Law firms in New Orleans and Baton Rouge are using hard-won experience from Hurricane Katrina and other disasters to help the victims, both businesses and individuals, of the record August floods.
"One of the biggest legal issues for businesses is did they have flood coverage? And what kind of covered losses do they have for flood?" said Cove Geary, a partner in Jones Walker's New Orleans office. "Sadly, as is the case for so many people, many businesses simply did not have that coverage."
So businesses are looking for other forms of relief, such as loans from the U.S. Small Business Administration.
Geary said when Katrina struck, he was surprised that so many companies didn't have flood insurance. He's less surprised this time.
"People just don't expect it. People think, 'Well, gee, I'm out of the worst flood zone so I don't need it,'" Geary said. "The truth is a 100- or a 500-year flood, they happen."
Jean-Paul Perrault, managing member of McGlinchey's Baton Rouge office, said the firm, whose headquarters are in New Orleans, and a lot of its clients went through Katrina.
"We did the flood blog to help, to serve as a repository for the click-and-get answers," he said. "It's not just legal analysis but stuff about insurance, questions arising with those issues, FEMA."
The idea was to create a resource where businesses could go and get the information they need and/or directions to the agency or agencies that can answer their questions, Perrault said.
So far, the biggest number of queries on the blog have involved Federal Emergency Management Agency assistance and U.S. Small Business Administration loans.
Brad Axelrod, a member of McGlinchey's business and corporate matters section in New Orleans, said that reflects small- and midsized businesses' need to quickly secure some cash to make repairs, pay their workers and suppliers, and keep their businesses operating.
Once companies secure the funds, whether from the SBA, lenders or another source, they can concentrate on other critical issues, like re-establishing supply chains, he said. This can be a purely business issue but can give rise to legal issues.
Elisabeth Prescott, a partner in Kean Miller's Baton Rouge office, said one of the bigger issues for landlords and property managers is they assume their commercial property insurance, like a residential policy, doesn't include flood coverage.
"The reality is they certainly may, but there's also instances where they don't. And there are commercial policies that are written in such a way that they do include flood damage," Prescott said. "So it's always important for our commercial clients to not assume otherwise."
It's always safer to file a claim, Prescott said, since insurance policies can be convoluted.
Another issue property managers are working through is figuring out what their obligations are to tenants under the terms of the lease, Prescott said. The lease may give the landlord a certain amount of time to repair the damage. If the damage is great enough, either the tenant or the landlord can break the lease.
The answer, when it comes to making repairs, isn't always black and white, she said. The lease may not directly state the provisions for flood. If it does, the contract may spell out what the landlord has to do in the case of "mere injury" or "partial destruction." But those terms are subjective, and there's no guarantee a court will agree with the landlord's interpretation.
Geary said the main lesson from Katrina is to buy flood insurance.
The National Flood Insurance Program says that nearly 40 percent of businesses that flood never reopen.
In addition to helping repair damage, a flood policy enables a company's separate business interruption insurance to kick in, Geary said. Business interruption coverage can cover lost profits and some expenses, such as payroll. It also may cover the cost to relocate while the business is restored. There also may be a provision for an extended interruption, covering the profits lost after the business has been restored but has yet to ramp up.