Searching for a cause: adjusters struggle to find out whether wind or flood produced Katrina's devastation.

Key Points

* Many Gulf Coast residents did not have flood coverage.

* Discerning the percentage of wind damage compared to flood can be as easy as finding a waterline and as difficult as "a shot in the dark."

* Several lawsuits have been filed, including one by Mississippi Attorney General Jim Hood, seeking payment for flood damages.

"And so this is Christmas, for weak and for strong, for rich and the poor ones, the road is so long ... A very Merry Christmas and a Happy New Year, let's hope it's a good one, without any fear."

--"Happy Xmas (War Is Over)" John Lennon and Yoko Ono

This is Biloxi, Miss. It's early December, just months after Hurricane Katrina. John Lennon's bittersweet Christmas song is playing on the car radio as State Farm public affairs specialist, Susan Lamey, points out the tarp-shrouded ruins of Beauvoir, the retirement home of Confederate President Jefferson Davis. Like so much else along Mississippi's coast, Beauvoir--once a stately mansion within sight of the Gulf of Mexico--is devastated.

"This is my childhood memories," Lamey said, as her car rolled past blocks and blocks of tangled piles of debris where homes once stood. "Friends I grew up with, played with, went to events with."

Lamey was born in Biloxi, grew up near Biloxi and lived and worked in Biloxi as an adult before moving to Jackson, Miss., to take a job with State Farm.

"I know these folks," she said as she pointed to a shattered and flattened house, just one more pile of rubble in a seemingly endless stretch of a ghost town where plastic bags and debris cling to tree branches, marking the waterline from the storm surge. The surge devastation stretches from the beach, stripped of sand in places and reduced to mud flats, all the way to the railroad tracks five blocks inland, where razor wire and military checkpoints keep the curious from wandering in.

Many people did not have flood coverage--because it was not required by their mortgage companies, they were not in a federally designated flood zone or their property withstood 1969's Hurricane Camille.

"The mentality of southern Mississippi before Katrina was this: I don't need flood insurance because, one, the mortgage company doesn't require it and Camille. Well, Camille doesn't mean anything anymore," said State Farm agent Vernon McHan Sr., who's based in Biloxi.

The worst-hit area is along Highway 90 in Biloxi and Gulfport. The road runs along the beach and was still closed to traffic in areas in December. Almost everything was wiped out: empty lots where buildings used to be; mangled steel and concrete frames of what were once hotels. Casino barges swept inland to crush homes and businesses beneath their weight.

"That whole stretch used to have the most gorgeous old houses built during the Civil War. There's literally nothing there. That place will never be the same," said Drew Powell, an independent insurance adjuster with Davidson & Co. of Mobile, Ala. "It blew this place apart."

Wind vs. Flood

South of the railroad tracks to the beach looked like a war zone in December, and in a way, it was. It represents the front line in the battle over wind vs. flood--whether policyholders are entitled to any insurance coverage in an area destroyed by flood waters when they had no flood coverage.

"The biggest problem, the one issue we're running into, is wind vs. flood,' Powell said. "We have carriers who say, 'Oh well, it's all storm surge--we're not going to cover it.' That's not going to fly. It puts us in an awkward position. People are asking us what we are going to do."

What Powell tries to do is convince his insurer clients to "put a percentage of it on wind and try to settle it and be done with it."

"Before the storm surge even hit, you had 100 to 130 mph winds. It would be based on speculation, but it would be reasonable to assume that every structure there had moderate wind damage before the surge even hit," Powell said. "I would have liked to see them take a position early on to negotiate. They could have said everything south of a certain point was 50% wind. That would have flown"

But instead, he said, many insurers are taking a "hard line."

"You have carriers saying it was all caused by storm surge. But how do you know that when you have buildings a mile inland that were totally destroyed by wind?" Powell said. "You want to try to do everything you can for them. I've been in business for 24 years and you look for coverage--that's what the companies should do, look for coverage instead of trying to find reasons not to pay."

Powell said discerning the percentage of wind damage compared to flood can be as easy as finding a waterline and as difficult as "a shot in the dark."

"What I try to do is to give them every benefit of the doubt," he said. "You try to find that water line and estimate everything from the water line up. That's if the building is still there. When the building's not there, it's much more difficult. You can't do a Marshall & Swift if all you have is a slab." Marshall & Swift/Boeckh provides local building cost information and residential and commercial property valuation services for property/casualty insurers in the United States and Canada.

"A lot of them, it's a total crap shoot on the value," he said.

Lecke King, a member of State Farm's catastrophe team, said the insurer's adjusters "look for coverage, to see if they have any wind coverage" when assessing the storm-surge-affected areas. But often, the adjusters come to the conclusion that the property was destroyed by flood, which is not covered unless there's a flood policy.

"Unfortunately, insurance doesn't cover everything," King said. "They never paid a premium for this. It was excluded. It's a contract."

King said when dealing with the area hit by the surge, it is almost impossible to even tell what kind of damage wind might have done before the water struck because little or nothing is left of the structures. When it gets down to it, she said, State Farm uses a variety of methods to determine the cause of the damage.

