A U.S. company - Risk Management Solutions – has reported that insured losses from Hurricane Katrina are estimated to be $40-$60 billion USD, of which $15-$25 billion are related to the Great New Orleans Flood.

Total economic losses are now expected to exceed $125 billion.

At least 50% of the total economic loss resulting from the effects of Hurricane Katrina can be expected to come from the Great New Orleans Flood. According to the Army Corps of Engineers, the floodwaters in New Orleans are receding at a rate of four to six inches per day, but a great deal of the city still remains underwater. Due to extensive power outages, some of the pumps in the loin the cal areas have not been operational for weeks. It could take months to drain the water and fully assess the level of structural damage, as well as the contamination in the soil and ground water.

With respect to contamination, this could lead to a sticky situation for insurers and insureds. Standard property forms provide very limited coverage in connection with pollution cleanup. Moreover, the debris removal coverage in standard forms specifically excludes the cost to extract pollutants from land or water or to remove, restore, or replace polluted land or water. However, coverage would apply to the cost of removing or replacing other polluted property, since no exclusion applies to such loss.

In crisis situations, insurance isn’t always at the forefront of peoples’ minds. However, some planning and foresight, with help from local insurers, could assist insureds in discovering what their policies cover.