BAY ST. LOUIS, Miss. – John Brennan and Daye Moynan have had enough. After struggling for 20 months to rebuild their business and their lives in the aftermath of Hurricane Katrina, the owners of a chic Old Town art mall are selling out and leaving the state.
While they were able to withstand the terrible damage the hurricane inflicted on their beloved Maggie May’s gallery and their home in neighboring Waveland, Brennan and Moynan can’t rise above its effect on their bottom line: a $10,000-a-year jump in the cost of insuring their business. They are not alone.
“A lot of folks still have that ‘we are staying’ energy,” Brennan says, “but a lot of us are losing it.” By this time next year, he and Moynan hope to have a new life – and a new Maggie May’s – in Nashville, Tenn.
Brennan and Moynan are among thousands of business owners in the flood zone who have been stunned to learn, long after the storm, how soaring rates for commercial wind coverage translate into fine print on their own policies.
It’s the latest reason that everyone in the flood zone loves to hate the insurance industry, which first earned the enmity of Gulf Coast residents by immediately declaring most damage from Katrina to be uncovered flood losses and refusing to pay. While the insurance industry continues to report record profits after the storm -- $64 billion in 2006 -- the non-payment issue remains the subject of a huge, tangled legal battle.
For most business owners, who are insured through a state pool, wind insurance rates are now about 2½ times what they paid before Katrina. With commercial rates already much higher than residential rates for similar structures (because there are four times as many homes insured by the pool as businesses, thus spreading the risk), the recovery of business districts all along the coast has been thrown into doubt.
In Old Town Bay St. Louis, for instance, while a number of businesses -- from attorneys to the local newspaper to a café and antique store -- have reopened, the vast majority have not. Several have opted for new digs miles away on Highway 90.
'Downtown' currently a single bar and grill
In Waveland, a lone bar and grill is the only business to reopen so far in a permanent building in the old downtown core on Coleman Avenue.
The situation had Bay St. Louis Mayor Eddie Favre shaking his head at a recent town council meeting as he noted how “very little” commercial construction has been started since the storm. “It all goes back to the insurance,” he said. “They can’t afford the increases.”
But local insurance agent David Treutel, a member of the state’s newly reorganized wind insurance pool, says things have actually gotten better recently for business owners, thanks to a reduction in wind rates. The state pool underwrites both residential and commercial policies for wind damage along the coast because so few commercial insurance companies will write new policies. After Hurricane Camille in 1969, the state allowed insurers to exclude wind to keep them covering other risks.
In addition to wind coverage, building and business owners must still carry standard insurance coverage for fire, vandalism, liability and other risks as required by their lenders. If their property is in a flood zone, they must also carry federal flood coverage.
The wind pool rates, which are the same in all coastal counties, took their first huge leap in October 2006, more than a year after the storm, going from $1,340 per $100,000 of coverage for a wood-frame commercial building to $4,935. Then last month, the state acted with federal help to reduce the commercial rate to $3,243 per $100,000, Treutel explained.
Post-Katrina wind rates for residences have been held at a 92 percent increase, to $1,353 per $100,000, thanks to government subsidies, he said.
Small comfort for gallery owners
That is small comfort for Mark Currier, who with his wife, Jenise McCardell, runs Clay Creations in Old Town and owns a gallery there that is leased by an artists’ cooperative
Mark Currier and Jenise McCardell (David Friedman / MSNBC.com)
“Come on,” he says of the commercial rate increase. “The big thing is we’re all excited that they did drop it down from being tripled, but it’s still more than doubled.”
Currier, who plans to remain in his current location, saw the annual insurance bill for his Main Street holdings -- which include his shop, the gallery, a photographer’s studio and a couple of residences -- go from $7,000 to $25,000 before coming back down to $17,000. “It’s a freaking mess,” he says.
And more of a mess than Renee and Drew Boxx, Currier’s new neighbors in Old Town, could take.
When Katrina struck, the couple and their four children lived in Cedar Point, an upscale neighborhood north of town. “We came home to a slab,” Renee Boxx said. In need of a new place to live, as well as space from which to operate Drew’s cabinet business and Renee’s Funky Rose dress and gift shop, they bought a large home with commercial zoning next to Currier’s place.
“We bought this house to open our businesses and live in it, thinking it was the wisest way to go financially,” Renee Boxx said. “And then we received our insurance bill. It was $27,000. For a year.” The wind coverage portion of that was about $18,000, including some contents coverage, Drew Boxx said. The couple shut down business operations in January from the new address and insured the building as living space only, dropping their premium for wind coverage to $3,500.
Saving big bucks by renting
Late last month, the Boxxes reopened both their businesses in a small strip mall on Highway 90. Despite the fact that they’re paying rent for the new space and the wind pool rates that they would have been paying on the Old Town property have been reduced in the meantime, “We are $10,000 ahead by doing this,” Renee Boxx said.
