Unhappy Anniversary: Katrina Insurance Battle Continues
âIf you can see the ocean, the ocean can see you.â So said Julie Rochman, who saw her Florida condo destroyed by a hurricane years ago.
âHope for the best and deal with whatever happens. And thatâs one of the prices you pay when you live on the coast,â added a fisherman interviewed by ABCâs âGood Morning Americaâ on June 15.
Voices like those â assuming risk as residents of coastal regions â have been few and far between in TV news coverage of Hurricane Katrina insurance claims. The results from the first anti-insurance company lawsuit are in, and the judge ruled to protect the contract already in place. That simply underscored the fact that the federally funded National Flood Insurance Program (NFIP) is the only way to insure a home against flood. But journalists downplayed insurance contracts and framed the judgeâs ruling as a âvictoryâ for business against hurricane victims.
Big Business vs. Little Guy
âA federal judge deals a big blow to homeowners recovering from Hurricane Katrina,â said CNNâs Gerri Willis on the August 19 âOpen House.â âItâs a blow to the hundreds of homeowners who did not have flood insurance along the Gulf Coast.â
Many of those homeowners are suing, represented by Richard âDickieâ Scruggs, the wealthy trial lawyer who gained fame suing âBig Tobacco.â In several recent CNN broadcasts, Scruggs â who still says he won the insurance case â was given ample time to talk up his anti-insurance company view and promote his firmâs 3,000 similar pending lawsuits. In contrast, the insurance company was usually represented by a short statement.
Since the first suit was filed, the media have ignored or downplayed the flood exclusion in private contracts, even though the governmentâs NFIP has offered flood insurance since 1968. Private insurers canât compete in price with the federally subsidized program, as Ted Frank explained in a Business & Media Institute commentary.
Despite those facts, CBSâs Harry Smith called the suit âthe first legal test for insurers who claim their policies do not cover floodsâ (emphasis added) on the July 10 âEarly Show.â
Insurance companies have been cast as Big Business out to stick it to already-traumatized homeowners.
âLt. Paul Leonard says he just wants his insurance company to play fair and help rebuild his storm-damaged home,â said NBCâs Mark Potter on the July 10 âNBC Nightly News.â Leonard, the plaintiff in Scruggsâ lawsuit, followed: âI felt like theyâd be, you know, on my side. Well, I donât know that they are.â
CBSâs Bob Schieffer described the plaintiffs on the August 15 âEvening Newsâ as âseeking damages that they were denied.â
The Leonardsâ protest was that their policy was âtoo ambiguous,â CBSâs Jim Acosta reported on the July 20 âEarly Show.â Then he told viewers what the policy said: âexcluding âflood and overflow from a body of water whether or not driven by wind.ââ
Scruggsâ argument was that the policy didnât use the words âstorm surge.â So where was the insurance company to answer the charges? In that âEarly Showâ story, Acosta included plaintiff Leonard, lawyer Scruggs, and Mississippi Attorney General Jim Hood, who also has sued the insurance industry. For all other critics who couldnât be on the program, Acosta piled on: âCritics of the insurance industry say this debate over wind versus water is actually just a delay tactic, designed to drag out the claims process until either the homeowner gives up or the federal government steps in.â
Against that onslaught, one insurance spokesman was allowed only a few sentences.
Where is the companyâs side?
That treatment is common, said Julie Rochman â who once lost her own condo to a hurricane and now is the senior vice president for public affairs with the American Insurance Association. The association represents about 400 property-casualty insurance companies.
âNow we have to go to the industry representative, so here is your requisite six seconds,â she said, describing the tiny corporate sound bite in what she said she has seen as the mediaâs approach to insurance stories. Rochman said most claims adjustors do the opposite of what they are portrayed as doing on TV. âWe look for coverage,â not ways to cheat homeowners, she said. âThat storyâs never told.â
Instead, journalists framed stories like CBSâs Bob Schieffer on the July 19 âEvening Newsâ: âthe first of hundreds of lawsuits against insurance companies refusing to pay damages.â Plaintiff Julie Leonard complained, âItâs a trust in faith that theyâre going guide and direct you; they didnât.â
But these stories did a disservice to the audience, because they mislead on several points, Rochman said. First, those who say the company should pay simply because they have been paying the company need to understand how insurance works. When someone pays premiums for many years without a significant claim, that money is going to pay claims for others who are experiencing tragedy, she said. âIt doesnât go into a shoebox with your name on it.â And, of course, exclusions in your contract wonât change after the fact.
The payment angle struck a chord with the media, who were quick to point a finger at any business. (See coverage of oil profits and gas consumers.) On the July 19 âEvening News,â CBSâs Acosta followed up later on a comment from Hood, who also is suing the insurance industry. Acosta: âThe industry, he notes, posted record profits last year.â
Thatâs misleading, Rochman said. When people talk about industry profits, theyâre talking about all types of insurance, including homeowners, auto, fire, etc. But the industry canât take money from one type â say, auto insurance â and use it to pay out homeownersâ claims. Thatâs where reports can get misleading. An industry âprofitâ doesnât necessarily mean homeownersâ insurance is making a profit.
âTwo of the last 28 years weâve actually made money,â she said, referring to underwriting income â meaning the industry takes in more in premiums than it pays out in claims. Thatâs assessed on a state-by-state basis. And when underwriting comes up short, itâs investment income that keeps the industry afloat.
âLast year in Mississippi and Louisiana, the insurance industry paid out the equivalent of about 20 yearsâ worth of profits for those states,â Rochman said.
The industry saw 3.3 million claims from hurricanes last year, which added up to about $60 billion in insured losses. That wasnât just Katrina; it was the entire hurricane season. At this point, Rochman said, 90 percent of those claims have been settled. Yet the media focus on the 10 percent that havenât, or the even smaller percentage that are in litigation.
She said she understood that stories about the 90 percent would be, frankly, boring. âTonight at 11: Insurance companies are paying their claims,â she said.
Still, that doesnât mean journalists should frame things the way CNNâs Gerri Willis did on the August 17 âCNN Live Today,â setting up an adversarial relationship: âInsurers score a big victory against homeowners.â
âThe villain is called Hurricane Katrina,â Rochman said. âThe villain is not the insurance industry.â But âMother Nature rarely does interviews.â
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