Two years after the storm 50% of the city’s dwellers had not yet returned. The economic failures of Pre Katrina started reflecting themselves in the property markets. The American housing survey indicated that a median owner occupied home in 2004 within New Orleans was about $120,000 while 1700 square feet was the median size for homes that were occupied by owners. This implicated $67 was the price for every square foot; considerably below most reasonable approximations of construction costs for houses that were deemed to be of standard quality. Not to mention houses that had been built to withstand the effects of the hurricane’s flooding and winds (Congleton 7).
The costs of housing below the average market costs is an aspect that is common in most areas that have negative population growth and is accredited to the resilience of houses that were built in more contented economic times. There was an excess supply of houses in New Orleans after the hurricane which resulted in low pricing for the New Orleans housing sector. The impact of the hurricane in New Orleans extended to the Mississippi gulf coast. The Hurricane substantially reduced both the number of companies and the number of employees residing in New Orleans. In 2005 about 9000 workers submitted their wage reports to the state’s unemployment urgency two years later this number had declined to 7000. Proportionately, lesser declines were recorded in the suburban areas that surrounded the city. This reflected the disparities in the nature of losses suffered and the differences in the amount of losses that were covered by insurance companies (Congleton 10).
Policies and Coverage Affected By This StormThe Hurricane storm impacted a number of insurance policies and coverage which include; Business interruption coverage, property policy and costs incurred to prevent losses. Property insurance policies tend to cover the structures and schedules listed in a policy. This means that to determine if a certain building could be insured it is critical to not only check the kind of losses covered by an insurance company but also the schedule of structures. Insurance policies should be evaluated to check if they have provisions for newly acquired property. Under such provisions an insurance company could have coverage for property that is newly acquired as much as such a property may not have been listed on the schedule of structures. Most insurance companies tend to also insure personal property even if it is not listed on a schedule of structures (Erwann 165).
Coverage for Costs that are incurred in the prevention of lossesProperty policies tend to characteristically contain provisions that pay for the precautionary measures that are taken by an insured to prevent losses and also necessitate these provisions. These are the sue and labor provisions that are applied whenever the insured spends money to protect property that is already covered from destruction or damage by a peril that is already covered. The objective of this provision is to encourage the insured to be active in the protection of their property so as to prevent larger expenses to the insurer due to greater losses of properties that are covered (Erwann 167).
Additional Living expensesMost insurance policies for renters and home owners offer coverage for Additional living expenses (ALE). These are any necessary increments’ in living standards incurred by an insured to ensure that their families maintain their normal living standards. This coverage is provisional within the short time necessary to replace or repair the damage. However, if the insured permanently relocates the shortest time that is necessary to ensure that his family is settled elsewhere (Erwann 170).
Type of Conditions and ExclusionOn the 29th of August in 2005 the Gulf of Mexico was wrecked by Hurricane Katrina; tornadoes, high velocity winds, hail, flooding and coastal erosion caused untold human suffering, deaths, economic loss, injuries as well as infrastructure and property damage in Alabama, Mississippi and Louisiana. After the occurrence of this magnitude of natural disasters it is inevitable to have fights on the scope of insurance coverage. Those who had insurance attempted to rebuild their homes and lives after turning to home owner’s insurance as a recovery source (Erwann 172).
These home owners were shocked to realize that their policies on the hurricane had certain exclusions on floods or other kinds of water damage. This posted a huge challenge both in Mississippi and New Orleans. Insurance companies were sued for excluding the water coverage in their policies by the US Attorney General and Senator Trent Lott. However, their case did not succeed because in the case of ambiguous contract language Mississippi courts interpret the cases based on prior case laws and approval by the insurance department of court language (Erwann 174).
Mississippi had adopted the effective adjoining cause doctrine in the interpretation of insurance contracts where policy holders were permitted to recover damages if they proved that wind caused them losses related to the Hurricane Katrina. This was despite of excluded causes such as flooding being the major causes of such losses. When these courts were previously confronted with such cases they did not annul the insurance clauses, rather they permitted the insured parties to be compensated for losses they proved were caused by a peril that is covered.
In a consideration of the practical certainty of annulling the exclusions the potential repercussions on the Mississippi homeowners’ insurance market would have been devastating. This would have been particularly so had insurance companies been forced to pay for policies they did not collect premium for or did not have enough money for compensation. Companies would have become insolvent and most of them would have altogether retreated from the market (Erwann 176).
Floods: The Hazard That Contributed To the Problem’s Severity
The hazard that may have contributed to the severity of the policy holders losses was floods. However, even though private insurance companies are afraid of covering water damage home owners in New Orleans and Mississippi should have purchased flood insurance offered by the National Flood Insurance Program (NFIP). This program which was incepted in 1968 provides flood insurance where private insurers decline and covers both storm surge and floods. When it was formed its intentions were to provide reasonable flood insurance coverage for individuals residing in flood probe areas such as Mississippi. The drafters of this policy felt that the availability of policy was likely to shift large costs incurred during floods from the public since less federal assistance tax payer funded programs would be required after floods if more homeowners relied on insurance (Erwann 165).
The NFIP was also tasked with guiding future construction and building in flood prone areas. For community residents to be eligible to buy flood insurance policies from the NFIP their communities had to be NFIP participants. To be participants communities had to adopt NFIP designed measures to alleviate future hazards from flooding in future development and construction in these communities. These measures include; regulations that regard; building codes, zoning and subdivisions. For instance it is mandated by the NFIP regulations that new construction of any buildings that are extensively damaged in the flood prone areas should have the lowest floor of their homes raised up to a predetermined base level. Consequently it is approximated that buildings constructed in line with these regulations suffer 90% less damages yearly in comparison to those that do not comply. It is projected that this program is likely to save up to $1 billion in expenses annually (Erwann 167).
