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Lessons From The Nashville Flood Of 2010

Singer David Allan Coe famously said that the perfect country song had to contain “Mama, or trains, or trucks, or prison, or gettin’ drunk.”

Songwriter Steve Goodman obligingly added a verse containing all five to “You Never Even Called Me By My Name,” a humorous take on the misery that some listeners expect in a country tune that Coe turned into a hit. Its popularity demonstrates that country fans have a sense of humor about the disasters that fill the lyrics of some of the genre’s most famous songs.

But the misery of the home of country music, Nashville, Tennessee, in 2010 was all too real.

Areas that routinely experience flooding are typically prepared for the monetary costs and rebuilding efforts required by rising waters, allowing residents and businesses to purchase proper insurance coverage before a flood. Yet in May 2010, heavy rain, combined with a leaking levee, caught Nashville’s residents off guard. According to the Federal Emergency Management Agency, only 4,100 National Flood Insurance Program policies were in force across the metro area at the time.

More than 13 inches of rain fell in Nashville over a two-day period. This was more than double the city’s previous rainfall record and caused the Cumberland River to overflow and spill into downtown. More than 20 people died, more than 50 Nashville schools were damaged and hundreds of homes were filled with floodwater; overall, the flood caused billions in property damage.

In addition to the human misery created by a disaster of this scale, Nashville’s status as a living museum to music history meant that the flood destroyed many irreplaceable cultural artifacts and instruments. The Nashville Symphony lost two concert grand pianos, along with components of its pipe organ. The Country Music Hall of Fame and Museum had to close temporarily to deal with serious flooding in a mechanical area, though no exhibits were affected. And the Grand Ole Opry saw its famous stage covered in 2 feet of water.

What lessons can we take from the Nashville flood? Many can be found in the story of Soundcheck Nashville, a complex of rehearsal spaces, repair shops and — most important in this case —storage facilities.

As a “cartage” company, Soundcheck not only rents storage space for instruments and equipment, but also delivers gear to professional studio musicians when they arrive for a recording gig. It is a huge facility, about 160,000 square feet. This means that a lot of Nashville’s professional musicians stored their instruments in the same place. Unfortunately, in 2010, that place was under water.

At the time of the flood, roughly 1,000 musicians stored instruments and equipment at Soundcheck, which was submerged for six days before anyone could access the facility. Its location on the Cumberland River meant that the business sustained millions in damage. Brad Paisley lost most of his touring guitars and equipment because, ironically, he and his crew were rehearsing for “The H2O World Tour” (a name keyed off his single “Water,” recorded long before the flood). Stars also affected by the Soundcheck flood included Vince Gill, Keith Urban, Lorrie Morgan and many others. The flood destroyed instruments played by legends such as Jimi Hendrix, Pete Townshend and Johnny Cash.

Any musician or music lover can appreciate the financial and emotional impact of the destruction of such one-of-a-kind items. Insurance does nothing for the emotional loss, but it can mitigate the financial blow. Soundcheck clients were responsible for insuring their own equipment, and many of them did not.

Professional musicians should be aware that most homeowners insurance policies do not cover instruments used to make money, even with a rider to provide additional coverage for high-value items. In addition, homeowners coverage typically includes a valuation process in which appraisers — who may not have much experience with instruments — assess value at the time the instrument is damaged. And, crucially in this case, most homeowners policies do not cover flood damage at all.

While riders to a homeowners policy may be useful for amateur musicians or students, professional musicians will likely want to look at specialized musical instrument insurance. In determining whether to purchase an instrument policy, musicians should consider their financial ability to replace or restore an instrument in case of loss or damage. Typically, instruments valued at $5,000 or more are worth covering. A handful of companies offer such policies, many with specialized focuses by instrument type or use. Instrument insurers tend to understand the items they cover more intimately, allowing for a range of coverage options that musicians can tailor to their unique situations. Many musical instrument policies cover flood or water damage by default, but buyers should check. Cost of coverage varies widely depending on how rare the instrument is and how vulnerable it is to damage. (For instance, because of their size, double basses are much more damage-prone than violins.)

