For adaptation practitioners Hurricane Sandy introduces the ripples that are likely to emerge (or are already emerging) from the effects of climate change. In effect it becomes a Petri dish allowing an exploration into the resilience of individuals, corporations, sectors and cities to the effects of extreme weather, the likes of which are forecast to increase. Already questions are being asked about emergency preparedness, land use planning, disaster communication, insurability, forecast reliability and utility planning. This blog entry is the first part of a series that will highlight some of the emerging impacts and lessons that Sandy presents to climate adaptation practitioners.
With estimated economic impact exceeding US$50 billion it should come as no surprise that the legal ramifications of Hurricane Sandy are already emerging. All tiers of government and utility providers are likely to experience legal conflict surrounding preparedness and response. The private sector too will be directing and facing legal inquiry (e.g. where supply chains have been broken the wordings of force majeure contracts may face intense scrutiny).
As is often the case after extreme events conflicts are likely to emerge between insurer and the insured. Issues may include the meteorological definition of the event (e.g. hurricane or storm), the specific nature of the damage (e.g. wind versus flood) and the speed of assessment and payment, to name but a few.
The fine print of insurance policies becomes increasingly important and contested during the aftermath of extreme events. For example some businesses who evacuated (voluntarily or involuntarily) but were not physically evacuated may find that they are not covered for business interruption.
According to a New York-based legal firm lawyers are currently engaging clients about issues associated with:
- Improperly denied claims;
- Unreasonable delays in payment;
- Undervalued claims and unfair settlement offers;
- Improperly calculated deductibles; and
- Deceptive or unethical practices by insurance adjusters and other insurance company personnel .
While some litigation will be immediate, others will occur over time (especially after the results of government-lead post disaster reviews). The New York Governor Cumuo recently appointed a commission to investigate a range of issues, including:
“(i) the emergency preparedness and response of utilities during and following emergency weather events, including the performance of the utilities during and following emergency weather events; (ii) the adequacy of present laws, rules, regulations, practices and procedures with respect to utilities’ emergency preparedness and response; (iii) the adequacy of existing oversight and enforcement mechanisms; (iv) the structure, organization, ownership, financing, control, management and practices of the utilities as they affect emergency preparedness and response; and (v) the provision of utility services to New York State under the existing legal regulatory framework.” (NY Gov. Cuomo, Oct 29 2012)
As the outcomes from the above emerge winners and losers of resilience planning will be identified and it is almost inevitable that class actions and/or independent litigation will ensue. According to the New York Daily News residential litigation has already commenced. A recent filing in the Manhattan Supreme Court sees a resident of a luxury condominium in New York’s financial district suing his condominium board for US$38 million for a range of issues including disaster planning and failing to claim insurance for common use areas.
Prudent adaptation practitioners will be taking lessons from Sandy and other recent extreme events to consider how reactive regulatory impacts will affect their clients. Although litigation is difficult to completely avoid it is worth working with legal firms that have an established reputation, networks and experience with issues associated with climate change adaptation.
Initial estimates of insurable losses are in the order of US$10 - $20 billion. This would make it the second costliest weather-related insurance event in US history. The majority of the bill sits with the re-insurance industry. It is still too early to understand the private insurance ramifications that will ripple down to policy holders in the future. It will however have a considerable impact on tGovernment facilitated insurance.
Governments are often seen as the insurers of last resort. This is especially so for flood insurance in the USA. The indebted and controversial National Flood Insurance Program (NFIP) in the US is likely to experience change post Sandy. The NFIP has a debt of approximately US$18 billion (predominantly as a result of Hurricane Katrina) and is legally restrained from occurring any more than US$3 billion further debt. To date Hurricane Sandy has seen 115,000 new claims, with the NFIP estimating the total damages to be between US$6-12 billion.
The NFIP is currently only bringing in about US$3.5 billion in annual premiums. Although they will be increasing premiums by 25% extreme weather is on the rise and simple mathematics shows that the program in its current format is unsustainable.
