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"We've learned some things about some of these carriers."

That's coming from a man who's filing property claims for two hurricanes, Katrina and Rita, on four properties--in Biloxi and Gulfport, Miss., and New Orleans and Lake Charles, La.--where upward of $1.2 billion is at stake.

Davis is dealing with about 20 carriers for Harrah's two Mississippi properties, and layers of about another 20 carriers for the Louisiana locations. Without incriminating particular insurers, let's just say that some of the claims are rolling along to Davis' satisfaction, while some are not. Davis isn't sure what, or who, is behind it.

What's especially frustrating is that Davis and his boss, vice president of risk management Lance Ewing, have spent hard time on the claims. Davis says it's been a "massive undertaking" to collect lost content inventories and property damage estimates on the four CAT-sacked properties.

"Part of the challenge is just assembling the claim," says John Bullock, Harrah's broker and president of the Willis gaming and hospitality practice, "in that we're having to get our arms around just what it's going to cost from a direct damage basis, along with calculating what our business interruption was. And when you're talking multiple locations, and hundreds of millions of dollars of revenue, there's just a lot of information that has to be digested in order to come up with what the claim actually is."

Davis and company have digested all this information, along with the help of forensic accountant John Dempsey, and passed it along to their insurers. For some properties, the insurers have provided their own numbers for comparison.

"The two teams are working very well together on this claim generally," Dempsey says. "I think it's going extremely well." In fact, he expects major breakthroughs on these properties in June.

Not for one of the properties, though. On this one Davis hasn't heard back from the insurers as of early June, despite Harrah's getting them cost replacement figures in November.

"I'm rather disappointed in all that," Davis says. With his smooth drawl hiding any tension in his voice, Davis promises that when he finds out just which carriers are causing the problem, he'll say to them, "We don't want to deal with you." In the meantime, he'd like his money. The New Orleans casino has been running since February 17, and the Biloxi site is set to reopen in August. But Bullock estimates that only $250 million in advances have made their way to Harrah's hands so far--out of that estimated $1.2 billion, remember? Davis finds it "frustrating getting the money flowing like it should."

Davis says he doesn't know exactly why there's this two-claims effect--one good, one not so good--but he suspects that there are too many people on the insurers' side involved.

Dempsey agrees. "Any time decisions are made by committee, it takes longer than usual," he says, adding, "There may be a lawyer in the background, wanting everybody to dot i's and cross t's. . . . We don't really know, but it sort of smells that way to me."

Bullock suggests that part of the problem may be that Harrah's inherited a pre-existing property policy when it acquired Caesars.

"So we have different underwriters, different brokers, different terms and conditions, and that is part of the problem," he says. "Do I think both claims will get paid to the satisfaction of the client? I think so."

Dempsey shares the optimism. "Both Lance and Roger have been very, very effective in keeping everybody's eye on the ball," he says, "And it's worked."

FIRST BACK TO THE BEACH

There's hoping you'll win, and then there's actually having the chips in hand. Another casino company, Isle of Capri Casinos Inc., reopened its Biloxi gambling operation on Dec. 26, 2005, amid the rubble of its competitors.

"We completely reconstructed a casino in our event center, where we have about 950 slot machines and 27 table games," says Robert Boone, vice president of risk management and human resources.

Also opened are two restaurants, a snack shop, a nine-table poker room and 750 hotel rooms. The Biloxi hotel has been open since October, when it took in construction and government workers.

By the end of the year, Isle of Capri plans to unveil a new interim casino, which will remain open until an even bigger, better casino is in place in a couple years.

In June 2006, Isle of Capri was one of only three casinos open in the traumatized beach town--the Imperial Palace and the Palace Casino Resort being the other two. Boone estimates that his casino is bringing in 2.5 times the revenue that it did before the storm, and that he's collected about $55 million in advances from a claim that will stack up "north of $150 million" when all's said and done.

"We haven't had anything that we would consider deal-breaking issues," Boone says about his claim. "The carrier has been cooperative."

Isle of Capri built into its property policy both wind and flood. It had insurance through the federal flood and wind program to ease the deductible, which was still a "big bite" at $6 million plus, he says.

The risk exec is of course keeping his hand close to his vest when discussing his property claim, as are the other risk managers involved in this piece, understandably so.

One insight Boone does share, though, is about his business interruption. Dealers are raking in the chips at the Isle, yet Boone will still be collecting business interruption, he figures, until the new casino is finished in a couple years. The interim casino will be running until then, sure, but that will have to be broken down when construction starts on the new one.

"That's how we have the policy set up," he says, not meaning to brag.

It's not just insurance buying that Boone credits with his smooth claim. The casino was well-constructed as well, he says, built high enough to avoid the worst of the storm surge damage.

The company's business continuity plan helped in resuming operations pronto too (see Risk & Insurance®, Sept. 15, 2005, p. 8), with but one major hiccup. Their backup computer systems were stored in Vicksburg, Miss., where Katrina knocked out the power.

