Property insurance typically only covers wind/rain related losses and not flood losses. Since hurricanes often bring both wind and flood, the determination of property losses caused by wind vs. flood is very important.
Mississippi property insurers paid $13.8 billion in covered losses on Katrina claims, and the federal government stepped in to help homeowners who did not have enough insurance coverage to rebuild, adding more than $2.1 billion of grant assistance from the state Homeowners’ Grant Assistance Program (HAP) program homeowners that faced uninsured (not wind) losses. The attorney general’s office is filing lawsuits against insurance companies—without notifying the homeowners who initiated the claims. “The basic allegation is that insurers underpaid, partially denied, or denied wind claims by classifying them as flood claims,” noting that insurers did so with knowledge that the HAP program would likely reimburse damage identified as flood “because of the insufficient flood insurance on the properties, and that existence of HAP would lower the chance that policyholders would take action against their insurers for underpaying or denying the claims.”