The state should step in to protect the rights of victims of Tropical Storm Isabel who have been shortchanged by their insurance companies, according to a report released yesterday by Maryland's former insurance commissioner.
Based on a survey of Isabel victims in Baltimore County, a review of flood insurance policies and an examination of state and federal law, the study found that insurance agents gave consumers inaccurate information about coverage, delayed paying claims and failed to follow state mandates for processing them.
"I can't tell you how many people came up to me and told me, 'This policy is a rip-off,'" said Steven B. Larsen, who was hired by Baltimore County to conduct the study. "People had rights under these policies, and they didn't know about them and weren't told about them."
The report, the latest indication of the troubles faced by Isabel's victims, comes more than four months after the storm ravaged eastern Baltimore County.
Up to 300 families are still living in trailers or other temporary housing in the wake of the storm, state officials say, and legislators are considering bills that would provide homeowners with low-cost loans to rebuild. The governor's office estimates that insurance companies, charities, and federal, state and local governments have provided $340 million in claim payments, grants and loans to Isabel's victims but $17 million in housing needs remain unmet.
Bernice Myer, a Baltimore homicide detective who has started an Isabel victims group, said yesterday that government pressure on the insurance industry would be far more helpful than grants or low-interest loans.
On the night of the storm, water coursed through her house on Millers Island, a narrow peninsula at the mouth of Back River. It destroyed the 1950s diner-style kitchen she'd just installed, smashed drywall, ruined floors and washed away her possessions. The house was later razed.
She said she sat in her car and cried yesterday afternoon because the fight against her insurance company is so overwhelming.
"For us waterfront homeowners, we're pretty much middle-class, hard-working families," she said. "We don't want to owe anybody anything. We don't want any handouts, we don't want any welfare. We want the insurance companies to honor our policies and pay us what they owe us."
Baltimore County Executive James T. Smith Jr. hired Larsen in December to conduct the study in response to complaints about problems with insurance claims. One of Larsen's main conclusions was that his successor, Insurance Commissioner Alfred W. Redmer Jr., has the power to force flood insurance providers to follow the same practices as other insurance agents and adjusters.
"The commissioner has the right to force companies to comply with the law or follow what he finds to be the right result," said Larsen at a news conference yesterday in Annapolis. "He has broad discretion, a real hammer to bring down on these companies."
Redmer has contended that because flood insurance is a federal program, he has no right to regulate the agents and adjusters in the private sector who sell and service the vast majority of flood policies. His spokeswoman, Debbie Rosen McKerrow, said yesterday that an opinion from the state attorney general's office supports Redmer's view.
Smith sent a copy of Larsen's report to Attorney General J. Joseph Curran Jr. but said he will not seek a formal opinion.
Mark Stevens, a spokesman for the Federal Emergency Management Agency, said FEMA can help resolve disputes between consumers and the companies that sell flood insurance, but that doesn't mean a state insurance commissioner can't also be involved.
"The insurance commissioner is empowered to regulate the activities of, or the business of, the insurance companies that do business within his or her state, and that includes flood insurance," Stevens said.
Redmer, who reacted angrily when Smith commissioned the study, declined an interview on the report. He issued a statement saying that he appreciates Larsen's effort but the study "fails to highlight anything new." Redmer said his staff has conducted a review and made recommendations on ways to improve claims service.
In his statement, Redmer dismissed the scope of Larsen's study, which is based on questionnaire responses from 89 victims and follow-up interviews with 23. The insurance commissioner said his staff has met with more than 1,200 storm victims.
Larsen, who was paid $24,000 by Baltimore County to conduct the six-week study, found that because of the way the federal government limits compensation under flood insurance, the losses of many Isabel victims would not be covered in full. Many who participated in the study lacked flood insurance for the contents of their homes, and many did not fully understand their policies, Larsen wrote.
The vast majority of those who responded to the questionnaire said they found insurance agents and companies to be unhelpful and ignorant about the flood insurance policies they sold. Respondents also complained that they were pressured by adjusters into taking lower settlements than they were entitled to.
"We were struck by the tone of desperation, frustration and, in some cases, hopelessness conveyed by the Isabel victims," Larsen wrote. "Some told their stories in tears."
Don Cleasby, assistant vice president, regional manager and counsel to the Property Casualty Insurers Association of America, said the insurance industry did well under difficult circumstances but needs to do a better job of making sure agents and adjusters know the details of the federal flood insurance program. He said his group would consider supporting more educational and disclosure requirements.
"It's not good for our industry for such misrepresentations to be going on," Cleasby said.
The Larsen report suggested that the federal government expand the flood insurance program, rewrite policies to make them clearer and create a claims manual.
Rep. C.A. Dutch Ruppersberger, a former Baltimore County executive, said that he and Sens. Barbara A. Mikulski and Paul S. Sarbanes will review the flood insurance program and pursue any changes necessary to avoid a repeat of the problems after Isabel.
After four months of wrangling with their insurance company, Frank and Elaine James settled last week for far less than they will need to rebuild their Middle River ranch home. Now, six months before Frank, 64, is due to retire, they're facing a mortgage and hoping that Social Security will pay the bills because they can't stand to stay cooped up in an apartment anymore.
"We have to start over again," said Elaine, 57. "And at this age of my life, I don't want to start over again."