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10 p.m. CDT, Saturday, July 9

Dennis, a Category 3 hurricane, barrels toward the Florida Panhandle after lashing Cuba. With 125 mph sustained winds, the storm threatens to become to a ferocious Category 4, amazing experts with the speed at which it strengthens. In their view, Dennis bears terrifying resemblance to Ivan the Terrible, the $7 billion disaster that ransacked the Gulf Coast merely 10 months earlier. Authorities have instituted voluntary or mandatory evacuations for the more than 1.2 million people throughout the Gulf Coast.

The worst has happened. Dennis is now a Category 4 storm. Its maximum sustained winds reach 145 mph--with higher gusts. Storm surge is forecasted to peak at 19 feet. Isolated rainfall at landfall could total 15 inches. The modeling companies have estimated worst-case-scenario losses as high as $11 billion. The National Hurricane Center warns that the storm is "EXTREMELY DANGEROUS."

Noon CDT, Sunday, July 10

The National Hurricane Center reports, "Dangerous Hurricane Dennis within a few hours of landfall ... Preparations to protect life and property should already have been completed."

Early on Sunday, whether they were holed up in Jacksonville waiting out the storm, or monitoring it on their laptops in Bermuda, businesses owners, risk managers and insurers held their breath, prayed, crossed their fingers or did whatever it took to make themselves feel better. Dennis was coming, and he looked mean.

Meanwhile, Bud Trice, vice president and head of Crawford & Co.'s Catastrophe Services Group, aimed his forces right at the storm and pulled the trigger. From headquarters in Atlanta, he activated his PROACT team, an administrative and managerial support group that included experts on facilities, IT, HR, training, and compliance and licensing, to choreograph the effort. Trice prepped his PROACT team with questions on "what if, what if, what if" for any eventuality that Dennis might throw at them.

Hundreds of adjusters were contacted and placed on standby. When Dennis neared, the decision was made to deploy them to a common location. PROACT targeted Mobile, Ala., for a temporary base of operations. About an hour's drive to the east, Pensacola, Fla., which appeared to be directly in the path of the storm, was chosen to be the site for the "Armageddon station."

PROACT leased the on-site space and sent 10 computers, high-speed scanners, fax and photocopy machines, the spare coffeemaker, and other office equipment and supplies from Atlanta headquarters to furnish Armageddon station.

To make sure his team would have the tools they needed no matter how flattened Pensacola ended up, Trice dispatched a satellite truck. Weighing in at more than 24,000 pounds, the truck was loaded with as many as 15 satellite phone lines, Internet access for as many as 256 users, 150 gallons of diesel and 100 amps of output, enough juice for a broadcast to the Atlanta headquarters and another feed if necessary.

All of this had to reach Mobile, Pensacola, Panama City, Apalachicola and all other affected communities as early and as safely possible. Otherwise, insurers could be left with thousands of claims--totaling billions of dollars--and no estimates. Business owners would be left with losses and no checks.

"You can't wait until the claims are piling up before you act," says Trice.

DENNIS JUST A MENACE

Within only hours of the coast, Dennis decelerated as the hurricane passed over cooler water and was weakened by its own thunderstorms. When the storm eventually made landfall at Santa Rosa Island, Fla., on Sunday at 2:30 p.m. CDT, its winds were sustained at a healthy 120 mph--still worthy of Category 3--but far less fearsome than the 145 mph-plus blasts that it packed earlier that morning. Moreover, Dennis was smallish compared to Ivan, and it moved fast through the area, unlike Ivan, which squatted on the area for 12 hours.

"Florida dodged a bullet," says Trice.

Dennis' eye swept over Pensacola, but the worst of it roared east of the city through sparsely populated lowlands and small Florida beach communities like Pace, Milton and Navarre. Whereas most major hurricanes tear a track 30 to 40 miles on either side where they make landfall, Dennis' swath was a mere 8 miles. As Trice put it, it was like a tornado had come through, without the severity of a tornado.

This turn of events seemed heaven-sent for most of the people who lived and worked in Pensacola. They had dodged Armageddon. Trice, on the other hand, had committed money, personnel and equipment to Pensacola the weekend before with the idea that it all would be needed during the weeks, possibly months, to come.

Instead, Trice found himself in Mobile, on Wednesday, July 13, standing before approximately 200 adjusters, telling them that at least half would have to go home. From what Trice had heard, actual numbers of insurance claims were only 20 percent of the predicted number, and these were trickling in slower than the drizzle from the gray clouds above. One client, for instance, notified Trice on Thursday that instead of the 40 adjusters it had requested earlier, it would now need only five.

At the start of all storms, there's always a lot of "hurry up and wait." But with Dennis, the waiting threatened to be all there was. Storms are these folks' livelihood. Or as one member of the on-site PROACT joked, "Storms is good for business."