Adaptation practitioners need to recognise the benefits and limitations of insurance in managing the effects of climate change. Risk transfer is only one small (albeit important) element of a suite of responses required to adapt. At present insurers seem confident about managing the risks – however recent reports in the US show that very few general insurers consider climate change impacts in their portfolios. Sophisticated businesses, home owners and adaptation planners should ask themselves “what happens if insurance becomes too expensive?” Given the fact that insurance contracts often are for short, fixed periods (i.e. 12 months) a business or home owner in the wrong place may experience premium increases that are outside of their budget forecast within a year or so of an extreme event occurring.
The climate change literature often talks about how the elderly are more vulnerable to the effects of extreme weather and climate change. This was demonstrated during Hurricane Sandy. While those aged 65 years and above represent just 13.7% of New York’s total population, they accounted for 47% of recorded deaths (during Hurricane Katrina it was over 65%).
Adaptation planners will need to recognise the fact that New York has an aging population. By 2030 the cohort will increase by 44% where approximately 1.35 million New Yorkers will be over 65. Staten Island (which saw at least 24 deaths) is projected to be the elderly hub – increasing its over 65 cohort from 11.6% of the 2006 population to 18.7% in less than two decades. This blog will continue to explore demographic issues as they emerge.
Internet and Adaptive Capacity
“Facebook saved lives.” This proclamation came from Mid-Island City Councilman James Oddo, who used the social media website to direct emergency services to people in need. At present there in a strange conflict between the amazing ability of information communication technology (ICT) systems to help communicate warnings, direct emergency response and facilitate post-disaster recovery against the backdrop of the fragility of these systems to extreme weather events.
Sandy brought out the best and the worst of information communication. Twitter and other social media sites allowed those affected to share stories with friends, loved ones and voyeurs alike. Post event it has helped inform residents about anything from food drops and accommodation through to road closures and public transport route changes. However social media only works if there is a functioning ICT and electricity network. At its peak over 8 million customers in New York lost power, 25% of cell towers where affected and data centres were disabled, affecting internet services around the globe.
Interestingly those with established reputations and feedback on certain web sites are likely to have a higher adaptive capacity (at least for accommodation). As demand for post-disaster accommodation has skyrocketed many customers of web-based service provider Airbnb have offered free rooms to those affected. Those that had already used Airbnb are in a stronger position to gain accommodation as their public web-based reputation and feedback is already available.
Adaptation practitioners should consider ICT networks as critical infrastructure. As our society becomes more dependent on it for information the more vulnerable they will become when those systems go down. The information age is changing how we view and value each other. Your access to post-disaster accommodation may be based on your public Facebook profile or most recent tweet.
What does it mean for Australia?
In a nutshell Hurricane Sandy is a wakeup for Australia. This is especially so for Queensland which is exposed to regular and intense hurricanes. The IPCC had stated in 2007 that south east Queensland in particular has vulnerabilities exacerbated due to “unchecked development”. A hurricane will strike the heavily populated region of south east Queensland and when (not if) this happens the impact will be phenomenal. Economist Ross Garnaut modeled the impact of a category three cyclone hitting the Gold Coast alone damages could be up to $25 billion.
The current Queensland Government is doing little to minimize the exposure of development to risks associated with storm surge. In fact it has just suspended the State Planning Policy that was designed to address the concerns highlighted by the IPCC and prohibit development in at risk areas. In general Australia is currently experiencing a shift away from science-based policy towards political short term thinking and as a result has seen climate change adaptation responses downgraded in Queensland, New South Wales and Victoria. It seems that until an extreme event, similar to the scale of Sandy occurs in an Australian city, our risk exposure will continue to increase.
This blog is intended to encorage a discussion and we welcome all comments.
 Napoli Bern Ripka Shkolnik, LLP (2012) Hurricane Sandy Litigation, available from http://www.napolibern.com/Hurricane-Sandy-Insurance-Litigation.aspx
 See et al (2006) Climate change and human health: present and future risks, The Lancet - 11 March 2006 ( Vol. 367, Issue 9513, Pages 859-869 ) DOI: 10.1016/S0140-6736(06)68079-3
 Peek, Lori. 2010. "Age." Pp. 155-185 in Social Vulnerability to Disasters, edited by B. D. Phillips, D. S. K. Thomas, A. Fothergill, and L. Blinn-Pike. Boca Raton, FL: CRC Press.