Owners reeling from insurance rate hikes

High property insurance rates in Terrebonne Parish following, first, hurricanes Katrina and Rita, then hurricanes Gustav and Ike, are creating difficulties in obtaining insurance for some property owners in the parish.

One Houma businessman in particular encountered an unpleasant surprise when renewal time came around.

Many property owners have had to obtain insurance from the quasi-governmental, nonprofit Louisiana Citizens Property Insurance Corporation, set up to write insurance policies to residents and business owners unable to find insurance elsewhere.

By state law, Louisiana Citizens usually charges higher rates than could be obtained normally on the open market. The company encourages residents to see if alternative insurance coverage is available.

On obtaining property insurance, Terrebonne Economic Development Authority CEO Mike Ferdinand said, “As we understand it, it’s mixed. For some folks, (Louisiana Citizens) is the only kind of insurance. It depends on where you physically are.”

Ferdinand said some property owners can self-insure or just go at risk, carrying no insurance.

Melvin Kappel, owner of Melvin’s Restaurant on the Intracoastal Waterway in Houma, recently was able to obtain property insurance on the open market, but not without first going through an ordeal.

The company insuring Melvin’s Restaurant before Hurricane Katrina stopped writing a policy after the storm.

Kappel could not get a yearly premium under $45,000, he said, but he was able to purchase one from Louisiana Citizens to cover 2007 for $6,495.

For 2008, the premium was increased to a still affordable $13,457.

But for 2009, the premium was raised to a prohibitive $42,436.

The astronomical rise prompted Kappel to write a letter to state Insurance Commissioner Jim Donelon.

“My restaurant does not generate enough income to justify payment of that premium,” he wrote in the letter to Donelon.

“Small businesses simply cannot afford to do business when insurance becomes economically unavailable,” he wrote.

“I would self-insure before paying that,” Kappel said later.

“Citizens is supposed to be run by the state as a last resort,” he said. “Everybody pays taxes to subsidize Citizens. Why do they charge so much?”

“I found another insurance company that would underwrite for a reasonable amount of money,” he added. “If no one was writing (policies) like after Katrina, we would have been in serious trouble.”

Melvin’s Restaurant proprietor Melvin Kappel enjoys the view, but not the insurance rates for his business on the Intercoastal Canal. * Photo by KEYON K. JEFF