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
EMAIL THIS
TRACKBACKS
Trackbacks are links to weblogs that reference this post. Like comments, trackbacks do no appear until approved by us. The trackback URL for this post is: http://www.typepad.com/services/trackback/6a00d83451b0aa69e200d834c7f12769e2
advertisement
This article is about MS not New Orleans, LA. We are not below sea level here on the coast. Actually where the acticle above is referencing is probably 20 ft. above sea level not in a bowl. Areas 10 miles inland flooded from Katrina. Areas that have never flooded before. At least read the article before you start ranting or at least get a map.
D, B.S.L (Sent May 1, 2007 10:55:19 AM)
The insurance companies have become toxic to many consumers due in part to the failure of our government to investigate and correct fraudulent and price fixing practices by big insurance. Many people do not insure their cars or property simply because the insurance companies are allowed to overcharge them while the government in most states requires drivers to have insurance. The government has granted the insurance companies the license to steal. The government needs to closely regulate this dirty industry and act responsibly on behalf of the consumer. The Katrina aftermath is a great example of how much the insurance companies profited even after paying out [begrudgingly] the few claims which they were forced to pay under threat of lawyer involvement. Record profits at the expense of the consumer and the rank practices of denying insurance claims for any reason under the sun, moon, stars, and even buses! This is simply dishonest business and the insurance companies need to be stopped in their tracks before no one is willing to buy their expensive and often worthless products. The government is willing to stand by and allow insurance companies to commit outright fraud - what's wrong with that picture? Other means of protecting our assets must be forthcoming in the near future or we will all pay the price - the elevated one the insurance companies set all the while knowing they will rarely pay out settlements to the customer. The biggest shell game in history - the american insurance industry!
steve lucas, Seattle, WA (Sent May 1, 2007 10:59:09 AM)
Another win for the powerful insurance companies. As a doctor, I see a lot of people from that area. There should also be a story on what the health care insurers are doing with those victims' health with delays and denials.
Andrew Campbell, MD, Houston, Texas (Sent May 1, 2007 11:03:46 AM)
I think that the government should step in and help.
We can aid every other country on the face of the earth but we can't extend a helping hand for our own people. If my insurance company didn't pay and still had to pay the mortgage on a house that wasn't standing anymore. I would go straight to Washington to get answers. There is no way that another country should come before ours.
Clay Mcintyre Mer Rouge,La. (Sent May 1, 2007 11:09:41 AM)
It's stories like this that people need to think about when they're cheering the "little guy" who gets a multi-million dollar settlement from an insurance company that he didn't really deserve because a) he was not carrying flood insurance or b) he already collected on his flood insurance policy but now he wants his homeowner's policy to pay for the same damage. That "little guy" just won the lottery and guess who ends up paying for it? I do...you do...everyone does.
You're supposed to get *paid* for what you're actually *insured* against, Bloomington, IL (Sent May 1, 2007 11:13:22 AM)
THIS IS OBVIOUSLY AN UNDERSTANDING PROBLEM, IF THESE PEOPLE KNEW THAT THEY DID NOT HAVE EITHER WIND OR WATER DAMAGE COVERAGE, WHICH THEY MUST HAVE, THEY WERE TAKING A CALCULATED RISK (A BET IF YOU WILL) THAT THEY WOULD SAVE THE PREMIUM ON THE COVERAGE THEY OPTED OUT ON. TOUGH SHIT, THERE IS NO IDIOT INSURANCE
HANK, LAREDO TEXAS (Sent May 1, 2007 11:13:52 AM)
I don't get it. Insurance companies post huge profits but are held unaccountable by our government. But think about it, what other product is out there when your best customer is one who will never use your service? That is what insurance companies want the most. People who will pay but will never use the insurance. That means, people who need it, insurance companies don't want. So what happens when you actually need it? Reject reject reject because that's money going out and not coming in. Sounds like the biggest legal scam if you ask me.
Dan, San Francisco, CA (Sent May 1, 2007 11:14:10 AM)
In Florida, the Florida Department of Insurance reported gross premiums for 2005 of $36 billion for property and casualty coverage (real and tangible... not auto, life, disability, etc.) Since then, the gross premium in this state has increase approximately 2 1/2 times the 2005 level or and estimated $90 billion. Wind coverage accounts for approximately 70% of the annual P&C gross premium or roughly $63 billion.
The Florida legislature has debated the insurance issue among themselves using a potential "catastrophic" hurricane disaster estimate of $50 to $100 billion. This means that the state could create a self-insurance fund for wind risk using two years of absurd premiums that would otherwise go to the private insurance industry, and would also mean the the citizens of the state would not have premiums to pay beyond the second year unless losses require replenishment of the fund.
State run self-insurance is the way to go instead of allowing these companies to pilfer the citizenry and walk with billions of dollars in premiums in years in which there are no losses (like 2006).
