Same Insurance Claims, Different Results in La. Town

Silvia I. Cosenza, who lived in Gretna, La., until Hurricane Katrina roared through, says she's been caught in an insurance nightmare: Her flood claim denied because an insurance adjuster ruled that her neighborhood was not flooded.

That came as a surprise to Melmary Matheny, who lives across the street and has already received partial payment on her flood claim and has been told to expect another check soon.

What's the difference? Beyond the fact that different insurance companies handled the claims, neither knows.

"For sure, she flooded as much as we did," Matheny said. "Our whole entire neighborhood flooded."

As the insurance industry grapples with its largest-ever loss and a record number of individual claims -- 1.6 million from Katrina, another 1 million from hurricanes Rita and Wilma -- policyholders are learning that the opportunity to get their lives back in order often depends on which company is processing the claim. In many cases, homeowners living in areas that were equally flooded have had drastically different experiences.

Particularly puzzling to some homeowners is that all flood claims are ultimately paid by the federal government's National Flood Insurance Program, which is operated by the Federal Emergency Management Agency. Insurance companies merely administer the program as contractors, selling flood policies and processing claims for a fee. The government -- which hired 95 firms as flood program contractors -- sets the rules and is responsible for paying the claims.

"It's the same money," said Andreas Anderson, who owns two houses in New Orleans's Lakeview neighborhood and is still waiting for an answer from Allstate Corp. on whether his claim will be approved. He said the water in the neighborhood got so high a car floated into one of his houses.

Blaine Lecesne, a law professor who lives in Lake Terrace, an adjoining neighborhood that was also severely flooded, said representatives of State Farm Insurance Co. investigated his claim in a 30-minute telephone interview and sent a $250,000 check to his temporary home in Houston two days later, on Oct. 3.

The widely disparate treatment encountered by those and other Louisiana homeowners is a reminder of the secrecy that shrouds claim-handling in the $1.3 trillion insurance industry. Insurance companies, which are regulated by the states, are not required to disclose their claims practices, including how quickly claims are processed, how many are denied and for what reasons.

To speed the processing of hurricane-related flood claims, FEMA in late September relaxed its reporting guidelines and authorized contractors to perform investigations over the phone for claims in heavily flooded areas. The agency is using aerial photography and its own data on water depths to determine whether damage is so extensive that on-site visits can be waived. FEMA has also suspended its requirement that policyholders submit sworn "proof of loss" statements; instead, where the policyholder agrees, the agency will rely on an adjuster's report.

Not all insurance companies are interpreting the relaxed rules the same way. Some homeowners echoed Lecesne, saying that State Farm handled their claims over the phone. Ben Benton, a retired video store owner, said he has already received a $143,000 check from State Farm for his home in the Broadmoor neighborhood.

Phil Supplea State Farm spokesman, said the Bloomington, Ill., company is closely following FEMA guidelines and "moved quickly to begin work with satellite imaging technology that allowed us to expedite claims."