When Disaster Strikes: Preparation, Response and Recovery

MANAGING BUSINESS RISKS

No business is totally immune from disaster. Every year, businesses temporarily shut down—or close forever—because of a disaster such as a flood, fire or hurricane. Forty percent of businesses do not reopen after a disaster and another 25 percent fail within one year, according to the Federal Emergency Management Agency (FEMA).

Fortunately, you can take proactive steps to mitigate the impact of a disaster on your business. In addition, carrying adequate insurance coverage can help your business get back on its feet quickly.

 

Disaster Preparation

Households—especially in areas prone to hurricanes, tornadoes and earthquakes—often prepare for disasters by storing extra supplies, having an evacuation plan, and learning about emergency resources. Businesses similarly want to prepare, with a focus on restoring your operations as soon as possible and minimizing your losses. To prepare adequately for a disaster, take the following steps:

• Develop a Formal Written Plan—Sometimes called a “Disaster Recovery Plan” or “Business Continuity Plan,” this document should detail how your business will respond to and recover from a disaster, including temporarily relocating your business. The National Fire Protection Association (NFPA) has developed a National Preparedness Standard for developing a plan. Some businesses also develop specific plans to protect and recover their information technology (IT) infrastructure. In today’s era of cloud computing, it is increasingly easier to back up data offsite.
• Train Employees—Share your Disaster Recovery Plan with employees, assign responsibilities, and offer training so that your workforce can help your business recover. You may also want to conduct drills to assess and improve response.
• Store Emergency Supplies—Keep flashlights, a first-aid kit and a battery-powered radio on hand at your business. Depending on its location, you may even want to store food, water and blankets. As feasible and needed, consider stocking equipment that can help your business return to operations, such as a generator.
• Maintain Key Information Offsite—To get your business up and operating again after a disaster, you’ll need to be able to access critical business information. In addition to backing up computer data, keep an offsite list of your insurance policies, banking information and the phone numbers of employees, key customers, vendors and suppliers, your insurance professional and others. You’ll also want to maintain an inventory of your business equipment, supplies and merchandise; you may want to photograph items as well.

 

Disaster Response and Recovery

After a disaster, you’ll want to put your Disaster Recovery Plan into action. Read the Insurance Information Institute’s “Best Practices for Filing a Business Insurance Claim,” which details several steps to control damage and recover costs. In the immediate aftermath of a disaster, take the following actions as appropriate:

• Secure your building, boarding up entry points if necessary.
• Make temporary repairs, especially to minimize further damage, such as placing a tarp over a hole in your roof.
• Relocate salvageable equipment and property to a safe, protected location.
• Inspect your property and keep a detailed list of damages; take photos to document damage.
• Clean up your property, taking care to wear safety gear such as gloves and protective eyewear. If feasible, save damaged property in case it needs to be inspected by your insurance adjuster.
• Contact your insurance professional and your insurer to begin the claims process.
• Keep receipts of all expenses related to the disaster.

Once you’ve secured your property and taken other immediate steps, you can begin to focus on making your business operational once again. You should lay the groundwork for restarting operations in your Disaster Recovery Plan. Issues to consider include:

• Location—Should you open a new temporary location or can you operate from your home or use the facilities of a partner or even friendly competitor?
• Communications—How will you communicate with your employees, customers, vendors and suppliers?
• Insurance Claims—In addition to filing a property claim, you’ll want to file a business interruption insurance claim, if you carry this type of coverage. This insurance will help you cover costs of relocating as well as lost income.

Reducing Risks to Your Business Vehicles

MANAGING RISK

Whether you own or lease a single business car or an entire fleet of commercial vehicles, you’ll need to purchase commercial auto insurance. Your insurance professional can help you weigh your risks and evaluate coverage options.

But even with insurance in place, you’ll want to take steps to prevent accidents and protect your employees and vehicles. Your business can reduce the chance of an accident by establishing and enforcing the following practices and policies.

 

Hard-and-Fast Driving Rules

When it comes to the safety of employees and the protection of your vehicles, you should set certain firm driving rules that must be followed at all times, including:

• Mandatory Seat Belt Use—Nearly every state has a seat belt law. Seat belt use helps prevent deaths and limit the severity of injuries in vehicle accidents. There is no reasonable excuse for not using a seat belt.
• Zero Tolerance for Intoxicants—Even one alcoholic beverage can impair a driver’s reaction time. Employees should never drink or use other intoxicants prior to using business vehicles.
• No Cell Phone Use—Distracted driving is a leading cause of accidents, and cell phone use while driving is banned in some states. Prohibit employees from taking calls or texting while driving.

