"It is likely that in some heavily damaged parts of New Orleans redevelopment will be restricted, either temporarily, or even permanently. The possibility of such restrictions immediately gives rise to the following question: Will restrictions on development in New Orleans effect compensable regulatory takings under the Fifth Amendment of the U.S. Constitution? In this paper, we try to answer that question, or to at least provide a framework for answering it. We conclude, although cautiously, that it is more likely than not that temporary restrictions will not effect compensable takings because property owners still have economically valuable interests, while it is more likely than not that permanent restrictions will result in compensable takings because of owner expectations and a lack of reciprocity of advantage.
"We have three primary goals. First, we summarize the proposal for redevelopment which explicitly allows for the possibility of moratoria on redevelopment in certain neighborhoods. Second, we situate the current case law on this issue within the larger context of takings jurisprudence. Understanding the courts' trends on this issue, if any are discernible, will be indispensable in trying to get a sense of how courts would rule in litigation that might arise out of regulating redevelopment in New Orleans. Third, we give an analysis of how current holdings on takings issues might apply to the situation in New Orleans. Because of the complexity of takings jurisprudence, and because of the somewhat unusual nature of the situation in New Orleans, it is difficult to make a confident prediction about how such claims would come out."—Abstract.
"Average insured homeowners throughout Gulf and Atlantic coastal communities have taken just half the steps which would best position them to recover from a major storm, according to a new Hurricane Readiness Index released today. The Index is based on a survey which asked individuals to [sic] whether they had taken eight key preparedness steps, including whether they have an inventory of their possessions, whether they feel they have enough homeowners or federal flood insurance, and whether they have critical documents ready to go in case of evacuation. The poll was taken for seven of the nation's leading property and casualty insurance companies."—Press Release. The Index appears following the Press Release.
"In the aftermath of the 2004 Indonesian tsunami and America's continued vulnerability to seismic hazards, including the 2006 Hawaiian earthquake, Members of Congress might elect to focus attention on the vulnerability of the U.S. coastlines to offshore earthquakes and tsunamis, and the potential effects of a major earthquake on both the homeowners' insurance market and the overall U.S. economy. Congress has debated the vulnerability of America's coastlines to earthquake and tsunami hazard risks, leading to legislative action following the April 1992 California earthquake/tsunami and the 1964 earthquake/tsunami at Alaska's Prince William Sound. Although a federal flood insurance program was eventually enacted in 1968 in response to the 1964 earthquake, it took Congress another decade to address the nation's exposure to earthquake hazards with the enactment of the Earthquake Hazard Reduction Act of 1977. Congress did not create an explicit federal earthquake insurance program, albeit the National Tsunami Hazard Mitigation Program was established in 1992. Some insurance and disaster policy experts suggest the time has come to implement a federal insurance or reinsurance program for earthquakes and other seismic risks. Conversely, other experts question the need for such a program. This report will be updated as events warrant."—Summary.
+Kousky, Carolyn, Erzo F.P. Luttmer & Richard Zeckhauser, Private Investment and Government Protection (Harvard University, John F. Kennedy School of Government, Faculty Research Working Papers Series, RWP06-017) (May 1, 2006) (PDF — 374K)
"The devastation wrought by hurricane Katrina along the Gulf Coast has once again reminded citizens, policymakers, and academics of the difficulties of making decisions regarding development in risk-prone locations. This paper has highlighted that government does not face a simple decision of how much protection to offer investments, nor do private entities face a simple decision of how much to invest in an area with a given risk level. Instead, government and investors respond to each other, with investment increasing when protection levels are raised, and government raising protection when investment in a risky location grows. When the marginal value of protection increases with the level of protection provided, the game may have multiple equilibria. Thus, given an ill-behaved benefits function, a local optimum may not be the global optimum, which complicates policy decisions, as does the uncertainty regarding the level of investment that will follow a given level of protection."—Conclusion.
"In 2005, two events garnered great national attention: the controversy over the death of Terri Schiavo and the destruction of New Orleans by Hurricane Katrina. Although each event was compelling and even tragic, only the former, which focused on whether a single individual would be removed from life support, was widely understood as implicating constitutional questions. Using a population-based perspective that is influenced by the discipline of epidemiology and focuses attention on both the interests of and the impact of law on populations, this Article analyzes why a controversy concerning the life and death of one woman was understood as raising questions of constitutional law while the failure to protect thousands was not viewed as such. The Article begins reviewing the courts' embrace of an individualistic right-to-reject treatment in cases such as Cruzan v. Director, Missouri Department of Health and contrasting that embrace with the Supreme Court's rejection, in cases such as DeShaney v. Winnebago County Department of Social Services, of any broad right to care and protection. Taken together, these cases demonstrate that contemporary constitutional law fails to appreciate the interdependency of risk and the social and population context in which health threats, and treatment decisions, arise. As a result, the rights vindicated in cases such as Cruzan and Schiavo are particularly shallow as they cannot provide either individuals or populations (such as that in New Orleans) with the opportunity to make meaningful risk-reducing choices. In addition, because of the influence of constitutional discourse in our society, the shallowness of constitutional rights spills over to influence political and legislative priorities. Hence, the fact that the population of New Orleans had no legally recognizable constitutional right to protection against hurricanes may have abetted the government's failure to protect the city's residents. Likewise, a constitutional discourse that focuses on the plight of a single woman while overlooking the multitude of problems faced by large populations may reinforce the political system's failure to protect populations from other potential natural disasters, such as a potential influenza pandemic."—Abstract.
