Nearly one year after Hurricane Charley came ashore on thesouthwest coast of Florida, thousands of people are still out oftheir homes. In addition to the inconveniences that they faceeveryday, displaced hurricane victims also incur extraexpenses.

At more than $15.5 billion, 1992's Andrew still holds the recordfor the single most costly hurricane for insurers. The combinedinsured losses from last year's four hurricanes have now reached$22.8 billion. A large part of that figure can be itemized underthe heading of additional living expenses.

At the beginning of May, the Office of Insurance Regulationreported that 186 insurers had a total of 57,830 claims still open.Although the figure seems high, it is a small percentage of thenearly 1.7 million insurance claims that resulted from damages in54 of Florida's 67 counties, according to the OIR.

For the most part, the delay in closing claims has been due tothe shortage of licensed roofing contractors. “As we havemaintained, one of the biggest obstacles to settling claims hasbeen shortages,” said Sam Miller, executive vice president of theFlorida Insurance Council. “Shortages of materials, such as roofingshingles and plywood, and shortages of contractors, able bodiesavailable to do the work necessary.”

Home Away from Home

Most homeowner policies cover additional living expenses. Asidefrom the days that insureds are out of their residences duringhurricane evacuations, living expenses also are covered for thetime 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 youcan't live in it, you still have to pay the mortgage, and you haveto pay for some other place to live.”

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

Although many people are using their ALE funds to rent houses orapartments, 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 manypeople still have seriously damaged homes,” said Bill Bailey,special counsel for the Insurance Information Institute anddirector of the Hurricane Insurance Information Center in PuntaGorda, Fla. “There are 40,000 in the state still in various stagesof repair and rebuilding. Those would be the obvious candidates forALE.”

Insurers are taking several approaches to seeing that theirpolicyholders are settled comfortably while they sit out therebuilding phase. “We've been able to accommodate our policyholderstoward the ALE that their policies allow through a variety ofmeans,” said Ryan Priest, a spokesman for Allstate. “They've beenable to find either temporary housing in apartments or other typesof accommodations so that they're able to continue on with theirlives with some sense of normalcy while their homes are beingrepaired or rebuilt.”

Typically, in Allstate's case, policyholders make arrangementsfor their own temporary housing, Priest said. State Farm, on theother hand, works with vendors to find temporary housing, accordingto Tom Hagerty, a spokesman for that company. Realtors andmanagement companies often can supply listings of suitable rentalproperties, and some insurers enlist the services of temporaryhousing companies who locate accommodations and broker theleases.

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

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

Finding suitable housing is a team effort, according toCrittenden. “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 gothe hotel or long-term rental option,” said Crittenden. “It'seasier to get 30-, 60-, 90-day lease terms in the summer.”

Landscape with Blue Tarps

Although one in every five Florida residences suffered somedegree of damage from one or more of the hurricanes, not all ofthose homeowners were forced to make alternative livingarrangements. As part of their emergency response program, theFederal Emergency Management Agency and the Corps of Engineersprovided tarps and labor to cover damaged roofs. Miller estimatesthat tens of thousands of these tarps still are visible throughoutthe state. “You have a lot of people with blue tarps on theirhouses,” he said. “At least these people are able to live in theirhomes; not very comfortably, but they're living in theirhomes.”

Crittenden agreed with Miller's assessment. “One thing thatshould be recognized is, although there were a lot of homes thatsuffered total loss damages or damages that rendered the homesuninhabitable, there are a whole lot more that sustained minor roofdamage and temporary repairs have been done, or were done back inAugust after Charley — which is important in the light ofDennis.”

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

“FEMA was the biggest help for most of the people down inFlorida,” said Crittenden. The agency supplied approximately 16,000mobile homes and travel trailers for displaced storm victims whowere uninsured, located land for temporary housing parks, andestablished an infrastructure for the mobile homes. Although theinitial program was free, after a prescribed time period, themobile home inhabitants began to pay rent or to buy the unitsoutright. “FEMA sold them mobile homes with long-term paper,”Bailey said. “Thousands of people are still living in mobile homeswhile 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 isenough,” noted Crittenden. “Even if you were to add to it, the costof the premium would be rather substantial, so most people don't doit.”

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

Nevertheless, Bailey does not believe that ALE is going to be asubstantial figure in relation to the total losses. “That'sbecause, 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. Inaddition, FEMA-supplied mobile homes will offset ALE.

Bailey also believes that the insurance industry learned somevaluable lessons in relation to ALE following Hurricane Andrew.“Back in 1993, the companies realized that they were spendingmillions of dollars every month in ALE payments, but reconstructionactivity was very, very slow,” said Bailey. Hundreds of people whowere replaced by Andrew went north and became comfortable in theirnew environments.”

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

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

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

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

Another factor in lengthening displaced policyholders' sojournsaway from home was the extension of ALE, Bailey believes. “Back in1992, faced with the largest storm that we had ever known in ourcountry's history, and the costliest, the industry felt enormouspressure from the customers, from the regulators, from the media,to not rush people into moving into homes that were not properlyrepaired.”

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

This time around, insurers are approaching the situationdifferently. “What we will do is we will stick to the contract, buton an individual, case-by-case basis, give adjusters in the fieldthe authority to extend the ALE for two or three months,” Baileysaid.

Displaced victims of last year's hurricanes also are showingmore anxiety to return and begin rebuilding their lives, hesaid.

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

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

“The tarps are good for day-to-day stuff — you know, typicalrains — but if a good-sized storm comes through here with highwinds, 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 landfallthis early,” said Hagerty. “Although we hope that the worst isover, realistically, there are still a lot of weeks and monthsstill to come in the storm season. We all just hope and pray thatlast year was an anomaly.”

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