 

Vehicle Use Guidelines

Other rules may be more flexible, but you should consider instituting policies and adhering to the following practices yourself as appropriate:

• Limit Non-Business Use of Vehicles—While some employees use the same car for work and personal use, generally limit business vehicle use to work-related travel.
• Slow Down—Scheduling should allow sufficient travel time between meetings and assignments. Do not create such a frantic pace of work that employees are encouraged to speed. In addition to reducing the risk of accidents, driving the speed limit also will help control fuel costs.
• Lock and Secure Vehicles—Employees should always lock vehicles when on the job. Whenever possible, vehicles should be parked in secure, well-lighted areas.

 

Employee-Focused Practices to Reduce Vehicle Risk

• Know Your Employees—Before hiring employees to drive company vehicles, check their driving record with the motor vehicle department for past infractions. Limit or ban driving by employees with a history of accidents or moving violations. Employees should also be required to report any accidents they have while not working. In addition, recognize that some personality traits—such as a bad temper—can raise the risk of auto accidents.
• Training—Employees who regularly drive work vehicles—or are taking on a new assignment requiring vehicle use—should be provided with drivers training. This course may just be a refresher for some, but it should cover key safety practices such as following distances and proper backing techniques.
• Recognize Safe Drivers—For businesses in which driving is central—such as a florist or a moving company—establish a program to recognize and reward safe drivers. You may also want to reward a department or the whole company for accident-free periods.

 

Responding to an Accident

The above practices and policies can help minimize the risk to your business vehicles, but they cannot entirely prevent accidents from happening. If a business vehicle is involved in an accident, you’ll want to help your employee-driver respond appropriately and proceed with filing an insurance claim. The following practices and steps will help your business and the involved employee recover and get back to work.

• Establish Procedures in the Event of an Accident—Employees using company vehicles should be trained what to do if an accident occurs. This includes not leaving the scene of an accident, contacting the police, and collecting information (license plate numbers, contact information, insurance information, etc.) from the affected parties and any witnesses. The accident should also be reported to appropriate personnel at work. Consider using the incident as an opportunity to educate all employees who drive company vehicles about what to do if they are involved in an accident.
• Contact Your Insurance Professional and File a Claim with Your Insurance Company—As soon as possible, contact your insurance professional to report the accident and begin the claims filing process. It’s especially important to work immediately with your insurance team if anyone has been injured in the accident. Follow the guidance of your insurer in a timely manner, such as getting estimates for repairs.

Remember too, that auto insurance claims are not limited to accidents. You may also need to file a claim if your vehicle is vandalized, stolen or damaged from an event other than an accident, such as fire or severe weather.

Source : Insurance Information Institute 

Steps to Reduce Workplace Injuries

MANAGING BUSINESS RISKS

Injuries to employees can be devastating for businesses, especially small businesses with fewer employees available to take on new roles when an injured worker is on leave. While workers compensation insurance will help pay medical costs and replace an injured employee’s lost income, your business will have to absorb costs associated with reduced productivity, overtime, training replacements, and so on.

The best way to minimize the hidden costs of workplace injuries and related insurance costs is to prevent accidents from happening in the first place. Follow the steps below and consider developing a formal, comprehensive workplace safety program to help reduce the risk of injury:

• Engage Management and Employees—Businesses are most successful improving workplace safety when leadership and employees collaborate. Responsibility for workplace safety should be part of everyone’s job, and specific employees and managers should be tasked with implementing, maintaining and improving workplace safety program components.
• Analyze Your Workplace and Operations—Evaluate your business from top to bottom. Review your equipment as well as all workplace activities. As part of your evaluation, talk to your employees to learn their safety concerns. Whenever you add new operations, equipment or facilities to your business, analyze these for risks as well.
• Mitigate Hazards—Simply identifying and being aware of hazardous practices, equipment and infrastructure is not enough. When hazards are identified, you should seek to remove or control them by replacing or fixing equipment, adding new safety measures or changing workplace operations.
• Implement Training—Train employees about workplace safety and how to identify hazards. Include workplace safety training as part of employee onboarding and offer refresher training on a regular basis. In addition to injury prevention training, you may want to include first-aid training so that your workforce can respond effectively if an accident does occur.
• Review, Respond and Improve—Promoting workplace safety is an ongoing process. You should review and improve your program—especially in response to accidents or “near misses.” Employees should always be encouraged to report newly identified hazards or workplace incidents so that you can respond appropriately.

