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Despite Katrina's destruction, the rebuilding show went on


As risk management nightmares go, it's hard to top what Warren C. Perkins Jr. faced after Aug. 29, 2005.

First, he had to evacuate himself and his family from New Orleans as Hurricane Katrina barreled down on the city and then tore up his company's properties. Then he had to set up remote operations as it became clear that the flooding that followed the storm had inundated his office and his home. After that, he had to ensure that more than 1,500 employees had access to health care. Then he had to gather information on numerous property and equipment losses as he organized the most complex set of claims he had ever encountered or is likely to encounter again. And then, as the main contractor to the U.S. Army Corps of Engineers, he had to make sure that Boh Bros. Construction Co. L.L.C. was fully covered as it set about its tasks in stemming the flooding and rebuilding the infrastructure of New Orleans.

Meanwhile, looming in the months ahead were insurance program renewals that, thanks to Katrina, would prove to be among the toughest that any business along the Gulf Coast has faced.

In part, due to his and his colleagues' response to the calamity that his company and his city faced, Mr. Perkins, vp, risk manager at Boh Co. L.L.C., the administrative management arm of Boh Bros., has been named to the Business Insurance 2007 Risk Management Honor Roll.

Before Katrina struck Southeast Louisiana and Mississippi, Mr. Perkins had evacuated to his aunt's house in Montgomery, Ala. There, with the aid of his broker, Willis Group Holdings Ltd., he set up an emergency office where he worked for the next two weeks, coordinating risk management functions for Boh Bros. as the company took on complex emergency repair projects, including sealing levees, pumping out water and repairing bridges and other parts of New Orleans' infrastructure.

"They weren't like other companies in New Orleans. They couldn't shut down and abandon the city. They had to keep going because they were being called on to save the city," said Louis P. Iglesias, president of AIG Global Risk Management, a unit of American International Group Inc. "He did so many things that went above and beyond what most risk managers are called on to do," said Mr. Iglesias, who nominated Mr. Perkins.

The company, which has operated in New Orleans for nearly a century, faced numerous, and in many cases unprecedented, risks and challenges as it set about its work. And as its workers performed those tasks, they incurred expenses that Mr. Perkins is still accounting for and negotiating with his property insurers as an extra-expense claim.

Those expenses ranged from hiring a helicopter to drop Boh Bros. staff onto the roof of the company's offices so they could retrieve information needed for the company to bid on a $31 million bridge repair less than a week after the storm; to costs associated with setting up 30 trailers in a Boh Bros. equipment yard to provide housing for employees as they worked to save the city; to paying for shipment of basic supplies, such as truck loads of water from Oklahoma.

Perhaps the biggest extra-expense claim that Boh Bros. faced was the cost of retrieving two huge cranes on derrick barges and two material barges that had been attached to a dock at the company's yard in east New Orleans but that broke away from their moorings during Katrina. "All four of these barges floated down a canal and ended up a couple of miles away, stuck on the shoreline. So we had to get the barges off the shoreline and it was not an easy thing to do," Mr. Perkins said.

In particular, the derrick barges were a problem because they were so heavy. Eventually, with the help of a barge company, Boh Bros. hooked up hoists and operated the cranes so that they dug the barges out while they were being pulled.

"That was quite a process, and I was given the task of arguing that that cost was recoverable under the sue-and-labor clause of our hull policy," Mr. Perkins.

Sue-and-labor clauses were first placed in marine insurance policies to respond to situations such as the jettisoning of cargo to save a sinking ship.

At the time of Katrina, Boh Bros.' hull coverage was placed with Westport Insurance Corp., although it is now covered by Axis Insurance.

To assist with the claim, Boh Bros. called on Bill Condon, a marine insurance expert at Arthur J. Gallagher & Co., which had a relationship with Gillis, Baker & Ellis, the independent agent that handles the Boh Bros. hull and property placements.

"He was just unbelievable; he is the best marine guy I ever came across and he helped me. He was key," said Mr. Perkins. Mr. Condon's efforts helped secure a $1.1 million claims payment for the costs of rescuing the barges.

Many of the other extra-expense claims are with Boh Bros.' main property insurer, Hanover Insurance Co., and are still being processed, though the insurer has paid an advance on the claims, he said.

"It's just a very arduous process. We have 17 properties and each property has $250,000 in limits, so I have to tie the extra expense to each property, and that's very difficult when you have a lot of people working in the field," Mr. Perkins said.

In addition to the extra-expense claims, Boh Bros. had more routine property damage claims with Hanover.

Of the 17 properties, three were destroyed by the storm and 11 were damaged. The total claim was $1.5 million.

Boh Bros., like many businesses in New Orleans, did not have flood coverage at the time of Katrina. The company has since purchased National Flood Insurance Program coverage. Despite the lack of flood coverage, much of the damage to Boh Bros. property was determined to be as a result of the storm rather than the subsequent flooding and the company was paid $1.2 million for its Katrina-related property losses.

On the equipment side, the company had 180 pieces of equipment worth $60 million and much of it had to be fixed or replaced, which resulted in a $3 million claim with Hanover. All but about $500,000 has been paid, Mr. Perkins said.

At renewal in 2006, Hanover stayed with Boh Bros. despite the flight of insurance capacity from New Orleans risks that many businesses in the area had to endure.

The equipment coverage premium doubled, but on the property side, the premium increase was small, though the policy now includes a 5% separate windstorm deductible.

On the casualty side, Boh Bros. did not see a significant spike in workers compensation claims after Katrina. In 2006, Boh Bros. had only six lost-time injuries with more than 3.5 million employee hours worked.

"That all comes down to making sure that safety and loss control don't get put on the back burner when you are trying to fix things quickly," said AIG's Mr. Iglesias.