Another former downtown businessman, Jay MacAniff, owner of A OK home furnishings boutique, also chose to reopen on Highway 90, partly because rental space was available and partly because of insurance issues. Having received “almost nothing” from his policies for Katrina damage, MacAniff remains very bitter about an industry that he says “spent most of their money and time pointing fingers” after the hurricane instead of paying claims.
Treutel acknowledged that the insurance hit has been especially tough on small-business owners, speaking from personal experience. His own home and business were hit hard. With many of his clients not needing to insure their now bare lots, his revenue remains down. “It’s real slow and it’s rough,” he said.
But he is encouraged by other features in the legislation that authorized the wind pool subsidies, which believes will spur insurance companies to return to the Gulf Coast, fostering competition that will force rates down. “I have no doubt, no doubt, that you’re going to see this area boom and grow.”
That better happen soon, says the departing Brennan. “We’re still kind of a ghost town now, but wait until next year. You’re going to see a lot more small businesses shuttered. … As far as all that empty land out there on Beach Boulevard, you can believe it’s from insurance – either not receiving any money or not being able to afford to insure what they can rebuild.”
Long term, Treutel says, “A final decision on properly insuring this country against catastrophic disasters is going to have to come on the federal level.”
Hancock County’s representatives in Congress, Sen. Trent Lott and Rep. Gene Taylor, agree. They’re pushing legislation to end the federal antitrust exemption enjoyed by the insurance industry. Both lawmakers lost their homes to Katrina – Taylor was the Boxxes’ neighbor in Cedar Point -- and joined legal action against their insurer.
Taylor, who has accused insurers of outright fraud in denying Katrina claims, summed up his anger toward the industry recently when a reporter asked him what he’d like to get from the Easter Bunny: “State Farm’s head on a platter,” he replied.
Katrina dried up rental market
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Anyone dumb enough to live BELOW sea level in a river delta that is IN a hurricane zone and expects the rest of us to pay for it is dreaming- Stop wasting our tax dollars and hiking our insurance premiums to cover places like N.O.
Jason Jackson (Sent May 1, 2007 8:03:34 AM)
Insurance companies are definitely in the business to make money, but shouldn't be doing so on the backs of all of the Katrina survivors. While I agree that rates need to go up, and the government doesn't need to be subsidizing people's insurance premiums, it's going to be expensive to cover areas that are prone to natural disasters. Just the way it is and people staying there need to get a grip on that.
Kronkhoff, Washington state (Sent May 1, 2007 8:35:59 AM)
Don't blame the insurance industry for the premium increases, blame the federal judge who ruled that flood damages are really caused by windstorm. Water is water and when you live below sea level it isn't the windstrom that brought water and mud into your hosue...IT'S FLOOD, STUPID!!! With this ruling the insurance industry is now forced by judicial decree to provide coverage for a risk that was previously insured through taxpayer subsidized flood insurance premiums. When the government subsidy is no longer in the equation, the private insurors have no choice but to charge a rate for the risk. And when you live below sea level, GUESS WHAT??? Stop playing the blame game unless it's where it should be. At the feet of of the federal court.
Jeff Cole, Kennebunk, ME (Sent May 1, 2007 8:52:23 AM)
It isn’t just businesses. Many Florida homeowners have had insurance increases of 1000 percent or more. Folks that were paying $400.00 a year are now paying $400.00 per month. Florida will soon be populated with elderly people on fixed incomes that can’t afford to live here, but can’t afford to move.
To make matters worse young people are staying away in droves because the sky high housing and insurance costs are unaffordable. There will soon not be enough workers to provide the services the older population needs and not enough taxpayers to keep the state solvent.
Doctors and nurses in a nearby town are leaving the state because even well-paid professionals are struggling in this insurance climate.
The state created insurer of last resort, Citizens Insurance, is now the largest property insurer in the state. Another bad storm or series of smaller storms will wreak havoc with Florida’s finances. The insurance companies are now selling only life and auto policies so they’re in effect taking the profit and leaving the bulk of the risk on the taxpayers.
Rock, Florida (Sent May 1, 2007 9:02:26 AM)
insurance is misnamed. it is a payout for small claims while it fails to honor the spirit under which policies are sold. it should become a national crime, taking money under false pretenses very similar to health and the HMOs. i do not understand why Americans take it lying down. could it be Americans have the government and the 'dog eat dog' type economic system that they deserve? mickey glantz
mickey glantz, boulder, colorado (Sent May 1, 2007 9:04:17 AM)
Insurers used to be in the business of insuring people and businesses from loss, but that's not the case anymore - now they're in the business of making an enormous profit. Look at the buildings insurers are putting up. Oil companies and insurance companies - I'd love to see them both take catastrophic losses as the people have. Maybe someday.
fedup,chicago, il (Sent May 1, 2007 9:12:22 AM)
We who have already made Nashville home after deciding not to live through any more frustration in the hurricane's aftermath will welcome others from the Mississippi Gulf Coast with open arms. You will find familiar eating establishments and a thriving culture that is a good mix of sophistication and hardworking people. Chappy's has relocated to Nashville and it is so nice to have a piece of home to visit for a familiar meal and faces. The hurricane did not destroy us, the greed of corporate America is what is keeping the Gulf Coast from returning to what it once was. Come to Nashville and enjoy the fruits of your labor. We are eagerly awaiting you.
