When homeowners were left with hefty hotel and travel bills after choosing to flee Hurricane Ida, sharp words from President Biden prompted insurance companies to chip in to cover costs. But, experts say, this generosity was unusual. Based on the way home insurance policies are written, future evacuees should expect to be left on the hook.
This homeowners that evacuated ahead of Ida were in Louisiana — where the storm made landfall and where devastation has been the greatest, according to FEMA. Some residents who fled the storm later reported having home insurance claims denied for expenses such as hotel bills and restaurant tabs they incurred in their evacuations — sometimes to the tune of thousands of dollars.
A number of major insurers subsequently reversed their denials, but only after what was possibly the first-ever public dressing-down of home insurance companies by a President of the United States.
In Sept. 3 remarks in LaPlace, Louisiana., President Biden said “[Y]ou paid your insurance premiums. You’re supposed to get payments for additional living expenses in the case of an emergency. Well, but the insurance companies are saying, ‘No, no. No, we won’t pay you what we owe.’”
Technically, the insurers didn’t owe the money, as Biden clarified in other remarks. But his admonishment, along with an order from Louisiana’s insurance commissioner to approve the denied claims, moved the needle for some Louisianans who racked up bills after leaving their homes voluntarily to escape the hurricane.
Here’s what was behind the initial denials, and why those who choose to flee future disasters can’t count on the same treatment for their claims.
What prompted the Ida insurance exception
The Ida claims disputes are rooted in a provision of most home and renters insurance known as additional living expenses — or ALE — coverage. ALE claims may be made, according to the Insurance Information Institute, if you cannot “live in your home due to mandatory evacuation or as a result of damage to your home from an insured catastrophe, such as a hurricane.”
The trouble is that many who left their homes during Ida did so voluntarily, since authorities where they lived did not mandate such departures, despite the expected magnitude of the hurricane. That led some insurers to initially deny claims, and then to the criticism from President Biden and other officials.
“No one fled this killer storm because they were looking for a vacation or a road trip," the president said. "They left their homes because they felt it was: flee or risk death. There’s nothing voluntary about that, so I’m calling on private insurance companies right now, at this critical moment, to don’t hide behind fine print and technicality.”
A one-time limited reprieve from policy rules
The presidential pressure was supplemented by a call for the same relaxation of the rules by Louisiana Insurance Commissioner Jim Donelon. “Insurers must treat the many diverse actions taken by public officials as tantamount to an order to leave and pay people who have coverage for those expenses as if a mandatory evacuation had been issued,” Donelon said, according to reporting from Baton Rouge, Louisiana, station WAFB-TV.
Donelon announced that Allstate, USAA and PURE Insurance Company agreed to approve ALE claims in Louisiana parishes in which mandatory evacuations were not ordered. To Mark Friedlander, director of corporate communications for the Insurance Information Institute, the provision by those companies of ALE coverage to those who voluntarily evacuated is “a great example of how the insurance industry acts as the nation’s financial first responder in times of crisis.”
But not all companies are on board with relaxing the requirements. Donelon said he “strengthened” the Department of Insurance’s order after State Farm — the largest home insurer by far in the state, according to the Louisiana Department of Insurance — “said it would not pay loss of use claims where no express civil authority order was in place.” This week, Donelon told the Insurance Business news website that State Farm still isn’t complying with the order and has plans to challenge the order in court.
State Farm’s apparent resistance underlines that the impact of the Ida policy concessions in Louisiana is limited, and doesn’t assure any permanent change to policy provisions around evacuations. As Friedlander confirms, the III is “not aware of plans by any insurers to make changes to ALE coverage provided within property policies or plans by any state legislatures to address this issue.”