An observer could say that Lady Luck had a hand. Where the casino was built, for example, Katrina spared the infrastructure relative to elsewhere on the beach.

Others could point to the smaller size of Boone's claim, relative to, say, Harrah's. But although only one Isle of Capri site was damaged in Katrina, the owner and operator of 15 casinos was hit by Rita in Louisiana and Wilma in Florida.

Boone's broker, Kathleen Bryant, national gaming practice leader at Willis Nevada Inc., credits "active management" of the claim.

"We have managed the process and the flow of documents and information (so that) there should not be any surprises," she says. "Robert and I have stayed involved in all processes and requests. We are managing timelines and expectations on all sides.

This involves meetings with construction consultants every two weeks and monthly meetings with claims adjusters.

At the upcoming adjusters meeting, Bryant smells settlement, after which they will have to "negotiate, negotiate, negotiate!"

BIG BUT NOT EASY

"Poor Royal Crescent," says Mel Bangs, director of risk management for Irving, Texas-based Omni Hotels, an operator of 38 luxury hotels and resorts.

The Royal Crescent, one of two Omni properties in New Orleans, was spared flooding of Biblical proportions at its location in the business district, but Katrina's winds ripped off enough roof to allow rain to pour in. Mold soon followed.

At about the end of September, the utilities kicked back in. That's normally a good thing, but in the Crescent's case, employees had left the faucets on in the guestroom bathrooms before they had evacuated--thinking they would need potable water after the storm--and water poured out of those bath tubs and flooded out the lobby.

A fire erupted outside the hotel, too, during cleanup. The smoke broke through a window and was pulled through the building because of the negative-air pressure from mold remediation. It blackened the "the one area of the hotel that had been fairly unscathed," says Bangs.

The Crescent is still closed. Bangs, who recounts the story with her glass half full, expects the Crescent to reopen in midsummer when its lobby, upper floors and computer system are back. Omni's other Big Easy property, the Royal Orleans, is operating, along with its famed restaurant the Rib Room, after suffering minor wind and rain damage during Katrina. It's a success story from Bangs' view.

Her primary insurer paid out its first advance when, Bangs says, Omni started spending "real dollars." Since then, Omni has received about half of its total claim in advances.

"We've had a pretty even stream of advances coming in so that we could keep our work going," Bangs says. "Our claim has just kind of rocked along."

The property loss was relatively straightforward, says Bangs, especially at the Orleans. At the Crescent, the carriers were convinced that the tub flood was part of the Katrina claim, not vandalism worthy of a separate claim.

Another obstacle--detection of lead paint--halted cleanup at the Orleans for a couple weeks, but Bangs avoided a pushback from carriers by reporting it promptly.

"When it comes to what looks like an impasse in a claim, don't let it be," she says. "The more you're out in front of it, the easier the claim goes."

Bangs hosted a weekly conference call--still does--among her project manager, the building consultant, contractors, remediation and air contractors, and her adjuster.

"Everbody's on the same page. If there are questions or concerns, everything comes out during that call," she says.

Her U.K.-based broker, Charles Gallannaugh of R.K. Harrison, is knee deep too. R.K. Harrison took over Omni's Katrina claims from Willis when it became responsible for the company's March 2006 London renewal placement. Since then, it was R.K. Harrison, Gallannaugh says, that helped to get advances flowing--$15 million worth--and increased Omni's reserve from $10 million to $25 million, alerting excess carriers in the process.

"The claims process has not been easy," he says. "The workload of the underwriters is such that they tend to respond to the broker making the most noise. You have to shout to make yourself noticed."

Gallannaugh foresees further shouting to be done with business interruption. For Bangs, the Crescent is "kind of an easy one" for figuring business interruption. because it's still closed. But for the Orleans, she's currently in conversations with her adjuster about when that B.I. ends. Omni is still calculating its 2006 business interruption losses. The storm hit on August 29 before the 2006 budgets were worked out. So Omni will piece together a budget as if Katrina didn't come, and recoup lost revenue. Meanwhile, Bangs is negotiating with carriers on a bill-to-bill basis.

"Communication with underwriters is the key," says Gallannaugh. "Shocks to them only slow matters down."

The inevitable question is: which one of these three companies has their matters in worse shape? Is it Harrah's with one of last season's largest claims? Then again, its New Orleans casino is open, and the company is planning a $1 billion new casino in Biloxi and sold off its Gulfport, and preparing to sell off its Lake Charles, facility (for which it will still reap the insurance proceeds, when they come).

Meanwhile, Isle of Capri was at ground zero, but is one of the only games in town post-Katrina. Omni Hotels, outwardly satisfied with its claims, is facing the uncertain future that all New Orleans business are.

Will the answer not be clear until the claims process closes? Or until the end of the 2006 hurricane season?

MATTHEW BRODSKY is associate editor of Risk & Insurance®.

July 1, 2006

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