As soon as a community is registered as NFIP participant flood insurance is availed by for purchase by home owners, business owners and renters within the community. However, there is a one month waiting period before this policy goes into effect. This means that in a year that forecasters expect an out of the ordinary hurricane season home owners can buy flood insurance a month before the hurricane begins. The costs range from $400 to $500 per annum for coverage that is worth $100,000. However, individuals are allowed to purchase up to $250,000 net worth of coverage (Erwann 176).
Health ConcernsThe hurricane destroyed virtually all of New Orleans health care system with more than 1000 doctors displaced and a dozen hospitals annihilated. The entire population in New Orleans lost its access to their daily health care providers. People with chronic cases were the most hit. Over 2000 patients in Orleans Parish were evacuated. Apart from that dialysis centers in Louisiana with cases of over 3000 patients were smashed and only 50% of these patients could be accounted for a month after the storm (Baumrucker and Karen 27).
The destruction of this city’s health system was particularly intense for the uninsured cohort in the low income bracket who heavily depend on a handful of providers particularly Charity hospital which is amongst America’s oldest hospitals that is committed to treating those who are economically disadvantaged. The insured were no different for New Orleans lost access to all its care sources. However, those that had taken private coverage managed to reach out to health care providers in other Cities and were confident of the health care being covered. Contrastingly, the low income insured were stuck (Bovbjerg and Frank 23).
Even though the hurricane generated a myriad of problems for Louisianans many indicators show that they had poor health situation before they were hit by the storm. Louisiana numbered worse for premature death, infant mortality, cancer deaths and the prevalent of smoking. It was amongst the highest rated states for violent crime, cardiovascular deaths, infectious diseases, motor vehicle deaths and occupational fatalities. As soon as the storm hit emergency services and health care tireless worked to get patients out of harm’s way. The destruction meted to health care facilities prompted creative solutions that ranged from the construction of mobile treatment centers to the use of the Louis Armstrong international Airport as both a temporary morgue and a triage center (Baumrucker and Karen 35).
The Louisiana state executed policies to guarantee that the Medicaid program continued to be re-laid to its beneficiaries. Temporary cards were quickly issued to those that had lost theirs in the hurricane. The state additionally waived all prior bureaucratic requirements so that any out of state or in state health provider could provide their services to the beneficiaries. Federal officials began crafting strategies of assisting the economically disadvantaged to access medical care. Waivers were issued through Medicaid to cover Katrina evacuees. Navy hospital ships were also deployed to the New Orleans city seaport. Despite all these emergency deployment’s the community’s full recovery will necessitate more reflection of public needs and developing new strategies to service delivery in the state (Bovbjerg and Frank 35).
Government ResponseThe failure of the government in dealing with national disasters such as the Hurricane Katrina stems from the fact that such disasters are more of political events. These are the words of James Lee Witt FEMA (Federal Emergency Management Agency) director upon testifying before Congress in 1995 about the cause of perpetual disasters and lack of adequate management due to corruption in the agency. While these words could easily have come from an ignorant person on the street it was despicable that they came from the FEMA director. This went down in history as another failure by FEMA to tame disaster and another congress investigation into their management problems (Krueger 8).
The events of 2005 were nothing new identical issues still emerged after nearly all the other major disasters. The only difference in 2005 was the brutality and visibility of this failure as well as the untold human suffering it vented on unsuspecting citizens. In most other disasters the victims of these government errors are usually very diffuse and hard to locate. However, after Katrina, a majority of the victims were crammed together in various places which led to the unearthing of the mismanagement problems in FEMA by the media. Like all people self interested bureaucrats and politicians only respond to the incentives they face. The choice and decisions of public sector agents like FEMA can be comprehended through a cautious evaluation of their incentives (Krueger 12).
SummaryThe coastal storm surge, winds and rain linked to this storm resulted in substantial destruction. Beyond these characteristic impacts, the hurricane incepted a chain reaction that led to a near total abandonment of a key American city. New Orleans which is a city that was largely constructed from land that was reclaimed from a swamp, witnessed enormous failures on the levees systems that were constructed to protect the city from its surrounding waters. Most of the city and the suburbs that surround it were flooded.
The city residents who had not yet heeded to warnings by weather forecasters to flee were also evacuated. Within a week’s time the city’s population of about 400,000 had been reduced to zero. Earlier estimates from private insurers on losses for offshore gas or oil platforms, flooded, damaged or destroyed businesses and homes were estimated at about $42-59 billion. As estimates started being revised the figure came to $45 billion most of it uninsured. The question that still lingers in many people minds in te wake of such natural disasters is when the government will walk the talk and stop giving excuses while experimenting with peoples lives
Works CitedBaumrucker, Evelyne, and Karen Tritz.. “Hurricane Katrina: Medicaid Issues.” CRS Report for Congress RL33083. Washington, DC: Congressional Research Service. (2010): 27-35. Print.
Bovbjerg, Randall R., and Frank C. Ullman. Health Care for the Poor and Uninsured After a Public Hospital’s Closure or Conversion. Washington, DC: The Urban Institute. Assessing the New Federalism Occasional Paper No. 39. (2011):23-35 Print.
Congleton Roger D. “The Story of Katrina: New Orleans and the Political Economy of Catastrophe,” Public Choice, vol. 127, (2009): 5–10. Print.
Erwann O. Michael-Kerjan. Catastrophe Economics: The National Flood Insurance Program Catastrophe Economics: The National Flood insurance Program. Journal of economic perspectives. 24:4, (2010): 165-176.Print.
Krueger Alan, “At FEMA, Disasters and Politics Go Hand in Hand,” New York Times, 15, September, 2005: 8-12. Print.
