With his Moore home's sagging ceiling, busted windows and debris-covered floor, Gabriel Becerra couldn't believe an insurance adjuster told him he could live there.
“You could see the walls wobble, they moved all around the house. It was ridiculous,” he said. “The adjuster said ‘we could patch this up.'”
Becerra's home of 15 years, where he lived with his wife, adult daughter and granddaughter, was directly behind the Warren Theatre and a block from the 7-Eleven where three people died in a deadly tornado on May 20. The city later condemned the home and tore it down.
But his insurer, Foremost Insurance, a Farmers subsidiary, insisted it was repairable. He is one of 28 homeowners who are suing their insurers over claims filed after deadly tornadoes caused widespread damage in central Oklahoma on May 19 and 20. In court filings, Farmers denies the claims.
For a catastrophe of such magnitude, it's not surprising to see some residents' insurance disputes end up in court, said Insurance Commissioner John Doak. An EF5 tornado that tore through Moore and south Oklahoma City, and a twister that hit Shawnee the day before, spurred 95,000 insurance claims, including 45,000 on homes. Losses are estimated between $1.5 billion and $2 billion.
“Part of a natural catastrophe cycle is that there will be, in our case, hopefully a small percentage, that go to this level of a dispute,” he said.
He encourages homeowners to try mediation through the department's EAGLE, an acronym for Ending Arguments Gently, Legally and Economically. It was developed after a May 1999 tornado outbreak as a way to quickly resolve issues.
The residents involved in the lawsuits who live in Moore, Oklahoma City and Carney, claim their insurance companies refused to pay enough to replace or rebuild destroyed homes, despite having replacement cost coverage.
Other claims include withholding benefits, inadequately investigating damages, delaying payment on claims and wrongly underpaying.
State Farm, Farmers and Allstate are named in the majority of the lawsuits; others include AAA Oklahoma and American National Property and Casualty Co.
Not replacement cost?
In Becerra's case, and many of the others, homeowners argue the amount paid on the claim was less than the replacement value of the home, which is used to determine their premium.
A homeowner who purchased a policy with a replacement cost value of $200,000, for instance, was led to believe he would receive $200,000 if his home was destroyed, explains Jeff Marr, an Oklahoma City attorney who is representing 28 clients with claims related to the May 19 and 20 tornadoes.
But that's not what is happening, he says. Instead, insurers are paying out much less and, in some cases, telling customers to move back into homes that are unsafe.
“They are stuck in no-man's land,” Marr said. “They don't have enough to move on with their life and they can't get it fixed because it's not repairable.”
One of the more unusual cases involves Ted and Cheryl Hover, whose home in Carney was hit by a tornado May 19. They filed a claim with their insurer, American National Property and Casualty Co., but were told the damage was not significant and it was livable, the couple said.
A utility worker was wary of restoring power to the home two weeks after the storm, but an adjuster insisted it was safe, Ted Hover recalls.
Three months later, a fire in the attic destroyed the home. The Hovers believe the wiring was damaged by the tornado, which also caused nails to protrude from the walls and ceiling.
The state Insurance Department strives to avoid such lawsuits by using outreach in affected communities, Doak said. Immediately after the May tornadoes, he warned insurers not to give Oklahomans the runaround. “Our message was to do the right thing quickly before consumers get upset,” he said.
Through a written statement, State Farm says it handled claims in Moore and Oklahoma City appropriately.
“State Farm has been helping thousands of Oklahomans recover from the tornadoes ever since they struck Moore and surrounding communities. We were there at the beginning, writing checks for food, lodging and other temporary living expenses; we were there when residents and businesses were ready to rebuild, putting millions of dollars back into the community. And we have been there every day of the past eight months, working with customers during their recovery process,” spokesman Jim Camoriano said in the statement.
“We take each complaint seriously and are always willing to work with our customers toward a resolution,” he said.
Jared Peterson, vice president of insurance for AAA Oklahoma, said the positive stories from customers far outweigh the negatives.
“We've settled thousands of insurance claims. When you have a storm of this magnitude and the damage that takes place, the circumstances may cause concern for some,” Peterson said.
A spokesman for Farmers declined to comment on this story because the cases are pending.
American National and Allstate did not respond.
Q: How does an actual cash value policy differ from a replacement cost policy?
A: Actual cash value will only pay for the replacement cost minus depreciation. A replacement cost policy will pay up to policy limits the cost necessary to replace property destroyed by a covered loss, with no deduction or depreciation. You will pay a higher premium for replacement cost coverage.
With replacement cost coverage, the company pays the value of the damaged or destroyed property at the time of the loss, then makes an additional payment for the difference between the actual cash value and the replacement value once the property has been replaced.
Some homeowners say they are unaware of this, which requires use of their own funds up front to rebuild an equivalent home.