When Hurricane Katrina roared through Linda and Charles Spears’s neighborhood one year ago, a neighbor said he saw winds virtually explode houses on their block long before Lake Pontchartrain began to rise. When the wind died down and the waters subsided, there was nothing but a slab where their house used to be.
The Spearses filed a claim with their insurer, a unit of State Farm Insurance Co., for the face value of their homeowner’s policy — $232,000.
State Farm denied the claim, arguing that flooding — not wind — caused the damage. Flood damage was not covered in their policy.
After a mediation session, State Farm agreed to pay $10,000, including living expenses. The Spearses got $151,000 in taxpayer-financed flood insurance from the federal government — leaving them at least $70,000 short of what they say they’re owed and even less than what they need to rebuild under stricter building rules and with skyrocketing construction costs.
Then last month, a letter from State Farm arrived in the mailbox they’d erected on the slab that had held their house. It was a notice: Their insurance premium had been increased by 23 percent.
Struggles like theirs are going on across the Gulf Coast, where more than a million policyholders have turned to their insurers for payment on homeowner’s, commercial and other insurance claims. Battles over claims have clogged state and federal courts here and spilled into state legislatures.