10 Business Insurance Lessons and 1 Owner’s Advice from Katrina

Nearly 10 years ago, wind and storm surges as a result of Hurricane Katrina caused $41 billion in insured losses and $108 billion in total economic losses. Many of the lawsuits filed as a result of the fifth hurricane of 2005 have only recently been decided.

During a recent webcast by insurance broker Marsh, “Lessons Learned From Hurricane Katrina: Looking Back, Planning Ahead,” experts and a New Orleans businessowner weighed in on how risk management has evolved as a result of Hurricane Katrina.

James Laborde, Marsh’s New Orleans Office head, recalls the storm had a major impact on communication. “The ability to communicate was so constrained,” Laborde said.

But what stood out most to him was how people embraced the common goal of recovery and rebuilding.

Steve Pettus, managing partner of Dickie Brennan & Co., which runs four high-end restaurants in New Orleans’ French Quarter, said the scale of the storm was unbelievable.

“We never evacuate. But this time we did,” said Pettus. Recounting his personal story, he said he left the day after Katrina hit New Orleans, on Sunday.

“It took about seven hours to drive 70 miles,” said Pettus.

He said that the normal practice during these types of evacuations was to pack just a few things since most evacuations only lasted a few days. However, this was not what happened after Katrina. Pettus stayed with his business partner’s family for a night and then was taken in by a family he had never met before.

Due to the mandatory evacuation of New Orleans, residents needed a pass to get back into the city. Pettus acquired one about six days after the storm but that was not the only hurdle to overcome.

“The challenge was that all of the resources were being consumed,” Pettus said of trying to get his restaurants back up and running.

Pettus put a priority on getting the payroll system running so that his employees could be paid during the five week period the restaurants remained closed. The restaurant group also paid its purveyors, a move he said fostered incredible loyalty among its vendors that remains today.

At the onset, Hurricane Katrina didn’t initially appear significant, according to Duncan Ellis, Marsh’s U.S. Property Practice leader. Once the levies broke, that changed.

While most people don’t read their insurance policy until after a loss, Ellis said stressed the importance of businesses knowing what’s covered ahead of time. As an example, he said many businesses were surprised to find out they were not covered for storm surge losses, the main coverage issue resulting from the storm.

Ellis and Paul McVey, Marsh’s U.S. Property Claims Practice leader, developed a list of the top 10 tripwires in a property policy arising as a result of a major loss.

Some key rebuilding concerns following a disaster, according to restaurant owner Pettus, include:

• Staff – personal issues, housing, communications, meetings, ads, phone trees;
• Physical properties – assess disasters and construction needs;
• Customers and suppliers – order equipment; and
• Contractors.

Pettus shared what he does now to prepare for disasters:

• Build healthy cash reserves.
• Direct pay for staff.
• Carry smaller inventories, even more if a storm is forecast.
• Review insurance coverages.
• Review emergency preparedness manual each year, and identify and secure extra housing for employees.
• Have generators and redundant systems on hand, and have VOIP office phones and offsite computer services.
• Secure access passes each year from the mayor’s office.

Johnson is editor of ClaimsJournal.com.