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Making a disaster less disastrous.

Making a disaster less disastrous An office fire sets off the sprinkler system and damages computer equipment and furniture. A vandal destroys company records. An earthquake hits and your building is destroyed.

Property loss can occur from just about any source--wind, hail, volcanoes, and other acts of God as well as human-caused problems. Speaking from more than 15 years of experience, I can say the most common disasters result from fires and storms.

Disaster can strike at any time. If your business suffered a disaster-related property loss, would you know what to do first? Could you document each item lost? Do you know how to avoid mistakes in the first hours of panic that could cost you even more?

Large or small, a disaster can wreak havoc on your company. If you have suffered a property loss, you already know this. If not, take heed.

Before you have problems

The best way to recover from a disaster is to prepare for it, in particular when negotiating with your insurance company. Many people find insurance rather bewildering, but there are some quick and easy ways to prepare to deal with your insurer in a disaster.

* Take inventory of all property used in your business. With a video recorder or a still camera, tour your office or building and take photos of everything--from production and office equipment to furniture and artwork. Store the tape or photos in a safe place off-site, such as a safety depotsit box.

* Keep accurate records and store duplicates away from your office. Maintain an updated, complete set of all financial and personnel data in a file away from your office. Include any and all information that could help give a clear picture of how your business was operating before the disster, and what it will be doing in the next year. If you do have a disaster, you want to be able to prove to the insurance company how the business would have performed had no loss occurred.

All records are important--not only the financial documentation of how the company is doing, but in the case of a business interruption claim, anything that might give credence to lost revenues and profits.

* Have an emergency plan. A prearrangement with an emergency service contractor is important. You will find such services listed in the Yellow Pages. These contractors are trained to help secure the property, make repairs needed immediately, and stop further damage or vandalism. They will respond at any hour of the day.

Decide who wihin you r organization will be in command when a problem erupts. What if a key person cannot be reached? Names and phone numbers of building maintenance crews are also essential. You must know where to reach them at any hour--for instance, the people to call to turn off the sprinkler system.

* Check your insurance coverages periodically. Invite your agent to your facility to assess the appropriateness of your coverage. Be sure your property is insured for its replacement value; this is especially important in periods of high inflation and property appreciation.

Make sure you understand your coverage; not all disasters are included in standard policies. For example, many people in the Puget Sound region choose to add eartquake coverage--at a nominal charge. Policy endorsements also are available for professional assistance after disasters. Know the risks and weigh the benefits of adding additional coverage.

If your space is leased, check your landlord's insurance coverage. How would liability be divided if your company's quarters were damaged?

* Interview and select a competent public insurance adjuster--an independent professional who works for you, not your insurance company. Their services are not well known, but public adjusters can be huge money and time savers in case of a real crisis. They know insurance, disaster follow-up procedures, and rights better than you do.

Be sure to check references carefully. Call the Better Business Bureau and the state commissioner of Insurance. Ask the adjuster for a complete list of clients going back at least six months. If the adjuster balks, find someone else.

Apublic adjuster's job is to handle the paper work and look out for your financial interests following a disaster. If you have one on your team, you will be able to get back to running your business more quickly. The public adjuster's fee is usually a percentage of what you recover from the insurance company.

When the unthinkable happens

Should you get a heart-stopping phone call in the middle of the night, stay calm and let your advance planning go to work for you.

* Call in your disaster service team: the emergency service contractor, the cleaning company, and your public insurance adjuster. This team will get your situation stabilized.

* Reread your insurance policy from cover to cover--not just the declaration page, but the entire contract. Develop a strategy for presenting your claim most persuasively. For example, how can you classify damaged or destroyed items to maximize dollar recovery? A ruined carpet, for example, might be listed under structure or contents, depending on how closely you have approached policy limits in the two categories.

* Notify your insurance company in writing. This initial letter should say your business has suffered a loss. Identify the cause or type of loss, and give the date of the event. Do not include any details in this notification letter.

* Document the loss. A public insurance adjuster can be instrumental in establishing what was damaged and how much it was worth. You or the public adjuster must inventory everything, separating damaged from undamaged property. For damaged items, show age, actual cash value, and replacement cost. also, list structural specifications on repairs, and be sure the specs conform with insurance policy conditions.

* Do not throw anything away! It is certainly tempting to rid yourself of smoke-damaged or waterlogged property as soon as possible, but you could be out of luck if a dispute arises with the insurance company and you have dumped the evidence. it is better to wait until the insurance company authorizes disposal in writing.

* Do not overlook the business interruption. Include it in your documentation of loss. The recovery to which you are entitled depends on the specific policy, butyou and your public insurance adjuster should consider these questions:

What are the ongoing expenses during the time your income was reduced or eliminated?

What was your projected profit or loss for that period?

Is your business seasonal and, if so, did the disaster wipe out a key part of the normal business cycle?

Did you have to set up operations of a temporary location, rent equipment, install new phones, add help?

* Br thorough. You are entitled to reimbursement for debris removal and the cost of guard service to protect property. Your public adjuster will help make your list complete.

* Submit your claim. Double-check your policy for time limits. Most insurance contracts require "proof of loss" within 60 days of loss. If the insurer agress to honor your claim, the company still may attempt to negotiate down or simply to delay the payoff. If you have engaged a public insurance adjuster, he or she will help you counter such tactics.

There are some insurance policy provisions that appear, on the surface, to settle any dispute that may arise. But unless you really know the "ropes" of making a claim against your insurance carrier, these provisions favor the insurance company. If your claim is paid, get back to business and be sure your disaster plan is up to date.


We would all like to think we are immune from disaster, and there are plenty of ways to fill a workday without considering problems that may be only a remote possibility. But a little time invested considering the worst possible scenario for your business may help assure that you never have to live through such a nightmare.

Robert Smith is president of Allwest Adjusters, a Washington state-based public insurance adjusted firm. He has more than 15 years of experience in the insurance claim and loss consulting industry.
COPYRIGHT 1990 National Association of Realtors
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Title Annotation:Insurance Insights; mitigating property damage in disasters
Author:Smith, Robert
Publication:Journal of Property Management
Date:Mar 1, 1990
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