Julie Gervais, Smyrna, Tennessee (Sent May 1, 2007 9:16:10 AM)
After 31 years as an Insurance agent, I got tired of constantly wrestling with Insurance Companies and I left the Business.
All they care about is the Almighty dollar....we were selling their products and you wouldn't believe how they treat their own agents.
My heart goes out to all flood and hurricane victims as the Insurance Companies try to tell you water caused the damage, not wind driven or Hurricane water. I hope you sue the pants off of these Companies. If you look up the definition of GREED, it is spelled INSURANCE. They are thieves!!!
Don Stroman, Plymouth Meeting, Pa. (Sent May 1, 2007 9:20:41 AM)
We feel your pain in FL too. The Legislators here made a bigger mess than they tried to fix. Not only can we NOT afford the insurance rates the counties continue to value our property at pre hurricane rates. We have lost at least 25% on the value of our property and even dropping prices we cannot sell to get out of the area. If things don't change we will be bankrupt then the banks can pay the taxes and insurance! Destin Fl
Frank, Destin Fl (Sent May 1, 2007 9:20:42 AM)
After working so hard in 2005 with the Corps of Engineers to install Blue Roof for these and many other Bay St. Louis residents (Operating out o fthe old train depot across the street from the locations of many of these businesses), I'm so heart broken that our government has moved so slowly and poorly to effect permanent rebuilding. As a Baton Rouge native, Bay St. Louis and Waveleand were part of my growing up, and I fear that my kids may never get to experienc ethem they way I did.
Philip L. Hoffman, Washington, DC (Sent May 1, 2007 9:23:00 AM)
Well of course insurers will take advantage when and where possible...they are after all in the business of making more money than they spend...and with little or no over sight... its easier...but people need to understand if they are going to keep building on the coast..(you will be hit again)...and put some blame where it lies on state and federal authorities for not supporting a levy and flood plan that works.
DAN, west springfield,mass. (Sent May 1, 2007 9:31:56 AM)
I am also a victim of insurance fraud and deceit from State Farm in Biloxi. The May prior to the hurricane, I asked the agent to increase my insurance so that "if we get hit by a hurricane we are covered!" I was told I had plenty enough insurance. I wish I had the faxes that I sent. State Farm is just out to screw their patrons.
I lost my condo down there. I had just given it to a Property Manager to rent out. We spend thousands upon thousands updating and renovating the property...4th of July of that year was the last time I saw my property. It was completely finished and ready to go.......now it's gone and our personal State Farm insurance would not pay. If they had, we could have rebuilt with the others.
I don't trust insurance companies anymore. None of them. They want YOUR money and then they don't want to honor their claims. How can they sleep at night?
Cindy Andreucci, Phenix City, AL (Sent May 1, 2007 9:38:41 AM)
thankyou for mentioning the state of MS, and not New Orleans, after the national news media made out Katrina's wrath to be " the New Orleans story", most folks across the USA have no clue what happened to the state of MS, and likely never will. I am not saying New Orleans had it easy, but MS should not have been ignored.
carol jacques, gulfport,MS (Sent May 1, 2007 9:49:29 AM)
It's amazing all the money we send overseas to help other countries, including those nations that are terrorist countries, and yet we can't rebuild and help our own people.
I'm thinking of the situation where Israel and another country were at war and Bush pledged millions to help them rebuild. My thoughts were to the south states hit by Katrina and even people of Hurricane Andrew who have yet to get help.
Mulroy (Sent May 1, 2007 9:53:21 AM)
GO GENE TAYLOR!!!!!!!!!!!!!!!
Mac Hadden (Sent May 1, 2007 9:57:44 AM)
OK, not that I condone insurance companies and the profits they have made from storm victims, but who should pay for the increased risk when hurricane victims want to rebuild in the same place that has proven not to be safe?
jack johns (Sent May 1, 2007 10:03:52 AM)
If I ran an insurance company I wouldn't insure anyone who was building or living below sea level and depending on leves and pumps. New Orleans is a sinking hole that should be filled in. Instead of rebuilting in place, the residents need to scrap the below sea level parts of town and rebuild on higher ground. A less extreme solution would be to put in 30 feet of fill dirt (perhaps from derging the river) to fill the low areas. But fill isn't good in New Orleans where the base mud slowly sinks under the weight. Its a bad place for a city. The people ought to leave and go to higher firmer ground. If I ran an insurance company the annual cost would be around 25% of the total value. And yes, that's fair in a swamp below sea level in a hurrican zone.
