Nationwide Insurance is On Your Side - Unless You are a Katrina Victim

Cyrus Dugger

Nationwide Insurance is On Your Side - Unless You are a Katrina Victim

The Homepage of Nationwide Insurance

At Nationwide, we're working hard every day to meet the insurance and financial needs of our customers, at every stage of life. Whatever happens.
You can count on it. With more than $157 billion in statutory assets, Nationwide is one of the largest insurance and financial services companies in the world.

We offer a full range of products and services for your home, your car, your family, and your financial security. We're easy to reach no matter where you are, day or night, from any one of the 50 states and Washington D.C. to Europe and Latin America.

Simply put - Nationwide is On Your Side

Unless you are victim of Hurricane Katrina.

Despite the broadly smiling African-American man on their website's homepage, Nationwide is doing nothing close to making hundreds of the many African-American Katrina victims smile.

The insurance company is systematically denying homeowner insurance claims by Katrina disaster victims. The company claims that its home insurance policy only covers damage from wind and not from water.

In the first case of more than 3,000 individual claims against insurance companies mounting similar defenses (Mississippi Attorney General also filed a separate class action lawsuit), Federal District Judge L.T. Senter Jr, the judge who will be responsible for deciding almost all of the other cases, sided with Nationwide and held that:

"The provisions of the Nationwide policy that exclude coverage for damages caused by water are valid and enforceable terms of the insurance contract. Similar policy terms have been enforced with respect to damage caused by high water associated with hurricanes in many reported decisions."

The damage to the home in question owned by Police Lieutenant Paul Leonard and his wife Julie Leonard, is estimated at $130,000. In his decision, the judge increased the sole compensation for wind damage from $1,228 to $2,889. Notably, the Leonards were required to pay a $500 deductible before receiving their benefits.

There are a few problems with this decision.

The first is that despite his ruling, the judge specifically held that the contract's distinction between water and non-water damage was ambiguous, and that if a decision were based on the contract's its plain text, it would also have excluded all claims for any damage if water contributed to the damage in any way.

This finding implies that the insurer purposefully wrote contracts in a way that it could later argue covered nothing if water was involved in damaging the house in any manner. These types of insurance contracts are contrary to established Mississippi law.

As stated in the decision:

A windstorm is a weather condition that is specifically included in the coverage of
this policy. When the policy is read as a whole, I find that this exclusionary provision is ambiguous-the policy as a whole providing explicitly for windstorm coverage in one section and purportedly excluding the same coverage on the grounds that a windstorm, a "weather condition," and an excluded peril, a flood, occurred at approximately the same time - If this second provision were read to exclude wind damage that occurs at or near the time that any excluded water damage occurs, the result would be contrary to well-established Mississippi law.

If the judge found that this language was ambiguous to the extent that if read literally it would have such an absurd result, it is arguably so ambiguous that the distinction between water and non-water damages should be ruled null and void in its entirety.

The plaintiffs' primary argument was that a "storm surge" driven by wind, is different from the classic flood which was specifically excluded form the contract.

As identified in the complaint, the insurance company somewhat acknowledged the ambiguity:

"On September 7, 2005, nine (9) days after Hurricane Katrina, defendant Nationwide suspiciously sent Plaintiffs a "Hurricane Coverage and Deductible Provision Endorsement," which for the first time attempted to exclude damage caused by hurricane "storm surge" for the October 2005 to October 2006 policy period. This conveniently new "Hurricane Coverage and Deductible Provision Endorsement," which of course was not in effect during Hurricane Katrina, conclusively establishes that 'storm surge' damage was not an excluded form of damage."

I'm not a weather expert but, for what it's worth, storm surge has a separate definition than flood on Wikipedia.

The second major issue is that the plaintiffs repeatedly asked their insurance agent if they needed flood insurance. What is significant about the decision is the judge's finding that the evidence did not support the claim that their insurance agent "misled them by implying that their Nationwide homeowners policy would cover water damage caused by storm surge flooding."

The judge found that the insurance agent repeatedly said that there was no need to get additional insurance. Moreover, despite these inquiries and the response the repeated response that additional coverage was not needed, the judge found that the plaintiff "lept" to the conclusion that the agent had said that additional insurance was not needed because his insurance already covered all hurricane related damage.