"Each one is handled on its own individual merits. If there's nothing left of the structure, we can't assume anything. We have to use scientific measures," King said. "We take all the scientific evidence. We request from FEMA, NOAA, engineering firms, to give us surge maps."

Satellite imagery and engineering firms round out the assessment of a property. Often it is determined wind had little or nothing to do with a home's collapse.

King said there were no confirmed tornados with Katrina and peak winds in Gulfport only reached 130 mph in three-second bursts.

"Will a 100-mph wind destroy a house and make it go away? The answer is no," King said. "You may have some shingles gone, but it will never tear a house down."

And the waves washed completely over many of the homes destroyed south of the tracks in the surge zone, flattening the building and leaving the roof "without a shingle gone," she said. It is a sight seen throughout the devastated region south of the tracks.

"People just don't understand the power of water," King said, noting that one square foot of water moving at 10 mph has the force of a 280 mph wind.

Powell, though, is convinced there was some wind damage to the homes destroyed by the surge. "When you have a building north of the railroad tracks totally destroyed by wind, you got to figure down by the beach it was worse," he said.

Taking It to the Courts

And he's not the only one. Lawyers are running ads on television asking for video taken of Katrina on the coast to prove that there were devastating winds prior to the surge.

"The litigation is going to be massive," Powell said. "When suits are filed and it goes to court, the insurance companies are going to be dead losers. The suits are going to be filed in Jackson County, Harrison County and Hancock County and you think you'll find 12 people who weren't affected?"

Several lawsuits already have been filed, including one by Mississippi Attorney General Jim Hood, seeking payment for flood damages. It's an emotional issue that necessitates guards at both State Farm's catastrophe center in Gulfport and its claims center in Biloxi.

Catherine Mason, a State Farm agent in Gulfport, said her background in psychology helped her deal with frustrated policyholders.

"You definitely get into a psychological counseling role with people. I had a lady come in, sit in a chair and just start crying. Her husband had passed away just before Katrina. She lost everything. It's very emotional," Mason said. "It was like putting out tires. If an adjuster did not make it, I'd get out there in my car and take pictures with my digital camera. I would go by and try to help a lot of people."

"It's not easy, what we do. The worst thing in the world is to tell someone who doesn't have flood insurance that their home is gone and it was caused by a flood," King said. "I'll tell you if it was coming out of our pocket, we'd pay it. But we can't. It's not owed. It's a difficult thing for them to hear. They'll talk to you and they're fine, then they reach a peak of anger and then they burst into tears. It's just horrible. These are not the richest people in the world. They've lost their boats, which were their livelihood. They've lost their homes. They've lost everything."

Powell said most of the people he has dealt with "were pretty patient," though "all the people who lived there had a look on their face like they just had their butt handed to them."

"I worked Hurricane Charley last year and it was bad, but it pales in comparison," he said.

Katrina's Estimated Insured Losses by Line

Homeowners

$14 billion-$17 billion

[ILLUSTRATION OMITTED]

Commercial Property

$13.5 billion-$16 billion

[ILLUSTRATION OMITTED]

Private-Passenger Auto

$1 billion-$2 billion

[ILLUSTRATION OMITTED]

Source: Insurance Information Institute

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State Farm

A.M. Best Company # 00088 Distribution: Exclusive agencies

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RELATED ARTICLE: A house for next time.

When Hurricane Charley struck Punta Gorda, Fla., in 2004, Leslie Chapman-Henderson, the president and chief executive officer of the nonprofit Federal Alliance for Safe Homes, set out to try to bring some good to the situation.

She found Teresa Fogolini and Jim Minardi combing through the wreckage of what was formerly their home, and asked them if they would like to participate in "A Tale of Two Houses," a program that would tell the story of two homes hit by Charley, one with "code-plus" building standards, the other--theirs--without.

While Chapman-Henderson was working with partner State Farm Insurance on the program's educational film, home improvement expert Bob Vila was getting in touch with the Federal Emergency Management Agency to find out how he could help educate people to fortify their homes. FEMA's Todd Davison, also a steering committee member of FLASH, brought FLASH's "A Tale of Two Houses" program and Bob Vila together.

Vila offered to rebuild Fogolini and Minardi's home according to FLASH's safe home standards on his nationally syndicated television program. He incorporated a number of storm-resistant home features into the new home, including:

* Cast-in-place concrete walls, which provide superior wind resistance and impact resistance to windborne debris.

* Impact-resistant windows and sliding glass doors, which eliminate the need for additional shuttering.

* A superior roof system with enhanced metal connectors, thicker decking than what is required by building code and a secondary water barrier.

* A permanent power generator and entire-home surge protection.

* An impact-resistant garage door.

* Sustainable, low maintenance native trees and landscape materials. Native plants are proven to stand their ground in high winds and storms better than exotic or foreign ones.

