State Farm to Begin Excluding Wind Coverage in Miss.
A State Farm Insurance Co. executive says the company is no longer offering wind coverage for new customers in Mississippi’s six southernmost counties and is reviewing whether to continue extending the coverage on renewals.
Because the base hurricane deductible is restricted to 2 percent in Mississippi, increasing the deductible was not an option as it has been in other states, said Robert L. Trippel, who oversees the Southern Zone as senior vice president of claims for State Farm.
“Our alternative is at this point to go in with a policy that’s minus wind,” Trippel said. “When and if we’re able to make adjustments, we’ll begin writing wind.”
Hurricane Katrina prompted the changes, Trippel said.
The storm’s tidal surge and winds destroyed thousands of homes and businesses along the Mississippi coastline and caused widespread damage in Louisiana and parts of Alabama, making it the costliest storm in U.S. history.
Trippel said State Farm is working with Mississippi Insurance Commissioner George Dale’s office on what will be done about renewal of current business in the state.
Dale’s office is examining State Farm’s conduct in handling Katrina claims.
“I continue to be in a predicament that I don’t really relish,” Dale said Friday, “but if I can’t keep a market on the coast, the coast can’t rebuild.”
State Farm also stopped selling property insurance within one mile of the coastline in its Southern Zone states of Mississippi, Alabama and South Carolina, Trippel said, partly because Katrina’s wind and water damage have proven so difficult to separate.
“I would state it would be extremely difficult, when a home is sitting on the water and is washed away, as the homes were down there, that it is very difficult — I don’t care if you’re a structural engineer or a trained claims rep — to solve that issue,” Trippel said in sworn testimony the courts compelled him to give Nov. 29 in a lawsuit that Oklahoma tornado victims had filed against the company.
An Oklahoma jury in May found that State Farm denied tornado claims through the use of biased vendors to assess damage.
Since Katrina, similar allegations in Mississippi have led to federal and state investigations and policyholder lawsuits against State Farm. The debate in Mississippi centers on whether wind or water damaged properties.
Many policyholders in surge areas believe State Farm used biased experts to blame tidal surge, which is covered by federal flood insurance, rather than wind, which is covered under the company’s policies.
A 5 percent deductible on a house insured for $250,000 would be $12,500. A hurricane deductible is the amount much the policyholder pays before insurance picks up the rest of the tab.