According to the judge:

"[The insurance agent] sometimes discouraged his clients from purchasing flood insurance policies. That much is clear from the testimony of a variety of witnesses, including Fletcher's office assistant, Cindy Byrd Collins. There was enough evidence on this point to warrant the conclusion that Fletcher, as a matter of habit and routine, expressed his opinion, when he was asked, that customers should not purchase flood insurance unless they lived in a flood prone area (Flood Zone A) where flood insurance was required in connection with mortgage loans - There was no testimony from which I can discern the reason Fletcher discouraged some of his clients from purchasing flood insurance policies."

The court's primary point was that while the agent may have given bad advice, he did not affirmatively mislead the plaintiffs. This point could really go either way. The agent may have just genuinely felt that it was not necessary, but this point also raises the issue of the level of the duty of cared owed by an insurance agent to his or her clients. More importantly, the issue is also illustrative of the fact that even if the insurance agent had misled them, how would they prove it?

There are also two other side issues.

The first is that the insurance adjuster who first surveyed the damage attributable to wind later modified his report to reduce coverage for a variety of items. "The adjuster had also been reprimanded twice by the Texas Board of Professional Engineers for not following 'generally accpeted engineering practices.'"

The plaintiffs' attorney has also cited whistleblowers who have come forward to claim that insurance companies are secretively rewriting their existing contracts to excluded water related damages.

While reasonable minds can disagree about the outcome of this first of 3,000 cases, what is most distressing is the reaction of the insurance community.

In response to the ruling, the Property Casualty Insurers Association of America ("PCIAA") praised the decision and said that the decision allowed

"[I]nsurers and other businesses in the state to operate without a lingering cloud of uncertainty about the validity of their contracts, which will help energize both the insurance market and the economy of Mississippi."

"Help energize both the insurance market and the economy of Mississippi?"

Don't you need repaired homes for that? How is denying claims to rebuild destroyed homes energizing anything but the profits of insurance companies, let alone for the whole of the state?

PCIAA also said that the decision:

"[R]einforced the need for consumers to take proactive steps to prepare for disasters by making sure that their insurance polices are up to date and that they have the correct type of coverage… especially for flood insurance."

But, as previously stated, the plaintiffs in this case repeatedly asked their insurance agent if they needed additional flood insurance coverage, and were repeatedly told - - - no.

The Property Insurers of America also said that:

"A healthy insurance industry is absolutely key to a rejuvenated economy down here."

Except that without people or homes, how can the economy exist?

Is this the twilight zone?

In other news:

"Shares of most property and casualty insurers rose following the ruling, amid a generally surging stock market - - - American International Group Inc. shares added 73 cents to $62.43
Allstate Corp. shares gained 80 cents to $57.22,

St. Paul Travelers Cos. shares rose 93 cents, or 2.1 percent, to $44.02,

and Hartford Financial Services Group Inc. shares jumped $1.01 to $82.49"

and such

and so on

and on

and on.

insurance nationwide+insurance katrina civil+justice tort+reform tort+deform lawyers courts tort

Comments

Allied Insurance and October 10, 2005
Nationwide Company

Claim Number 84L44185
HSNO Number 30932
Insurer Bill Baer
Date of Loss 08/06/2005
Policy Number BPR 7801676788 0
Agent Nick Chavez, FCLS

In the shadow of Hurricane Katrina and Hurricane Rita, my claim may appear small in nature. I find that the things that are so important to the world about the two hurricane have very little important to my claim. My claim with your insurance company and dealing with the god like person named Nick Chavez (P.O. Box 6940, Visalia, Calif. 93290 � (559) 735-0717) has caused nothing but delays and added to the pain of our loss. I find that the agent does things just to cause delay in processing my claim. He has informed me �I have sixty days before I even have to start processing your claim� and �What are you going to do? You can not sue us and just have to wait for us to get around to your claim�.
1) I and other agents from Allied Insurance informed Nick Chavez of the health issues of the over three hundred pounds of spoiled meat and groceries. The smell goes for many feet from the burnt building. The insects (flies, meat bees. etc...) were almost out of control.
2) Nick Chavez was informed that we do not have any water on the property (three other families depend on the water) because the well power was connected to the burnt building.
3) Nick Chavez was informed that we do not have any sewage system because the power to run our waste reclaim system was connect to the burnt building. Four other families depend on the sewage system.
4) I supplied Nick Chavez with a quote from a local handy man to fix the problem. The quote was for $4,633.82 to remove the burnt trees, fix water/sewage electrical issues and clean-up/debris removal. I informed Nick Chavez that we are 50 miles from any city of size to support contract people to do the same work. Nick Chavez would not accept the quote (the quote is around $3,000 lower than the policy allows and daily travel expense from the nearest large city would add to the quote). If it was up to Nick Chavez, we still would not have any water, sewage system or clean-up (now over 60 plus days). Everyone felt it was terrible that people of Hurricane Katrina did not have basic necessities for one week (we would be over 60 days if left up to Allied Insurance). The only way the above issues have been correct is by my own effort.
5) I have made two written request for status and mile stone of my claim. Nick Chavez has elected not to reply. I have asked for dates to help me plan for the future. Nick Chavez has chosen not to supply any information. Nick Chavez was to get back to me on some issues by the end of the day on 09/01/2005. I reminded him over nineteen days later he need to reply and still over sixty days later has not answered my inquires.
6) The insult to injury is Steven Miller. Steven Miller (HSNO) made a request for information to handle the loss of business. The request was for several years of information (over 400 pages). I supplied the information that was requested on a CD instead of paper. It saved waste of paper and mailing cost. I made a request in a letter to Steven Miller to let me know how the requested documents work in his calculations. Steven Miller will not supply me with how the documents were needed for his calculations or would use the CD instead of a paper form. He has informed me he would not do any more work on my claim.

