An unexpected fire catches at a hardwood planing mill.
LUA: It Can Happen To You – How To Survive A Catastrophic Loss
Boca Raton, Fla. - An electrical fire, flooding, vehicle accidents, catastrophic weather, robbery: is your business prepared to handle any of these scenarios? Since you can’t determine when disaster will strike, it is important that you are prepared and know what actions to take in the event you are faced with one.
“If you are not prepared, you may make hasty decisions that may not be in the best interest of your business and those around you,” explains Lumbermen’s Underwriting Alliance President and COO Mike North. “At LUA, we partner with our customers to provide a planned approach to recovery should the need ever arise.”
While developing such a plan can be challenging, many find that piecing together disaster preparedness plans – including lists of coordinated steps to follow when faced with a catastrophe – can be very helpful. Make sure each facility has a prevention plan containing several key elements, including a clear policy statement, well-defined activation authority and a method to distribute information regarding the disaster. The plan should also provide for employee training and performing ongoing reviews and revisions to the written procedures.
The format and elements of a disaster plan vary widely from company to company – large, multi-national organizations may have complex legal, insurance, information and security needs, while smaller organizations may be fully served by brief disaster prevention and recovery guidelines.
Firefighters work diligently to put the fire out but the damage being done is irreversible.
What follows is a general checklist of initial steps to take in the event disaster strikes:
• Activate proper evacuation and safety procedures first. • Activate the emergency alarm and notify emergency services. • Notify upper management of the nature of the disaster. • Start calling the list of team members assigned to disaster recovery. • Assess the damage. • Photograph damaged materials and facility. • Implement previously established procedures for protecting vital records. • Label and remove damaged materials (or materials that are not damaged if they are obstructions), depending on the volume of damaged documents and/or the extent of damage to the facility housing the documents.
Depending on the scale of the disaster, plans also need to incorporate decisions on clean up, ranging from repair to rebuild. This raises the important question of how will you generate revenue during this time. It is essential to consider what happens after the initial loss is over. So now what?
1. Do you have a plan if your plant goes down? 2. Can you use another facility? 3. Do you have any arrangements with a friend or a competitor to help? 4. Do you have business interruption coverage to help in this situation? 5. When will you re-open?
What will happen to your employees? 1. Do you have them come to work? 2. How will you pay them if there is no revenue? 3. Who do you keep if you have to lay people off?
During the aftermath of such catastrophes, many businesses find that despite the fact that they are fully insured for the value of their property, they do not have insurance protection on the earnings that they produce. According to the Insurance Information Institute, most people would never considering opening a business without buying insurance to cover damage from fire or windstorms. But too many business owners, especially smaller companies, fail to think about not just property damage but also the inevitable challenges they face while they wait for that property to be restored.
Restoration from fire is expensive. This image shows the devastating aftermath of a destructive fire.
A business that has to close down completely while the premises and/or equipment are being repaired may lose out to competitors, both in sales and employment. That is why a quick resumption of business after a disaster is essential. Particularly in today’s economy, business owners must recognize that a small property loss can often result in a significant business interruption claim. For example, an integral piece of equipment could catch fire, causing a $100,000 property claim. But if that forces the entire mill to shut down for a week while the machine is being repaired or replaced, the cost in terms of lost production and sales can be many, many times that. This can all be avoided with the additional protection provided by business interruption coverage, including:
• Protection of the income or profit and loss statement. • Replacement of the sales and income of the firm. • Provisions for the firm to retain key employees. • Available funds to the firm to operate temporarily while being restored.
If you would like to see how your disaster recovery plan measures up, or for more information on business interruption insurance, visit www.LUA.cc or contact your local Lumbermen’s Underwriting Alliance sales representative for a more detailed assessment of your business interruption needs.