WASHINGTON The morning after Hurricane Irene blew through their Takoma Park, Maryland, neighborhood, homeowners Michael Desautels and Susan Hearn awoke to find a giant holly-leafed cherry tree nestled precariously in some broken tiles on their roof.
Hearn called State Farm, the company that holds their homeowners policy and boasts on its web site, "we're here to help... Ready to respond to Hurricane Irene."
After the usual press-one-press-two roundabout, she heard a recorded message: "We are experiencing extremely high call volumes, please call back later." Click. And Hearn was disconnected. She finally got through to her insurance company the following day.
Sigh. With more than a million homeowner claims and billions of dollars of damages expected to result from the storm's violent trip up the U.S. East Coast, it's not surprising that the path to an insurance settlement might not be smooth.
The big insurance firms have rushed into the most hard-hit areas; Allstate, for example, says it rushed more than 1,000 adjusters and 16 mobile claim centers into the most affected areas as soon as they were safe. State Farm says it has a 1,700-member catastrophe services response team, and has sent a first wave of 1,000 adjusters to the East Coast.
"We definitely had a very high call volume yesterday, but I've not heard of any problems today," said Jeff McCollum, a State Farm spokesman. "We do 'triage' the claim calls and make every effort to get to those with the most severe damage first," he said.
But attorneys and consumer representatives who have experience with disasters and insurance companies warn that homeowners could get soaked more than once.
"The real problem arises after a catastrophe because there is such a discrepancy between the hundreds of thousands of dollars at issue for the homeowner and the insurance company, which has millions or billions of dollars at issue," said Richard T. Phillips, a Batesville, Mississippi, attorney who represented homeowners who sued their insurers following Hurricane Katrina.
"Homeowners just need to realize that they are operating in an adversarial situation," he said. "Katrina proved it is naive to think the insurance company is going to pay what it should."
That doesn't mean every claim will turn into a nightmare. Even Phillips concedes that many small and straightforward claims are resolved simply and directly by insurance company adjusters. And Robert Hunter, director of insurance for the Consumer Federation of America, said "Not all insurance companies handle claims badly, so go into the claims process with an open mind."
But it probably makes sense to keep those eyes wide open too. Here's a quick review of where trouble may lurk.
THE FLOOD FRACAS
Other than total demolition by fire, water causes more expensive and severe damage than most other hazards. But if that damage is caused by flooding -- typically defined as water that seeps (or rushes) into your house from the ground -- that damage might not be covered at all.
Typically homes in flood plains do carry federal flood insurance; lenders usually require it. The federal flood insurance program was created as a way to get coverage for homes in flood plains; its premiums are subsidized.
Usually, the federal flood insurance program is serviced by private insurers, so a homeowner who does have federal flood insurance may file the claim with the company that holds their homeowners policy.
But private homeowners insurance hardly ever covers flood damage, according to the Insurance Information Institute. Homeowners who don't live in flood plains have to hunt out the federal program and buy their own flood insurance, and they usually don't.
So finding out your flooded basement isn't covered is bad enough, but when an entire house is destroyed by wind and rain and flood, it can prompt the insurer to deny the entire claim, and not just the flooded parts.
Concurrent damage by more than one cause is grounds for denying the claim, said Aviva Abramovsky, a law professor and insurance expert at Syracuse University. Case law made in the aftermath of Katrina affirmed that, she said.
But the Consumer Federation of America takes issue with those exemptions, called "anti-concurrent-causation" clauses. "CFA believes that these clauses are ambiguous, so if an insurer uses such a clause to deny your claim, read the provision carefully to see if you think it is ambiguous, and, if so, see an attorney right away," the consumer group said in a statement released on August 26, as Irene was approaching North Carolina's coast.
Even homeowners with federal flood insurance may not have a speedy path to full recovery. Homeowners have 30 days (unless the Federal Emergency Management Administration decides to extend that; so far they haven't) to file comprehensive and detailed claims for their properties.
Do that thoroughly, and do it quickly, said Soren Gisleson, a New Orleans trial lawyer who has litigated several Katrina cases. He has seen homeowners miss out on money they should have received because they didn't adequately document their claims with photos, contractor estimates and more, or because they missed that key 30-day deadline.
ARE YOU SURE THAT WILL COVER IT?
The insurance adjuster's idea of how much it will cost to fix your house and the amount you actually have to spend to fix your house can differ by amounts large enough to drive a drywall truck through.
Sometimes that's because insurance companies can rely on discounted prices at a time when supplies, like that drywall, can be marked up by post-storm demand, said Gisleson. He tells homeowners to secure at least one serious repair estimate from a licensed contractor who can actually do the work. Get a price and a date for when the work can be done. And then submit that to the insurance company, he said.
In the meantime, the more you document, the better. Photos of damaged areas, an inventory of household items that were destroyed, receipts and a log of all those phone calls can help make your case.
The Consumer Federation tells consumers who receive a low-ball estimate to use those records to complain to senior staff at the insurance company, and to also complain to their state insurance department. Folks with massive losses may also choose to get an attorney.
That attorney can call in an independent adjuster to evaluate the true cost of your home repair and pursue a lawsuit if there's evidence the insurance company is acting in bad faith by bouncing or minimizing your claim.
OUT OF POCKET, TIME AND MONEY
Don't expect instant cash. While insurance companies do sometimes settle claims rapidly, especially in hard-hit areas or where claims are very clear cut, more complicated claims can take months or even years to settle.
Finally, expect to be out some money even if your claim sails through. In recent years, deductibles have gone up, and some have been switched to percentage deductibles instead of flat dollar limits.
That can leave homeowners on the hook for as much as 10 percent of a home's value. At the same time, insurers may have capped the amount they will pay to replace a home that is completely damaged. If post-storm demand pushes up the prices of construction materials and labor, homeowners could end up facing gaps between their actual costs and the claims paid.
Once that's all done, there's still one more bill to be paid. Insurers can and do raise their premiums in the aftermath of crises. Perhaps that's one reason why shares of the big insurance companies did very well today, despite those out-sized loss estimates. And it's one more reason for homeowners to save up their money.
(Editing by Beth Gladstone, Martin Howell)