INSURANCE CLAIMS PAYMENT PROCESS IN THE GULF COAST AFTER THE 2005 HURRICANES HEARING BEFORE THE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS FIRST SESSION FEBRUARY 28, 2007 Printed for the use of the Committee on Financial Services Serial No. 110–7 ( U.S. GOVERNMENT PRINTING OFFICE 34–677 PDF WASHINGTON : 2007 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 VerDate 0ct 09 2002 11:36 May 31, 2007 Jkt 035288 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 K:\DOCS\34677.TXT HFIN PsN: TERRIE HOUSE COMMITTEE ON FINANCIAL SERVICES BARNEY FRANK, Massachusetts, Chairman PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama MAXINE WATERS, California RICHARD H. BAKER, Louisiana CAROLYN B. MALONEY, New York DEBORAH PRYCE, Ohio LUIS V. GUTIERREZ, Illinois MICHAEL N. CASTLE, Delaware NYDIA M. VELA´ ZQUEZ, New York PETER T. KING, New York MELVIN L. WATT, North Carolina EDWARD R. ROYCE, California GARY L. ACKERMAN, New York FRANK D. LUCAS, Oklahoma JULIA CARSON, Indiana RON PAUL, Texas BRAD SHERMAN, California PAUL E. GILLMOR, Ohio GREGORY W. MEEKS, New York STEVEN C. LATOURETTE, Ohio DENNIS MOORE, Kansas DONALD A. MANZULLO, Illinois MICHAEL E. CAPUANO, Massachusetts WALTER B. JONES, JR., North Carolina RUBE´ N HINOJOSA, Texas JUDY BIGGERT, Illinois WM. LACY CLAY, Missouri CHRISTOPHER SHAYS, Connecticut CAROLYN MCCARTHY, New York GARY G. MILLER, California JOE BACA, California SHELLEY MOORE CAPITO, West Virginia STEPHEN F. LYNCH, Massachusetts TOM FEENEY, Florida BRAD MILLER, North Carolina JEB HENSARLING, Texas DAVID SCOTT, Georgia SCOTT GARRETT, New Jersey AL GREEN, Texas GINNY BROWN-WAITE, Florida EMANUEL CLEAVER, Missouri J. GRESHAM BARRETT, South Carolina MELISSA L. BEAN, Illinois RICK RENZI, Arizona GWEN MOORE, Wisconsin, JIM GERLACH, Pennsylvania LINCOLN DAVIS, Tennessee STEVAN PEARCE, New Mexico ALBIO SIRES, New Jersey RANDY NEUGEBAUER, Texas PAUL W. HODES, New Hampshire TOM PRICE, Georgia KEITH ELLISON, Minnesota GEOFF DAVIS, Kentucky RON KLEIN, Florida PATRICK T. MCHENRY, North Carolina TIM MAHONEY, Florida JOHN CAMPBELL, California CHARLES A. WILSON, Ohio ADAM PUTNAM, Florida ED PERLMUTTER, Colorado MARSHA BLACKBURN, Tennessee CHRISTOPHER S. MURPHY, Connecticut MICHELE BACHMANN, Minnesota JOE DONNELLY, Indiana PETER J. ROSKAM, Illinois ROBERT WEXLER, Florida JIM MARSHALL, Georgia DAN BOREN, Oklahoma JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel (II) VerDate 0ct 09 2002 11:36 May 31, 2007 Jkt 035288 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 K:\DOCS\34677.TXT HFIN PsN: TERRIE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS MELVIN L. WATT, North Carolina, Chairman LUIS V. GUTIERREZ, Illinois GARY G. MILLER, California MAXINE WATERS, California PATRICK T. MCHENRY, North Carolina STEPHEN F. LYNCH, Massachusetts EDWARD R. ROYCE, California EMANUEL CLEAVER, Missouri RON PAUL, Texas NYDIA M. VELA´ ZQUEZ, New York STEVEN C. LATOURETTE, Ohio MICHAEL E. CAPUANO, Massachusetts J. GRESHAM BARRETT, South Carolina CAROLYN MCCARTHY, New York TOM PRICE, Georgia RON KLEIN, Florida MICHELE BACHMANN, Minnesota TIM MAHONEY, Florida PETER J. ROSKAM, Illinois ROBERT WEXLER, Florida (III) VerDate 0ct 09 2002 11:36 May 31, 2007 Jkt 035288 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 K:\DOCS\34677.TXT HFIN PsN: TERRIE VerDate 0ct 09 2002 11:36 May 31, 2007 Jkt 035288 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\34677.TXT HFIN PsN: TERRIE C O N T E N T S Page Hearing held on: February 28, 2007 ............................................................................................ 1 Appendix: February 28, 2007 ............................................................................................ 53 WITNESSES WEDNESDAY, FEBRUARY 28, 2007 Hartwig, Robert P., President and Chief Economist, Insurance Information Institute ................................................................................................................ 18 Hood, Hon. Jim, Attorney General, State of Mississippi ...................................... 20 Jefferson, Hon. William J., a Representative in Congress from the State of Louisiana .......................................................................................................... 9 Jindal, Hon. Bobby, a Representative in Congress from the State of Lou- isiana ..................................................................................................................... 6 Maurstad, David I., Director and Federal Insurance Administrator, Mitigation Division, Federal Emergency Management Agency, U.S. Department of Homeland Security ............................................................................................... 