With roads, rails, and air traffic shut down on the East Coast, and water and wind levels rising, most precautions have already been taken by local governments and businesses. But it’s not too late for corporate executives to make last-minute preparations to protect property, supply-chain, and employee safety, experts say.
According to the National Hurricane Center today, Sandy is currently a weak Category 1 hurricane with maximum sustained winds of 75 miles per hour. The current forecast has it making landfall in the United States along the southern to central New Jersey coastline early on Tuesday as a Category 1 extra-tropical cyclone. Hurricane and tropical storm-force winds are extending outward up to 175 miles and 520 miles from the center, respectively, Risk Management Solutions reports.
Property-and-casualty insurer Zurich observes that numerous major American retailers, manufacturers, and distributors rely on goods received along the Eastern seaboard. The American Association of Port Authorities ranked the New York/New Jersey area as the third-largest container traffic port in 2011 (Savannah, Georgia, was fourth).
James Breitkreitz, vice president of Zurich’s risk-engineering services, tells CFO that even at the last minute, there are things risk professionals can do. They need to activate their contingency plans, for one. They can check their emergency tools onsite and check the fuel levels of emergency generators. They can also make sure they have backup fuel for those generators, he says. “Checking generator fuel is worth a shot. The worst of the storm hasn’t hit yet, and you may still be able to get an emergency fuel-oil delivery if you call now,” he adds.
From a loss-control perspective, one thing risk managers need to do before and even during a storm is maintain the integrity of their buildings. One thing maintenance people don’t always think about is making sure roof drains are clear, especially with continually falling leaves, Breitkreitz says.
“If drains are clogged with debris or even partially clogged, when you have a heavy rainfall event, the additional load of water ponding on the roof, because it can’t make it to the drain, can collapse the roof,” he warns. “That’s one of the simple things you can do at the last minute.”
Another thing companies can do is make sure there are no loose materials near the building — which can turn into missiles in a strong wind, says Breitkreitz, noting that while glass can resist wind pressure, it will not withstand the impact of an object.
Joffre Mishall, a manager of property insurance adjusting with Zurich Global Corporate in North America, advises companies to keep their claims call-in phone numbers available. He also observes that people sometimes wait, when they could be collecting valuable claims information. This includes money spent in readying for an event, such as boarding up windows or putting out sandbags in case of a storm surge. “Money spent to protect property prior to an event could be recoverable,” he adds.
Regarding their supply chains, Mishall explains that companies should look at any suppliers located in a critical area and try to line up alternatives.
Zurich notes that personnel safety is the number-one priority. Any employees working at heights under high-wind conditions need extra protection.
Companies need to enforce safety procedures, including electrical safety and good material-handling practices while moving equipment or making preparations for the storm. They also need to monitor work surfaces to prevent slips, trips, and falls among workers, customers, and emergency-services personnel.
Insurance litigator Linda Kornfeld, with the law firm Jenner & Block, notes that as soon as possible, corporate policyholders need to review their policies and take these steps:
• Companies need to understand the limits or restrictions in their business-interruption policies. For example, is damage to property a requirement for receiving earnings coverage?
• Insurers may argue that certain policy exclusions preclude coverage, so policyholders need to ascertain all potential causes of loss and damage and frame their claims in a way that focuses on covered areas rather than excluded ones.
• Insurers may seek to limit their coverage obligations by characterizing a claim as falling within coverage with a lower limit of insurance, such as flood coverage, as opposed to earth-movement insurance, which may have higher coverage. Positioning claims to get the most coverage is key.
• If a business is not located in an area affected by the storm, its suppliers may be. Business could still be affected. In such scenarios, a company needs to prepare clear proof of the difficulties it faced before the supplier returned to business as usual.
As soon as possible, the firm advises policyholders, companies should review their policies, make a list of applicable conditions, and seek to ensure they’re in strict compliance with their insurance policies. If they’re worried about complying with the timing requirements of policies, or feel their companies potentially lack the information needed to make a successful claim, companies should contact their insurers as soon as possible to inform them of the concerns, according to Jenner & Block, and get insurers to modify what may be impractical requirements.