Do not get me wrong. It has not been all bad. The lady that took the information on the day of the loss was great. The first agent (Mike Copland) on the site was very helpful and understanding of our loss. We were to the understanding that we were to get a more senior agent to replace Mike Copland. The only way Nick Chavez is more senior is to cause delay and make the loss more painful. If it was up to Nick Chavez, the people living on my property would still be with out water, sewage and/or a health environment. Nick Chavez is very good at keeping Allied Insurance money in the business as long as possible. Nick Chavez reply the water, sewage and cleanup was �So� and �Just wait and we will get around to it�.

If you cannot help, please let me know who can help me. I do not understand how a company of your size and reputation dealing with small business could have Mr. Nick Chavez (Allied) and Mr. Steven Miller (HSNO) working for them. I hope that their action is not the standard or required behavior for an agent/manager. I have only asked to understand their actions and reasoning. I have check with my Allstate agent (handles my cars, motorcycle and home in Fremont California) to see if I am in the wrong. She agrees that the agent and manager are not performing correctly. Allstate does not handle our type of business and cannot get anything out of her comments.

William �Bill� Baer
3460 Highway 132
Coulterville, Calif. 95311

The Better Business Bureau February 5, 2006
Serving Northeast California
400 S Street
Sacramento, Calif. 95814-6997

Subject: File A Complaint about
AMCO Insurance, Nationwide Company and Allied Insurance.

To whom it may concern:

I am having problems getting my claim with my insurance carriers (Nationwide Company, AMCO Insurance and Allied Insurance) resolved, so I may rebuild my business. I have tried to resolve the outstanding issues with my local insurance agent (Mr. Nick Chavez), California Director of Claims (Mr. Jeffrey Kaiser) and senior officers at Nationwide Company. I have been informed not to e-mail or send letters to any of the insurance staff per the attorney letter from Lewis, Brisbois, Bisgaard and Smith that have been retained by AMCO Insurance Company. I contact the Insurance Commissioner and received a letter of intimidation and payback for going to the Insurance Commissioner (see attached). I have attached about 50 (fifty) pages from the original 150 (one hundred and fifty) pages of information supplied to the Insurance Commissioner (see attached). I just do not see how Insurance or any other company can treat people as AMCO Insurance, Nationwide Company and Allied Insurance has treated us. I have attached the following information for your review:

1.) Picture of our business that shows before, during and after the fire. The business is a total loss. The inventory was at the highest in the history of the business.
2.) Copy of letters and e-mails during the claim process. The information that was passing on was a request for help from anyone.
3.) Copies of letters from the attorney that the claim information will be provide. The law firm would manage the claim and bring closer to our claim. We are still waiting.

A few of the problems we had were that the insurance staff would find reason to delay and/or postpone the claim being resolved. The following are just some of the main delays:

1.) The first agent on site did an estimate on the replacement of the building. A little over sixty days later the senior agent decided that the estimate was not correct and had to be redone. We have not received a copy of either estimate.
2.) The insurance company was informed that the business and residents on the property do not have water and sewage services available because the wiring to the well pump and sewage system were connected to the business. The loss of the business caused the loss of the electrical supply.
3.) We had over five hundred pounds of spoiled meat and a full cooler full of dairy products that caused a smell that carried for over thirty yards after the fire. The spoil meat and dairy products caused a very large increase in insects. The smell and insect caused health problems and hurt our second business (caf�). The agent�s delay was over thirty days.
4.) I requested copies of the reports, quotes and status of our claim. The agent and Director of Claims refused to supply any information concerning our claim. I ask for the same help from the senior office of the main company to only receive a letter from a law firm informing me not to contact anyone other than the law firm. The letters and e-mails are attached. I do not think my requests were out-of-line or in bad taste.

