. He wished me a happy Thanksgiving and then hung up," Trowbridge said.
Trowbridge retained Santa Cruz as his attorney shortly afterward, and they continued to try to reach an agreement by going through a mediation hearing arranged by the state Insurance Department. About 1,650 policy-holders have scheduled mediation, with 189 of the first 216 cases settled before or at the hearings, according to the department.
But in Trowbridge's case, Nationwide was unwilling to offer anything more.
"I was actually hopeful that we could come to some sort of agreement," he said. "They told me that you should be happy you got your flood (insurance)."
Trowbridge was paid in full by the National Flood Insurance Program and got about $120,000, although his losses were much higher. The Nationwide policy valued the house and contents at about $230,000, said Santa Cruz, and the lawsuit also seeks payment for replacement costs, attorney fees and punitive damages.
The Trowbridges knew they were potential targets for a killer storm, and after the 2004 tsunami in the Indian Ocean began to make plans to move to higher ground. Last spring they bought a piece of land on Firetower Road, near one of the highest points in the county, and began working feverishly to remodel their home, putting in new floors, new kitchen fixtures and a remodeled bathroom.
“We were to the point of putting a sign out” to sell it, Judy Trowbridge said.
Now they have taken out a loan from the Small Business Administration and are beginning work on their new home some 15 miles to the north.
"There was a while that we thought we were going to have to seek medical attention for depression," John Trowbridge said. "It still is a depressing time in our life."
Trying to remember 'normal'
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Insurance used to be the "Protection Racket", shady guys coming around looking for protection money and threatening home and business owners that something bad would happen if they didn't have protection. Now with the Bushies in power, business rules and the rest of us are fools.
Pat Hess (Sent Apr 3, 2006 2:10:02 PM)
Sad for all you folks that are going through this - as an insurance purchaser on higher ground, would you name your insurance companies when you comment, so that they rest of us can know who not to buy from?
Vikki, Reston, VA (Sent Apr 3, 2006 2:10:15 PM)
It's amazing how insurance companies will raise your rates every year to cover increased costs they expect when you need to rebuild, but when it comes time for them to give you money to rebuild they look for reasons not to give you the money. Maybe it's time the American people took the insurance money invested it themselves and when a disaster strikes you wouldn't need the insurance company, you'd have the money saved and could rebuild yourself. More or less put the insurance companies out of business instead of them putting you out of your home.
Wendy Kay, South Nyack, NY (Sent Apr 3, 2006 2:14:47 PM)
Hey, take it easy on the insurance companies, they are doing their best. There is just not enough money after the tremendous operating costs. A friend of mine works as a supervisor for a major insurance company and she even had trouble with her claim until a friend at the company had it fixed. So, this has been an unpleasant experience for all involved. By the way, the house turned out beautiful.
Henry Gimlet (Sent Apr 3, 2006 2:15:26 PM)
Alas consumers are no saints either. I know of a few people who have quite happily used a small mishap in their house to generate large claims for remodeling. They claim "well i paid my isurance all these years...i'm entitled to it".
John Doe (Sent Apr 3, 2006 2:17:12 PM)
Let's face it, there are places people should not build
and insurance companys should not write policys there...if they write, they SHOULD PAY!
sTEVE dAGGER (Sent Apr 3, 2006 2:18:59 PM)
As long as insurance companies are allowed to invest policyholder's premiums in other areas such as stocks, bonds, and investments with mortgage companies, we will suffer at their hands.
They are not required to answer to the policyholders, only to their investors and their board of directors. As long as they are able, as in the case of 9-11 to swing their political powers on Capitol Hill, they will continuously have the taxpayer at their mercy. After 9-11, Congress passed the $900 billion act. Any claims in excess of $900 billion are automatically picked up by the taxpayer. Mortgage companies and insurance companies are preying upon homebuyers and homeowners. You cannot buy a home w/o insurance, as mortgage companies will not lend the money. A majority of the money that mortgage companies have to lend come from investments by the insurance companies. I wish all of you who have suits against your insurance company the best of luck.
R.C. Walters, Crewe, VA (Sent Apr 3, 2006 2:19:11 PM)
WHAT DID YOU EXPECT FROM THE INSURANCE COMPANIES. THEY WERE CROOKS BEFORE KATRINA AND THEY WILL BE CROOKS AFTERWARDS. THE ONLY WAY, AND I MEAN THE ONLY WAY TO GET THEM TO HONOR THEIR POLICIES, IS TO SUE THEM.
mike litchfield connecticut (Sent Apr 3, 2006 2:20:10 PM)
It is very sad that the government will allow the insurance to delay claims so they can earn interest on the money for as long as possible. The legitimate claims need to be paid ASAP. You cannot leave the people who paid their premiums out in the cold. This should be illegal. What would happen if you were late on paying the premium? They should be held accountable for being late on the claim! This needs to be addressed.
