Post-Katrina Reconstruction Liability: Exposing the Inferior Risk-Bearer

Abstract

This Article describes the doctrinal, functional, and moral flaws inherent in the Gulf Coast Recovery Act (GCRA), a United States Senate bill that would provide liability protection to government contractors engaged in disaster relief work in the areas devastated by Hurricane Katrina, as well as in future disaster areas. First, the Article discusses the history of the government contractor defense and finds that the protection provided by the GCRA is quite unlike the traditional government contractor defense. This Article further argues that this doctrinal departure cannot be justified on grounds of efficiency or fairness, as the GCRA allocates risk away from government contractors and the government and towards the disaster area residents and relief workers who are potential victims. Finally, this Article notes that even if the sort of protection provided by the GCRA may be justified under some conditions of market failure, there is no empirical evidence that government contractors in the Gulf Coast have experienced such conditions, and there are superior alternatives to the GCRA that could provide such protection while preserving a path for victim compensation. This Article concludes that the GCRA is an untenable solution to a problem that has not been proven to exist, and one that violates the basic principles of good government.

Keywords: Hurricane Katrina, insurance and indemnification, government contractor defense, moral hazard, least cost risk avoider, superior risk bearer

JEL Classification: H57, K12, K13, K23, L33, L74