'Beaten down:' how Louisiana's failed insurers left hurricane victims exposed

The plastic sheet hanging from the ceiling, a makeshift wall, doesn't do much to keep Jessica Jones-Langford's house insulated from the elements.

The summer heat melts candy and baking supplies. In the winter, Jones-Langford and her husband, Charlie Langford, cook dinner in the cold. Bugs crawl through the cracks from the unfinished laundry room on the other side of the makeshift wall, despite the foam board she stuffed into the door jambs.

All of it is a stark reminder of the couple's ongoing insurance nightmare, which hasn't let up since Hurricane Ida damaged their home in August 2021.

They got insurance through Americas Insurance Co., a small regional firm with policies concentrated in storm-prone south Louisiana. When Ida tore up their roof, causing rainwater to inundate the laundry room, Jessica Jones-Langford filed a claim.

By the following summer, Jones-Langford still hadn't received nearly enough to complete repairs. State officials, meanwhile, had begun liquidating Americas, one of 12 insurers in Louisiana that would eventually fail.

Today, Jones-Langford is struggling under the weight of rising costs. Her insurance premium shot up from $1,877 at the time of Hurricane Ida to $7,200 now, causing her monthly note to rise from $1,400 a month to $2,300. She can't change insurers until her pending claim with Americas – now being handled by the state-backed Louisiana Insurance Guaranty Association – is resolved. In September, Jones-Langford shut down her accounting business and moved her office furniture to a storage unit, opting for a full-time job with another company in hopes of finding more stability.

"I don't really have a lot of faith in anything anymore," Jones-Langford said in an interview at her River Ridge home. "I'm just trying to get by."

Failed companies drew raft of complaints

Jones-Langford's saga is a familiar one for thousands of policyholders across south Louisiana.

The 12 failed insurers were mostly regional companies structured in a way that allowed them to send millions of dollars to affiliates tasked with most of the work. When hurricanes hit Louisiana, these regional insurers drew an outsized share of complaints from policyholders. Several were subjected to investigations by the Louisiana Department of Insurance; three of the five firms the agency fined for violating laws around claims-handling after 2020's Hurricane Laura later failed.

Since shortly after Hurricane Katrina, Louisiana has pursued a strategy of wooing regional carriers – by assigning them stacks of policies from Louisiana Citizens, the state's insurer of last resort, and in some cases, giving them millions of dollars in state grants as well. The data suggests the strategy came back to bite policyholders when they needed the companies most.

The cascading collapses have shown there is little stopping companies from setting up shop, building a quick book of business and extracting profits in the quiet years. Then, when hurricanes hit, they can close their doors, liquidate their often-limited assets and fob off the open claims on the state-backed Louisiana Insurance Guaranty Association.

Some Louisiana officials cite the prevalence of litigation as a contributing factor to the state's insurance woes. Indeed, data from the National Association of Insurance Commissioners shows Louisiana had more lawsuits than most other states in 2021 and 2022 – though the state is nowhere near as litigious as Florida.

But the available data suggests most complaints against insurance companies – that the firms are delaying claims, sending multiple adjusters and otherwise refusing to pay people what they're owed – have at least some merit.

Louisiana had the highest rate in the nation of claims paid later than 60 days in 2022, according the National Association of Insurance Commissioners. That year, with many Ida claims still in the system, insurers took more than 60 days to pay nearly half of all claims in the state. The rest of the country saw a rate of 22% on average.

The Louisiana Legislative Auditor reviewed the insurance department's handling of complaints after Hurricanes Laura and Ida and found 67% of complaints about adjusters were resolved in the policyholder's favor. The Insurance Department's own analysis found a little over half of complaints went policyholders' way.

"There's no question companies acted poorly," said outgoing Insurance Commissioner Jim Donelon, who said the firms that failed had racked up an outsized share of complaints.

Donelon said it's no surprise those firms struggled to handle claims: Many of them were "thinly capitalized," making it difficult for them to compete with national carriers to hire adjusters.

Donelon noted the Legislature recently raised the minimum capital requirements for insurers from $3 million to $10 million to better ensure companies have the financial strength to adjust and pay claims.

Lowball offers

In interviews with The Times-Picayune | The Advocate, several homeowners who suffered damage from Ida said their insurer had tried to settle for a fraction of the cost of repairs. Some took out loans to cover the difference. Others are still living in damaged homes.

On top of it all, most homeowners whose insurers failed are now paying exorbitant amounts for coverage, in some cases 10 times what they had been paying.

