Many of the thousands of homeowners in the Lower Ninth Ward, one of the hardest-hit areas in the city, lacked flood insurance because the neighborhood in theory was supposed to be relatively safe, local insurance agents and residents said.
Most of the area sits outside the "high-risk" flood districts designated on federal maps used for insurance, and so, unlike homeowners elsewhere in this low-lying city, most in the Lower Ninth Ward were not legally required by lenders to buy flood coverage.
Those federal insurance maps, however, were based on a vastly mistaken assumption: that the levees and flood walls protecting the neighborhood from inundation would remain intact. When the levees breached near the Lower Ninth, the floodwaters ravaged countless homes unprotected by flood insurance, and many neighbors wonder whether anyone will have the wherewithal to rebuild.
In communities all along the Gulf Coast, the shape and extent of the recovery -- or neighborhood abandonment -- may depend largely on who had flood insurance and who did not.
Hurricane Katrina was one of the most destructive storms to strike the United States in 50 years. Now some insurance experts say it is likely to be the most difficult from which to recover because a relatively small portion of the economic damage is covered by insurance.
Robert P. Hartwig, chief economist at the Insurance Information Institute, an industry group, has tallied insurance payouts after natural disasters in the United States, Western Europe and Japan.
On average, private insurance covers 62 percent of the economic losses after natural disasters in those places, he said. But in New Orleans, he expects that insurance will cover less than half of the losses -- and perhaps much less than that -- because of the magnitude of uninsured flood losses.
"It will probably be the lowest percentage of coverage for a major natural disaster in the U.S. for the last half-century," Hartwig said. "Unfortunately, the level of coverage in New Orleans is likely to be somewhere between the Western countries and the Third World -- where places can be affected for years, if not decades, by natural disasters."
Homeowners in the Lower Ninth Ward are becoming acutely aware of the difficulties of rebuilding without insurance. While insurance has begun paying for repair crews in more-affluent areas, they fear their working-class neighborhood could become a ghost town.
"Lots of people will lose their homes," said Mary Hammothe, 48, a bank processor whose roof has a hole where her son cut his way out of the attic.
"I lost two jobs with Hurricane Katrina," said Cynthia Minor, 45, a pharmacy technician who lives nearby. "I don't have any money to rebuild. Who does?"
Among the key factors determining whether a homeowner buys flood insurance are the complex maps created by the Federal Emergency Management Agency and adopted by communities.
Banks are supposed to require that borrowers have flood insurance for homes that are inside designated "special flood hazard areas."
About 61 percent of single-family homes in such areas in the South are covered by flood insurance, according to a Rand Corp. analysis cited by the Insurance Information Institute. By contrast, outside those areas, only about 1 percent of property is covered.
"Flood insurance is a very tough sell -- and very few homeowners seek out flood insurance if it's not required," said Cheryl Small, president of the National Flood Determination Association, a group that represents companies that work with the flood maps.
Most of New Orleans is considered a "special flood hazard area." But most of the Lower Ninth Ward, which is a few feet higher, is not.
"I had flood insurance, but they said I didn't have to," said Jessie Philson, an area homeowner who recently returned for a visit. To save money after retiring, she said, "we dropped it."
Upon seeing the damage for the first time, she burst into tears.
"It's going to cost a fortune," Philson, a retired group home manager, said with a sigh. "I don't know what we're going to do."
Most of the Lower Ninth Ward and much of neighboring St. Bernard Parish, which was also hit hard, were not designated flood hazards because the risks were determined by calculating how much rain would accumulate on a given property in a "100-year storm event."
The mapmakers took into account ground elevations and pumping capacity in neighborhoods, but they assumed that the levees would hold and that neither the Mississippi River nor Lake Pontchartrain would spill in.
"Now when the levee breaks, that's a whole different situation," said Michael Buckley, deputy director of FEMA's flood mitigation division.
Critics charge that the maps are outdated and inaccurate.
"It's not just New Orleans," said Steve Kanstoroom, a pattern-recognition expert who has brought FEMA problems to Congress's attention and organized a Web site on the issue, www.femainfo.us. "People are in harm's way all over the country and they don't even know it."
Buckley said that FEMA's New Orleans maps were based on assurances from the U.S. Army Corps of Engineers that the flood control system would stand up in a "100-year flood" -- that is, a flood so severe there is only a 1 percent chance of it happening in any given year.
Buckley said that had the levees held, most of the Lower Ninth Ward would have remained dry.
"While Katrina was considered greater than a Category 3 hurricane, the rain was not considered a 100-year event within the city," he said.
The assumptions about the levees proved wrong. But, Buckley said, simply throwing out that assumption would create significant problems for New Orleans.
If flood insurance regulations did not assume the levees would hold, every new building would have to be built as much as 15 feet off the ground. That would make new construction ungainly and much more expensive.
"It's not a simple subject," he said.
While some lawmakers talk about relief for the uninsured, no one is sure what will happen, and the uncertainty in the Lower Ninth Ward breeds household fears.
"What happens when I don't pay my mortgage?" Minor asked. "What are they going to do?"
Rep. Gene Taylor (D), who represents portions of southern Mississippi hard hit by the hurricane, has proposed legislation that would allow those who suffered flood damage to retroactively enroll in the flood insurance program.
"Katrina erased entire communities, and those communities are anxious to rebuild," Taylor said. "Unfortunately, many homeowners and business owners were not required, or even encouraged, by their banks or their insurance companies to purchase flood insurance."
Private insurers are expected to pay about $40 billion in Katrina damage, Hartwig said. The flood insurance program will kick in billions more. But total Katrina damage has been estimated at $125 billion, and Hartwig said that figure is probably too low because the interruption of business is only partially included.
"Places that are well-insured tend to bounce right back," he said. Those that are not, do not, he said.
Burnell Lucien, 48, a foreman on a concrete crew, built his home in the Lower Ninth Ward last year.
"The kitchen had granite countertops and stainless-steel everything," he said recently, carting away some of the second-floor furniture. "I had a perfect life."
He frowned, though, when his thoughts turned to the future. The water rose about 10 feet inside his home, leaving about two inches of muck.
"We weren't in a flood zone, and the breach wasn't our fault," he said. "But nobody knows who's going to pay for what. People keep telling me, 'It's going to be better.' The president says, 'We're going to rebuild.' But show me. Show me the money."
Jessie Philson, 59, cries after seeing the inside of her flooded home. Philson, like many in her neighborhood, was told that she was not in a flood zone, so to save money, she dropped insurance coverage after retiring.
George Brooks, 56, holds back tears as he examines his home and business on St. Claude Avenue. Most of the Lower Ninth Ward and much of neighboring St. Bernard Parish were not designated as flood zones.