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By MATTHEW BRODSKY is senior editor/Web editor of Risk & Insurance®

In September, Risk & Insurance® Senior Editor/Web Editor Matthew Brodsky accompanied McLarens Young International Executive General Adjuster Thomas Dollar to the outskirts of Ike damage to witness first-hand how adjusters navigate their way through a large commercial insurance claim. This is his account.

It gives the impression that these engineers already packed up in anticipation of getting the heck out of this multimillion-dollar construction site at this energy outpost on the Gulf. Or that they never unpacked to begin with nearly three years ago when they began building the energy facility.

Either way, they weren't getting out of here anytime soon. Not by the projected finish date at year-end 2008. Not perhaps for another entire year.

Executive General Adjuster Thomas Dollar walks into the office with problems of his own. A 20-year veteran of the claims business, a Houston native, a shorter man who walks fast with big purpose, Dollar is one of those adjusters who seem to know a lot about a lot. When Hurricane Ike made landfall on Sept. 13, 2008, it pushed eight feet of water into his home. He is living with his brother in Houston proper, where he and his wife had evacuated before the storm.

Yet five days later, Dollar marches into that double-wide trailer because he has a job to do for a significant client.

"They need attention too," Dollar says, in damage assessment mode. "This is more a look-see, a sortie if you will."

He is there to confirm initial reports that damage was minimal. Early indications from industry experts were that the energy sector along the Gulf was hit lighter than expected. On this particular site, the already-constructed storage tanks are built to withstand Cat-5 winds. Their shells are made of 3-foot-thick steel. A one-storey-high berm was constructed around the facility to hold off the waters of the ship channel, which bordered the site on one side.

Word is, Ike's surge topped those soil walls and flooded the facility. A few feet's worth of water, which could still be sitting there.

Dollar spoke by phone with the energy company's risk manager and broker yesterday The message from that conversation: "What's our exposure, inquiring minds want to know?"

Yet driving east on I-10 toward the scene, Dollar has a sense that the answer might not be simple. Both the owner and the contractor have a lot invested with this facility. The energy company wants its facility up and running as fast as possible, but wants it still to be "new." And the engineering firm gave a warranty on its work.

"They have to put their name on this thing," says Dollar.

The engineers' faces proved these suspicions right. Yet the engineers do not take Dollar to a back room and rough him up, despite every indication they want to hit something. They know Dollar and welcome what he can do for them. After all, he'd been on-site earlier in the construction process to adjust a $10 million loss.

One of the engineers, a positive man with a thick Japanese accent, chuckles with a laptop in his hand. Another, a taller man in jeans, bald head and no smile on his face, tries to rub the tired out of his eyes behind his glasses. The third contractor, a grandfatherly gentleman with the build of an AFL defensive end, leans back in his chair with his hands folded behind his head.

He speaks first. It isn't looking good. Crucial valves and pipes, which were awaiting installation, were exposed to salt water. Their warehouse, where even more parts and components were located, far enough inland that it didn't get hit by Rita's storm surge in 2005, got hit by Ike's water. The project had been 90 percent done, on schedule to hand over the plant in December. But now ... Dollar better take a tour of the site and look for himself.

Dollar agrees. "I don't want to have to throw darts if I don't have to."

The intense man with the glasses says he'll get hard hats, but Dollar brought his own. Once in the engineer's truck, the man swears like a man possessed by Tourette's. In 25 years of working, he explains, he's never been on a site with more problems than this one. Hell, maybe that story about the Indian burial ground is true.

Dollar chuckles. He's heard this one before ... how the energy facility is being constructed on top of a Native American holy site and the spirits are going poltergeist.

They drive past workers and Dollar changes the topic. How many employees have they out here? About 150 on the cleanup effort, the engineer replies, out of 1,000 normally. On site, they have a well, and with power up since yesterday they were able to pump out water to clean those valves, pipes and everything else. Get the salt water off them. Try to prevent MIC, or microbial-induced corrosion.