Jim Drake, Coral Springs, Florida (Sent May 1, 2007 11:19:36 AM)
We in the heartland of this country are tired of those who live on the shores crying about the high cost of insuring their property in hazardous areas.
An element of choosing to live by the shore is certainly the hazard involved and the acompanying costs associated with their risk.
Pat Smith, Columbus, OH (Sent May 1, 2007 11:20:54 AM)
I find it ironic that people want to rebuild in a location where their homes and businesses can be destrotyed again. I personally don't want to see my hard earned tax dollars going to rebuild this same area 10 years from now after another devistating hurricane. It seems to me that the insurance industry is taking a solid economic approach. If you want to live or have a business in a dangerous area, then you will have to pay a steep price - otherwise, move somewhere safer.
Art Wilson (Sent May 1, 2007 11:20:57 AM)
I agree with Rep. Taylor. My husband and I have been paying home owner's insurance for over 20 years. Our first small fire claim, they raised our rates 20%. Legally we are required to have home, auto insurance (big plus for the insurance companies). They are glad to take our money but we better not ever use it. What kind of business is that?
Patty, Denton, Texas (Sent May 1, 2007 11:25:28 AM)
WELL AS OUR CITIES FALL INTO RUIN OVER NO MONEY AND CORRUPT INSURANCE COMPANIES, OUR DEBT CLIMBS TO GALACTIC FIGURES AND THE 2 WARS RAGE ON...WE ARE ALL IN A MESS, WE SUFFER WITH YOU IN THE GULF. WE SUFFER AS YOU AND OUR COUNTRY SLIP FURTHER INTO THE BRINK. POVERTY, DISEASE, AND QUIET GREED WILL NOT LEAVE A PRETTY MARK ON OUR FACES AND IN OUR BELLIES. FOR THIS WHITE HOUSE HAS LET YOU AND THE WORLD DOWN, ALL THEIR 'HOLY' AND RIGHTEOUS WORDS HAVE DONE LITTLE TO MATCH THEIR PUNY ACTIONS AND STEADY LIES...WE PRAY AS WE BOW OUR HEADS IN SHAME!!!
DISGUSTED, SALEM, NH (Sent May 1, 2007 11:28:00 AM)
My family went through hurricane Betsy in Chalmette, La. in 1965 and our home was flooded. That home was destroyed by Katrina in 2005. The bottom line is this-if you want to rebuild, either a home or business, in an area that repeatedly gets catastrophically destroyed, you should pay the cost. I don't want to subsidize your folly.
charles in Baton Rouge, La. (Sent May 1, 2007 11:30:02 AM)
They are not the only ones paying for KATRINA. State Farm will not WRITE any new policies on any properties in Maine within 2500 of the coast or if you live on and Island (Mount Desert and Deer Isle the exceptions). This came into effect last year. The sad thing is that the properties my Father has had and has been turning over to us were all insured by SF. Once the turning over was completed, they wanted nothing to do with us, saying that now they were owned by his children, a new policy had to be written, hence we thank you George, but as for your kids, Tough Luck.
State Farm has lost nearly 20 policies from our family in the last 3 months and they will continue to lose more. Corporate State Farm has no clue and could care less about customer loyalty.
Carl Johnson Bailey Island, Maine (Sent May 1, 2007 11:30:33 AM)
First off, yes, the insurance companies have done too much payment dodging, and I'm sure there are many, many folks who have been screwed (and seeing record profits on the insurance company books makes you wonder). But, I'd just like to hear a little less "where's mine?" entitlement rhetoric. If there is one thing we've learned from Katrina it's that New Orleans is a high, high risk area to live. Why should the federal government (aka taxpayers) have to subsidize your insurance to live in that high risk area? Why should insurance customers living in lower risk areas have to pay much higher premiums so that insurance company A can afford to do business in New Orleans and offer more affordable premiums? I'm sorry, you should have to pay more to live in a city on the Gulf coast, especially one that is 20 feet below sea level. Bottom line is it's your choice and I don't think the federal government should use my tax-dollars to subsidize your choice. Put your business/house in a safer area.
John Flick, Newport News, Virginia (Sent May 1, 2007 11:30:48 AM)
The beautiful insurance business at its best.
Jim Cammisano
Jim Cammisano (Sent May 1, 2007 11:34:16 AM)
A lot of you are saying people shouldn't build a home in a dangerous place. Where is it safe? Where are there no tornados, fires, hurricanes, floods, landslides, earthquakes, avalanches, straight-line winds, lightening? It isn't that insurance companies don't want to pay out to people foolish enough to rebuild in these areas. They don't want to pay out period.
