We live in an age of disasters. Devastation to manufacturing facilities by fires, tornados, explosions, floods, hurricanes, earthquakes, tsunamis, etc., is now commonplace. So, you have sought to protect your business with an expensive insurance program. While it is hard to predict when and how a calamity will affect your business, you should know now the steps that you will need to take immediately after disaster strikes. The preparedness of your company’s response correlates directly with the extent and speed of your recovery, including funding by your insurance policy.
In today’s economic climate, it is not enough to hope that the good relationship a business has with its insurer and/or its brokers will carry you through to a fair and speedy claim resolution. It is a common misconception, even among sophisticated corporate policyholders, that the insurance carrier will handle everything following a large loss. In fact, it is the policyholder’s responsibility to handle most aspects of its loss and insurance claim. The insurance policy specifically requires the insured to mitigate its loss and pursue its claim. So do management, customers, and the market. The competition will not wait for you to fully recuperate. Everyone will be watching to see how well you respond and recover from a large loss event.
Good disaster planning begins with focusing on the immediate response, or “emergency” phase, of a loss. Decisions made and actions taken within the first days and weeks after a disaster are critical. The damage caused to the facility and remaining operations, combined with navigating the claim process, will prove to be overwhelming. You will need to know how to handle the following:
Investigating The Cause Of Loss
Determining how damage occurred is the urgent focus of all losses. The exact cause of loss is critical to knowing who is responsible and/or if it is covered by your or another insurance policy. As many businesses learned in the aftermath of Hurricane Katrina, if the loss was primarily caused by wind, as opposed to flood, then the loss was covered under the insurance policy. Determining cause requires an investigation by competent and qualified professionals. For instance, experts are called upon to discover if a fire occurred by natural, accidental/negligent, or willful means; the results of this investigation will control whose insurance policy responds to the loss. What caused the loss will also heavily influence the investigation into the full scope of damage as different causes dictate the nature and extent of the damage.
Developing Preliminary Scope Of Damage
A preliminary assessment must be made early as to the scope of damage caused to a facility and its operations. Important questions are: what is the full extent of physical damage, what operations and sales have been affected, what customers have been impacted? Internal and external specialists will be needed to answer these questions. For the insurance claim, you will need experts to make a preliminary assessment into valuing the damage to the physical structure, equipment and business income. Simultaneously, your team must work in tandem with the insurance company’s team of professionals as they develop their perspective of the scope.
Controlling Site Access
Immediately following a disaster, the policyholder will learn that many, often competing, interests heavily desire access to the loss site. First, the individuals handling the investigation into the cause and scope of loss above, on behalf of the policyholder and the insurer (of both the company as well as a tortfeasor), will demand full access. Moreover, various local, state and federal authorities (building inspectors, police and fire officials, environmental, regulatory) often request access for their investigation. In addition to the chaos involved in trying to coordinate these efforts, it will be incredibly disrupting to the business and ongoing operations. Your team needs to control who gets in, when, and for what purpose. Reasonable protocols need to be established and enforced.
Controlling The Message Regarding The Loss
Your employees will want to know the extent of damage and how it may impact the company and their jobs. Your customers will need to know whether you can still meet their needs or if they should look instead to your competition. Management will need to know how to plan for the short and long term. The press will demand information. Some information you simply will not want disclosed in a competitive market place. Your team needs to be consistent with answers given to these questions, as well as how the loss is being presented to the insurance carrier.
Stabilizing The Facility, Mitigating The Loss
You will need to establish a facility, or a portion thereof, that can continue operations to the extent possible. Any temporary repairs necessary to stabilizing the facility must be identified and made. This is important both in terms of continued income for your business, and it is a requirement of your insurance policy after a property loss to minimize the loss.
It is imperative that a business handle these and additional responsibilities immediately after a loss. While no one enjoys thinking about the possibility that a catastrophic loss will befall their business, knowing what to do after a large loss is the key to recovering the insurance benefits paid for. The insurer has its own interests and will view the loss through its own lens, as an outsider to your business. You will often disagree as to the amount of money lost and effort required to restore your business to its pre-loss condition. The key to controlling such potential issues is by having a qualified full-time team in place to take full ownership and responsibility for the claim. When an insured develops its own perspective on the valuation of the loss, it can more fairly resolve the claim. A properly handled emergency response to a disaster sets the groundwork for getting your business back to its pre-loss conditions and recovering the insurance benefits owed.