August 30, 2014 at 1:00 am

Warren mayor wants insurance reform in wake of floods

Dennis and Debbie Gerbe in their flooded basement in Warren on Aug. 12. Mayor James Fouts is calling for the state Legislature to reform flood insurance after receiving complaints from residents who thought they were covered but found out that they weren't after the Aug. 11 rainstorm. (David Coates / The Detroit News)

Warren— Mayor James Fouts is calling for the state Legislature to reform flood insurance after receiving complaints from residents who thought they were covered but found out that they weren’t after the Aug. 11 rainstorm.

Fouts sent his a proposal and 10 affidavits from Warren residents Wednesday to Gov. Rick Snyder, calling for “truth in flood insurance.” His proposal calls for homeowners’ policies at reasonable and competitive prices; insurance companies to provide a separate document containing a clear and concise summary of any limitations on coverage and a list of typical items that are not covered under the policy.

“The only way we are going to get real relief to flood victims is to change the insurance law,” he said.

Warren, the state’s third most populous city, was hit hardest by flooding on Aug. 11. The city’s final damage tally on property affected by the flooding showed 22,782 parcels damaged out of 56,940 in the city or 40 percent. The amount of damage is now at $231. 6 million.

Fouts declared a state of emergency on Aug. 12. The following day, Snyder declared a state of disaster for Macomb, Oakland and Wayne counties.

The governor’s declaration makes available all state resources in cooperation with local response and recovery efforts in the disaster area as outlined in the Michigan Emergency Management Plan. Snyder’s declaration authorizes the Michigan State Police/Emergency Management & Homeland Security to coordinate state efforts.

Lt. Michael Shaw, Michigan State Police spokesman, said the Warren Police Department sustained damage to its station.

Warren City councilman Keith Sadowski proposed during an Aug. 19 council meeting using $10 million of the city’s rainy day fund to issue low-interest loans to residents in need. The council unanimously approved.

David Griem, city attorney, said the Michigan Constitution forbids public funds from being loaned or granted to private citizens. There are state statutes and two Michigan attorneys general opinions that also make such a plan illegal, he said.

Even if it were legal, Griem said, the city would need to bring in people with banking experience and would have to investigate the legitimacy of loan requests.

“And if the loans are not repaid, then what would we do?” he said. “We’ve done everything we can do to make both Federal Emergency Management Agency and Small Business Administration monies available to Warren citizens. It is still going to be a couple of weeks.”

Fouts said when the governor toured Warren Aug. 18, he agreed with the mayor’s call for flood insurance reforms.

The mayor’s proposal also calls for encouraging more insurance companies to offer substantial flood coverage through tax breaks or subsidies for policies written in the state or municipality. It requires that all property owners be offered flood insurance along with their standard homeowner policy, but allows them to “opt out” of that coverage and prohibit insurance companies from canceling, not renewing or unreasonably raising premiums because a flood claim is made.

“This is something that would save people a lot of money and provide relief,” Fouts said. “FEMA isn’t going to provide the relief that people are hoping for nor is the state, but reforming the insurance industry will do that.”

uwatson@detroitnews.com