Is the USACE Ruling a Pyrrhic Victory?

Yesterday’s court ruling that the US Army Corps of Engineers is at least partially to blame for the flooding in St. Bernard Parish and New Orleans’ Lower Ninth Ward after Hurricane Katrina is being hailed as a landmark ruling. The judge in the case wrote in his decision:

The Corps’ lassitude and failure to fulfill its duties resulted in a catastrophic loss of human life and property in unprecedented proportions. The Corps’ negligence resulted in the wasting of millions of dollars in flood protection measures and billions of dollars in Congressional outlays to help this region recover from such a catastrophe. Certainly, Congress would never have meant to protect this kind of nonfeasance on the part of the very agency that is tasked with the protection of life and property.

Residents of the affected areas are hailing this as a landmark decision. But their victory may be Pyrrhic and may have the perverse impact of slowing down post-Katrina recovery.

Protection against natural disasters comes in a variety of forms: floodworks (like levees) that have public good characteristics, insurance policies that protect insureds against specified events (such as flooding), and improvements (like home elevation, storm shutters, or roof tie-downs) that have private good characteristics. These different protections work together in a systemic fashion; when they are aligned they can effectively lessen risk and mitigate the effects of natural disasters. When they work against each other, they are much less effective.

What this ruling does is further muddy the complex entanglement of financial responsibility for Katrina, which is currently (haphazardly) apportioned between property owners, residents, private insurance companies, the federal and state governments, and the National Flood Insurance Program. This breeds uncertainty, which breeds finger-pointing, which breeds litigation, which breeds more uncertainty.

Whether this ruling is correct as a matter of law is another question altogether. But what we are likely to see as a result of the decision is insurance companies litigating against the US Army Corps of Engineers. This will increase uncertainty about the future of levee protection and the cost and availability of insurance — the first two of the three protections against natural disasters discussed above.

Above all, the ruling creates uncertainty. And uncertainty slows recovery. Insurers are likely to litigate against the Corps of Engineers now. The Corps may be forced to reevaluate its floodworks, which will mean further delays in getting better protection. And how this will affect New Orleans’ master plan is anyone’s guess.

What Orleans and St. Bernard Parishes need now is what they’ve needed for four years and gotten very little of from the federal or state governments: certainty about moving forward. While this ruling may financially benefit some of Katrina’s victims, it’s likely to have deleterious longer term consequences, both in Katrina’s wake and in the aftermath of future disasters.