The common belief after a storm of the magnitude of Sandy is that the brunt of the cost will get picked up by insurance companies. But that’s far more true in the case of typical hurricanes in normal hurricane zones like the Gulf Coast. In the Atlantic Coast, insurance policies don’t come with flood insurance in most cases. In fact, this WSJ article does not reckon with the possibility that many homes affected have no flood insurance at all.

Thousands of homeowners in New York, New Jersey and nearby states added flood insurance last year after Hurricane Irene and Tropical Storm Lee swamped much of the same area with heavy rains.

But many others are likely to find that their flood insurance policies have lapsed or that they wrongly assumed their homeowners’ policy would cover the damage. That is a common misunderstanding, according to insurance experts.

Flood insurance “is mandatory if you have a federally backed mortgage and you’re living in a flood-risk area,” said Erwann O. Michel-Kerjan, managing director of the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania.

But, he added, “the reality is slightly different. After many events, we realize that many people who were supposed to have that coverage were not covered.”

Simply put, there’s very little enforcement of the mandatory flood insurance guidelines, meaning that unaware homeowners may not be covered for this event. And just the possibility of that means that insurance companies will attempt to wriggle their way out of as many costs as possible.

Similar to the plight of the homeowner, the Metropolitan Transit Authority does not have insurance for damages suffered to the subway system. In fact, they are self-insured, and there’s simply no way they have the kind of money in their coffers it will take to pay for the restoration of the wrecked system.

This all said, because homeowner’s policies typically cover wind damage, and auto policies cover flood damage, the insurance industry could still pay out as much as $15 billion for Superstorm Sandy, which would be the third-largest in history. But the flood insurance program will certainly be overtopped by this damage, and unlucky individuals either unaware or unwilling to pay for their mandate will have to bear the costs by themselves.

Some sort of disaster relief bill for the Atlantic Coast is going to be necessary, and fast. This completely changes the character of the lame duck session, which to some deficit scolds was supposed to be a time of deficit reduction, not enlargement.