State Farm Relaxes Rules on Checks for Living Expenses Post Katrina

State Farm Insurance policyholders in Louisiana who received $2,500 checks to help with living expenses following Hurricane Katrina will not be required to document how they spent the money, according to the Associated Press and the New Orleans Times-Picayune.

“It’s basically the right thing to do,” Dick Luedke, a State Farm spokesman, said. “We don’t see a need to go back to pursue them and said, ‘OK, We gave you $2,500 and you only spent $2,200. Where is our $300?’ That seems somewhat ridiculous.”

State Farm issued 90,000 checks worth $2,500 apiece to help policyholders displaced by Katrina pay their living expenses.

As long as those customers don’t seek additional money from the company for Katrina-related expenses, State Farm will not ask its policyholders to document how they spent the money or return any of it, even if they didn’t spend it on hurricane-related living expenses, Luedke said.

Luedke’s comments mark a sharp reverse for the company, which drew scathing reviews from state lawmakers earlier this week for announcing that the $2,500 payments would be subject to a policyholder’s standard deductible. With a typical deductible running $1,000 to $2,000, that means many policyholders could have been asked to give most of the money back.

But State Farm now is following the course set by Allstate Insurance and Louisiana’s other big insurers, which handed out millions of dollars for living expenses without such conditions.

However, if customers want to collect more than $2,500 for living expenses under the so-called civil authority clause, they’ll have to provide receipts and the deductible will apply, Luedke said. Under the civil authority clause, policyholders can collect up to 14 days of living expenses because local officials ordered them out of their homes.

State Farm policyholders can get reimbursed for up to two years of living expenses if wind made their home uninhabitable, but most of the homes wrecked by Katrina sustained water damage, not wind damage.

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