Katrina Claims

Here is the Reader’s Digest version of claims to homes in the path of Katrina. Homeowners’ insurance covers losses caused by wind and wind driven rain. Home insurance does not cover loss by flood. Flood is excluded from coverage regardless of the cause of the flood (wind that damaging a levy, causing a flood is still excluded).

Flood insurance is available for almost all homeowners through the National Flood Insurance Program.

One report has it that only 40% of New Orleans residents have flood insurance. In some affected parts of Mississippi, only 10% of homes are insured for flood.

There is some talk that politicians will pressure insurance companies to cover damage caused by flood. The thinking seems to go, “On 9-11 the insurers didn’t invoke the war exclusion. They should not invoke the flood exclusion in Katrina.”

The fact is, insurers didn’t use the war exclusion on 9-11, because they couldn’t. 9-11 was not an act of war by any definition. At the time, terrorism was covered by almost all property insurance policies.

The current situation is very different. The current flood exclusion is firm with no ambiguity – damage by a flood is not covered by standard policies. What will state regulators do? Stay tuned!