"It seems like once you start making progress you get hit with another event," the engineer says.

Dollar reminds the contractor to keep a separate costs count for this valiant cleanup effort.

"Time is not your friend on this," the adjuster says.

Chew bulging in his cheek, the engineer gives a dead stare ahead like he's had that thought himself too many times already in the last few days. They haven't called in the manufacturers yet for those valves, he eventually continues. They want to get them as clean as possible before any inspection.

And cleanup isn't just a desperate attempt to keep valves "new" and under warranty from the OEMs. The contractors are trying to make the site safe for their workers. They've hauled out enough debris for 30 dump trucks and 10 flatbeds.

The contactor stops the truck. He and Dollar step out and walk toward a mammoth maze of metal pipes, each feet in diameter. They duck under a bundle running parallel to the coastline, horizontal to the mud.

You see, the engineer continues, they've caught as many as 12 moccasin snakes on the property and two gators. He points down the embankment of the berm toward a fence along the shore. They caught one gator down here, he says, waving on Dollar to see if it's still there. No such luck.

The engineer sweeps his hand over the water in the direction he imagines the surge came. The nearby town, where a lot of his workers lived, got wiped out, he says. A nearby bridge got moved four feet. A rather large tank washed up into their construction site, probably from one of the neighboring energy facilities.

Did it store benzene oil, Dollar wonders.

"I hope not," the engineer says.

Back in the pickup, they drive inland, toward the two massive fuel storage tanks. One hasn't been sealed yet. They peek in. In the dark of the tank, the walls are so high it's like stepping in front of a tsunami.

Outside, in the basin of the construction site, sit the valves and pipes, those submerged by surge. Dollar examines them, inside and out, and takes notes. The engineer at first points out this and that, then stares off like he's tired of the guilty parties.

They drive next to the warehouse, site of yet more waterlogged equipment. But on the way, they hit a traffic jam--a dump truck is parked in the middle of the dirt road encircling the site, a backhoe works next to it digging debris off the ground and dropping it into the dump truck. They wait.

The engineer's phone squawks, a voice comes through. The night watchman doesn't have a cell phone and wants to know what to do.

Another pickup pulls alongside the engineer's. Windows are rolled down. We need more broom handles for the cleanup, says the elderly man in the other truck. The men might start to break them so they don't have to work.

The engineer shakes his head, rubs his eyes. The backhoe finishes its heavy duty and they drive to the warehouse about five minutes up a local road.

There, workers are using broomsticks to sweep out the storage sheds. Other workers stand in packs and smoke and sweat. Valves the size of sewage pipe litter the concrete, sitting out in the sun.

In a large open warehouse, computer equipment, rolls of insulation, panels--anything and everything the engineers need--is still salt-water wet. Dollar inspects in silence and takes his notes.

He is getting a sense of the scope of this claim, but the full impact and complexity of it becomes all too apparent back in the engineers' double-wide trailer. The mood there hasn't gotten any better.

The engineers sit in their sparsely decorated office and stare at the whiteboard, which is jammed with scribble.

Listed there are 42 total "problems," eight circled in red, all divided into columns with such categories as "civil," "mechanical," "tank" and "pipe."

Dollar unfolds a seat and removes his notebook. He begins transcribing onto his page but he also has to translate these problems into dollar amounts.

The damaged pipe, for instance. The plant has about 136,000 feet of piping above ground fabricated at a cost of $19 million, the grandfatherly defensive lineman says. About 20,000 to 25,000 feet of that was damaged. At $3,500 per spool of 25 feet, plus painting costs, perhaps the costs of bringing in a fabricator on-site--the bigger engineer taps into an engineer's calculator--that could come to $4.4 million just to replace the lost pipe.

The math on the potentially corroded control valves: 80 lost at $40,000 apiece. The loss on tank level gauges? $400,000 apiece. For electrical equipment lost in the warehouse? $200,000.

For soaked insulation meant for the inside of the storage tanks? $400,000. The fencing damaged along the coastline? $500,000. The 80 lost manual cryo valves? $4 million.

