Galveston Slowly Recovering From Hurricane Ike

Close to three months after Hurricane Ike struck the Texas coast, Galveston is slowly recovering as adjusters and the state's wind pool are still working to settle claims, an agent group executive said.

But whether that action results in class actions from dissatisfied policyholders is still too early to tell said Garry Kaufman, president of the Independent Insurance Agents of Texas and president of Galveston Insurance Associates in Galveston.

Mr. Kaufman said while the city has seen progress in getting rid of debris from the storm, a lot of work remains, as some areas still remain untouched, and others are struggling to find resources and put things back in order.

“Galveston, as a city, was hit pretty hard,” said Mr. Kaufman.

Parts of the city were cleaned up, while other areas still look like “a war zone” he related.

While Hurricane Ike, struck the city in early September, as only a category 2 storm, it powered raging waters into a storm surge that was more on the level of a category 4 storm. That wall of water flooded 75 percent of the homes in the city.

Few homes had flood insurance or secured inadequate coverage, he said. He estimated the total at around 1,900 policyholders out of a population of approximately 58,000.

Most homeowners had wind coverage through the Texas Windstorm Insurance Association (TWIA), the state's residual market, of which Mr. Kaufman is also a board member.

The result has been a situation where homeowners are finding they did not have sufficient coverage to cover their losses, or have yet to get answers on their claims as evaluations progress slowly. He said part of the difficulty in taking care of the claims is that the 1,500 adjusters brought in are not familiar with the unique form TWIA uses.

Many consumers will probably be very unhappy with the final outcome of their settlement, said Mr. Kaufman, but whether much of that dissatisfaction will result in litigation is too soon to say.

“It would not come as a surprise if we did not get that on some scale,” observed Mr. Kaufman.

This weekend, the law firm of Merlin Law Group will hold an event at the Almeda Mall in Houston where attorneys will be on-hand to review consumer's insurance policies and explain to them what their policy covers and what to expect in a settlement.

The event, explained Frank Chimento, director of client services for Merlin, is intended to assist policyholders with understanding the claim process and what is owed to them. It is not intended to collect new clients to create a class action suit.

“A lot of people are still struggling with their insurance claims,” he said, noting that some, such as those in the Hispanic community, are confused and need the help of an attorney to explain the extent of their coverage.

“The insurance companies are not always the enemy here,” he noted, adding that the aid of the attorneys can relieve a lot of pressure on the consumers. He added that it is “way too early to tell” how many claims could turn into litigation.

From an agency perspective, Mr. Kaufman said his agency evacuated 150 miles inland and was up and running during the storm, taking claims from people who called reporting losses based on what they saw from news footage.

Other agents, he noted, were not that well prepared, and some lost their offices and files.

The storm, he said, has served as a wake-up call for many coastal agents who realized they need to be prepared when another big one strikes.

Examining TWIA, Mr. Kaufman said while the fund is able to cover losses, expected to around $2.4 billion, through state coffers and company assessments, future viability is an issue, and the board is actively reviewing its options.

One decision that should help the plan is approval in early November of the Texas Department of Insurance granted the plan a rate increase of 12.3 percent for residential policies and 15.6 percent for commercial policies effective Feb. 1. The state law caps rate changes at 10 percent, but the department is allowed to suspend the cap after a catastrophic loss.