Yesterday, we looked at some of the problems with the way The Dark Knight Rises handles corporate law. Today we’re looking at, not so much problems with the movie, as issues the movie raises that are going to be problems for somebody, almost right away. We’re going to be doing some speculation here, but it’s all in good fun. Major spoilers ahead.
Specifically, we’re looking at who’s going to pay for all the damage to Gotham City, similar to our analysis of The Avengers, and some of the legal issues raised by Bane’s occupation of Gotham.
I. Who’s Gonna Pay for That?
When we talked about The Avengers back in May, one of the first things we asked was who was going to pay for the massive amount of property damage done to Manhattan during the battle with the Chitauri. Here we’re asking a similar question, but because the facts are different, the analysis is different. With The Avengers, we concluded that this was probably an act of war, i.e., a large-scale military action by some sort of organized foreign power with state-like qualities. We concluded that this wasn’t likely to be covered by insurance, as acts of war are generally excluded from most insurance policies. The government, likely the federal government, was going to need to pick up most of the tab.
But an alien invasion isn’t what happens in The Dark Knight Rises. Rather, we’ve got about as perfect an example of “civil unrest” as can be described. Bane himself may or may not be foreign, it doesn’t really matter, but he’s explicitly aiming at what amounts to a revolution, and he sets off riots, prison breaks, and widespread looting and vandalism, all with a political motive (or so Bane claims). And guess what? “Civil unrest” and/or “civil disturbance” is also excluded from most insurance policies. This is going to turn out to be really problematic, because the potential insurance claims in The Dark Knight Rises are worse than those in The Avengers by quite a bit.
The estimate for damage to Manhattan was $160 billion, including things like business interruption, debris removal, the works. Well in terms of straight-up physical damage, Gotham looks like it’s been at least that beat up. Those bridges alone are going to cost a few hundred million. Then there’s all those explosions that went off all over the city when the cops got trapped underground. Then there’s all the damage caused by rioting, looting, vandalism, squatting, etc. So if all Bane had done was attack the city and go home, we’d be looking at a situation at least as bad, if not worse, than Gotham.
But it’s going to be much, much worse than that. Gotham City has a lot of people. Where it is and how big it is are pretty explicitly ambiguous, but Lucius Fox once commented that there were 30 million people in the city, approximately 12 million within the 6 mile blast radius of the bomb. That would make it more than twice the size of the largest city in the country, New York, so it’s not clear whether Gotham is supposed to be New York, or what. Regardless, there’s a ton of people. But from the look of the scene where the bridges blow, Gotham seems to extend itself on both sides of the river/bay, sort of like New York does (which is appropriate, since those scenes were filmed in Manhattan). Let’s keep things small and say that Bane is only occupying the central island. Manhattan has about 1.6 million people living on it, but the population about doubles during business hours because of commuters and tourists. So let’s pick a number and guess at there being 4 million people on the island when Bane takes over.
This is hugely problematic. We’ll just take as read that some way is worked out about feeding them all—more on that in a minute—but the death toll is going to be catastrophic. In the Avengers, there was a battle, but it didn’t look like the Chitauri were going out of their way to kill people. Not as such. They were just smashing the place up. Bane and his lackeys are holding Kafkaesque kangaroo courts—conducted by Scarecrow, no less—and it seems to be more-or-less open season on anyone who did well under the old regime or is less than thrilled with the new one. Not to mention the fact that all of those commuters and tourists are now homeless. But the death toll over the three months of Bane’s “rule” could easily have been in the tens or hundreds of thousands.
This means that life insurers are going to have a really lousy quarter. War and civil unrest are excluded from property insurance policies. They are not excluded from life insurance policies. Even soldiers, who have access to life insurance through the Pentagon, can buy it on the private market. Life insurance pays pretty much no matter how you die (other than suicide within the first few months or year of the policy). And in April, the estimate of the number of people with life insurance was down to 44%, a historic low. If 200,000 people die, and half of them have life insurance with an average policy value of $250,000, that’s $25 billion in losses in a three-month period. That’s bad.