Other storm-resistant features added are outward opening entry doors to reduce wind-driven rain and wind pressure blowing doors in, an elevated foundation with a three-foot stem wall to guard against flooding, and a mold-resistant form of drywall.--Keith Amato

RELATED ARTICLE: Agents brave Katrina at work and at home.

Hurricane Katrina was barreling down on the Gulf Coast, but Vernon McHan Sr. refused to leave. A State Farm agent in Biloxi, Miss., McHan said he believed he had an obligation to stay and be near his policyholders as the storm struck and in its aftermath. But he did get his family evacuated to Arkansas, where he previously lived.

At first, it seemed as if the storm warnings were exaggerated. McHan's wife called from Arkansas and said she saw on the news that Biloxi was getting hammered. He told her all was fine, and that's when he looked out the window and saw his trailer and boat go blowing by.

McHan told his wife what he saw, she asked him to make sure her antiques were safe and then the line went out.

"My cell phone wasn't working. It was five days before I got hold of my wife," McHan said. "She thought I was dead."

But McHan had more immediate concerns as Katrina's winds ripped into his home: part of his roof had been torn away. He could see daylight where his roof had been, and rain was coming in relentlessly.

"It was like someone had put a water hose in the house and let it run," McHan said.

His wife's request on his mind, McHan raced about the house, gathering up antiques and family photos and carrying them to the one room that wasn't being drenched from the leaking ruins of the roof. Bigger items that he couldn't more, he covered the best he could with tarps and plastic.

"I saved all the pictures, all the antiques. I just couldn't save everything," McHan said. "I lost my house. We have a mattress and a kitchen left." Later, that room would be shared with his office staff, among others, who also lost their homes.

"I don't know of many families down here that weren't touched," McHan said. "Some will never recover from it"

Sudden Beach-Front Property

Catherine Mason, another State Farm agent based in Gulfport, lost two homes. She was in the process of moving from her townhouse in Gulfport to a new home in Diamondhead, Miss., when Katrina came.

"I'm just glad I made the decision to leave because my thought was to stay. I thought Diamondhead was going to be fine," Mason said. "When they started comparing it to Camille, I left. I didn't have time to grab things."

When she got back, her townhouse was devastated and all the homes and businesses between her place and the Gulf were gone.

"I found I now had beach-front property and I was a few blocks from the beach," she said. "It was very, very eerie. Camille was a baby compared to this. I never thought I'd witness anything like this."

And her home in Diamondhead was flooded with six feet of water. "My house is gutted. It's like starting over."

Worst of all, Mason lost all photos of her son, who had died at 17 in a car accident. "Those are memories for me that are just memories because I lost them," she said.

Homeless and without fresh clothes, Mason went to work in her agency office with no electricity and about two staff members short. Later, another agent would help her find an apartment, where she is still staying and sleeping on air mattresses.

At his agency, McHan found it too had been seriously damaged by Katrina. "The roll roofing was literally rolled up in a big ball. It was a 15-year roof and it lasted, what, one-and-a-half, two hours in the hurricane," he said.

A New Flood: Claims

It wasn't long after he arrived at his office that McHan's first insurance claim was filed.

"I'm on the roof, first day they let me in here, nailing down a tarp, and someone drives up in a car and asks if it's too early to file a claim," he said in early December. It was just the beginning.

"People were lined up down the driveway," McHan said. "We're taking claims the second or third day after the storm. We had no electricity, no water. I'm working on adrenaline now. I hadn't eaten anything in three days."

It was two weeks of working outside in the heat, taking about 450 claims down on paper, before the electricity was restored.

"We're still working new claims. In fact, I just picked up three yesterday that hadn't been reported yet. Our day starts early in the morning and goes late into the night," McHan said. "But we're not working weekends anymore."

"We've adapted. Either we've adapted or things are getting better," he said. "Now it's going to get better. We're still going to have some hurdles to cross, but it's going to get better."

McHan has learned a few lessons from Katrina, he said. One, make sure people understand their options to buy flood insurance. The others?

"Material things don't matter. You have your health and family, you're OK."

And, "if another storm above Category 2 comes, I'm going north 600 miles. I really couldn't do anything the first three-four days anyway."

"I don't live in the past, I work in the future. But I'm an old history teacher and I learn from the past," McHan said. "We're going to learn from the past."

Top 5 Writers by Line,
Mississippi, 2004

Group market shares (%) are based on direct
premiums written.

Homeowners Multiperil

State Farm Group             30.4
Southern Farm Bureau Group   21.0
Allstate Insurance Group      9.9
Nationwide Group              7.0
Farmers Insurance Group       5.7

Note: Table made from bar graph.

Commercial Multiperil

Zurich Financial          14.91
St. Paul Travelers Cos.   13.53
Nationwide                 6.98
State Farm                 6.76
W.R. Berkley               5.99

Note: Table made from bar graph.

Private-Passenger Auto

State Farm Group               26.31
Southern Farm Bureau Group     15.90
Progressive Insurance Group    12.62
Allstate Insurance Group        6.45
Nationwide Group                4.61

Note: Table made from bar graph.

Source: Best's State/Line Reports