Hurricane Katrina Raises New Claims Challenges For Insurance Adjusters

In addition, for claims professionals, the wind versus flood issue that arose in the suit filed last month by Mississippi Attorney General Jim Hood could trickle down to every meeting between homeowner and carrier representative over how much is owed for what damage.

But the claims specialists must concentrate on the task at hand.

Ray Stone, vice president of catastrophe management for St. Paul Travelers, oversees a staff of 640 from the main storm office in Houston.

"People are displaced and getting claims to us in a variety of ways," he said. "They can call in, but we have been having massive communication problems."

The fact that areas were restricted for long periods of time will set this storm apart from the others, Mr. Stone said. He said delays of insurer payments for living expenses can result if adjusters can't view the damage.

"We have to do some digging, because if they are out of the house and the house is not damaged by wind or a covered peril then there is no payment," he explained.

While some politicians and editorialists may berate the insurance industry for trying to use the flood exclusion to escape legitimate wind claims, specialists in the field see little trouble in discerning the difference between flood and wind losses.

"Our adjusters are well trained to tell the difference between what is caused by surface water and what is caused by wind," Mr. Stone said.

In a similar vein, Robert Hartwig, chief economist for the Insurance Information Institute, said the issue has not really arisen much after other hurricanes.

Robert Phillips, catastrophe team manager for State Farm Insurance, has to face a lot of disappointed customers.

"A lot of people do not have flood insurance. But we are not in some of those flood areas yet because water is still coming down," Mr. Phillips said in mid-September.

"People are disappointed," he added. "I had an adjuster say these people had two feet of water in their house. While that is not a lot, it is still enough to do some damage. They had no flood insurance, and in the end, understood that" damages wouldn't be covered.

But there may be many policyholders who will not be so understanding.

Mississippi Insurance Commissioner George Dale told a state legislative hearing that while insurers should not be held liable for flood damage, he did send a bulletin to insurers forbidding claim rejections without looking at the damage firsthand.

In addition, he sought federal funds to hire an outside expert to spot-check residences when claims have been denied to ensure they were properly handled.

John Eager, director of claims for the Property Casualty Insurers Association of America, said so far the issue has not been a problem. "I think the experienced adjusters know how to handle the claims," he said.

The issue could arise more in New Orleans, which has been the most restricted area in terms of access. But even as more areas were open to adjusters and residents, Mr. Eager said he did not see many disputes arising.

Independent claims adjusting firms have stepped up to the unusual challenges poised by a storm of Katrina's magnitude.

Atlanta-based Crawford & Company, for the first time in its history, made immunizations available to its adjusters to protect against contaminated floodwaters. In addition, the firm has deployed satellite communication trucks to provide a stable source of power and wireless communication for the adjusters in the field.

"In my 40 years in the industry, I have never seen anything like this," said Crawford president Tom Crawford.

Crawford adjuster Phyllis Funches had to cope with the extreme damage done to her New Orleans home, while getting on the job as soon as possible to help other victims get their lives back in order with insurance payments.

"I am telling people how to secure their homes and get them funds, while my house is just sitting there unsecured because I can't get to it," she said.

Ms. Funches was finally able to relocate temporarily in Gainesville, Fla., where she had to get her son settled in school. "I felt like I was just starting out–like when I was 18," she said.

But compared to life in the Astrodome, Ms. Funches said, "I'm telling you, man, I am not complaining."

While news stories may talk of wind vs. flood coverage, Ms. Funches has to confront the issue on a human level several times a day.

"People are aggravated–and frustrated. And legally they may understand if they don't have flood insurance," they can't be paid. "But emotionally they feel like somebody should pay for it," she said.

Most people fail to get such coverage because it is not required, she said.

When properties have suffered partial wind and partial flood damage, Ms. Funches is somewhat off the hook.

"I go out and write what is clearly wind and if there is a question about whether or not something flooded, I send in a referral for an engineer to go look at it," she said. "So someone else makes the final call–for which I am glad."

A little less than half of the properties she handles fall into the undecided category requiring more detailed study, Ms. Funches said.

She encounters little hostility, in part, because her policyholders realize she is one of them. "They can tell from the area code of cell phone," she said. "And that kind of takes their anger away because I am coming from a similar boat."

Hart Hubbard manages the GAB Robins operation from Columbia, S.C., directing about 200 adjusters.

Gradually improving communications help lessen the initial burdens between policyholders and adjusters, he said, as cell phone "dead spots" start to disappear.

With the task of adjusting claims from Katrina still mountainous, Hurricane Rita delivered a second blow to the industry late last month. In response to an increased need for trained adjusters to handle claims from both events, Crawford said it had escalated adjuster recruiting and added training through a continuing education facility–Crawford University–with more than 100 individuals expected to receive basic adjuster training in a matter of weeks.

Upon completion of training, Crawford said the adjusters could be immediately deployed to assist the industry with Katrina, Rita and other catastrophic events, inviting carriers to contact its Catastrophe Services division for information.

Caption:

Ray Stone, vice president for catastrophe management for St. Paul Travelers, oversees a staff of 640 from the main storm office in Houston. He's pictured here in the company's mobile claim headquarters in Hattiesburg, Miss.

Caption:

Michael McBain, Dave Parsons, Ray Stone, Damian Vaesa and Dennis Neuharth huddle inside the St. Paul Travelers mobile claim headquarters in Mississippi.