Policies that determine payout according to both agreed value and devaluation are ideal for most professional musicians, since these policies cover not only the repair or replacement costs of the instrument up to an originally agreed-upon amount but also cover any reduction in the instrument’s original value as the result of repair. Agreed value also leaves little room for dispute with the insurer, since the instrument’s payout value is determined upfront. Actual cash value (ACV) coverage is also common, but differs in that the insurance company determines the payout amount according to the instrument’s replacement cost and assumed condition immediately prior to the event causing damage or loss, typically resulting in a lower amount.

Musicians who own unique or historical instruments of high value especially may want to secure coverage based on agreed value. Although ACV may cost less, care is required when insuring high-value instruments based on it. The risk of disagreeing with the insurer over the instrument’s proper value rises greatly with one-of-a-kind items. Also, ACV policies often include limits on the total payout amount, regardless of the instrument’s true value.

When agreed-value coverage is unrealistic because of cost, the next best thing may be coverage based on stated value. Not to be confused with agreed value, stated value allows policyholders to insure items for less than they are actually worth in exchange for lower premiums. The Nashville flood serves as a warning that if you own any item that is truly irreplaceable, it is important to understand under what circumstances your existing insurance covers its loss.

The 2010 flood also serves as a reminder that it is important to diversify. Valuable assets and possessions face many of the same risks as stocks in an investment portfolio do. The devastation across Nashville in 2010, especially at Soundcheck, is a lesson in geographic risk — the risk of financial loss because of a market’s geographic location. Homeowners have one primary residence, so geographic risk is difficult to mitigate in case of a natural disaster without fortifying the home or moving. Businesses, however, should note the damage caused by Soundcheck’s decision to store all of its customers’ equipment in one physical space, increasing risk that a local weather event could essentially wipe out the business. Soon after the flood, in fact, Soundcheck opened a separate facility in Austin, Texas, and later another in Houston.

John Hobbs, a member of Gill’s band, told the Los Angeles Times that many musicians had banked on their vintage or collectible instruments to supplement their retirement savings. Unfortunately, tangible property is vulnerable to rain and river water, as well as to the whims of the market. A natural disaster can create very real consequences for keeping all one’s eggs in one basket — or storage facility.

The last lesson from the Nashville flood is the hugely important role that philanthropy continues to play in people’s lives. Communities that come together in the darkest moments to help those most in need deserve recognition. Paisley, Gill, Urban and many other musicians who lost instruments at Soundcheck or elsewhere donated them to NASH2O, a charitable endeavor organized after the flood. NASH2O auctioned off the damaged instruments as collectors’ items and donated the proceeds to recovery organizations, including one that focused on relief for uninsured musicians and industry professionals.

Nashville being Music City, several benefit concerts supported rebuilding efforts. Gill, Garth Brooks and even Kesha (who grew up in Nashville) all hosted benefits. Taylor Swift donated $500,000 outright, and many musicians loaned or donated their own instruments to others who had lost theirs. Not only celebrities pitched in. The mayor’s office estimated that 29,000 volunteers donated more than 375,000 service hours to clean up the city and rebuild damaged homes.

While helping others out of the goodness of one’s heart provides incalculable human benefits, those who contributed personal instruments and funds toward the rebuilding efforts likely also received financial benefits through the charitable income tax deduction. Though donated time is not deductible, expenses incurred while performing charitable work can be claimed on Schedule A of a taxpayer’s return. Such benefits are obviously not the motivating factor behind most people’s generosity, but they stretch resources.

During the years following the Nashville flood, Music City has regained its footing as the thriving hub for country music. Paisley may have summed up the experience best in telling the Los Angeles Times shortly after the flood, “I think the silver lining is that we’ve seen a side of Nashville you only see emerge in this kind of adversity, and it’s a fantastically graceful place. No one’s looking for a handout. No one’s even angry.” Much like the best country songs, even the darkest moments of the Nashville flood ended with a sense of hope.

Senior Client Service Manager Thomas Walsh, who is based in our Atlanta office, contributed Chapter 8, “Education Funding,” to the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. Thomas also was among the authors of the firm’s book The High Achiever’s Guide To Wealth.
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