I recently read several articles marking the 20th anniversary of Hurricane Katrina. The articles covered a pleth
ora of changes, including ISO form changes, the quality of claims serviced, the enormous financial cost, the unreal peopl
e cost, the improvement in the design/maintenance/governance of the levees, and even the improved acknowledgement that risk managem
ent matters in insurance. After all, with two centuries of insurance, who would have guessed risk management really matters?
I performed a significant amount of errors and omissions (E&O) work in New Orleans and the surrounding area over the ensuing years after the hurricane. I was in New Orleans so often, my family suggested
I get an apartment. On my first trip to New Orleans after Hurricane Katrina, the day after the airport reopened, a client gave me a tour. The flooded areas were
like Mars. Everything was a monotonous shade of gray dirt. The trees, the abandoned cars, and the buildings, liter
ally everything was the same color. Few commercial bus
inesses were open, and the hotels that survived were jam-packed, often with FEMA personnel. The refrigerators set along the street for trash pickup i
hed were a major surprise. It turns out that rotten food permeates a refrigerator’s casing over time, and those other
wise untouched neighborhoods did not have electricity for days and days.
The postmortem on the storm, which my client clearly conveyed to me on that first trip, was that this was a ma
Watch More Image Part 2 >>>
n-made disaster caused by incompetence in managing the levee
s. It is sad that people must suffer so much loss for actions to be taken that should have happened long ago.
In reflecting on my experiences and subsequent changes to pr
operty and property insurance, my thoughts include issues mostly surrounding agency E&O and mandated building codes.
Errors & Omissions
The E&O claims were awful. Somewhere around 98% of my clients’ E&O claims were dismissed or won fairly qu
ickly because the claims had no basis. In some cases, insureds were simply desperate. In other cases, they were
greedy. In some cases, they claimed the agent, literally–and I am not exaggerating–should have been making all insurance coverage decisions for the insured witho
ut the insured’s consent. This means that ambulance-chasing attorneys were aiding and abetting in each of the
hundreds, if not thousands, of E&O claims. Making the situation worse, these attorneys inflated the hopes of homeowners who had lost their homes.
I also discovered how deeply my clients cared for their customers. They were going through their own suffering, their staff was going through their own losses, a
nd yet they were working long hours on behalf of their clients. In fact, in a few cases I experienced, I felt the deluge o
f E&O claims (again almost uniformly without much, if any, merit) caused agency owners to retire early, and ma
be in a couple of cases, the stress led to early deaths. And to add insult to injury, some carriers sued their agent
s. Carriers often win E&O cases when they sue, and yet carriers are supposedly the agents’ partners.
Since then, I have completed some interesting work involving carriers and agents who should have been on the same side in political lobbying efforts, but they
were not. Without question, the agents had the consumers’ interest mo
re at heart than carriers, even though the agents would be the ones suffering growth losses because, in their position, rate increases would subside.