A consumer advocate warns that insurance companies may try to opt out of paying for Katrina damage.

CNN-TV “AMERICAN MORNING” SHOW

SOLEDAD O’BRIEN: What do you do now if your house looks like that or if you lost everything or had any kind of damage from Hurricane Katrina? What kind of insurance should you have, hurricane or flood? Doug Heller is the executive director of the Foundation for Taxpayer and Consumer Rights. He is in Los Angeles this morning.
Nice to see you, Mr. Heller. Thanks for talking with us.

DOUG HELLER, CONSUMER ADVOCATE: Good morning.

S. O’BRIEN: To a large degree, aren’t they splitting hairs when they are quibbling over whether people — and you just saw that picture, whether that was flood damage, because the bottom half of the home is under water, or if it’s hurricane damage, the top half has been utterly blown off. I mean, isn’t one caused by the other?

HELLER: Well, that’s exactly right. And unfortunately, we’re already hearing from many Katrina survivors who are being told that they’re not going to have insurance coverage because, well, they didn’t have the flood insurance. And they’re all asking the same question: If I bought hurricane insurance, and in many cases paid thousands of dollars a year for it, and then Katrina ripped through my neighborhood and destroyed my home, why is my insurance company telling me they’re going to deny my claim?

And you know it’s like telling — it’s like saying that a murderer is going to be let off the hook because, well, it was the bullet that killed the guy, not the murderer himself. Everybody knows that it was Katrina. It was Hurricane Katrina, not flood Katrina that came through. And it just doesn’t make any sense. If it wasn’t for the hurricane there wouldn’t have been a 20-foot storm surge in Biloxi.

S. O’BRIEN: How — when you say — I’m going to stop you there, because you say, everybody knows. But I have a feeling that actually this is going to end up in the courts which will ultimately decide whether it was Hurricane Katrina or flood Katrina, so to speak, that did the bulk of the damage.

HELLER: Well, we are really afraid of that. The insurance companies, you know, they take our premiums every year and have no problem with that. But they’re very tight with the money when it comes to paying out. And we’re concerned that we are going to see Katrina survivors having to get lawyers, having to go into court and fight for their rights to get paid.

And, it’s just so many people who know that it was Katrina that pulled the trigger. But the insurance companies are going to point to subsection 3-F or whatever it is in your policy and say, well, there was an exclusion here. But if it wasn’t for Hurricane Katrina, there wouldn’t have been a levee break, there wouldn’t have been a storm surge and all these folks wouldn’t have lost their homes, so they should get paid.

S. O’BRIEN: How much money do you think we are talking about at the end of the day in that distinction between the flood and the hurricane? And how much money will potentially homeowners lose out on?

HELLER: Well, it could be — depending on where you are, I think in the Gulf Coast, it may be that there is a little bit more — people get a little bit more paid because it looks like the wind was the direct cause of the damage. In Orleans Parish, in the city of New Orleans, it could be a whole lot, if not virtually all of your claim, the insurance companies will fight over and say you are not covered for. And that’s a real concern.

And we are really warning and urging people to be assertive policyholders and make sure these insurance companies don’t write you off. Because after going through such a tragedy with the natural disaster, they shouldn’t be forced through the kind of hoops that the insurance companies want to put them. But we’re talking tens of billions of dollars are at stake here.

S. O’BRIEN: How — isn’t FEMA giving money to people who need money and need to rebuild?

HELLER: Well, FEMA will give a little bit of cash upfront. You know, we’ve heard some problems about the difficulty in getting that money. But when it comes to the bulk of rebuilding, at best most people will only have access to loans. You know, insurance is a much better way to get — to rebuild your home because the insurance company gives you money.

FEMA and the federal government, we are just going to give loans, you know — or I should ,say they’re just going to just give loans to the public. And that’s not the same thing. You are going to have to pay that back. You still have to pay your mortgage. And that’s why we have got to make sure that the insurance companies don’t let, the taxpayers pick up the tab where they’re supposed to. Because they just rebuilt people’s homes, it’s not a question of loans.

S. O’BRIEN: Let’s run through some of your tips. First — and I want to get to all of them, so let’s go pretty quickly. First, should you wait to document your loss? I mean, obviously, a lot of people have trouble getting in, should you wait a little while?

HELLER: Right. No, the first thing that people should do is contact their insurance agent. If they can’t find them, call the insurance company and let them know that you have had a loss, that you are going to file a claim. You want to get things started right away.

And as best you can, if you can get back to your homes, document everything. If you have cameras, video cameras, get it all on paper at least. And one thing that we are recommending to people is to sit down and start making the list of what they’ve lost. Because you are going to have to claim — you’re going to have to document everything. And you will find that you have forgotten an entire room. And so as soon as you think of something, put it down on paper at the least if you can’t get back and photograph what you lost.

S. O’BRIEN: You also say, don’t sign anything early on, don’t sign away any of your rights, and also make sure you are aware of the time line. What do you mean by the time line?

HELLER: Well, there are — the insurance policy and state laws have different time lines in which you have to file your claim, you have to report your damage. And if, unfortunately, this gets to court, there are going to be deadlines for filing lawsuits. So you just need to talk to the insurance company and find out exactly what time line you have to file everything with them and to inform them about problems you are having.

S. O’BRIEN: Get a second opinion, I know, is some more advice you have. What would you use for the second opinion?

HELLER: Well, first of all, for legal advice, I know there are going to be a lot of lawyers who are giving free legal advice to Katrina survivors. And it’s very important, especially before you sign any waiver or any releases, that you get independent advice from an attorney or from some expert, perhaps at the state department of insurance. But also, if you don’t feel that the adjuster or the contractor that the insurance company has brought in is doing a fair job, or if you think they are trying to lowball you, you have every right to bring in an independent contractor and it may cost you a couple of hundred dollars to do that, but that could be worth it in the long run to make sure that you get a fair deal from the insurer.

S. O’BRIEN: Some good information. Doug Heller is the executive director for the Foundation for Taxpayer and Consumer Rights. Thanks, Doug.

HELLER: Thank you so much, Soledad.