Damage costly for many

Official: Out-of-pocket expenses likely to be hefty

Advocate staff photo by ARTHUR D. LAUCK -- Denise and Clarence Jones look over work being done to their Killian house on Monday, after it was flooded by over a foot of water during Hurricane Isaac. They said they will rebuild their house in Livingston Parish but may raise it on piers to keep it from taking on water in the future.

Louisiana Insurance Commissioner Jim Donelon said Tuesday that he expects damage caused by Hurricane Isaac will be less than half the $2.2 billion caused in the state by Gustav, noting that those figures do not include flood damage and that he does not have any actual damage estimates in hand from insurers.

Donelon said the National Flood Insurance Program will probably pay out as much in damages as private insurance companies because flooding likely caused much of the damage.

Policies from private insurers do not cover damage from floods.

Donelon discussed hurricane damage at a news conference announcing that policyholders affected by Hurricane Isaac will get extra time to pay their insurance premiums and go to out-of-network health care providers under an emergency rule implemented by his department.

Policyholders affected by Isaac will have until Sept. 25 to pay insurance premiums due on or after Aug. 26, according to the department. Insurers will not be allowed to charge a late fee or penalties, and the insurance companies cannot cancel policies and must renew them.

The emergency rule also removes restrictions health plans have on prescription drugs; a consumer can receive a 30-day supply of prescription medication without penalty.

Donelon said the major issue from Isaac, as it was for Hurricane Gustav in 2008, will be the name-storm, wind-and-hail or hurricane deductibles that many insurers implemented after 2005’s devastating hurricanes Katrina and Rita.

These deductibles require property owners to bear a percentage of the cost of damage, Donelon said. For example, the owner of a $150,000 home whose policy carries a 5 percent named-storm deductible would have to pay for the first $7,500 of damage.

Most people whose homes were damaged won’t be getting money from their insurance company, Donelon said. People were shocked after Gustav when they learned how much their out-of-pocket expenses would be, and the Insurance Department expects similar reactions after Isaac, he said.

State law requires insurance companies to put the hurricane deductibles, in larger type, on the declaration page of a policy, usually one of the first few pages of a policy, Donelon said.

Donelon said he doesn’t expect Louisiana will get much of an economic boost from the hurricane repairs.

“There will be some, but there will be a lot of mom-and-pop putting it back together themselves versus insurance money or federal flood insurance money,” Donelon said.

Around 40 percent of the state’s residents have flood insurance, Donelon said. But that means that 60 percent didn’t, and flooding probably caused the majority of damage.

Donelon said he also expects the federal government to implement some sort of program to help hurricane victims.

There is also a chance that Congress, as it did in the previous four hurricanes, will pass a law allowing property owners to deduct from income taxes the damages not covered by insurance.

Donelon encouraged consumers who have questions to contact the Insurance Department at [phone]. Consumers can find resources online at http://www.ldi.la.gov, and can also submit questions via email to [e-mail].

Meanwhile, Donelon said the claims for Louisiana Citizens Property Insurance Corp., the state-backed insurer of last resort, will amount to less than $75 million.

Citizens had to pay $104 million last month to settle a class-action lawsuit over allegations that it had not started the claims-handling process quickly enough after hurricanes Katrina and Rita.

Citizens is getting close to the bottom of its cash, Donelon said, so if there were another hurricane, Citizens might have to draw down on its $75 million line of credit.

Citizens won’t have to levy an assessment on insurance companies and property owners, unless the state gets hit by a Katrina-sized storm, Donelon said.

Citizens, which sells policies to homeowners who can’t get coverage anywhere else, had to borrow nearly $1 billion to pay claims from Hurricane Katrina. Bond debt is paid for by assessments on private insurance companies, which pass those fees along to their policyholders.