Effort to Gain Federal Wind Coverage Questionable

An effort to add coverage for wind damage to the National Flood Insurance Program will likely face tough opposition as the measure goes to the floor of the House of Representatives some time this week for a vote.

The insurance industry is lobbying against the Multiple Peril Insurance Act, which would add optional wind coverage to the flood program passed by the House on July 15.

The legislation, proposed by Rep. Gene Taylor of Mississippi has drawn such varied opponents as the Chamber of Commerce and the Obama administration. It was first proposed in 2005, at which time the Bush administration also disapproved.

“You would think, with the astronomical increases in premiums that businesses have had to pay for wind insurance [after Hurricane Katrina], the chamber would go to bat for businesses and not the insurance industry,” said Taylor. “But they have taken a stance against it, and so has the administration. So, this makes both a Democratic and Republican administration that have been against it.”

The specific scenario Taylor’s bill seeks to avoid is one in which a single claim was caused by multiple factors, in this case wind and flooding, and the insurer refuses to pay due to a concurrency clause in the policy.

“The claims adjuster goes out and says, ‘Well, it was 30 percent wind and 70 percent water. Thirty percent of the bill goes to wind, 70 percent of the bill, water,'” said Taylor. “Unfortunately, in their policies — in many of their policies — buried in these policies, in the case of State Farm it was like on page 10 of a 24-page policy, they had one paragraph that said if any two things happened concurrently, that they would not pay at all.”

Taylor’s measure passed the House in 2007, but the Senate extended the flood insurance program without the added wind coverage in 2008. With the stiff opposition, the chances of passage this time are not good, leaving many Americans, especially those living on the Gulf Coast, potentially vulnerable to the concurrency loophole.