Business looked bad. Depending on the company they work for, CAT adjusters are paid by the hour of adjusting, or they get paid a certain amount per number of claims. Either way, Dennis was a dud, financially.

Emotionally, the mantra among Trice and his adjusters was one of sympathy and relief. The people of Pensacola wouldn't have been able to handle another Ivan, said Trice. It's a bit contradictory, making money off other people's misfortune, and a bit of a touchy subject. One adjuster, for example, refused to drive his luxury sport sedan to confirm a claim, preferring instead his utilitarian-looking SUV. A luxury sedan just wouldn't look right.

Part of the concern could have something to do with fear of being wrongly associated with public adjusters, who have the unsavory reputation as shysters who flood into hurricane-ridden sites like litigators racing to a car wreck. It got so bad in Florida last year with public adjusters--and their imposters--that undercover "adjuster police" patrolled loss sites to bust adjusters without licenses. Tales of public adjusters fleecing senior citizens during Ivan still floated around Pensacola after Dennis.

Another adjuster said that understanding adjusting is all about perspective. To illustrate the point, he recounted a claim he had done years past at an autobody shop. A storm had thrown a pole into a recently repaired car. The adjuster told the business owner that he must feel lucky that the pole only wrecked one car, while three others nearby were unscathed. Actually, the owner replied, he was disappointed the pole had missed, this adjuster said.

SAFETY, SECURITY, SCOPE

On the most fundamental level, though, CAT claims management services such as the Crawford team provide manpower to insurers. When insurers or self-insured corporations need, say, 100 adjusters for a single event, they call Trice or one of his competitors, and they rescue insurers before the storm of claims drowns them.

In the immediate aftermath of the storm, modeling agencies were predicting insurance industry payouts ranging from $1 billion to $5 billion.

A later estimate, released by ISO's Property Claims Services July 27, showed that property/casualty insurers were expected to pay policyholders in four states $900 million on claims for insured property losses from Dennis.

Clearly, insurers did have claims, and some were rather large. One such loss occurred at a shopping mall in Pensacola. Dennis, as hurricanes are wont to do, had spawned a tornado, and it had barreled into the commercial center. With such a big claim, Crawford's CAT team handed it off to Crawford's Technical Services Group of Executive General Adjusters--Tech Services for short.

The adjuster for this particular job, Pete Howell, a man with three decades of experience in the business, arrived in the area Thursday morning. His first order of business at the site, he says, was "safety, security, scope."

Howell had actually started drawing out his game plan sitting on the plane to Pensacola. Upon getting to the site, Howell assessed the structure for its safety and security. After he was confident in its stability, he began the more traditional tasks of quantifying damages.

He decided what specialists to call in to form his team, whether they be construction, roofing, electrical or drying experts. He then determined the "scope of repair," the extent of the damage and what it would take to get the shopping center operational again.

To the untrained eye, this looked like a monumental task. The roof took the brunt of the hit. Whole swaths of roofing had been torn off and strewn about. Chunks of debris had smashed into air-conditioning units. Inside, the center looked more like a warehouse than a retail site, with goods stacked and covered and stowed away.

But even that was a stretch. Wires criss-crossed the floor, puddles filled the spaces where the power cords weren't, and workers in boots and goggles frantically carried things about.

It took Howell an hour and a half to make a preliminary assessment. His next task would be to put the job out to bid, and after he considered several bids, he could then calculate the amount of loss. His ultimate goal, Howell says, was: "Pay what we owe, not a penny more, not a penny less."

In the process of finding this magic number, Howell had to make countless decisions with the resolution of a full-bird colonel, about his specialists, about repairs and about other details that he'd rather not talk specifics about.

"It's not difficult making those decisions, knowing what I know," Howell says. "A lot of it is people skills, qualifying who you're dealing with." It's a matter of having faith and confidence in his own skills and experience, and in those of his specialists. And it's about common sense and a wealth of construction knowledge.

Just by examining the roof, Howell could discern exactly what that tornado had done to it. Spider-webbed patterns of cracks in the lightweight concrete were signs of old wear and tear. The tic-tac-toe grids of cracks, on the other hand, were fresh, a result of the concrete shattering when it was lifted and then slammed back down onto the trusses.

Another clue that this is what happened, Howell says, were the base sheet fasteners, metal hooks that normally hold the roof down onto the metal undergirding. They now were loose and poking up.

With wind damage to the roof, Howell trained his expert eye on whether the water damage inside this particular retail store was caused by leaks through the bad roof, or from flooding--and whether the damage would be covered by the wind or flood policy.

"That is an art and not a science," says Trice. "It's lovely to say you go from the water line down and that's flood, but it's rarely that clean."

Adjusters must discern if the wind damage came before the flooding, and somehow opened the door--or roof in this case--for the water damage.