Workplace safety programs provide additional benefits beyond preventing accidents. These programs have been found to increase employee morale, retention and productivity.

 

Beyond Prevention: Workers Compensation Insurance

Unfortunately, accidents and injuries do happen. Following the steps above can help reduce workplace injuries, but the risk cannot be absolutely eliminated. To help employees—and your business—recover from a workplace injury, your company will need workers compensation insurance. Workers compensation insurance requirements for employers vary from state to state—and knowing the requirements for your state is essential to protecting your business.

What Workers Compensation Covers

A workers compensation insurance claim can be filed if an employee is injured at your workplace or while on the job at another location. A claim can also be filed if a worker is injured in a vehicle accident while on business. Costs are also covered for employees that develop work-related illnesses. Your workers compensation insurance will cover:

• Income Benefits–Replaces a portion of an employee’s salary when work is missed.
• Medical and Rehabilitation Costs—Pays necessary medical care to treat work-related injuries or illness.
• Funeral Expenses—In the case of death, funeral and related expenses such as burial or cremation are covered.
• Death Benefits—Paid to a surviving spouse and dependents.

Each state has different laws governing the amount and duration of lost income benefits, the provision of medical and rehabilitation services and how the system is administered. For example, in most states there are regulations that cover whether the worker or employer can choose the doctor who treats the injuries and how disputes about benefits are resolved.

What Isn’t Covered

While workers compensation covers costs directly tied to an injured employee, it does not cover the hidden costs associated with the loss of an employee, including:

• Business interruption losses.
• Hiring and training of employees.
• Overtime costs.

Workers compensation must be purchased as a stand-alone policy, approved by the state in which you do business. This type of coverage is not included in Commercial Package Policies (CPPs) or Business Owners Policies (BOPs).

Steps to Reduce Your Vulnerability to Theft

MANAGING BUSINESS RISKS

Businesses of all sizes face potential losses due to criminal activity. Depending on the nature, size and location of your business, your company may be vulnerable to various types of crime—from burglary to employee theft to fraud.

In addition to purchasing specialized crime (or “fidelity”) insurance, you will want to consider taking steps that prevent crimes from happening.

 

Preventing Theft by Outsiders

Taking precautions can deter criminals from targeting your business for burglary. Consider installing and maintaining:

• Strong Locks and Doors—External and security doors should have deadbolts and steel frames.
• Suitable Lighting—Bright internal and external lights can deter would-be burglars. It’s especially important to provide strong lighting near doors and windows.
• An Alarm System—This might include sensors at doors, windows and other places of entry, as well as motion detectors. Determine local regulations concerning alarms and options for a system tied to a monitoring service.

If you’re starting a business or relocating, seek out a property that already has theft-prevention features in place. In addition—especially if your business is located in a high-crime area or you keep highly valuable property on your premises—you may want to consider additional protections, such as:

• Barred windows
• Burglar-resistant glass
• Security cameras
• Private security patrols

Burglary and theft are crimes against property, but robbery involves taking property from a person via force or threat. Train employees how to respond to robberies, and minimize losses by limiting how much cash is easily accessible.

 

Preventing Insider Crimes

Insider crimes committed by employees can be highly damaging to a business. As many as 20 percent of business failures may be a result of employee dishonesty, including theft, according to the American Management Association. The Association of Certified Fraud Examiners (ACFE) estimates that businesses annually lose on average 6 percent of their revenues due to employee crime. You can help prevent insider crimes by taking the following steps:

• Increase Opportunities to Uncover Employee Theft—Implement tight accounting controls that include frequent audits and take steps to ensure employees are aware of these practices. In addition, establish a policy that enables employees to report thefts and other crimes committed by co-workers without fear of exposure or reprisal.
• Model and Reward Positive Behavior—Emphasize the values of your business—and practice those values in how you treat customers and employees. Establish performance standards, reward loyalty and acknowledge hard work.

 

Increasing Your Protection with Commercial Crime Insurance

Your commercial property insurance—either as an endorsement or as a component of a package policy—may provide some coverage against robbery and burglary. Crime insurance also covers two important types of property excluded by standard commercial insurance: money and securities—including destruction or disappearance as well as theft. 