Dollar tries to keep up. The Japanese engineer walks out, returns. That figure on the tank level gauges? That should have been 400,000 euros apiece, not dollars, he says, smiling and shrugging his shoulders.

The lineman-sized engineer gets back to the pipe. He forgot to mention the $2.4 million already "invested" in the labor of putting the pipe together. With this plant, every weld has to be X-rayed.

Then figure in inflation, which is "big time" for stainless steel and copper, he says.

And then there's the cost of labor. Silent up until this point, the bald engineer with the pickup and the dip figures it costs $80,000 a day for the 150 cleanup workers.

They still need to get men underneath those massive storage tanks, both of them, to clean the 1,000 or so concrete supports. Hopefully they've caught all the moccasins.

The older man leans forward in his chair and points. "The obvious stuff you can put on the board."

It's like he's got a secret that just now he's going to share with Dollar. The not-so-obvious stuff.

"I don't know what the snot we're going to do with that workforce," he says. Not the 150 cleaning, the other 850. These are, after all, migrant construction workers, whom these engineers have trained and held onto for the last three years.

If these workers leave, it could take an additional year to get finished. The engineer puts his bald head in his hands, whether from the calculations of that loss, or the calculations of having to live away from his family for another year in the middle of the bayou.

"It's not our fault," consoles the older gentleman.

Dollar tries to get his head around what they're saying. Just how long could it take to get replacement parts for those damaged?

It can take six to nine months just to make one of those control valves.

There's no other work around for employees to do?

The old man is exasperated. Not at Dollar's questions as much as at the re-unfolding of a bad situation.

They could bring back the workers to stand around and do nothing, but they'll be waiting on just the pipes alone for weeks. They were 90 percent done, he reminds Dollar. All they had left was to fit in the remaining valves and piping.

Now, after training these workers for months, getting them up to speed after years on the job, they'll lose the workforce. It will disperse, disappear. After all, Ike will provide plenty of other work in reconstruction.

They could be looking at, what, $20 million at least in direct losses, but what about the indirect losses? The indirect losses could as much or more. The defensive lineman rests his hands back behind his head, having made his case.

What the energy company requires is what will drive the delays, replies Dollar. If they want to replace all of the valves, it's their multimillion-dollar plant.

Their decision will be impacted by what the valve manufacturers say after inspecting the affected parts. If the valves' lifecycles have been accelerated, the manufacturers will not sign off on them.

The plant's location is desolate, but if it goes off, nothing this side of the Gulf would survive the explosion.

"You don't want to play games with a valve that may or may not work," says Dollar. "People run from liability, they don't run to it."

If the owner wants everything replaced, says the engineer with the chew in his cheek, they could be looking at a year delay.

"Mammoth," says the older engineer.

Sensing his moment, Dollar kicks into a flurry of advice. He says he'll bring in an accountant and meteorologist if necessary. The engineers had mentioned a professional cleaning service; Dollar recommends they definitely use it before the manufacturers come in to inspect the valves.

If the delay does become months, and the labor force dips down, they could still have a skeleton force. They could look at the payroll and profit and overhead for the entire job--as if it had been completed in three years--then extend it out another year to figure out losses and soft costs. It's possible to come up with a monthly calculation for this.

They might have expediting and extra expenses on the builders' risk policy, so they could contact the valve manufacturers and pay more to have their orders moved to the front of the line.

They could look at the costs of overtime pay for longer shifts and weekend pay to get the new valves in place as fast as possible when they're built.

All of the losses in a construction project, Dollar knows, can, and will, be figured "down to the penny." The losses won't be estimated, they will be audited. And Dollar knows that the energy company most likely will want those new parts and, if so, will eat lost income because of it.

He stands and assures the men he will return, no matter how much more forlorn they look the next time. In a day, he could be back with his experts. In a week, he'll be on-site in force.

"The right decisions will be made," Dollar says.

March 3, 2009

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