The Insurance Department developed an index to pinpoint the insurers drawing a disproportionate share of complaints. After 2020's Hurricane Laura, the agency investigated several firms and issued fines to five of them. But even the maximum penalty – $250,000 – is puny compared to the size of the insurers. The most any Louisiana insurer wound up paying was $150,000.

Three of the companies that were fined – United Property & Casualty, FedNat and Maison – later failed. The other two, Geovera and Allied Trust, are still active.

UPC had a billion-dollar book of Louisiana business at the time. The firm, based in Florida, specifically targeted "catastrophe-exposed areas."

The Insurance Department investigation found UPC failed to follow state laws protecting policyholders, and even "compelled" some policyholders to sue by offering far less than they were owed. The agency fined UPC $250,000, but reduced it to $150,000 after the company appealed.

The fine struck many policyholders as measly – it's about the size of a single large claim – and Donelon agrees with them. But he notes the Legislature subsequently agreed to double the maximum fine for unfair trade practices to $500,000.

"In the overall picture, it is small," Donelon said. "Oh my goodness, do they fight and resist and challenge what we do to take them to task and punish them publicly. It's punishing them publicly that's the biggest deterrent."

UPC has drawn more serious accusations. In 2022, several adjusters publicly accused the firm of altering their field reports to dramatically lower the estimated cost of damage.

UPC didn't return messages seeking comment.

After Laura, Louisiana also investigated Maison, another company that eventually failed. The Department of Insurance found that more than 12% of Maison's claims were paid far later than the law allows. One wasn't paid until 273 days after the proof of loss was submitted. Typically, insurers are required to pay within 30 days.

The agency is still conducting an examination of the five companies that had the highest rate of complaints after Ida. Nina Hunter, deputy commissioner of consumer services, declined to identify the firms.

Revolving door

Doug Quinn and his group of consumer advocates were in Louisiana after both Laura and Ida. And he said he saw problems immediately.

First, many insurers were refusing to pay for alternate living expenses, like hotels, after people's homes became inhabitable, even if their policies required it. Homeowners were telling Quinn's organization, American Policyholder Association, that their insurers were saying their houses were livable even if they lacked electricity and water.

The next problem was delays. Quinn said he spoke with policyholders who had had to deal with up to 15 different adjusters or claims managers.

Then, insurers started underpaying claims.

Quinn, whose organization brings complaints about insurers to state officials, said he has referred at least one criminal complaint to authorities in Louisiana. And he said the problems are particularly acute among the 12 failed insurers.

"They leave just enough in reserves to keep regulators happy," Quinn said. "A company with adequate reserves does not go under."

When an insurer behaves poorly, it can take months for complaints to get resolved. In one case, documents from the Insurance Department show it took five months to resolve a case where Southern Fidelity refused to pay for alternative living expenses. The agency eventually sent a cease-and-desist letter telling the firm to stop providing "misleading and inaccurate disclosure summaries" about what its policies covered.

Damage lingers

As Ida approached the coast, Ruth Fahrig evacuated her home of 15 years in Ama, on the west bank of the Mississippi River in St. Charles Parish. Fahrig, a schoolteacher, fled with her husband, a trucker, to stay in a travel trailer in Texas.

Back home, rain was pouring in. The Fahrigs' windows, roofs and doors all leaked. It took two months to even get their insurer, Southern Fidelity, to send out an adjuster. In the meantime, they lugged waterlogged belongings to the curb, commuting from McComb, Mississippi, because their power was still out.

The adjuster that finally came only made it halfway through the house before leaving for another assignment, Fahrig said. The report offered to cover $55,000 in damages. To Fahrig, it was an obvious lowball. At the end of the year, she hired an attorney, whose adjuster estimated nearly four times that amount in damages.

A few months later, Southern Fidelity sent out another adjuster, but it was too late to make any difference. The company went belly-up a week later. Fahrig found out through the media.

Fahrig is now paying to restore her home out of pocket, joining a host of policyholders left behind by failed insurers. She has dipped into her retirement account twice to help pay for a new fortified roof, impact windows and replacement of siding that was reinstalled improperly, among other things. She and her husband have spent $86,000 of their own money.

Fahrig said she got "beaten down" by Southern Fidelity. Just making phone calls to check on her claim took countless hours. Her house is still mostly gutted.

"They have manufactured a system deliberately against us," she said. "They know that either we're going to give up or we're going to hire a lawyer. How many people are just going to give up?"