But the real kicker is going to be business interruption insurance. Not only is pretty much all of Gotham itself going to be shut down for the duration, but tons of businesses that do business with Gotham are going to be out of luck. Businesses that supply Gotham, like food services and utilities, will probably see their stuff seized by the government and paid for at slightly less than they’d like. Bane’s not gonna pay those bills, so the government’s going to have to. That’s not really an insurable loss. But there are tons of businesses with critical pieces of their logistical or corporate chain which run through New York, and we have to assume that Gotham is the same. New York City has a GDP of $1.2 trillion. This part of Gotham’s is presumably at least that big. That’s not quite 10% of the entire economy, by the way. Call it $1.5 trillion. We’re knocking out a whole quarter of that, upwards of $379.5 billion. Plus countless jobs that depend on Gotham operating for their raison d’être. The damage to the economy is going to be full-on catastrophic. And business interruption insurance isn’t going to pay for any of it, because, again, civil unrest and civil disturbance aren’t covered perils.
II. What Next?
So what happens? Well… it kind of depends on how you want to write the story. There are a number of potential solutions. A major, global depression is one option, and while it would seem to fit with the overall tone of the movies, this one seems to end on a happier note. Rather than speculate as to how things might turn out, we’re simply going to point at some issues that, either because of the legal system or just because, will need to be dealt with.
First, organized labor. Gotham has suffered some pretty catastrophic property damage. Enough to soak up the entire construction workforce of the country for the better part of the next decade, in all likelihood. If Gotham is anything like New York or Chicago, a significant portion of the local construction industry is going to be unionized. The AFL-CIO and related unions aren’t going to be very happy about bringing in non-union labor to do the work that needs to be done, but they’re likely to have significant trouble meeting the demand for labor. This could go one of several ways. A Republican-minded administration might use the opportunity to do significant damage to organized labor, using the enormous public demand for recovery as leverage to smack down the slightest hint of recalcitrance on the part of any union at the hiring of non-union workers. Indeed, there might be sufficient leverage to radically scale back the ability of organized labor to even exist, depending on how things go. On the other hand, a Democratic-minded administration might use the opportunity to radically strengthen the position of labor, insisting that all work be done with union labor, and facilitating the rapid expansion and revitalization of organized labor. Either option would be made possible by the fact that the federal government would likely be picking up the tab. What Congress pays for, Congress can regulate, as a rule. There’s also a middle ground, where companies might be offered an incentive to use organized labor, but no one is required to do so. Some might well chose to go for non-union help if it meant getting their job done faster. Organized labor might be willing to accept that, as they’d be pretty much guaranteed full employment for the next decade regardless. But no matter how it works out, this is something that’s going to need to be dealt with.
Second, displaced persons. Remember, we’re talking about an island with 4 million residents that’s just been essentially shut down for the better part of three months. It’s not going to get going overnight. The government’s likely to need to keep shipping in food for quite a while, as logistical systems reassert themselves. But even assuming that can happen fairly quickly, the rebuilding effort is going to take months, even years. What are people going to do in the mean time? Many of them will have seen their jobs completely gone. Businesses no longer exist, as their capital has been destroyed, their customers are in complete disarray, their employees are scattered to the four winds, and their principals may well be dead. There’s also the million-strong homeless population. Something’s going to have to be done about that. We could be looking at a human exodus that makes the outflow from New Orleans after Katrina look like a school field trip.
Third, criminality. There’s tons of it during the Ninety Days (or whatever). There’s going to be a lot of pressure to enact some kind of justice for those crimes, whether property damage, assault, or murder. Given that the city was basically in anarchy, it seems likely that the authorities would simply decline to prosecute anything less than murder. Figuring out who did what would be almost impossible. But the one thing that isn’t likely to happen is for it all to be ignored. Some kind of official amnesty or prosecution is almost certain to follow.
It turns out that basically destroying a city is a Big Deal. Not only is the damage, both physical and economic, going to be immense, but the human cost is almost unimaginable. While nuking the city would obviously have been worse, the difference between a nuke and three months of anarchy might not be as big as might be imagined. The one thing that isn’t going to happen is a return to the way things were. Not for a long time.