The current and projected financial impact on Louisiana from Hurricanes Katrina and Rita has reached into the hundreds of billions of dollars, according to figures released by Gov. Kathleen Babineaux Blanco's recovery panel. The Louisiana Recovery Authority estimates that the 2005 hurricanes had an impact between $75-100 billion on property and infrastructure and $15-20 billion in temporary relief services. In addition, the storms are expected to inflict between $50-70 billion in losses to Louisiana's economy and $8-10 billion in lost state and local revenue over the next five years.
The figures reflect the cost to recover, the cost to rebuild, and the cost to address economic and fiscal losses. This type of event was so massive that it significantly impacted the entire economy of the area. Should the economic impact be included in the but-for calculations of the losses sustained, or should the economic impact be excluded?
Ideally, the parameters for calculating business-interruption claims, including post-event economic impact, should be clearly spelled out in a business-interruption policy. As a result of Hurricane Andrew in 1992 and the terrorist attack on New York and Washington, D.C. in 2001, many policies do just that, but a significant number still use a now-antiquated approach.
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