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What came first? The wind or the water? The answer may seem easy to someone living near a river that floods every spring. But ask someone in Bayou La Batre with a claim on the garbage, the mold and the mud that once was his business--where there are both a three-foot-high waterline and sunlight coming through gaps in the roof.

Insureds are neck-deep in the reality of a storm that tried to drown them with wind and water, usually at the same time. "Where would the water have been without the wind?" they ask. Not rolling in at 30 feet above the ground, that's for sure. This question will be asked a 1,001 times for every adjuster in the aftermath of Hurricane Katrina.

"There are claims in this thing that are not going to be solved quickly," says Steve Smith, vice president and head of Carvill's ReAdvisory unit. "On the commercial side, we're going to see big commercial losses from flooding. ? This one is probably going to have a very long tail to it."

It's not that adjusters and engineers cannot discern the difference on-site between damage caused by wind and that caused by water. It's that the politicians cannot.

"Big catastrophes become intensely political. The fact that it becomes intensely political means insurers get picked on more," says Robert Muir-Wood, chief research officer for Risk Management Solutions Inc. "Insurers are going to be pressured to pay claims for houses completely destroyed in the surge waves even though the coverage may say that flood is not covered."

It already has begun. In the first week of September, Mississippi Insurance Commissioner George Dale hinted strongly at what the state would expect from private insurers.

"In some situations, there is either very little or nothing left of the insured structure and it will be a fact issue whether the loss was caused by wind or water," Dale wrote in a memo. "I expect and believe that where there is any doubt, that doubt will be resolved in favor of finding coverage on behalf of the insured."

Then there's New Orleans. Adjusters may not enter the city for a month, perhaps more.

"Somewhere like New Orleans is going to be a different thing to part the insurance claims," says Smith.

HURDLES IN THE MUCK

The ambiguity of much of Katrina's insured damage, though, is not the sole reason that the recovery and rebuilding efforts will stretch on. For the thousands of adjusters, supervisors and engineers who rushed to the Gulf, Katrina left more than the wind-and-water debate. They faced a logistical nightmare, a murky time-consuming confusion in which hotels, gas, power, cell coverage and open roads were all hard to get a hold of.

"This is a symptom of the largest catastrophes that it becomes very, very difficult to mount a field mission after them because of the degree of disruption that exists," said Muir-Wood in an emergency presentation on Katrina at the Aug. 31 RMS Terrorism Risk Seminar in New York.

For carriers and independent claims firms, the problem completely altered the way they went about adjusting. Instead of triaging claims so that worst-hit areas were handled first, insurers dispatched their people in an "inverted triage," according to the Property Casualty Insurers Association of America.

One simple reason why they couldn't get into the hardest hit areas was the corpses, which forced emergency management personnel to declare quarantines. "They're keeping the adjusters at the gates with everybody else," says Bill Bailey, managing director of the Hurricane Insurance Information Center.

Even in areas where adjusters and insurance experts could get through the "gates," they weren't finding life easy. Anywhere with power, hotel rooms were at a premium and a rare commodity. Adjusters had to hunt for rooms or sleep in their cars. They competed with thousands of refugees, utility workers and volunteers.

The situation that Gary Callaway, a catastrophe claim representative for St. Paul Traveler's, found himself in was indicative of many in his boots. His company sent him to Pensacola Beach, Fla., more than an hour's drive east of Mobile, which is more than an hour's drive east of Biloxi. By Saturday, nearly two weeks after landfall, the company hoped to move him and other staff to Hattiesburg, Miss., north of the calamity, Callaway says. But the company had made so many reservations for so many employees in so many hotels, it was difficult to coordinate a large movement of staff without eating excess room costs.

The lack of communication tools made it no easier. Many cell users found they had no service. In Baton Rouge, La., Bob Boyd, president and CEO of the business recovery specialist Agility, found that he and his clients couldn't get any reception. Boyd says that many people took to text messaging?until the word got out. Then text-message traffic delayed even their transmission. Messages sent in the evening, Boyd says, did not arrive at their destination until the following morning.

Perhaps the commodity hardest to get in the area--and most in demand--was gas. Stations had no fuel, or no electricity to pump it. Worse, 1970s-style lines of vehicles stretched for hours out of their lots. Teams of adjusters and insurers at one point were relying on the gas station at a big wholesale club in Mobile, where they were allowed to pull in a special line designated for emergency responders and government officers.

Larger hurdles stand in the way--like health risks.

The ambassadors and inspectors of the insurance industry must walk through block after block of moldy wood, decomposing garbage and rusting nails to do their jobs.

To handle the risk, Crawford & Co. has arranged for all of its adjusters to receive shots for tetanus, hepatitis A and B, and any other disease.

"I don't know that we've ever had a program for your shots," Bud Trice, vice president, told his staff.

Trice also offered his adjusters the opportunity to use an Employee Assistance Program, a confidential phone line for those in need of someone to talk with. Trice warned his adjusters that they'd be exposed to "life family issues, emotional issues, that (they've) never been exposed to."

MATTHEW BRODSKY is associate editor of Risk & Insurance®.

October 1, 2005

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