Home Away from Home

Most homeowner policies cover additional living expenses. Aside from the days that insureds are out of their residences during hurricane evacuations, living expenses also are covered for the time that it takes to repair their dwellings.

“ALE is one of the most important benefits of a homeowners' policy,” said Miller. “Just because your home is damaged and you can't live in it, you still have to pay the mortgage, and you have to pay for some other place to live.”

Insurers advance money to displaced policyholders to pay for temporary shelter, food, and clothing. As an element of ALE, the insured also is entitled to the cost of gasoline for extra driving, laundry, and other incidentals. Advances also can be made to replace major household items immediately, if necessary for habitation.

Although many people are using their ALE funds to rent houses or apartments, others are sheltering in trailers and travel homes. Still others have moved in with relatives.

“Right now, nobody seems to have a solid handle on how many people still have seriously damaged homes,” said Bill Bailey, special counsel for the Insurance Information Institute and director of the Hurricane Insurance Information Center in Punta Gorda, Fla. “There are 40,000 in the state still in various stages of repair and rebuilding. Those would be the obvious candidates for ALE.”

Insurers are taking several approaches to seeing that their policyholders are settled comfortably while they sit out the rebuilding phase. “We've been able to accommodate our policyholders toward the ALE that their policies allow through a variety of means,” said Ryan Priest, a spokesman for Allstate. “They've been able to find either temporary housing in apartments or other types of accommodations so that they're able to continue on with their lives with some sense of normalcy while their homes are being repaired or rebuilt.”

Typically, in Allstate's case, policyholders make arrangements for their own temporary housing, Priest said. State Farm, on the other hand, works with vendors to find temporary housing, according to Tom Hagerty, a spokesman for that company. Realtors and management companies often can supply listings of suitable rental properties, and some insurers enlist the services of temporary housing companies who locate accommodations and broker the leases.

“On a temporary basis, it's normally pretty easy to work out,” said Crittenden. “There are services that specialize in locating temporary housing for people. They work directly with insurance companies trying to get the best rates for temporary housing.”

Settling displaced families in apartments or houses, as opposed to hotels, offers advantages to both insurers and insureds. “If you put a family in a hotel, you're not only incurring the cost of the room, you're also incurring under the temporary living expenses the cost of the food,” said Crittenden. “We try to find another home or a place that has a kitchen so that their lives continue forward, with the exception of having the inconvenience of being in a place that is not their own.”

Finding suitable housing is a team effort, according to Crittenden. “The short-term stuff is easy; the long-term matters, such as total loss or total destruction, are when it gets tough,” he said.

Because Florida's population fluctuates with the time of year, the seasons can help or hinder the search for alternative housing. “In the winter, availability is a problem and you're forced to go the hotel or long-term rental option,” said Crittenden. “It's easier to get 30-, 60-, 90-day lease terms in the summer.”

Landscape with Blue Tarps

Although one in every five Florida residences suffered some degree of damage from one or more of the hurricanes, not all of those homeowners were forced to make alternative living arrangements. As part of their emergency response program, the Federal Emergency Management Agency and the Corps of Engineers provided tarps and labor to cover damaged roofs. Miller estimates that tens of thousands of these tarps still are visible throughout the state. “You have a lot of people with blue tarps on their houses,” he said. “At least these people are able to live in their homes; not very comfortably, but they're living in their homes.”

Crittenden agreed with Miller's assessment. “One thing that should be recognized is, although there were a lot of homes that suffered total loss damages or damages that rendered the homes uninhabitable, there are a whole lot more that sustained minor roof damage and temporary repairs have been done, or were done back in August after Charley — which is important in the light of Dennis.”

Many of those whose houses were uninhabitable were reluctant to leave them unattended. “A lot of people from the hurricanes last year used ALE to rent trailers and mobile homes, to put them right next to their homes that are uninhabitable,” said Miller.

