"Even if only 1 percent of the claims results in litigation, that will be a lot of litigation," says David Stratton, partner with the Washington, D.C., defense firm Jordan, Coyne & Savits. With such high demand for experts, lawyers may find it difficult to retain the ones they need, he believes.
While news reports vividly portray Katrina's physical devastation, some insurance litigators say that perhaps the greatest need for expert testimony will come not in assessing property damage, but in evaluating business losses.
Whether litigated or arbitrated, business interruption disputes depend heavily on the testimony of experts, says John H. Mathias Jr., partner with Jenner & Block in Chicago and chair of its Insurance Litigation and Counseling Practice. They require accounting experts to assess economic losses as well as experts to evaluate loss or damage to structures and property.
Lewis E. Hassett, partner in the Atlanta office of Morris, Manning & Martin and chair of its insurance/reinsurance dispute resolution group, agrees that issues surrounding business interruption coverage will result in a need for experts in forensic accounting. "Many of these claims will be at the limits of their coverage. I can see fights over finances. What was the value of the company, what was the company doing financially?"
Another area likely to require extensive use of experts is property valuation, says Kenneth A. Kroot, a litigation partner with Jenner & Block who represented the city of Chicago in numerous class action and individual cases arising out of the great Chicago flood of 1992. As part of the valuation of the overall business, real estate appraisers will be required to assess the worth of its property, he explains.
"You will need appraisal experts, to appraise the value of property," Kroot says. "Also, you would need private adjusters to adjust losses and other consulting experts to prepare proofs of loss."
Wind or Water?
Likely to be less of an issue for businesses than for homeowners is causation – the question of wind versus water—because commercial policies are more likely to include flood coverage.
Standard homeowners' policies cover damage caused by storms but not floods. One estimate said that only a quarter of houses in poor areas hit by Hurricane Katrina had flood insurance.
Still, John Matthias says he can foresee a number of circumstances in which the question may arise of whether the loss was caused by wind or by flood. In those cases, expert testimony will be required. "Insurance companies tend to argue that if the damage is from the bottom up, it is flooding, if from the top down, it is storm."
As Lewis Hassett observes, "After 9/11, insurers said they would not raise the terrorism exclusion. I have not heard insurers say they will not raise the flood exclusion."
Questions of causation may also require the testimony of "storm trackers" and other meteorological experts, believes Tiffany L. Powers, a lawyer in the Atlanta office of Alston & Bird who concentrates her practice in insurance coverage disputes. They can help sort through the confusion caused by concurrent possible causes of loss.
"The issue," she says, "turns on whether the damage to a home or a business was caused by flooding, which likely is not covered, or by windstorm, which is covered." A meteorological expert may be able to pinpoint the precise weather conditions at a specific time and location and help determine whether wind or flooding was the more likely cause.
But causation issues may extend beyond the question of storm or flood, says Matthias. Damage to buildings may be linked to pre-existing structural deficiencies or to outside forces such as vandalism. Mold in buildings may have been there before any flooding. Experts such as structural engineers can help sort through such questions.
"What of damages resulting from the levee break?" Matthias speculates. "What's the chain of causation there?" Expert testimony could help determine the answer.
Other Areas of Expertise
There are so many complex layers to this disaster, says Lewis Hassett, that it is difficult to foresee all the claims that may eventually arise or the areas of expertise that will be required. For example, he could foresee claims against businesses arising from toxic materials that leaked into the New Orleans floodwaters.
"A plaintiff may say, 'I've developed this cancer because I was exposed to chemicals A, B and C.' That would result in a fight over causation that would require experts," Hassett explains.
Another area of high demand for experts will be in insurance industry matters, particularly if litigation arises between insurers and their reinsurers. "Insurance experts may be required to testify on custom and usage within the industry," says Kenneth Kroot.
Lewis Hassett agrees, noting that reinsurers may seek to demonstrate that the claim paid by the primary insurer was ex gratia, in which case the reinsurer would not be bound by it.
In the end, John Mathias predicts, the greatest demand for expert testimony will come in three core areas: business interruption, property valuation and loss causation. In the wake of what is being called the nation's worst natural disaster, whether there will be sufficient experts to meet the demand remains to be seen.