Hurricane Katrina made landfall on August 29, 2005, with the eye of the Category 3 hurricane centered on Bay St
. Louis, Mississippi, though the storm is remembered largely because of the devastation to New Orleans, Louisiana. Over 1,800 people died in seven states, with over 1,500 of those in Louisiana.
The storm surge, a major loss cause, extended from the Florida Panhandle to western parts of Louisiana, and was 27 feet in Mississippi, flowing inland up to 6 mile
s and 12 miles up inlets and streams. One-third of Hancock County, Mississippi was flooded. St. Bernard Parish in Louisiana only had five buildings that were not flooded.
Following 53 separate levee breaches in and around New Orleans, 80% of Orleans Parish flooded under 2 t
o 20 feet of water. Well over a quarter-million homes were destroyed with many more damaged and tens of thousands of businesses were damaged or destroyed.
Over 1.7 million insurance company claims were reportedly filed with over $41 billion paid to policyholders. Ove
r 163,000 NFIP flood insurance claims were filed and over $15 billion paid to policyholders, wit
h the average payment being “just” $94,000. Total property damage was estimated to be $85 billion, resulting in an uninsured total of almost $29 billion.
These numbers were provided several years after Katrina by Jim Mahurin, CPCU, ARM, a risk management
consultant who did years of expert witness and consulting work along the Gulf coast following Katrina. Contrary to t
he numerous media r
eports of poor service by insurers, along with extensive litigation, a
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ccording to Mahurin, only 2% of claims were disputed, tracking with the national average for non-disaster claims.
He also asserts that New Orleans area independent agents did an exemplary job over many years in informing prospects and policyholders
of the importance of purchasing flood insurance, including newly available excess flood coverage. As a result, almost 60% of property owners in the Greater New Orlean
s area had NFIP coverage but very few, including many high net worth individuals, had excess coverage…independent agents offered excess coverage but few property owners accepted it. These agents docu
mented their offers, something that proved invaluable when E&O claims were filed.
The purpose, though, of this Insurance Journal special feature is to focus on the ISO homeowners and commercial property coverage form language changes made largely in response to litigation inv
olving whether water damage exclusions applied to damage resulting from storm surge and levee breaks. In addition, this article will address other changes and “lessons learned” that have impacted underwriting, rating, and loss control.