Insurance Limbo Delays Gulf Rebuilding

NEW ORLEANS -- The owners of the sagging, flood-stained home aren't in. Above the front door, a banner explains their absence, and the lack of progress: "Allstate paid $10,113.34 on this house for storm damage."

Like the home next to it and the one after that, the house was disemboweled nine months ago by Hurricane Katrina. The force of the gushing water punched the refrigerator into the kitchen wall, and it still sits leaning through the house's broken ribcage. Inside, mud has hardened into a crusty carpet, covering a designer sofa and a leather swivel chair.

"I want people to drive by my home and decide for themselves: Could I repair this for $10,000?" asks Eric Moskau, the home's exiled owner who had over $1.2 million in coverage on his 3,000-square-foot home.

Behind the sign he hung from his porch is a story all-too-common in this once-posh neighborhood of pummeled homes: Even New Orleans' affluent homeowners, who thought they had done the right thing by properly insuring their investment, are finding that technicalities are keeping them from securing enough from their insurers to rebuild.

The insurance industry says it has settled over 90 percent of its Hurricane Katrina claims, proving it's meeting its obligations to policyholders. But consumer advocates say insurers settled numerous claims for only a fraction of the actual damages, using numerous exclusions to reduce payouts. Insurance modeling firm ISO estimates Louisiana had $24.3 billion in insured losses, but the state department of insurance says only $12.5 billion had been paid out as of the end of April, the last month for which figures were available.

Without enough money from their insurers to rebuild, homeowners are left with two choices: Give up and leave, or else rebuild by hand, using their savings to pay for labor and materials.

"It's basically self-insurance," said Moskau, who had what he thought was plenty of coverage on his $600,000 two-story house and now counts himself among those who have abandoned their homes on once-stylish Bellaire Avenue.

Exactly 63 buckled, warped and mud-filled homes separate Moskau from the nearest neighbor who is now repairing his home. "With this," says 79-year-old Pascal Warner, holding up his large, lined hands, as the light streams in through the ribs of his still unfinished walls.

He and his 71-year-old wife, Irma, have dragged their sopping furniture to the curb, ripped the wet wallboard off the walls and stripped the house to the studs. With only a pittance from their homeowner's insurance, they had just enough money for supplies, not labor.

After last year's floodwaters receded, politicians initially blamed the residents of this below-sea-level city, claiming too few had purchased federal flood insurance on top of their homeowners policies, which cover only wind damage.

Yet an analysis by the office of Donald Powell, the Bush administration's Gulf Coast recovery czar, found few communities were better insured against flooding than New Orleans: Two out of three homes had flood insurance, 13 times more than the national average of 5 percent. It's also far more than in many other communities historically prone to flooding. For example, Harris County, Texas, has one of the highest rates of repetitive flooding in the nation and yet only a quarter of homeowners have flood coverage.

Moskau, a well-to-do real estate appraiser, thought he had taken every precaution: He had the maximum federal flood insurance of $250,000. But when the government issued that check, it was issued in two names: Moskau's and his bank's. His bank applied the check to his $600,000 mortgage, leaving him with an outstanding note of $350,000 and no money for repairs.