Insurance Woes for Katrina Homeowners

Feb. 20, 2007 — -- A year and a half after Hurricane Katrina battered the Gulf Coast, thousands of residents are still in the midst of a storm -- a legal storm.

All that's left of Jim and Jody Beckham's once $500,000 home is a concrete slab. They lost everything.

"We used to sit on the balcony and watch the fireworks," Jody Beckham said.

Loyal State Farm policyholders for 35 years, the Beckhams haven't received a cent from their "all risk" policy, which, it turns out, excludes flood damage.

State Farm denied their claim, concluding that the damage was from water and not related to Hurricane Katrina's 140-mph winds -- a fact the Beckhams and their attorneys say they were not told by the adjustor who examined their house.

"I never once heard him say a word about water. It was all, 'Wind destroyed this. Wind did that,'" Jody Beckham said.

The couple are now suing State Farm.

Paul and Julie Leonard, whose home suffered $100,000 in damage, have also sought help in court. The judge in their first trial ruled their Nationwide policy did not cover storm surge damage caused by the hurricane. They are appealing, but so far they've received only $1,200.

Still, the insurance industry maintains that for the most part Katrina claims have been settled amicably.

The major insurance companies contacted by ABC News declined to be interviewed.

Bob Hartwig, president of the Insurance Information Institute, said the insurance industry had paid out billions in Katrina damages.

"The insurance agency responded admirably to the unprecedented disaster that was Hurricane Katrina," Hartwig told "Good Morning America" anchor Robin Roberts. "Through that disaster, insurers paid 1.74 million claims, valued at $41 billion."

Despite that, critics point out the insurance industry made record profits in 2005: $49 billion, in fact, and growing to $60 billion last year.

"I understand [homeowners' confusion], but insurers have earned profits in other states, in other types of insurance," Hartwig said. "None of the profits in 2005, for example, were earned in the state of Mississippi. They were earned on auto insurance in Ohio or workers' compensation coverage in Oregon."