THE RHA REVIEW
Volume 1, No. 4, Third Quarter 1995

We have all heard the stories on the morning news about the fire that happened overnight and wiped out a business. And we have all seen the devastation that results from a tornado or a hurricane.

The real question for many businesses is, "What do we do now?"

If you have never had the unhappy experience of trying to recover from a disaster, the good news is that with a little planning you can recover — and recover quickly. If all persons know their responsibilities in the face of disaster, the business will be back in operation much faster and in an orderly fashion.

The first question to ask yourself is, "Do we have a disaster recovery plan in place?" If not, start there. There are many things to consider, but the first thing you should do is have a "telephone tree" so that as your employees hear the news, they will know what to do. It is quite possible that the first message would be, "Stay in place and we’ll call you back." That’s fine, because you may not want everyone on the scene. The important fact is that they have instructions.

The second question is, "What can you do to replace the most important aspect of your business?" For many people, this is going to be their computer system. For some, it may be their client list. For others, it may be the storefront they operate from. Your firm should know how to replace that key item and where to find it.

The good news is that you don’t have to write the entire disaster recovery plan yourself. You can hire an expert to help you, and if you have more than 150 to 200 people at any one location, you probably need to do that. Your banker is a good source for whom to hire, as banks are required by law to have a plan in place. Don’t forget to test your plan.

If a natural disaster like an earthquake, hurricane or tornado occurs, you must take into account the damage to your employees’ personal property. Not everyone will be available to work because they may have their own problems to handle.

Once you know how your company and your staff will respond, there will be a myriad of questions that all become equally important. One of them deals with your insurance coverage. Do you have coverage for the loss? Is it adequate? If not, after the loss is not the time to find out. When your policies are delivered, ask your agent to explain how a loss would be covered by your new policies. Ask him or her to detail how the policy has changed from last year. Then look at the policies yourself. Don’t take anyone’s word that, "they’re the same as last year."

Prior to renewal is also a good time to check your values. Have you really looked at the amount of insurance you carry? When was the last time you did an inventory? Are your building values current? Do you have machinery that is difficult to replace? How has your insurance been modified or changed to reflect your unique circumstances?

What about the extra expenses you will incur to get going again? Do you have coverage for the added costs that you don’t normally incur? If you do have coverage, is it limited to a certain dollar amount per month? How did you arrive at the amount of coverage? Your disaster recovery plan can be extremely helpful in determining these expenses.

How much money will you lose because you are not in production? Do you have the right kind of business interruption coverage? Do you know what expenses are covered? Did you buy insurance for your payroll? Do you know how to itemize the expenses so the insurance carrier will reimburse you?

As you can see from this very short list, there are many things to consider and do before the loss occurs. Don’t be lulled into thinking that because your building has a sprinkler system you won’t have a big loss, or that tornadoes and hurricanes don’t strike in your part of the country. Everyone is susceptible and it can happen. We have seen it happen.

Finally, if you have a question or need some help, consult with an independent insurance professional. Trying to find coverage after the loss only complicates the matter.

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