This year, hurricanes, with record rain, storm surges and winds, have resulted in severe damage to both commercial and residential buildings, mold contamination, and significant interruption to businesses in the impacted areas. Several Caribbean islands have been wiped away, Key West is unrecognizable, and Houston may have lost more than 150,000 homes. For most of us, luckily, the damage was less severe. My wife and I have leaks in our roof and elsewhere and lost a window (but gained an indoor tree). We lost power for about four and a half days. Friends in South Miami are still without power as of the writing of this post.

The legal implications of the hurricane aftermath extend well beyond mere rebuilding. Mold contamination and water intrusion must be addressed and properly remediated. Design and construction defects may be alleged to have exacerbated the extent of the damage from the hurricane. Employers may face workers’ compensation claims from employees and also may have vacation and lost wages concerns. Insurance coverage may be at issue. Construction costs may have escalated causing losses to builders or developers. Building permits and development approvals may expire due to delays caused by the hurricane. Condominium associations may not have sufficient reserves to act on emergency repairs. Construction licensing regulations may affect the ability to commence repairs and provide penalties for failure to engage properly certified contractors.

So what to do?

  • Make sure you and your family, employees and customers will be safe in your home or building.
    • Are there electrical system damage and risks?
    • Is the water safe to drink?
    • Is there a risk to the structural integrity of improvements?
    • Other Physical Hazards (don’t panic, but snakes and scorpions like piles of debris).
    • Contamination? Such as leaking petroleum tanks, chemical spills and the like.
  • Address potential health risks, whether mold or risky property conditions.
  • Secure your property and protect it from potential or further loss of property value.
  • Deal with Insurance.
  • Deal with Government Agencies such as FEMA
  • Deal with FP&L’s reimbursement programs.
  • Check with your mortgage lender. The lender may have the right to collect insurance proceeds and disburse the funds as repair and rebuilding proceed.
  • Only then commence to restore your property. Use only licensed and insured contractors. Where required by law, obtain all necessary permits and approvals. If you are part of a condominium or property owners’ association, make sure all Board approvals are obtained.
  • Get on with your life

Our lawyers have assisted clients in resolving insurance disputes, negotiating agreements in connection with assessment and remediation services, resolving design and construction defect claims,  implementing programs for addressing employee benefits, preparing hurricane and disaster response plans, and in finding their way through myriad environmental regulations.   In one recent example,  we resolved an insurer’s denial of coverage for water damage based on a theory that the building envelope was defectively designed or constructed and that the damage was not caused by a windstorm (as provided in the policy). By engaging the proper experts, a successful argument was made that the building envelope was properly designed and constructed and that it was indeed the hurricane-force winds that caused the water intrusion.

In another example, we assisted a client in requesting an extension of the expiration date for various development approvals that could not be met due to the direct delays of the hurricane, the difficulty in obtaining materials and the need to redesign to address increases in construction costs.

In addition to helping guide our clients in making proper recovery efforts, we are also focusing our clients’ attention on preventative measures to avoid future repeat damage and liability. We have found that many building and business owners have been hesitant to expend significant sums in prevention, in part to the belief that the recent hurricane landfalls in Florida were merely a fluke.  Whether global warming or a regular climatological cycle, it appears that the Atlantic hurricane season has been on an upswing that may continue for a decade or more. Proper preparation can lessen the business impacts and speed up recovery efforts.

 

The pictures and videos of the wide spread flooding in Houston and Southeast Texas are horrifying. Hurricane Harvey is officially the largest rain event in US history, dumping nearly 4 feet of rain.  Generally, when we think of hurricane caused flooding, we think of storm surge.  But Harvey, because it stalled and rapidly weakened as it made landfall, reminds us that hurricanes can be massive rain storms too and that rain storms can cause even more wide-spread flooding than storm surge alone.

As we watch Texas recover from the devastation, it is important to consider the implications that Harvey will have on the National Flood Insurance Program (NFIP).  Coincidentally, Congress must reauthorize NFIP by September 30 or it will expire.  The program has been under tremendous scrutiny, even before Harvey.  Prior to the hurricane, NFIP was $25 Billion in debt.  President Trump’s budget called for cuts to the program, arguing that government services should not be subsidized by tax payers who do not directly benefit from them.

Will Harvey change the president’s thinking? Though the president has pledged over $6 Billion in aid for recovery, the funds are not (at least yet) for flood insurance.  Flood premiums, historically, are insufficient to cover claims.  Insurers expect billions in claims in the coming weeks and months, adding to the deficit.  This is normally the case following a hurricane.

Interestingly, less than 1/3 of Harvey flood losses will actually be insured. As of April, less than 1/6 of the homes in Harris County (Houston) had flood insurance in the NFIP.  More than 1,000,000 homes are unprotected.  The NFIP deficit would be much worse if all or even more homes were insured.  But the losses will be staggering when everything is calculated.

Why are so many homeowners uninsured in Houston? People generally only buy flood insurance if required by their lenders.  Lenders rely on the flood maps.  Flood maps are not accurate and not updated regularly.  And, people become comfortable to learn that they are in the “100-year flood plain” believing that only a so-called “100 year storm” will affect them.  But that is not what the 100-year flood plain means.  It means that there is a 1% chance that your home could flood in any given year (.2% in the so-called 500-year flood plain).  The maps are prepared by the USGS and based on estimates, considering flowage of rivers and streams, their pressure points and dams, among other things.  But man made changes are not considered.  I am not talking about climate change and green house gasses.  I am talking about development.  Where have buildings and roads been constructed?  How has that affected natural surface water drainage?  In Houston’s case, natural bayous are paved over and become impervious.  There is no where for excess water to go.  The size and scope of the flooding from Harvey might not have happened 30 years ago or even 15 years ago.

Building codes are based on the flood maps and flood maps set participation in NFIP and in Houston’s case, fewer than 1/3 participate. Disaster.

What about the rest of us come September 30? Can Congress and the Administration re-authorize NFIP and control costs?  Prior to Harvey, the answer appeared to be no.  Representative Jeb Hensarling (R-TX), chairman of the House Financial Services Committee sponsored the re-authorization bill.  One of the things the bill proposed was to reduce the risk pool.  However, industry groups opposed and Representative Hensarling has trimmed the bill back.  For example, the bill originally required the phase out of flood coverage for new construction in high risk areas (read, coastal areas).  The National Association of Home Builders strongly opposed this provision and it was cut.  The bill would have removed provisions in the NFIP that continued to provide premium discounts to homeowners when flood risk changes.  But the National Association of Realtors strongly opposed this provision and it was cut.

The American Bankers Association warns that there will be a new foreclosure crisis if Congress terminates flood coverage. They hope that Congress will act before the end of the month.  Harvey might be the impetus to encourage Congress to re-authorize.  With Hurricane Irma rapidly approaching the US coast, and Florida possibly the target, we don’t have time to wait.

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