-marc
Marc Esparza Dallas, Texas (Sent Apr 3, 2006 2:21:54 PM)
Gee, how do I get Nationwide for my carrier?...NOT!
Johnnie Houston Texas (Sent Apr 3, 2006 2:21:59 PM)
This kind of thing is why lawyers are actually a GOOD thing, contrary to the image painted of the profession by, surprise, the insurance industry and those that it typically supports, namely republicans like our president. Recall that Mr. Bush never misses a chance to bash trial lawyers. You don't suppose he does that because it makes the insurance folks more inclined to support him? Of course that's why. It's ironic, and sad, that Trent Lott, no previous friend of the trial lawyer, and by association, the victim of storm damage or other third party harm, is now having to sue State Farm himself. I wish him well. Next time Mr. Bush or other republicans start hollering about the need for more "reform", keep all of this awful stuff in mind...more "reform" equals more ripoffs...it isn't lawyer fees and "frivolous" lawsuits, folks...
Philip M. Brown, Macon, GA (Sent Apr 3, 2006 2:22:06 PM)
State Farm and Allstate are the 2 companies that have made the worst case laws against insurance companies - even other insurance companies hate them.
Emlee Lage (Sent Apr 3, 2006 2:22:47 PM)
How can Nationwide afford all of those commericals on TV? It is cheaper than paying claims. We had a tornado come through our county in May 03'. I had business insurance with Erie Insurance. What a great company! We had extensive hail damage. They paid for a new roof and vinyl siding for my business without question. An amount of approx. $50,000 was paid for damage to my business. I have homeowners with Nationwide. My neighbors on each side got a new roof. Nationwide said no. That same year Hurricane Isabel came through Virginia and caused a tree to fall on my house. Nationwide again said no. They did pay me for 1/3 of a roof. Can you believe that? I never heard of such a thing. I can not wait to switch insurance companies as soon as I can get one to take me. You have to wait for about 5 years after claims to switch. I am going completely with Erie Insurance Co. What a company!
Jim Hix Amelia, Virginia (Sent Apr 3, 2006 2:23:20 PM)
I disagree that the insurance companies are just trying to take your money and not give you anything in return. I went through three hurricanes, (Charley, Frances, and Jeanne) during the time that I lived in FL. During that time I worked for one of the largest insurance carriers in FL. While these hurricanes are ripping through the state the employees of the company are having to wait these things out so they can get back in the office to start taking claims. I was fortunate enough to not have any serious damage and had everything fixed within a couple of months. After the hurricanes had passed I was in the office within 2 hours and on the phones with customers taking claims.
People have to understand that they are not the only one's that are having to file claims, and wondering why they haven't got a check for the damages. Just with those three hurricanes we took in about 50,000 claims. With less than 200 claims reps working 12-14 hours a day they were still trying to inspect the damages a year after the first hurricane hit. The last dollar amount that I heard for claims paid out for the hurricanes was somewhere in the 90-100 million dollar range, and that doesn't include automobile claims from the storms.
The misconception that some people have is that as long as you have that policy in your hand you are covered. Most people don't take the time to read the coverage form which is generally printed on the back of the declarations page, and select the apprpriate limits of coverage. That section will tell you what events will and will not be covered in the event of a loss. My suggestion is to purchase the maximun amount of coverage that you can get, and to speak with an agent so they can explain any questions that you may have. You may pay higher premiums, but in the long run the more coverage you have the better chance you have of getting the claim paid. People need to carefully read the exclusion section, and understand what will NOT be covered.
C. Stacey, Canton, GA (Sent Apr 3, 2006 2:24:27 PM)
I'm an independent insurance agent in Myrtle Beach South Carolina and cannot feel more compassion for the people of the stricken communities. We also have to deal with the hurricanes, tornadoes, hail, etc that affect the coastal regions. The best piece of advice I can offer anyone when purchasing an insurance plan is to READ THE ENTIRE POLICY! There are many exemptions (mold, wind-driven rain, terrorism) that most people never know exist. If you don't understand something, call the agent! If your agent doesn't have an answer, you might consider moving to a more knowledgable agency. Do not wait until something happens to find out you're not covered.
