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By Joel Berg

The "Good Friday tornado" made national news, so the scene at the Lambert-St. Louis International Airport was not a total surprise to Kent Ochs. But as he drove through the area on Easter Sunday, the devastation struck him nonetheless.

Ochs was no idle gawker. He is executive branch manager for the Chartis office in Clayton, Mo., a St. Louis suburb. The airport is covered by Lexington Insurance, a Chartis subsidiary.

Although he had been away over the weekend, Ochs had made contact with Lexington claims executives in Boston, as well as the airport's broker. The first relevant email popped up on his BlackBerry during dinner Friday evening, shortly after the tornado struck around 8 p.m. central time.

It is a complicated claim, expected to result in a payout of $25 million, according to airport officials. But communication between the insured and the insurer, coupled with a rapid response by both sides, ensured a smooth claims process.

The speed with which Lexington delivered an advance payment to the airport was one early sign of how the claim would unfold. Less than a week after the tornado struck, Ochs handed a $10 million check to Lambert.

"The insurance company understood our predicament," said Susan Kopinski, Lambert's deputy director for finance and administration. "As we continued working with them, they really understood that we were not out to get anything more than what we felt we were entitled to. We justified everything."

Overall, insurers have been getting better at providing cash to policy holders facing catastrophic claims, said Alice Edwards, a partner in the Atlanta office of Dempsey Partners, which provides forensic accounting on complex claims.

"In the past, we often really saw people struggling with cash flow, waiting for advance payment," Edwards said.

Before issuing payment, however, insurers need clarity, especially if a claim involves complicated issues of business interruption, as was the case at Lambert. Insurers want to help organizations bounce back, as it limits their exposure to loss. But they prefer to see a plan, said Tom Hebson, a regional executive in the St. Louis office of Heffernan Insurance Brokers.

"If you don't have a plan, and you say 'I just need some money,' I don't think you have a chance," said Hebson, noting that insurers responded well to the Good Friday tornado, which carved a 21-mile path of destruction north of St. Louis. One of Hebson's clients, a restaurant chain, sustained $35,000 in hail damage to a roof.

"I'm not really aware of anybody that had any disputes," Hebson said.

Airport officials train for emergencies, Kopinski said. But the tornado was the worst natural disaster she has faced at an airport in her nearly 20-year career.

Filling in the blanks

Everything went according to plan, she said. But in the aftermath of the tornado, Lambert had to fill in some blanks on the fly. One of them was how to resume operations after the total loss of a concourse serving American Airlines. Wind had shorn off part of the concourse's roof. It also blew out hundreds of windows in the main terminal and flattened a portion of the security fence, forcing the airport to shut down.

Within a few hours, officials decided on reopening two concourses, B and D, that had not been in use, according to Jeff Lea, a spokesman for Lambert. Logistically, that meant finding the right jet bridges and providing power and fiber-optic lines for computers and other equipment. The first planes landed on Saturday night, with take-offs resuming the next day.

Traffic was back to normal by Tuesday morning, though the airport was still feeling ripples from the tornado. The reopened concourses had fewer retailers and restaurants than the one that closed, for example, and the airlines were using less space than before the storm. Both factors cut into the airport's revenue, Kopinski said.

As forensic accountants calculated the economic damage -- which ultimately totaled $2 million, according to Kopinski -- engineers and consultants pored over the facility, assessing the destruction. It didn't take long for Lexington executives to grasp the airport's need.

They had already arranged to have a load of plywood delivered Friday night, for boarding up windows. By Monday morning, their attention had shifted to the airport's emergency spending on cleanup, remediation and overtime, according to Dean Owens, head of commercial property claims in the Americas region for Chartis.

"We knew that they needed funds to do that, so the focus on Monday was an advance to the client and making sure we could deliver those funds to them," said Owens, who was then vice president of property claims for Lexington.

By Monday, Lexington had plenty of information. Owens, based in Boston, first began lining up loss consultants Friday night, and some had begun work at the airport as early as Saturday. Among the first to arrive was Jim O'Brien, executive general adjuster in the St. Louis office of NHI General Adjusters. He drove 30 miles from his home in Kirkwood, Mo. on Saturday morning.

"There were trees everywhere," he said, "trees all over the roads."

Lambert's risk manager, who has since left the airport, helped him get through the security cordon surrounding the battered airport, O'Brien said. Accompanied by the risk manager, he surveyed the main terminal and Concourse C, the one used by American Airlines. They also inspected other concourses, as well as ground control towers, runways and additional facilities.

While he inspected the damage, O'Brien was in contact with the airport's broker, Jo Ellen Thelen, a managing director in the St. Louis office of Aon Risk Solutions. They talked about the loss, and Thelen said she stressed the importance of an advance to the airport.

"They're a public entity. They don't have hundreds of thousands of dollars just sitting off in some account somewhere that they can tap into," Thelen said. "It's not like a public or privately held company that can go to the bank or raise capital."

The number that came up was $10 million. "I can't say it was a scientific process," Thelen said. "It was more a gut reaction. 'Let's start with $10 million and see where that takes us.' "

O'Brien left Lambert about midafternoon, after airport officials had announced their plans to resume service.

The next day, Easter Sunday, saw the arrival of more experts contracted by Lexington. They included a team of engineers from New York City-based Thornton Tomasetti and consultants from J.S. Held Inc., based in Roslyn Heights, N.Y. They assessed the scope of the damage, with a goal of forecasting Lexington's total exposure.

Erik Jaeger, an executive vice president in J.S. Held's Ridgefield, Conn., office, arrived on Monday. He began taking notes as his plane rolled past the terminal. His task was to deliver a preliminary estimate of the cost of repairs. He also provided a level of comfort for the suggested advance payment.

"Obviously, they're not incurring $10 million on Day One," Jaeger said. "But it was also very clear to me at that point that the loss was certainly not a dollar under $10 million."

Owens, at Lexington, concurred, based on the claim's overall potential. "We knew it would be a pretty substantial amount," he said.

At that point, it became a matter of delivering payment. Lexington sent a check via overnight mail to its branch in St. Louis. Ochs picked up the check and, along with Thelen, delivered it Tuesday morning.

Ochs was impressed by the repairs that had been made since his drive past the airport on Sunday. "You could tell there was absolute progress in terms of windows being boarded up, parking lots had been cleaned up and swept of glass," he said. "A tremendous amount of progress had been made just in those two days."

JOEL BERG is a freelance journalist and college professor. He can be reached at riskletters@lrp.com.

September 15, 2012

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