Responding to Extraordinary Loss – Reeling and Writhing, of course, to begin with, and then the different branches of arithmetic — Ambition, Distraction, Uglification, and Derision.

It would be so nice if something made sense for a change.

Was there any other way to do the arithmetic?  Expedited Claim Handling Process

Would that have included litigation cases from cat losses in “2005” not signed, settled and sealed until 2008? Delay, Deny and Deceive shows up on your balance sheets sooner or later. (CLS)

If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?

What would really be interesting to know is what was said (not written) to the WYOs about the process. We may find out is some of the litigation still pending on the coast. I guess my point is, if standards were “relaxed”, did the gummint really want the WYOs to go through a lengthy battle of what is wind and what is flood?(Sampson)

I can’t explain myself, I’m afraid, Sir, because I’m not myself you see.

Sampson, I wondered what was said, too.  In fact, before I could write the scheme in its published form, I had to create a connection.  Obviously, I didn’t intend to publish it; but, since I have the keys to this place, I can lock it back up.

August 29, 2005. almost daylight. somewhere…Someone had started fresh coffee and anyone who had slept in their chair began to move as the smell filled the air and the rest of the group starting coming into the room.

His head was still down on the table but he’d opened his eyes and could see one set of hands working quickly to remove the remains of the evening and another putting a mug of fresh coffee in front of him.  Out of the corner of his left eye, he could see the bottom of the big screen and the CNN logo.

He had just begun lifting his head when he heard the muffled cheer and a voice across the table saying, “maybe Katrina won’t be so bad after all, it missed New Orleans.

First landfall was on the southeastern coast of Florida four days earlier. At 4:00am CST on the 29th, Hurricane Katrina was 90 miles south-southeast of New Orleans and 120 miles south-southwest of Biloxi with maximum sustained winds are 150 mph. At 6:10am CST, the hurricane made a second landfall south of Buras, Louisiana.

Uncertain of when in the late night discussion he had reached the point that he couldn’t fight sleep any longer, he eased his head back down and whispered, “thank you Jesus” before sitting up taking a look. One sip of coffee and a look around the table later, he said, “Let’s begin”. The discussion continued until just before 10:00am when the group paused long enough to watch as Katrina came on land again and delivered a second punch to Mississippi.

The eye crossed the coastline again at 10:00am with the most dangerous part of the storm, the eastern eyewall, hitting the Mississippi coast at the Mississippi – Louisiana border.

“A double hit and a hard one, too, means we’re fucked for sure now,” came from someone near the other end of the table. “Not like we’d be if this bitch had hit New Orleans””, quickly followed from somewhere on his right. He had no time to talk about what didn’t happen, the damage on the Mississippi coast was going to cost a fortune and that was going to be a problem – a growing problem. Katrina was heading inland with no surge behind the powerful winds plowing her path.

Discussion picked up as they went back to work and continued until the caterer began setting up lunch.  Shortly after 1:00 he had his hand on the desert tray when he heard Mayor Nagin’s brief mention of a reported levee breach and lost his appetite.

It was too early for the people he had in place to start calling with damage reports, so he pulled down the map and they started following the storm and looking at their potential exposure along the path.  Around 4:00 his phone rang.  The voice on the line said, “I just overheard someone say Senator Lott’s place was gone and his wife’s sister lost her place, too.  Got ’em both.  I thought you’d want to know, the sister is married to Dickie Scruggs.”

I’ll stop there for now and see if I made a note when I read something “new” about the expedited claim handling process.

11 thoughts on “Responding to Extraordinary Loss – Reeling and Writhing, of course, to begin with, and then the different branches of arithmetic — Ambition, Distraction, Uglification, and Derision.”

  1. Thanks for the link to the FEMA Guidelines of 9/21/05. In an earlier comment I mentioned that everyone seemed to be in uncharted waters….I had totally fogotten about the FEMA director leaving (don’t recall exact circumstances but do recall he was a dog show judge or something) shortly after the storm hit. I note the “Flood Claim Handling Standards” were provided by the “Acting Administrator/Director” about three weeks after Katrina hit.

    What is especially interesting to me (having never seen these procedures before) is that in many cases FEMA was instructing the WYOs to handle the losses without a physical inspection, if certain criteria were met. FEMA furnished the flood data and if the WYO could document the square footage of the house and the floor height, it sounds to me like the claim could be processed without any inspection.

    In some cases, it sounds like it would be OK to ask the homeowner for data (i.e. “how high is your floor above the ground?” or “how many square feet does your house have?”). I would certainly struggle to share some of this data if asked re: my house.

    It appears the gummint also went so far as to ID the “”floodarea” field” for the WYOs. Basically, if a house was located in the identified area, it appears the standards could be really relaxed. With these standards in place, it seems the process was destined to be ineffective or to fail. A contrarian would argue it was very effective because it got $$$ out to folks much more quickly and with less trauma & inconvenience.

    What is also interesting to me (and contradicts my previous post) is the statement: “FEMA will not seek reimbursement from the company when a subsequent review identifies overpayments resulting from the company’s proper use of the FEMA depth data and a reasonable method of developing square foot value in concluding claims”. Basically if the WYOs used FEMA data and had some proof of proper computation of square footage, they would have no problems, even if they paid something they did not owe.

