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Unhappy Anniversary: Katrina Insurance Battle Continues

     “If you can see the ocean, the ocean can see you.” So said Julie Rochman, who saw her Florida condo destroyed by a hurricane years ago.

 

     “Hope for the best and deal with whatever happens. And that’s one of the prices you pay when you live on the coast,” added a fisherman interviewed by ABC’s “Good Morning America” on June 15.

 

     Voices like those – assuming risk as residents of coastal regions – have been few and far between in TV news coverage of Hurricane Katrina insurance claims. The results from the first anti-insurance company lawsuit are in, and the judge ruled to protect the contract already in place. That simply underscored the fact that the federally funded National Flood Insurance Program (NFIP) is the only way to insure a home against flood. But journalists downplayed insurance contracts and framed the judge’s ruling as a “victory” for business against hurricane victims. 



Big Business vs. Little Guy

 

     “A federal judge deals a big blow to homeowners recovering from Hurricane Katrina,” said CNN’s Gerri Willis on the August 19 “Open House.” “It’s a blow to the hundreds of homeowners who did not have flood insurance along the Gulf Coast.”

 

     Many of those homeowners are suing, represented by Richard “Dickie” Scruggs, the wealthy trial lawyer who gained fame suing “Big Tobacco.” In several recent CNN broadcasts, Scruggs – who still says he won the insurance case – was given ample time to talk up his anti-insurance company view and promote his firm’s 3,000 similar pending lawsuits. In contrast, the insurance company was usually represented by a short statement.

 

     Since the first suit was filed, the media have ignored or downplayed the flood exclusion in private contracts, even though the government’s NFIP has offered flood insurance since 1968. Private insurers can’t compete in price with the federally subsidized program, as Ted Frank explained in a Business & Media Institute commentary.

 

     Despite those facts, CBS’s Harry Smith called the suit “the first legal test for insurers who claim their policies do not cover floods” (emphasis added) on the July 10 “Early Show.”

 

     Insurance companies have been cast as Big Business out to stick it to already-traumatized homeowners.

 

     “Lt. Paul Leonard says he just wants his insurance company to play fair and help rebuild his storm-damaged home,” said NBC’s Mark Potter on the July 10 “NBC Nightly News.” Leonard, the plaintiff in Scruggs’ lawsuit, followed: “I felt like they’d be, you know, on my side. Well, I don’t know that they are.”

 

     CBS’s Bob Schieffer described the plaintiffs on the August 15 “Evening News” as “seeking damages that they were denied.”

 

     The Leonards’ protest was that their policy was “too ambiguous,” CBS’s Jim Acosta reported on the July 20 “Early Show.” Then he told viewers what the policy said: “excluding ‘flood and overflow from a body of water whether or not driven by wind.’”

 

     Scruggs’ argument was that the policy didn’t use the words “storm surge.” So where was the insurance company to answer the charges? In that “Early Show” story, Acosta included plaintiff Leonard, lawyer Scruggs, and Mississippi Attorney General Jim Hood, who also has sued the insurance industry. For all other critics who couldn’t be on the program, Acosta piled on: “Critics of the insurance industry say this debate over wind versus water is actually just a delay tactic, designed to drag out the claims process until either the homeowner gives up or the federal government steps in.”

 

     Against that onslaught, one insurance spokesman was allowed only a few sentences.



Where is the company’s side?

 

     That treatment is common, said Julie Rochman – who once lost her own condo to a hurricane and now is the senior vice president for public affairs with the American Insurance Association. The association represents about 400 property-casualty insurance companies.

 

     “Now we have to go to the industry representative, so here is your requisite six seconds,” she said, describing the tiny corporate sound bite in what she said she has seen as the media’s approach to insurance stories. Rochman said most claims adjustors do the opposite of what they are portrayed as doing on TV. “We look for coverage,” not ways to cheat homeowners, she said. “That story’s never told.”

 

     Instead, journalists framed stories like CBS’s Bob Schieffer on the July 19 “Evening News”: “the first of hundreds of lawsuits against insurance companies refusing to pay damages.”  Plaintiff Julie Leonard complained, “It’s a trust in faith that they’re going guide and direct you; they didn’t.”

 

     But these stories did a disservice to the audience, because they mislead on several points, Rochman said. First, those who say the company should pay simply because they have been paying the company need to understand how insurance works. When someone pays premiums for many years without a significant claim, that money is going to pay claims for others who are experiencing tragedy, she said. “It doesn’t go into a shoebox with your name on it.” And, of course, exclusions in your contract won’t change after the fact.

 

     The payment angle struck a chord with the media, who were quick to point a finger at any business. (See coverage of oil profits and gas consumers.) On the July 19 “Evening News,” CBS’s Acosta followed up later on a comment from Hood, who also is suing the insurance industry. Acosta: “The industry, he notes, posted record profits last year.”

 

     That’s misleading, Rochman said. When people talk about industry profits, they’re talking about all types of insurance, including homeowners, auto, fire, etc. But the industry can’t take money from one type – say, auto insurance – and use it to pay out homeowners’ claims. That’s where reports can get misleading. An industry “profit” doesn’t necessarily mean homeowners’ insurance is making a profit.

 

     “Two of the last 28 years we’ve actually made money,” she said, referring to underwriting income – meaning the industry takes in more in premiums than it pays out in claims. That’s assessed on a state-by-state basis. And when underwriting comes up short, it’s investment income that keeps the industry afloat.

 

     “Last year in Mississippi and Louisiana, the insurance industry paid out the equivalent of about 20 years’ worth of profits for those states,” Rochman said.

 

     The industry saw 3.3 million claims from hurricanes last year, which added up to about $60 billion in insured losses. That wasn’t just Katrina; it was the entire hurricane season. At this point, Rochman said, 90 percent of those claims have been settled. Yet the media focus on the 10 percent that haven’t, or the even smaller percentage that are in litigation.

 

     She said she understood that stories about the 90 percent would be, frankly, boring. “Tonight at 11: Insurance companies are paying their claims,” she said.

 

     Still, that doesn’t mean journalists should frame things the way CNN’s Gerri Willis did on the August 17 “CNN Live Today,” setting up an adversarial relationship: “Insurers score a big victory against homeowners.”

 

     “The villain is called Hurricane Katrina,” Rochman said. “The villain is not the insurance industry.” But “Mother Nature rarely does interviews.”




For more information:



FloodSmart.gov, a site by the National Flood Insurance Program

 

American Insurance Association

 

Insurance Information Institute