Now, do not misunderstand and think that I am blaming the innocent victims of the storm for the denied claims. I can tell you that in most cases this is exactly what happens. The adjusters' job is to save the insurance company money. Is it right? Absolutely not. Is it fair? Not even close. Read your policy! The better you understand what is covered and what is not, the easier it will be for you to defend yourself and properly cover yourself. Also, be forewarned...cheaper is not always better. If you have two "identical" policies, and one is say, four hundred dollars less...it's safe to say something is excluded that was not excluded on the other policy.
To the comment about insurance agents believing your payment is to feed our kids, or keep them in private school: this is completely unfounded. I rent a two bedroom townhome and my child attends public school. Eight out of ten agents you meet have a home worth less than the average home they insure. Please, don't confuse big business players with actual agents.
Also, concerning the FEMA flood comment...I fully believe the story of the home being occupied for thirty-three years without a flood policy. Think of everything around you that has changed in the past thirty years. Do you think the flood maps have not been adjusted? Certainly! They have been amended and mortgage companies are required to notify buyers if they are located in a flood zone, and also require the insurance. Is it a perfect system? No. Though in most cases, buyers know they are purchasing in a flood zone well ahead of time. There have been situations where this has not taken place as it was supposed to, though not everyone is perfect.
Please, bear with us as we petition our State Departments of Insurance for a better system. Most of us cannot stand to be part of the process that has evolved around us and are making every effort to change our environment!
Danielle - Myrtle Beach, SC (Sent Apr 3, 2006 2:25:31 PM)
Are there any good gun insurance companies that are actually paying claims. I would like to know who they are so I can change carriers.
Kevin S, Moyock, NC (Sent Apr 3, 2006 2:31:53 PM)
The people of the United States should all stand up and refuse to give their business to the insurance companys that are refusing to pay these claims. They didn't refuse to take the premiums from those people for years and years, did they?
They knew when they accepted the contracts that the homes were in areas that were prone to hurricanes and all of the damage that hurricanes cause. We need a list of the companies that are refusing to pay, so that we can
TAKE OUR BUSINESS ELSEWHERE!
Susie Francis (Sent Apr 3, 2006 2:33:25 PM)
I wonder what St. Peter will have to say to the executives and adjusters when they meet. Talk about bad Karma and insult to injury..........
Kurt Fisher (Sent Apr 3, 2006 2:33:39 PM)
"We the People" can change the insurance industry. We empower them by paying the monthly fees. The only way to do that is to support a better company. I think a Non-Profit Insurance Company could work if “We the People” supported one. "We the People" should get behind a company like that. Think about it an Insurance Company that really was there for you, an Insurance Company that actually paid claims. This is just an idea.
Jack Hogue, Oklahoma, Oklahoma City (Sent Apr 3, 2006 2:34:06 PM)
Anymore it makes little difference if it is a claim to pay for an insured home that was damaged in a hurricane, or a health insurance claim. The insurance companies more often than not deny the claim and hope you go away. You have to fight back and demand them to pay! What kind of a country is this when you have to get a lawyer to sue the insurance company to make good on a claim ?
jeff anaheim (Sent Apr 3, 2006 2:38:14 PM)
The tort reform movement has placed us all in a situation where the most we can do to any insurance company is ultimately recover what they owed to begin with. There is no longer any fear of the courthouse because the teeth have been removed from most state and federal laws that the insurance companies once feared. We are reaping what we sowed by electing all these right wing politicians. I hope Trent Lott gets paid in about 2015. Most everyone else I feel sorry for.
John McDowell, Houston, Texas (Sent Apr 3, 2006 2:43:40 PM)
Why do insurance companies have so much power in this country. We pay medical, homeowners, car and every other kind of insurance payments because we have to or you can't get a mortgage, register your car, get medical treatment without insurance but when it comes to getting paid for a loss - you don't and on top of that your premiums go up because you filed a claim! They must have a lot of folks in Washington D.C. in their pockets. Disgraceful
Pat Foote, New York City (Sent Apr 3, 2006 2:44:44 PM)
Just thought I would let you know that State Farm profits are in the BILLIONS above last years.
I live in the insurance capital and know how these people live....believe me they aren't hurting.
zyoose, Bloomington, Illinois (Sent Apr 3, 2006 2:45:22 PM)
Maybe they should have read the policies before signing them. Insurance is all a big pyramid scheme anyhow..
Robby B., Bergen, NJ (Sent Apr 3, 2006 2:46:09 PM)
State Farm is my insurer as well. Makes me feel like all of us who weren't hit by Katrina should boycott the insurers who are denying these claims. Maybe I'll have to start looking into switching my own coverage. The insurers who don't uphold their end of their business arrangement (unless sued) should be punished.
Kari Footland, Arlington, VA (Sent Apr 3, 2006 2:47:00 PM)
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