Hurricane Katrina Leads to Large Number of Claims, Frustration
While Hurricane Katrina spent only a couple of days menacing the Gulf Coast, the trail of destruction in both lives and properties lingers on months later. As places like New Orleans, Mississippi and other surrounding affected areas look to recover and rebuild, the fallout from Katrina has touched many people and businesses both in and out of the Gulf Coast.
According to a TIME Magazine report, New Orleans alone has lost approximately $1.5 million a day in tourism revenues dating back to Katrina’s arrival. With many businesses still closed, and those that have reopened struggling to find employees, the holiday season in the Gulf Coast is anything but merry. Some businesses are even offering signing bonuses to get prospective employees to commit to a year in the New Orleans area.
Insurance Services Office’s Property Claim Services Unit estimated this fall (most updated figures) that Katrina is expected to cost U.S. property/casualty insurers an estimated $34.4 billion in insured property losses, making it the costliest U.S. catastrophe ever.
Katrina caused widespread damage to homes and businesses in six states–Louisiana, Mississippi, Alabama, Florida, Tennessee and Georgia. Policyholders in the affected states were likely to file more than 1.6 million claims for damage to personal and commercial property, automobiles, and boats and yachts.
The breakdown of insured property damage and claims count (as of October): Louisiana, $22.6 billion, 900,000; Mississippi, $9.8 billion, 490,000; Alabama, $1.3 billion, 123,000; Florida, $468 million, 110,000; Tennessee, $46.1 million, 8,400; and Georgia, $22.2 million, 3,300.
The personal property loss claims include approximately 75,000 boats and yachts in the affected states, with an estimated insured value of slightly under $2 billion.
If there is a glimmer of hope on the horizon, the federal government’s bill for hurricane relief and rebuilding efforts will reportedly come in less than the originally estimated $150 billion.
Congressional Budget Office Director Douglas Holtz-Eakin informed the House Budget Committee this fall that his agency now estimates damage to homes, government buildings, oil refineries and businesses will fall between $70 billion and $130 billion. Of that figure, at least $40 billion is covered by private insurance, according to Holtz-Eakin. Those numbers don’t include the immediate relief and rescue efforts, which have been covered from the $62 billion Congress has already approved. About $20 billion of those funds have been earmarked so far, according to Federal Emergency Management Agency’s Chief R. David Paulison.
As Katrina’s monetary toll took shape earlier in the fall, Congress voted to increase the amount of mney that the National Flood Insurance Program could borrow from the Treasury every year.
Both the Senate and the House supported by voice vote legislation a plan that raises to $18.5 billion the amount the NFIP can borrow yearly. In September, Congress voted to raise the borrowing authority from $1.5 billion to $3.5 billion.
A spokesman for FEMA, the NFIP’s parent agency, said insurers had been told to halt paying claims because the program had run out of money. House Financial Services Committee Chairman Mike Oxley (R-Ohio) warned that claimants could begin legal actions against both FEMA and the U.S. government if action to revive the program was not immediately undertaken.
FEMA takes a hit
In early November, several groups combined to file a class-action suit in the United States District Court for the Eastern District of Louisiana to force FEMA to provide timely aid to victims of Katrina living in Louisiana, Mississippi and Alabama.
The lawsuit, which was the first filed against FEMA in relation to its response to Katrina, said that the agency had violated and continues to violate federal law by failing to discharge its obligations as the federal agency chartered to care for victims of natural disasters.
The suit seeks a court order to require FEMA to make it easier for victims to apply for temporary housing assistance, to improve the agency’s outreach and accessibility and immediately to provide trailers or other alternatives to replace shelters, tents and other makeshift arrangements. The suit also asks the court to force FEMA to establish application guidelines under which victims can obtain continued financial assistance beyond a three-month period and receive adjustments based on family size and other factors.
The plaintiffs also were requesting that the court order FEMA to eliminate certain rules regarding the use of funds victims have already received and to cease a policy whereby FEMA makes room for its housing by evicting and destroying the homes of residents of trailer parks.