Insurance issues have been key in Southeast’s ongoing recovery

While Mother Nature was nicer to the Southeast and the insurance industry in 2006 than she was in 2005, her potential for destruction was never far from the minds of those living and rebuilding in the Southeast. Insurance remained a central issue in the continuing Katrina recovery and was debated by judges and politicians, homeowners and businesses across the region. When hurricane damage wasn’t the issue, the systems to aid injured workers and settle disputes often were.

Florida Property Market Mess
Insurers, agents, regulators, politicians, homeowners and business owners worked overtime to deal with rising costs and restrictions on availability of coastal property insurance coverage in this key state. Rate hikes, public subsidies, building codes, Citizens Property Insurance, surcharges and the reactivation of a commercial lines JUA were in the mix. The failure of Poe Financial’s three subsidiaries displaced more than 330,000 policyholders and another 70,000 were affected by the liquidation of Vesta Fire Insurance Co. and its subsidiary, Florida Select Insurance Co. It’s not over. A special legislative session will be held in January to consider recommendations of a special panel.

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Katrina in Court
In August, the insurance industry sighed with relief when U.S. District Judge L.T. Senter Jr. in Mississippi ruled thay Nationwide’s policies cover damage from wind but not from a hurricane’s rising water. This was the first post-Katrina insurance lawsuit to go to trial. The ruling in Leonard v. Nationwide broke no new legal ground, which is what insurers wanted. However, Senter also said Nationwide’s policies contain “ambiguous” language that it has used to deny claims in cases where damage resulted from a combination of wind and water. The disputes aren’t over. More than 1,000 lawsuits against insurers have been filed. Federal court trial dates have been set for 145 Hurricane Katrina-related insurance cases during 2007 and a similar number could be scheduled for sometime later in 2007 and in 2008.

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Katrina Claims Resolution
Not all Katrina claim disputes are ending up in court. One year after Hurricane Katrina, the insurance industry reported that nearly 95 percent of homeowners insurance claims had been settled in Louisiana and Mississippi, insurance companies have paid billions in storm damage claims and the vast majority of homeowners in both states say they are satisfied with their insurance company. The courts and state insurance departments throughout the region have been encouraging property owners and their insurers to take advantage of various mediation efforts. “Once the mediation conference is set up, 90 percent of the cases have been settled. That is a strong indication of success,” says Alabama Insurance Commissioner Walter A. Bell.

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At the 2006 Races
Republican incumbent John Oxendine took home the prize in the race for Georgia Insurance Commissioner and will serve a fourth consecutive four-year term. Oxendine handily beat challenger Gaeton Drexinger. With a victory in the race for Florida’s Chief Financial Officer, banker and business leader Alex Sink, a Democrat, will take on multiple tasks within the Florida State Cabinet, not the least of which is oversight of the Office of Insurance Regulation. As CFO, Sink will have some say in whether to retain the current insurance commisisoner, Kevin McCarty, or replace him. Sink had the support of insurance agents in her race against Republican State Senator Tom Lee. In another election, Alabama Commissioner Walter Bell was elected president of the National Association of Insurance Commissioners.

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Heeding the Hurricanes
On Aug. 27, Ernesto became the first hurricane of a season that forecasters warned could see as many as three Category 3 storms make landfall. Fortunately, the season never fulfilled the dire forecasts and the weather proved to be relatively benign, much to the relief of property owners and insurers. Still, insurers continued to heed risk models advising them not to go near the water. The year wasn’t finished before insurance and storm researchers warned that the below-average 2006 hurricane season probably won’t be repeated. In Washington, U.S. Senator Mel Martinez, R-Fla., introduced legislation calling for a national hurricane research initiative designed to better research, predict and prepare for hurricanes.

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Tough Winds in Mississippi
Mississippi wind-pool premiums were increased 268 percent for business owners and 90 percent for homeowners. Officials acknowledge that the rising costs has hampered the state’s recovery but then so would lack of insurance. The hikes would have been far worse had Gov. Haley Barbour not wrestled $50 million in federal relief money. Barbour is trying to get additional federal aid as further increases appear inevitable to cover pool losses. Since 1987, the pool has taken in $188 million in premiums and paid out $778 million. Even with the big increases, more people are being forced into the state-sanctioned wind-pool because private insurance companies are cutting back on policies. The companies have had to cough up more than $545 million in wind-pool losses from Katrina.

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Is S.C. Workers’ Comp Working?
While other states are enjoying a lowering of workers’ compensation costs, that’s not been the case in South Carolina. Premiums have jumped 30 percent in three years, and even at that pace they are not keeping up with costs, according to insurers. In recent years, medical and indemnity costs, attorney involvement and Second Injury Fund assessments have increased sharply. For example, the state’s Second Injury Fund increased its assessment by nearly 100 percent, to more than $250 million in 2005. Despite the burden on employers, legislative attempts within the past year to reform the system fell short.

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West Virginia Mine Tragedy
Twelve miners trapped after an explosion in West Virginia’s Sago Mine last January died. Congress overhauled federal mine safety rules after the Sago tragedy. State mine safety officials issued a report on the cause of the Sago Mine disaster that has been met with skepticism from families and unions. While investigators believe an unusually powerful lightning strike triggered the blast, the report says additional testing is needed to determine how it traveled more than two miles to spark the explosion inside the mine. West Virginia’s workers’ compensation insurer, BrickStreet Mutual, estimates it will pay as much as $10.8 million to Sago’s sole survivor, Randal McCloy Jr., and the families of the 12 men who died. BrickStreet initially planned to pay benefits until the date when the deceased would have reached age 70. Gov. Joe Manchin decided benefits should continue until the spouse dies or remarries.

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West Va. Clamps Down on Comp Cheats
West Virginia businesses that choose to operate without workers’ compensation coverage are being tagged with yellow signs. State Insurance Commission investigators started posting yellow warning signs on the doors of 147 businesses in Charleston in July, with plans to take the enforcement effort statewide. Employers targeted by the campaign were in default or failed to pay their premiums. The state estimates that 2,000 of 40,000 businesses do not have workers’ compensation. The state also implemented a system giving government agencies, contractors and other businesses that rely upon proof of coverage certificates free online validation of employers compensation coverage. The Coverage Validation System is the first in the nation to include authorized self-insured and exempt employers in its database.

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Florida Restores Proportion
Florida’s repeal of joint and several liability met with industry cheers. The bill (HB 145) eliminates joint and several liability, which made every defendant in a lawsuit liable for the entire amount of the plaintiff’s damages regardless of the degree of fault of any individual defendant. Florida is replacing joint and several liability with proportionate liability so defendants are only responsible for their relative share of the damages in question. Jubilation over the passage of the bill also came from Charlie Crist, the incoming governor. “In passing a bill to eliminate joint and several liability, the Legislature today made an important statement on behalf of our state’s economy, while still allowing injured plaintiffs to seek compensation from those who truly caused their injuries,” commented Crist.

Topics Florida Catastrophe Carriers Workers' Compensation Virginia Hurricane Property Homeowners Mississippi Market West Virginia