16 Taylor, Hon. Gene, a Representative in Congress from the State of Mis- sissippi .................................................................................................................. 12 APPENDIX Prepared statements: Watt, Hon. Melvin ............................................................................................ 54 Jindal, Hon. Bobby ........................................................................................... 56 Taylor, Hon. Gene ............................................................................................. 61 Hartwig, Robert P. ........................................................................................... 105 Hood, Hon. Jim ................................................................................................. 122 Maurstad, David I. ........................................................................................... 159 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Watt, Hon. Melvin: Property/Casualty Insurance in 2007: Overpriced Insurance, Underpaid Claims, Declining Losses and Unjustified Profits ...................................... 169 Memo to Great Lakes Zone Employees .......................................................... 198 New York Times article dated February, 24, 2007, ‘‘A Contract Is a Contract, Right?’’ ........................................................................................... 200 Statement of the Mortgage Bankers Association ........................................... 204 Statement of the National Association of Realtors ........................................ 260 Statement of Jeffrey H. Rose, from Lakeshore, MS, with attachments ....... 268 CRS Report for Congress—Post-Katrina Insurance Issues Surrounding Water Damage Exclusions in Homeowners’ Insurance Policies, dated February 27, 2007 ......................................................................................... 278 (V) VerDate 0ct 09 2002 11:36 May 31, 2007 Jkt 035288 PO 00000 Frm 00005 Fmt 5904 Sfmt 5904 K:\DOCS\34677.TXT HFIN PsN: TERRIE VerDate 0ct 09 2002 11:36 May 31, 2007 Jkt 035288 PO 00000 Frm 00006 Fmt 5904 Sfmt 5904 K:\DOCS\34677.TXT HFIN PsN: TERRIE INSURANCE CLAIMS PAYMENT PROCESS IN THE GULF COAST AFTER THE 2005 HURRICANES Wednesday, February 28, 2007 U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The subcommittee met, pursuant to notice, at 2:33 p.m., in room 2128, Rayburn House Office Building, Hon. Melvin L. Watt [chair- man of the subcommittee] presiding. Present: Representatives Watt, Waters, Lynch, McCarthy, Klein, Mahoney; Miller, McHenry, and Roskam. Also present: Representatives Melancon, Jefferson, Taylor, and Thompson. Chairman WATT. Let me declare this hearing of the Sub- committee on Oversight and Investigations to order. I want to thank everybody for being here and apologize to you all that we were hung up on the Floor with votes. But that’s the bad news; we are starting late. The good news is that votes are over for the day and we won’t be interrupted again, so we should be able to proceed through all of our testimony and questioning without delay again. Without objection, all members’ opening statements will be made a part of the record, and there are some members who have asked to sit on the dias with us and be able to ask questions, so I would ask the subcommittee members to consent that the following mem- bers be allowed to participate in today’s hearing after all of the sit- ting subcommittee members: Representative Richard Baker; Rep- resentative Ginny Brown-Waite; Representative Bennie Thompson; Representative William Jefferson, who will testify and then come to sit here; and Representative Charlie Melancon. And if any of the other witnesses want to join us, we’ll do a supplemental unanimous consent request to make that appropriate. Under the rules of the committee and the subcommittee, the sub- committee chairman and the ranking member will be recognized for 5 minutes each to make opening statements, and then other members who wish to speak, up to a total of 15 minutes per side, will be recognized. So I’m going to recognize myself, but before I get on the clock, let me just thank the members who are here. I had planned, if we had had a full complement of members, to intro- (1) VerDate 0ct 09 2002 11:36 May 31, 2007 Jkt 035288 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\34677.TXT HFIN PsN: TERRIE 2 duce all of them since this is our first subcommittee hearing since the subcommittee has been completed. Just for everybody’s information, I won’t go through a full intro- duction, but Representative Luis Gutierrez is on the