New England Flood Damage Estimates Rising But Most Lack Insurance

May 18, 2006

Receding flood waters revealed deep economic damage that hit a broad range of New Englanders — from homeowners who must dry out soggy carpets and replace rotted beams without help from flood insurance, to shopkeepers and industrial employers trying to recover from days of lost business and destroyed equipment.

Diners will have to wait until at least Friday to savor the Asian-Mediterranean fare at the Powow River Grille, where sandbags and boarded-up windows protected the closed restaurant Wednesday from the flood waters of the Powow River in Amesbury.

Co-owner Francis Broadbery estimated the restaurant’s flood cost at $200,000, from more than four days of lost business, destroyed foods and kitchen utensils in a basement and damages to the prep kitchen and offices.

“We were hoping to be able to put a deck out back, but it looks like the money will be spent on repairs and supplies,” Broadbery said.

Flood-related costs mounted even for businesses that managed to reopen along Route 1 linking Boston with the North Shore area. Highway traffic began returning Wednesday as waters receded, but customers were nevertheless sparse at the Essex County Co-Op, near the Ipswich River in Topsfield.

“Today’s been a little better than yesterday, but people still think the roads are closed,” said Gerry Cicchetti, a buyer at the feed, grain and landscaping supply store.

With just half its crew able to make it into work, the retailer shut down at noon on Monday due to a lack of customers. The co-op resumed regular hours Tuesday, but served just half its normal customer count of more than 400.

At one of the Merrimack Valley’s biggest employers, Philips Medical Systems in Andover, business was back to normal after flooding thinned the ranks of marketing vice president Tracy Byers’ 100-person department by more than half on Monday, and by about a fifth on Tuesday.

High waters and road closures prevented many workers from leaving home. Others stayed behind to protect property or care for children whose school classes were canceled.

Byers worked from home Monday while caring for her 7-year-old son. But she got little done because water damage knocked out broadband Internet service to her home. She spent an hour on the phone with customer service, then resorted to a slow dial-up connection.

“All of a sudden it felt deathly slow,” Byers said. “Instant messaging just isn’t the same when there’s a 30-second delay with the person you’re messaging with.”

Initial estimates put the flooding costs in the tens of millions of dollars in Massachusetts alone. Damage assessments were just getting under way on Wednesday, and Gov. Mitt Romney asked President Bush to declare a major disaster in Massachusetts — a move that could trigger federal aid including small business loans and disaster-related unemployment assistance.

While aid is expected to help soften some of the costs from New England’s worst flooding in seven decades, reimbursement from flood insurance is expected to be relatively small. That’s because the three hardest-hit states — Massachusetts, New Hampshire, and Maine — have relatively low participation in a federal flood insurance program.

Massachusetts, the nation’s 13th most populous state, ranks 18th in the number of policies in place through the National Flood Insurance Program. And Massachusetts’ total of 44,731 policies at the end of February — a small fraction of property owners in a state with 6.4 million people — dwarfs coverage in less-populous New Hampshire (6,692 policies) and Maine (7,396), according to federal data.

Flood insurance yields greater and faster reimbursement than aid programs which largely offer low-interest loans rather than grants. And homeowner’s insurance policies generally exempt flood damage.

Flood insurance is more common in New England’s coastal flood plains than inland areas that are usually less susceptible to storms and flooding. Many of the areas hardest hit by this week’s flooding are far from the oceanfront, including the Merrimack Valley, a region of mills and factories in southeastern New Hampshire and northeastern Massachusetts.

“Many inland homeowners never thought they would be susceptible to the flooding,” said Chris Goetcheus, a spokesman for the Massachusetts Division of Insurance. “We’re going to see that a significant portion of the homeowners in the northeastern Massachusetts towns are not covered.”

Northeastern Massachusetts’ flood-damaged Essex County has 5,673 flood insurance policies in effect, compared with about 9,000 apiece in Plymouth County and Barnstable County — coastal areas to the south that had relatively little flooding.

Massachusetts’ flood insurance coverage has been on the rise, in part because of several floods in recent years. All five of the federally declared major disasters in the Bay State since October 1996 involved flooding, according to federal data.

Congress created the flood insurance program in 1968 after a decline in the number of private insurers willing to offer flood insurance, which is typically unprofitable. The government plays the role of underwriter – assuming financial risk for damages – and relies on private insurance agents to sell policies.

In Massachusetts, residential flood insurance costs average about $800 a year, Goetcheus said.

In the Merrimack Valley, many of the property owners expected to suffer the biggest losses are machine shops and metal plating businesses that supply the valley’s medical device industry, including Philips Medical Systems and Smith & Nephew, which both have operations in Andover and are major exporters.

Many of the suppliers do business in riverside industrial areas that were flooded out, said Bob Halpin, head of the Merrimack Valley Economic Development Council.

“This region has a very integrated economy, and one of the strengths is the layer of industrial support provided by metalworkers and machinists,” Halpin said. “A lot of these companies were affected by the high waters.”


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