One bad Kat: business owners and adjusters begin the painstaking, often frustrating process of assessing the damage wrought by Hurricane Katrina. A massive piece of the real losses, however—the wholesale shredding of the social fabric—may never be truly recovered

Risk & Insurance, Oct 1, 2005 by Matthew Brodsky

Use whatever cliche you 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.

"I know how to draw up a lease. But I don't know one thing about a structural deck." Marl was in their hands. He understood not one lick of what they said, but had no choice but to trust them.

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.