Patty, Denton, Texas (Sent May 1, 2007 11:34:33 AM)
I feel bad for these people after losing so much, but maybe ocean frontage isn't that smart, huh? Why not try to build back away from the hurricane zone. I am glad that the insurance companies are jacking rates there. Now maybe the people in the hot zone will be able to pay for their own rebuilding every couple of years instead of me 500 miles from the coast.
JD, Illinois (Sent May 1, 2007 11:36:16 AM)
I personally think the increases in premiums should be higher. I don't think the vast majority of insured's insurance premiums should be subsidizing areas were we know this happens on a yearly basis (I know that a hurricane hadn't hit New Orleans in a while, but it's in a location that's a prime target). While insurance was designed to help out in similar situations, it wasn't designed to be a fund to help people to continue living in areas that just should not be inhabited, New Orleans being a great example. If these people want to continue living there, it is their choice, but they should have to pay their own way going forward.
Jerry, Cleveland, OH (Sent May 1, 2007 11:38:02 AM)
It is a sad state of affairs when our government lets these insurance agencys get away with this. You pay their high premiums but don't you dare have a claim or they increase your rates or drop you. They need to be put in the same position as the Gulf Coast residents are and see if they like how it feels.
Just like the government letting Exxon get away with not paying for the clean up of the oil spill a few years back after being found guilty.. Look at the oil company's big profits they are making while we pay their high gas prices to go to work and home....All Insurance Companys and Oil Companys make me sick.
Our government has forgotten it's own people that live in the USA...I feel so sorry and sad for the people on the gulf coast. It is their home and they want to stay there butttttt....Horrible
C. Lyn (Sent May 1, 2007 11:45:50 AM)
Unfortunately the real ratios of risk to peril were hidden for many years giving a false impression about the financial reality of building in flood and hurricane zones.
Federal flood insurance gave a false sense of security at the expense of the American taxpayer.
I'm sorry these folks have to move, but building back into flood and hurricane zones would only continue the ridiculous burden of risk to American taxpayers who choose not to live in areas with inherent risks.
If individuals wish to stand the risk on their own in such locations then fine, but don't keep building in such areas and expecting the American taxpayer to continue to bail people out. We don't mind helping in disasters, but not when the disaster is a projected event such as hurricanes and flooding in certain areas.
Maybe this acceptance of reality is a sign the American consumer is maturing?
L Brown, Goldsboro, NC (Sent May 1, 2007 11:46:29 AM)
Insurance companys should insure all places equally. Coverage should not allowed to be droped because of claims from disasters. Thats why people have insurance. My insurance from living in a coastal Alabama county is 2 1/2 times higher that 1 year ago and I have had no claims. I live 45 miles from any water. They are charging me for the claims they had to pay. How is this fair? Our goverment protects every place in the world, how about here. Some controls are needed. The insurance companies are in a risk business. They just change the rules when they have to pay. Where is the goverment support for the people. No wonder they have record profits. They never have spend much on claims!
John Turner (Sent May 1, 2007 11:46:33 AM)
It seems the insurance industry is once again profiteering from the misfortunes of the American people.
In a time and day far from this the principals of insurance were a community organization not meant for profit.
It saddens me to see one of the Culinary Meccas of the US continue to fade away so that big insurance can continue to make a profit.
Chef @ Boise, ID. (Sent May 1, 2007 11:49:42 AM)
We are seeing the same kind of issues in Lake Charles, LA from Rita. My only experience is with residential rates which have skyrocketed. It seems that younger couples and middle class families can no longer afford their homes because insurance rates for an average $150k home are reaching $500/month in some southern areas of the Parish. I fear that as people continue to get their insurance increases they will be forced to move in order to afford a home. What really irritates is the age old issue with insurance companies. You are a good customer for 10 - 20 years, never making a claim and diligently paying your premium...until you need it. Then it is a battle to get a payout and afterwards, you are either dropped or experience huge increases. The state or federal government is really going to have to step in and take action.
Jon, Lake Charles, LA (Sent May 1, 2007 11:50:22 AM)
I hate to seem callous, BUT...
If you are going to have a home or business in a high risk area, you should expect to pay for the privledge. Those in southern CA pay for the risk of Santa Anna diven wild fires and earthquakes. Gulf coast residents and businesses should expect to pay for their increased risks. That's what the insurance industry is all about. Assessing the risk and aportioning the cost, NOT elevating the cost to everyone to cover the risky lifestyles or life's choices of others.
Now, in closing, don't mark me as an insurance guy, I HATE the insurance industry. As a physician I pay over $50,000 a year for malpractice coverage!
BP, American Fork, UT (Sent May 1, 2007 11:51:16 AM)
SEND A COMMENT
PLEASE READ: All comments must be approved before appearing in the thread; time and space constraints prevent all comments from appearing. We will only approve comments that are directly related to the blog, use appropriate language and are not attacking the comments of others.