"No. 1 is, you have to have damage to the roof," explains CAT commercial adjuster David Atkinson. "You have a little damage to the roof, and then you can see the stains on the ceiling, then you have the water damage up there." Only then can you put the tab on the wind insurer, but even then it's not clear-cut. "But you have to separate the damages," says Atkinson, "between the water damage from that and then the flood damages."

BIKINI CONTINUITY INSURANCE

While Howell was assessing the scope of the damage to the shopping center for Tech Services, Atkinson was examining Crawford's commercial CAT claims at a hotel in the "Redneck Riviera" resort of Destin.

The hotel was brand-new. In fact, it hadn't even opened yet when Dennis ripped through with sheets of rains and shearing winds. The owner couldn't claim business interruption, even though he felt his hotel would have been up and running already had Dennis not stormed the beach.

Atkinson gave the owners more bad news. Although their property sustained damage that could be covered by their wind policy, the damage fell below their deductible, almost by an order of 10.

"When you live on a coast of Florida," Atkinson says, "you need to expect that you're going to have high deductibles."

The hotel owners didn't. What's more, their hotel had suffered flood damage, and the owners weren't certain they were covered. In some instances with national hotel chains, the corporate risk manager would have all of the coverage information available for Atkinson at a moment's notice. But in this instance, the hotel was franchised. Franchised hotels sometimes fall under the corporate coverage umbrella, but this particular one did not.

The owners were surprised, and they were flustered and angry--not necessarily at Atkinson, he just happened to be there. But the 63-year-old Atkinson has been in the business "for a few years," as he puts it, so he knows how to deal with insureds in the heat of the moment.

"You have to be honest with people," he explains. "Tell them what you think. Reach an agreement on damages. Discuss it with them."

As for their losses, Atkinson offered the owners a copy of his finished report, which they could then turn over to their accountant as a loss on their 2005 taxes.

The other businesses on Atkinson's agenda on this particular Friday were smaller enterprises in Panama City, the surf-and-sundries kind you would expect in a Gulf beach town. Mostly, they had claims because Dennis had made it difficult for these small retailers to sell bikinis, plastic sharks and camera film.

From the owners of these small stores, Atkinson asked for copies of the profit and loss statements and daily receipts. He would need to also examine their policies to make sure they had a mandatory evacuation clause in their business interruption coverage.

ACCRETION ISSUES

The last claim of the day may have been the trickiest. The owner of a restaurant in a forgotten village off the Intracoastal Waterway had claimed damage to her roof. Atkinson took one look at the rusty torn metal on the roof and knew it was old damage.

"What you do is look and you can tell," he says, "just from being an adjuster for a few years, you can separate what's new and old."

It would have been a different story if Dennis had torn off the rusty roof. So-called "accretion of damage" may have come into play. Then the woman may have had a loss. "If any portion of the roof were torn away, there could be a claim for the part of the roof that was wind damaged," Atkinson says.

"It's too simplistic to treat ongoing maintenance needs as insurable damage." In some instances, however, adjusting for accretion of damage could be a bit more complex, especially with larger losses such as the one suffered by the shopping mall. It wouldn't be difficult to separate new damage from old, but the role that old conditions played in new damage--that's a whole other can of worms.

The accretion issue may have an impact on the insured's recovery, and spark some heated disagreement between the insured and the adjuster. "Suffice it to say," says Howell, "a difference of opinion can exist."

By the end of the week, Panama City bathed in the sun, the Gulf waters glimmered in the light, and the cloudless Florida skies reflected only hues of blue. Tourists stormed the beaches in full force again. In such paradise, it was difficult to imagine anyone arguing over the details of an insurance contract. It was even more difficult to imagine that less than a week ago, Armageddon approached.

But Trice's mind was one step ahead.With equilibrium restored to communities bordering the Gulf Coast, he looked ahead to yet more preparation.

On Thursday, July 14--the same day he was setting up shop in Pensacola--he put his staff in Atlanta on alert for Hurricane Emily. The next storm in what could be a busy year was already a Category 2 and getting stronger.

Depending on which way Emily wobbled, Trice might put a team on standby for the weekend. From what he could gather at this point, in "Uncle Bud's opinion," as he likes to say, Emily would cross over the Yucatan first and then make landfall a second time slightly south of Brownsville, Texas.

If Emily did hit the Yucatan and the built-up resort towns of Cancun and Cozumel, Crawford could get involved with big-league adjusters like Howell. If Emily swerved north, and hit Corpus Christi, or worse, Houston, Trice's CAT team could face their Armageddon. But Trice couldn't wait to see which way the wind would blow. He had to decide now, five days beforehand, how to prepare.

"You just kind of have to take your best shot," Trice says.

MATTHEW BRODSKY is an associate editor for Risk & Insurance®.

September 1, 2005

Copyright 2005© LRP Publications