“FEMA was the biggest help for most of the people down in Florida,” said Crittenden. The agency supplied approximately 16,000 mobile homes and travel trailers for displaced storm victims who were uninsured, located land for temporary housing parks, and established an infrastructure for the mobile homes. Although the initial program was free, after a prescribed time period, the mobile home inhabitants began to pay rent or to buy the units outright. “FEMA sold them mobile homes with long-term paper,” Bailey said. “Thousands of people are still living in mobile homes while their residences are still being built or repaired.”

A Long, Long Way from Home

In most cases, ALE is covered for 12 months. “It never really is enough,” noted Crittenden. “Even if you were to add to it, the cost of the premium would be rather substantial, so most people don't do it.”

The inordinate demand that led to shortages of materials as well as contractors also created longer waiting periods for repairs. This, in turn, has meant that residents are out of their houses longer, resulting in higher ALE.

Nevertheless, Bailey does not believe that ALE is going to be a substantial figure in relation to the total losses. “That's because, for the most part, the damages to residential properties, both single-family and multi-family, were relatively fixable, relatively reparable,” he said. Although the damage was widespread, only a small proportion of the houses were total losses. In addition, FEMA-supplied mobile homes will offset ALE.

Bailey also believes that the insurance industry learned some valuable lessons in relation to ALE following Hurricane Andrew. “Back in 1993, the companies realized that they were spending millions of dollars every month in ALE payments, but reconstruction activity was very, very slow,” said Bailey. Hundreds of people who were replaced by Andrew went north and became comfortable in their new environments.”

In many cases, although their homes had once again been made livable, local infrastructures and services took longer to repair. “They were not in any big rush,” said Bailey. “Essential community services and functions were not there. That was one of the factors that we realized was driving ALE costs right through the ceiling.”

Following the 2004 hurricanes, restoring services, malls, and shopping centers was a priority. “The industry was very active in getting all these malls and shopping centers reopened, so that the people had somewhere to go buy food and the other items that they needed to make living more comfortable,” Bailey said.

“Certainly, from everything that I heard, there was not the damage to the infrastructure that there was after Andrew,” agreed State Farm's Hagerty. “That was just incredible damage down there.” When the 2004 hurricanes reached the interior of the state, much of the damage was to trees and roofs. “There wasn't major damage to the infrastructure itself,” he said.

Last season's hurricane victims also had fewer choices for alternative residences, he pointed out. “When you have damage in all but four counties in the state, there's nowhere to relocate,” Bailey said. “There was no running away to another part of the state.”

Another factor in lengthening displaced policyholders' sojourns away from home was the extension of ALE, Bailey believes. “Back in 1992, faced with the largest storm that we had ever known in our country's history, and the costliest, the industry felt enormous pressure from the customers, from the regulators, from the media, to not rush people into moving into homes that were not properly repaired.”

That, combined with a shortage of construction materials, prompted insurers to extend the ALE period from 12 months to 24 months. “What that did was to give people who were living up north a reason to hunker down, instead of giving them any incentive to get back and get their homes repaired and move in again.”

This time around, insurers are approaching the situation differently. “What we will do is we will stick to the contract, but on an individual, case-by-case basis, give adjusters in the field the authority to extend the ALE for two or three months,” Bailey said.

Displaced victims of last year's hurricanes also are showing more anxiety to return and begin rebuilding their lives, he said.

For those who still have tarps on their roofs, however, the early onset of the 2005 hurricane season has raised more than a few concerns.

“Customers cannot find licensed contractors, especially roofers. If we had all the materials we could use, we still don't have enough roofers to repair the roofs,” Bailey said. “To the extent that progress was being made, Dennis probably knocked it back down a couple of pegs.”

“The tarps are good for day-to-day stuff — you know, typical rains — but if a good-sized storm comes through here with high winds, it'll rip those tarps off and they'll sustain more damage,” Crittenden observed.

“This is the first one that I can recall ever making landfall this early,” said Hagerty. “Although we hope that the worst is over, realistically, there are still a lot of weeks and months still to come in the storm season. We all just hope and pray that last year was an anomaly.”

Thankfully, the damage from Hurricane Dennis, which crashed into Florida July 10, was relatively light. “Every hurricane is a potential threat to Florida, and we're now up to number five,” said Miller. “It's just too early. This year looks like being a long and horrible season.”