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Use whatever clichéyou want to describe America's small businesses--the lifeblood, the heart and soul, the glue that holds Main Street together. No matter what you call them, Katrina got them. It drained the lifeblood. It threatened to stop the heart and drown the soul. And it is still dissolving the glue as we speak.

"A small loss to a small business is just as important as a big loss to a big company," said a strip-mall realtor in Mobile, Ala., named Marl. He stood on the mangled roof of one of his properties with his adjuster and his roofers. They were speaking contractorese--lingo about decks, plies and lightweight concrete--and negotiating by the square foot, by metal versus concrete reconstruction, by percentage of his roof.

Men and women who had no business patching roofs in that heat worked around Marl, wielding axes, blowtorches and saws. It smelled like tar and garbage. At least half of his renters were closed below his feet. The dollar store, the fabric store, the wig shop, they were closed.

"When you see that much light coming through the roof, it's not good," Marl's adjuster from St. Paul Traveler's, Gary Callaway, told him while they examined the inside of the dollar store.

The barber shop was open, though its floor was coming up. The loan company was running, too, despite the fact that it smelled like a tomb. Top-down water, Marl was told, rain from the ceiling. That could be wind-related damage, not flood.

Marl had been used to this confusion, this expense, this hurricane heartache, every three or four years. But two or three times a year? It was almost more than his nerves could take. Marl was starting to take these 'canes personally.

Yet with experience comes wisdom, and Marl did the right thing by calling in his roofers immediately, said Callaway. With temporary repairs, the roofers prevented compound damage, and Callaway was able to touch base and "scope" the damage with the roofers. The sooner that happened, the sooner Marl could expect his claim to be settled, his check to arrive.

YOU COULD HEAR IT TEARING

The big brains of the insurance world will be arguing for months--perhaps years--about the final tally of the insured losses from Hurricane Katrina. They will bicker about the total economic damage the storm has inflicted on the Gulf Coast and the United States as a whole, with business-interruption costs, infrastructure disfigurement and oil looming large. They can compete with their loss ranges all they want, but one thing is certain, one thing cannot be estimated in a range?the damage to society, its systems, its psyche.

"Not only are we dealing with the typical things you would deal with in a catastrophe of the intensity and impact of Katrina," said Hemant Shah, cofounder and president of RMS, at the modeling company's Terrorism Risk Seminar in New York three days after the storm hit. "But the consequences that we all come together to talk about--insured losses and ... direct economic losses?are probably going to be eclipsed by societal issues, humanitarian issues, macroeconomic issues, and in many ways, the type of issues that confront developing countries when hit with significant catastrophe events."

Bud Trice, vice president and head of Crawford & Co.'s catastrophe services, put it this way to his adjusters at their staging site in Mobile, Ala., on Friday, Sept. 2. "I think that we just cannot get over the magnitude of this event. It's beyond an insurance function. It's beyond a financial function. It can be stated in numbers. But I think it's a social fabric issue here that's going to impact the entire nation."

THE OTHER SIDE OF THE BAYOU

"It's a nightmare," Larry told the adjuster from St. Paul Traveler's. He owned a franchise of a national electronics chain as well as his own boat electronics store, and both had been hit by three feet of flooding, despite the fact that their strip mall was half a mile from the water. Not to mention, the wind had crippled the roof, tearing apart pieces of trellis and crumbling the cinder-block walls underneath it. The rains then came in and finished off what the sea water didn't.

The strip mall wasn't much to look at even before the storm, and the corner location wasn't the best, but the store was his. And he had just finished remodeling the place two weeks ago.

"Talk about bad timing," the adjuster, Callaway, kidded. "The storm couldn't have happened two weeks before?"

That got a laugh out of Larry, his wife and his daughter, his family and employees. Not much else to laugh at though. Larry had been told to get cleaning the place, and would have even if not told do to so. When he piled all his refuse out in the parking lot, though, he was told he couldn't leave it there. He couldn't find a dumpster either, so he instead had to haul the foul, wet garbage in his truck, load by load. When that was finished, he was left to contemplate the future, now.

"We got no income, pretty much," he told Callaway.

Larry didn't see making any in this building. It looked dangerous. So he located an empty commercial space on the highway, and was set to move. But first, he needed to have the OK from the corporate office, and he needed his insurance check. Callaway was willing to work with him. The top-down water damage--the rain that poured in after his roof was damaged--might be covered by his business owners' policy, or BOP, as could the loss of business and the move to the new office.