I do not feel the insurance company is handling my claim in good faith. I do not think the insurance company is providing a timely resolution to our claim. I do not believe that their delay was an accident. The time that the insurance company has delayed the claim has caused me major financial problems. I still have to pay my vendors and accounts. Our inventory was at the maximum level that the store could manage (all deliveries were completed on Friday and the fire was around 3:00 am Saturday). If you can not help, please point me in the direction to someone that will help and/or pass the request on to someone that will help we resolve my concerns. Please provide some help.

Thank you for any help and/or support you can provide.

_________________________

William �Bill� Baer
DBA
Black Oak General Store
3460 Highway 132
Coulterville, Calif. 95311

Insurance Information:

Allied Insurance. � 1100 Locust Street � Des Moines, IA � 50391
AMCO Insurance � P.O. Box 6940 � Visalia, CA - 93290
Nationwide Company � One Nationwide Plaza � Columbus, OH - 43215

There is much more to the story of the insurance companies, Nationwide included, in the response to Katrina and how the courts and government will respond, particularly in response to the class action suits (I have to suspect that there will be more than just the Mississippi AG's). I was involved in the negotiations with Nationwide and the U.S. Department of Justice regarding the consent decree covering Nationwide's insurance redlining in the 1990s (http://www.usdoj.gov/crt/housing/documents/nationsettle.htm
). It took an intrepid fair housing group in Toledo, if I recall correctly, to push the case. These were the days when the Justice Department (under Janet Reno) was relatively intrepid in chasing the insurance companies for their misdeeds. But in the end, the consent decree provided remedies that were hardly comparable to the redlining damage that Nationwide had done, and I'll bet that the compulsory donations that the consent decree forced Nationwide to make (through nonprofit intermediaries) to help potential homeowners with mortgages and loans were taken by Nationwide as charitable deductions. Katrina has precedents. Look at the Loma Prieto earthquake in Los Angeles where litigation finally forced the insurance companies to own up to their plotting to deprive homeowners of coverage. Unfortunately, the solution crafted by California's insurance department was to exact contributions from the guilty insurance companies to 3 new private foundations set up by the state and managed by the Insurance Commissioner, one Chuck Quackenbush. A couple of years later, the money had been misspent and Quackenbush had decamped for surfing in Hawai'i leaving his staff and political aides to face censure and jail time (cf. my Nonprofit Quarterly article from 2003, "One for the Money, Two for the Show: Nonprofits as Conduits for Political Influence", http://www.ncrp.org/downloads/RickCohen/RC-Summer04-TheNonProfitQuarterly-One_for_the%20Money_Nonprofits_Conduits.pdf#search=%22%2BCohen%20%2B%22Nonprofit%20Quarterly%22%20%2Bncrp%20%2BDeLay%22). My take on these issues is through the lens of charity and philanthropy, but the overlap with Cyrus's concerns for corporate accountability is clear. Good work, Cyrus!

Nationwide sent an incompetent company to my home to secure my leaking roof. Soon thereafter, the damage to my home increased ten-fold. They refused to claim responsibility and would not return my calls or e-mails. I filed a complaint against them, and they increased my deductible from $500 to $2500 (if I didn't agree to the increase, they promised to drop my policy!)They then came to my home and assessed my damages at $2515, leaving me $15 after my new deductible. I explained that the figure was inaccurate (very low for the amount of damage), but the adjuster explained he had a list of companies that would make the repairs for that price. Needless to say- he later refused to send me the "list", and I paid a contractor $9,000 to repair the damages (that Nationwide caused!). Had I never contacted them, I could have repaired the roof for $750, and not had to endure 8 months of aggravation.

William,

So sorry to hear about your insurance trials. I feel like DMI should begin collecting and compiling stories like yours for the public. What action, if any, have you taken against your company? Do you know of any other instances of this happening with friends or family?

Rick Cohen,

Thank you for your helpful insight into these issues. Your perspective on these issues is really helpful.