As a South Mississippi native, I am all too familiar with destruction and devastation from natural disasters. August 29, 2011, marks the six-year anniversary of Hurricane Katrina, one of the worst natural disasters ever to strike the United States. While working for Congressman Gene Taylor (MS-4), we assisted families on a daily basis who were struggling to recover from the storm.
Thousands of families who lost everything were forced to turn to the federal government for financial support and many times moral support as their insurance companies denied their claims. For years after the storm, the federal government provided much needed aid to these individuals, who had few alternatives. Since Katrina, the rising cost of homeowners insurance and lack of private insurance options points to a troubling trend — when private insurance is inadequate, property owners must turn to the federal government for assistance.
The six-year anniversary of Katrina comes in the wake of Hurricane Irene and a 5.9-magnitude earthquake, both hitting the East Coast in the same week. Earlier this year, there were deadly tornadoes that flattened towns in Missouri, Mississippi, Alabama and other states.
In the wake of these natural disasters, thousands of individuals are facing a costly uphill climb as they rebuild homes and businesses and work to resume normal lives. Unfortunately, private insurance companies cover only a fraction of the damage. The federal government will again open its wallet to provide aid and assistance. Some politicians in Washington are complaining that federal dollars are already scarce and the government can't continue to bail out disaster victims. It just costs too much. But others say there is nowhere else to turn.
The goal of many state and local governments and individuals living in areas with high risk is to be prepared for such a disaster. Being prepared is often easier said than done. For most, the first step to being prepared is purchasing adequate insurance. However, many storms go beyond the coverage of insurance policies. For example, during Katrina, the storm surge easily surpassed the areas where flood insurance was required, leaving families to rely on their basic homeowners insurance. Hurricane Irene produced flash flooding as far north as Vermont.
After Katrina, insurers used the anti-concurrent causation clause to shift liability to flood insurance, which of course many of homeowners were not required to purchase. Many homeowners spent nearly three years or more battling claims. In the meantime, the cost of homeowner’s insurance skyrocketed and numerous insurance companies began to drop or refuse coverage to homes in risky areas. The cost of rebuilding was just too great, leaving some coastal areas deserted.
Just last fall, State Farm Mutual announced it would stop administering federal flood insurance policies. State Farm was the nation’s largest administrator of policies written by the National Flood Insurance Program and was responsible for writing policies, handling claims and sending adjusters to home to evaluate the damage post storm. This withdrawal left around 800,000 customers without coverage, leaving government officials to take up the slack and find a new company to oversee these policies.
Similar to Katrina, the victims of the tornadoes, earthquake, and now Hurricane Irene will in part rely on aid and financial assistance from the federal government through the Federal Emergency Management Agency (FEMA). The Disaster Relief Fund (DRF) is the program that assists state and local governments with rebuilding projects. The DRF operates under a project work order process.
Funding for the program is a primary concern. When the DRF balance dips below $1.5 billion, the program stops taking requests and halts reconstruction. With only about $792 million currently in the pipeline for emergencies, resources are strained. In an effort to address damage from Irene, FEMA officials have indicated the need to conserve these funds for immediate responses to disasters.
Thus, rebuilding efforts in communities damaged earlier this year could potentially be put on hold, leaving local communities without assistance, unless the President requests emergency supplemental funding. The overall outlook is that Congress will have to pass an emergency supplemental appropriation bill to complete project work orders and keep the DRF afloat.