"Many Mississippi homeowners who suffered property damage in Hurricane Katrina had insurance policies containing exclusions that denied recovery for damage caused by water. The Attorney General of Mississippi filed suit in response, attempting to declare these water damage exclusions void as against public policy. This paper examines the merits of the suit, addressing the central legal and economic reasons why the suit will likely be unsuccessful. The paper then proposes prescriptive measures, including changes to the National Flood Insurance Program and possible implementation of a federal comprehensive natural disaster insurance program, which may facilitate more efficient and widespread flood insurance coverage in the future."—Abstract.
"Traditional law and economics has no place for price controls. Yet public support for anti-gouging legislation has led to the enactment of a variety of legal regimes to control price hikes following natural and man-made disasters such as hurricanes and terrorist attacks. This Essay provides an economic justification for such laws. First, the Essay surveys the existing models of anti-gouging legislation. Then, the Essay describes the traditional economic critique of price caps, a critique applied to laws that attempt to control post-disaster prices. Finally, the Essay argues that anti-gouging laws enhance economic efficiency by ensuring a functioning consumer market after the collapse of electronic payment systems on which the American economy now depends. The externalities of consumption in post-disaster environments mean that the costs of consumers forgoing needed products are not adequately captured by a reliance on market mechanisms. This analysis suggests that current anti-gouging laws should be restructured to include a more discrete focus on areas actually affected by physical damage from natural or man-made disasters." —Abstract.
"Unfortunately, Attorney General Hood's colorful observation has proven untrue. Hurricane Katrina's direct physical toll has been estimated to exceed $200 billion, only a fraction of which is recoverable under existing insurance law. As many policyholders and citizens have realized, insurance is something we tend to think about only after a disaster. Indeed, this oversight is a central explanation for why the system for allocating flood losses in the United States has failed.
"Now that Katrina's waters have receded, it is time to reconcile insurance law and policy to reality: Catastrophic losses create interdependencies among public and private actors that must be managed rather than avoided. Our current systems for preventing, mitigating, and allocating these losses are fractured, diffuse, and maddeningly counterproductive. No single actor is vested with both the incentive and the power to manage this risk effectively.
"As with healthcare, the system for allocating catastrophic loss is characterized primarily by the evasion of responsibility at all levels: private, commercial, and governmental. The result (as in healthcare) has been dysfunction. Before Katrina's seemingly indelible memories recede - as they are destined to - it is time to recalibrate the relationship between government and the private market.
"This Article focuses on the two insurance systems that inadequately govern the distribution of flood risk: The National Flood Insurance Program (NFIP) and the private market for property insurance. There have been a number of studies detailing the structure and limits of these systems. However, scant attention has been directed toward the role that insurance law plays in driving the systems toward failure. What follows is a synthesis of insurance law, economics, and regulatory criticism, leading to the ineluctable conclusion that these two systems rest on a foundation of sand.
"I propose a market-based alternative that draws on the comparative advantages each system offers. To the information-generating of the marketplace, we may add a more precisely targeted governmental role in subsidizing some policyholders and reinsuring others. There are inevitable tradeoffs, and my proposal has a number of drawbacks - only some of which can be guessed at here. But the alternative is a system that has proven itself unable to cope adequately with the predictable losses of a bad year, let alone the greatest natural disaster in American history." —Abstract.
Judge Richard J. Leon's opinion holding FEMA must restore housing assistance and pay back rent to evacuees deemed ineligible for long-term housing assistance. See also the judge's order filed the same day.
"NFIP paid an unprecedented dollar amount for a record number of claims from Hurricanes Katrina and Rita. Congress increased NFIP's borrowing authority with the U.S. Treasury from a pre-Katrina level of $1.5 billion to about $20.8 billion in March 2006, but FEMA will probably not be able to repay this debt on annual premium revenues of about $2 billion. As of May 2006, NFIP had paid approximately 162,000 flood damage claims from Hurricane Katrina and another 9,000 claims from Hurricane Rita. Most paid claims were for primary residences where flood insurance was generally required....
"FEMA has made progress but has not fully implemented the NFIP program changes mandated by the Flood Insurance Reform Act. For example, 15 states had adopted minimum education and training requirements for insurance agents who sell NFIP policies, as of October 2006."—What GAO Found.