But Larry would need to read his policy and his lease to see exactly where liability was delineated between him and the building owner, and whether he had an escape clause in his lease. He would also need profit and loss statements for at least May, June and July to help gauge interrupted-business losses.

"The quicker you can get me these documents, the quicker I can get you a check," Callaway told him.

The problem was, Larry wasn't sure where his policy was. It might have been washed away or soaked, like his computer's hard drive was, the one that stored all his latest financial data.

KATRINA'S QUESTIONS

Bill Bailey from the Hurricane Insurance Information Center agrees with Trice about the sundering of the social fabric. "It's so dramatic, so painful, how many people's lives have been disrupted," he says. "It just leaves you with the sense that, in the long term, there will be damages to the social structure." There are kinds of damage that don't surface until later, he explains, psychological damage. "People are losing jobs. Families are forced to relocate." How long will they be there, he asks. Will there be jobs? Or will they have to return home eventually?

"So many of these questions are heavy," he says, "but it's going to be a while before there are answers."

SEE A GROWN MAN CRY

"I don't even know where my napkins are." Willis, the owner of a renowned seafood dive that once gave its customers a front-row seat on Mobile Bay, couldn't track down his 900 almost-new linens. He couldn't find the front of his restaurant either. It is the type of place where patrons request their favorite waitress, where you eat at picnic benches next to your neighbor. Was that type of place.

Katrina ate the front of it with waves and scrubbed the back of it bare of any semblance of its former self. Then looters came in and took whatever else valuable was left--50 to 60 bottles of wine, dozens of beers. He had put in a security system just before the storm. His chairs, his roof, his ice machine--they were all relatively new, too, and now gone.

Willis looked over the wreckage again from under his straw hat, cigarette dangling from his mouth, clothes covered with the cleanup. When one of his 30 employees came to visit him, they cried. He held back and told them not to feel guilty. Nothing was left here, so they had to find employment elsewhere.

When his wind adjuster visited him, David Atkinson with Crawford & Company, he told Willis that he needed a flood adjuster to scope the damage. Willis hadn't seen him or her yet. According to Atkinson, most of the damage appeared caused by waves. But Atkinson suggested getting a coast guard reading of wave heights at the location and sending in an engineer, to see if Willis' roof damage could have come from wind, as well. Chances were, though, if Willis wanted a check, he'd have to get his flood adjuster out there.

Willis showed his toe. He broke it moving debris, and now it was black and purple. He went to his dentist to get it x-rayed. It hurt. He told his brother after the accident happened, "You better turn away, unless you want to see a grown man cry."

You can find as many descriptions of Katrina's damage as you want. Perhaps the ones with the most weight come from the understated wisdom of old-time insurance veterans, like Tom Crawford of Crawford & Company.

"I've been in the business for 41 years," the CEO says, "and I've never seen anything like what we're talking about."

BACK TO THE BEGINNING

Dauphin Island, Ala., a barrier island in the Gulf about 30 miles south of Mobile, had been heaven for anglers, bird watchers and sun worshippers. Quiet rentals and loud bars shared space with white dunes and pine trees, and Steve and his father's real-estate business had helped vacationers rent or own their dollop of relaxation and pleasure.

But then Katrina came. When it passed, the dunes had retaken swaths of the island. It looked as if the beach village was only in the beginnings of development, instead of teetering at the end. The damage was so complete that authorities didn't open highway 193 to Dauphin Island until the Saturday after landfall--nearly a week later.

When Steve got on the island, he didn't find his office. He found its roof, and some of the building's contents flattened beneath it. But not his office. The storm surge had eaten it.

Steve kept perspective, though. Sure, his business was crushed by its roof, but he was also a full-time firefighter in Mobile, and he had helped medivac in refugees from New Orleans. Those folks only had the clothes on their backs. He still had his family.

And Earl Harlan, his wind adjuster, was trying to work with him. A corner of his roof had been beaten back, and Earl thought perhaps he could pay him a wind loss for that. Everything that had been the first floor of the building--and now either crushed or washed to parts unknown--would rest with Steve's flood coverage. Now if only his flood adjuster would show.

How about the flagpole? Steve kidded with Earl. "I'm just trying to keep my sense of humor, man," he said.

MATTHEW BRODSKY is associate editor of Risk & Insurance®.

October 1, 2005

Copyright 2005© LRP Publications