Bob
Catch more of Bob at The Truth According to Bob. http://bobstruth.blogspot.com
Bob, mytown, USA (Sent May 1, 2007 10:04:10 AM)
Hey, this isn't just happening at 'ground zero'. My business insurance for wind damage in St Pete, Florida have risen 4 fold over last year. It has gone from a substantial check to one that is quite onerous. I have elected to not carry wind insurance because of the cost. If I sustain damage it is now on me. Help!
Ron Wayne, St Pete, Florida (Sent May 1, 2007 10:05:39 AM)
For the uninformed, the property in Bay St. Louis that is the subject of this story (on Main Street) is approximately 22 feet above sea level. How would areas of Miami, Jacksonville, Savannah, Philadelphia, New York, Boston, etc. that are 20 feet above sea level fare with a catastrophe like Katrina???? I would suggest that the federal government listen to Mr. Taylor, and I would suggest that the Bush administration organize NOW so the next set of US Citizens who are the unfortunate victims of a natural disaster do not: 1. Pay for insurance from which they can not collect proceeds after a disaster, 2. Have to survive a complete and total failure such as is FEMA, and 3. Have to go through rebuilding facing the insurance industry's fraudulent use of its anti-trust exemption.
Get smart America, this is no longer about Katrina victims, it about the next set of victims: It could be about you!
Mac Hadden, Bay St. Louis, MS (Sent May 1, 2007 10:06:13 AM)
Running an insurance is also a business. Welcome to the business world folks. Health insurance costs have also risen dramatically.
I feel bad that life has put the Katrina victims in a predicament months after the incident, but it's time to either tough it out or leave. While harsh, there's only so much you can baby those affected by high rates.
Yi-Hsiao Liu, Washingon, D.C. (Sent May 1, 2007 10:15:01 AM)
It's funny how people choose to live in the path of tornados, hurricanes and other disasters and expect insurers to bear the risk for unreasonably low premiums. I sympathize with the plight of people who were unfairly treated by insurers in the aftermath of the disaster, but insurance companies are not charitable organizations either. People need to understand that insurers that don't charge proper premiums, especially given the high probability of future disasters on the southern coast, will probably not be around to pay ANY claims once disaster strikes.
Karl Zagoda (Sent May 1, 2007 10:15:47 AM)
This is just another human interest story about how evil insurance companies are squeezing honest, hardworking folks without an iota of public policy insight. The question that is never answered by bad journalism like this, that is not even broached, is WHY are rates going up? The answer to that is very simple: the risk is high. More risk means higher costs. Unless you want the government to jack up taxes on everyone to pay for some people's bad choices, as subsidies and underwriting do, packing up and moving some place safer is exactly what these people should do. Its just not something people want to hear.
Kevin, Los Angeles, CA (Sent May 1, 2007 10:17:21 AM)
So the people who have chosen to live below sea level are upset that insurance for people who live below sea level is expensive? Sorry if I can't weep for them. Maybe they should abandon the town completely, like sensible people, so I and my fellow tax payers sensible enough to live outside of the ocean, won't have to pay to fix the place next time the inevitable happens? Don't get me wrong, insurance companies are scum and all that, but people who live in the ocean are not the brightest folks.
Mick, West Chester, PA (Sent May 1, 2007 10:19:04 AM)
The problem with the bloodsucking vultures that call themselves the insurance industry is that they hedge their bets. Thats right folks, the insurance industry is no moe than a gambling operation. You are betting you property will be involved in some calamity and they are betting you won't. Only when they lose, they won't pay. Same way they won't insure anyone with any health issues for health insurance. Its big business and like it or not, thats how America works. Of course, the insurance industry probably couldn't afford to pay all the claims as it has to spend a bulk of its cash on lobbying congress for favorable legislation so it can continue to hedge its bets and profitt more. I seriously wonder how many New Orelanians would vote again for Bush if he ran now.
REMEMBER: They call it the "Trickle Down Therory" for a reason. Because its a therory. It doesn't actually work!
TIm Knoxville, TN (Sent May 1, 2007 10:21:29 AM)
It is interesting that the insurance companies claim the damage was by flood to fit their exclusions, but they or the pool, which often also denied coverage, have raised the wind rates to compensate for their losses all the while making record profits. However, unlike the State Farms and the MetLifes there were some companies that did behave well.
William L Guice III, Biloxi, Mississippi (Sent May 1, 2007 10:22:52 AM)
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