Standard commercial property insurance also does not cover a range of business crimes, such as fraud or embezzlement. To extend your coverage against business or “white collar” crimes, you might want to consider purchasing crime insurance. This specialized insurance includes coverage for losses resulting from:

• Employee theft
• Forgery and counterfeiting
• Embezzlement
• Computer fraud
• Wire transfer fraud
• Safe burglary

Source : Insurance Information Institute 

Filing a Business Insurance Claim

BUSINESS INSURANCE BASICS

It’s tough to face a situation that sets back your business. Imagine if:

• An electrical fire damages your offices, equipment or inventory—and temporarily shuts down your business.
• A burglary results in stolen merchandise or specialized equipment.
• A customer is injured on your business property.
• You are denied access to your property due to a hurricane, wildfire, flood or other catastrophe.

Fortunately, if you’re adequately insured, you can recover from these events and keep your business operating. Once you’ve responded to any immediate onsite emergency, follow the steps below to file your claim so you can get your business back on track quickly.

• Contact Your Insurance Professional and Insurer as Soon as Possible—Your insurer or insurance professional will provide assistance with responding to your loss and filing your claim. If damage is extensive, your insurer may send an adjuster to inspect the property.
• Contact the Police if Necessary—If your business loss is due to a crime, you’ll want to contact the police and obtain a copy of the police report.
• Review Your Insurance Policy—Your policy may specify steps that you need to take when an insurable loss occurs.
• Prepare an Inventory—To substantiate your loss, prepare an inventory of damaged or destroyed items and give a copy to your insurance company and/or adjuster along with copies of any receipts.
• Provide Proof of Loss—You’ll be asked to send a signed, sworn proof of loss containing the information requested to investigate the claim. This must be done within 60 days after the initial insurer request.
• Be Ready for the Adjuster—If your insurer sends an adjuster, be prepared to have him or her inspect the property and examine books and records.
• Document Damage to Your Property—Identify damage to your building and other structures and make a list of everything you want to show the adjuster, for example, cracks in the walls or missing roof tiles. You may want to consider taking photos or video of the damage.
• Make Temporary Repairs if Needed—Take reasonable steps to protect your property from further damage—provided the area is safe to access. For instance, if your roof is damaged, placing a tarp over the exposed area will provide a short-term patch to prevent further wind or water losses. If immediate repairs to equipment are necessary, save the damaged parts in case the claims adjuster is interested in examining them. Save receipts for what you spend so you can submit them to your insurance company for reimbursement—and remember that payments for temporary repairs are part of the total settlement.
• Get at Least Two Bids for Repairs—Repairs or replacements should be bid competitively in order to provide options and hold down costs.
• Stay Organized—Keep copies of all the documents you submit to your insurance company, as well as any paperwork your insurance company provides you. And record the names and phone numbers of everyone you are in contact with during the claims filing process.

 

Additional Steps for Business Income and Extra Expense Claims

If your business is forced to close temporarily or relocate, you will want to file a business income and extra expense claim, if you carry this type of coverage. To receive a business income settlement, you must be able to show your business’s net income and continuing normal operating expenses incurred, including payroll, both before and after the event that disrupted your business. Your insurer may also look at your financial records over several years to determine income. In addition to locating and organizing records from before the event, keep detailed records of:

• Ongoing business activity and transactions, if any, while you recover from the event.
• Expenses associated with operating in a temporary location.
• Ongoing expenses that you must pay even if your business is closed, such as utility or advertising costs.

 

Filing Civil Authority Claims

If government action—e.g., closure of an area for inspection following a hurricane—prevents you from accessing your company’s premises and running your business, you can receive insurance reimbursement for expenses and lost business income, provided you have appropriate coverage. Your Business Owners Policy (BOP) or Commercial Package Policy (CPP) may include coverage for this type of business interruption.

Civil authority coverage for business income usually begins 72 hours after government action first prohibits access to your premises; this coverage then lasts for up to four weeks. Coverage for related expenses will start immediately when civil action is taken and generally lasts up to four weeks.

Civil authority coverage is triggered only if all of the following elements are met:

• Government authority prohibits access to the insured property.
• The prohibition is issued as a result of physical loss or damage caused to property within a one-mile radius of the insured property.
• The time element deductible (“waiting period”) is met.

 

Troubleshooting an Inadequate Settlement

If you’re unhappy with the handling of your claim or the amount of the settlement, take the following steps to try to win an adjustment:

• Talk to your insurance professional or claims manager to explain your point of view.
• Contact the claims manager at your insurance company and share your story and why you think you deserve a larger settlement. Provide a written explanation of your problem with copies of supporting documentation.
• Contact your state department of insurance about your problem.