    I know I’m not the sharpest knife in the drawer but it seems to me the WYOs who paid under flood and now are being pressed for “improperly shifting costs” to the gummint, should have each of those alleged claims examined to determine if they are in the area where FEMA said they could pay without an inspection. If so, it seems the companies have a pretty good argument that their hands are clean (maybe not good and at least on this one point). On the other side, if the properties were located in an area where they should have been inspected, close scrutiny of the adjustment process is certainly in order.

    My beef is still with “what was said by FEMA” in addition to these published standards. Perhaps we will learn more soon. Thanks again for posting the memo for our viewing!

    1. Sampson, would love to know your thoughts on this: according to one of the government reports, the WYO’s kept no records indicating which claims were handled through the expedited process!

      Brian will have more on that I feel certain but that’s my recollection.

      The “public version” of the idea was that there were places that would not be accessible to homeowner or adjuster.

      Another point re “improperly shifting costs” – these expedited procedures only applied to the flood insurance program. When an insurer adjusted for wind damage, they could make any needed corrections in flood allocation.

      Instead, policyholders had their wind damage claim denied based on their acceptance of payment for flood damage.

  2. Muarstad’s memo was the “key to the candy store.” Gene Taylor knew this early on. Once the WYO’s saw this memo, they took it as permission to pay little or nothing for wind damage under their HO policies.

    It is documented by NOAA that Katrina spawned tornadoes as far north as Pennsylvania. NOAA also documented that the erratic eyewall winds, in a swath over S.E. LA. and S. and S.W. Mississippi, were equivalent to “at least” an F2 tornado on the Enhanced Fujita scale. This does not even include the areas documented on Doppler of mesocyclonic activity. Some of these mesocyclones were captured directly over our clients’ properties.

    To suggest that a strong Cat 4 (Plaquemines) and strong Cat 3 (Hancock County,etc.) did not do devastating wind damage before the height of the storm surge is rank bullshit. Remember what Andrew did to Homestead Fla. without the storm surge. Look at what Ike did to downtown Houston as a Cat 1 without surge.

    I know what went on in these “flood call centers,” and no verification was necessary for the adjusters to fork over full flood limits from the U.S. Treasury. It was as ridiculous as the adjuster asking the homeowner, “How much water do you think you got?” when, in almost every instance, the homeowner could not get back to the property because the authorities would not let them. The “Blue Zones” were also complete b.s. because it never took into account what the house was made of or how high it was elevated.

    Focusing on the part of the 9-21-05 memo that deals with slab claims, who in the world made the decision that when a structure was gone, it was washed off its foundation? We have tried many slab claims (Weiss, Grilletta and Veade to name a few) in which we proved just the opposite with competent record eveidence; that the primary destruction of the home was high-velocity winds, which came long before the storm surge.

    So then you have the HO insurers coming back in litigation years later saying, “you admitted your house was damaged or destroyed by flood when you accepted your flood limits.” Trust me, these people had no choice but to take the flood checks because they were left twisting in the wind (NPI), sometimes for years, before they got a penny from their HO carrier, if even a penny.

    The Muarstad memo is just as confounding to me now as it was when I first saw it in 2006. This is because you cannot tell where the govt. ends and the insurance industry begins, or vice-versa.

  3. Question Rick, to the extent that any of the incorrect information in that memo came from an insurer, would providing that misinformation be considered fraud?

  4. Nowdy:

    Don’t you know it can only be fraud when a claimant makes a material misrepresentation? Insurance fraud is a one-way street.

    Plus, who would prosecute the insurers, the very govt. that gave them the keys to the candy store in the first instance?

    1. One set of government “rules” don’t sit in isolation from all others. For example, even with the expedited claim process, all other duties, responsibilities, penalties of a fiscal agent of the government would remain in place, would they not?

    2. I looked up “material fact” just to make certain I understood. It seems pretty “material” to me to claim all slabs are the result of house being washed off its foundation.

      In fact, one of my first “original” thoughts about slabs was that the water washed away the evidence of what the wind destroyed.

      I suppose that comes from growing up where I could see tornado damage on a fairly regular basis – a pressure hose in that part of the country is a “clean up tool”

      MATERIAL FACT – A fact that would be important to a reasonable person in deciding whether to engage or not to engage in a particular transaction; an important fact as distinguished from some unimportant or trivial detail.

      The word “material” means that the subject matter of the statement [or concealment] related to a fact or circumstance which would be important to the decision to be made as distinguished from an insignificant, trivial or unimportant detail. (e.g. re: insurance fraud – To be material, an assertion [or concealment] must relate to a fact or circumstance that would affect the liability of an insurer (if made during an investigation of the loss), or would affect the decision to issue the policy, or the amount of coverage or the premium (if made in the application for the policy).

      A material fact is one which might affect the outcome of the case under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To preclude summary judgment, the dispute about a material fact must also be “genuine,” such that a reasonable jury could find in favor of the non-moving party. Id.

      MATERIALITY – That which is important; that which is not merely of form but of substance.

      When a bill for discovery has been filed, for example, the defendant must answer every material fact which is charged in the bill, and the test in these cases seems to be that when, if the defendant should answer in the affirmative, his answer would be of use to the plaintiff, the answer would be material, and it must be made.

  5. The WYO carriers certainly did not need engineers and other experts to pay flood claims. Have you heard of any expert reports changing the primary cause of the destruction from flood to wind? We’ve seen plenty of the converse.

    The rules were different when they were flashing around taxpayer money, as opposed to insurer money, but then again, I am starting to sound like a broken record.

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