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R&R Insurance Blog

Business Interruption Coverage: Will You Sink or Swim?

Posted by Lisa Murawski

closed due to the stormRecent catastrophic events and natural disasters go beyond the initial devastation of a business; they bring new threats and lessons to be learned.

  • Sept 11, 2001, the United States suffered a tragic terrorist attack that led to restrictions of air travel both nationally and internationally; the access of electronic services were impaired for weeks; merchant shipments were stalled; and construction services were abandoned completely. Our Society – our world- changed that day and for insurance purposes, new coverages and exclusions to standard policies were devised.
  • August 2004, a series of 3 hurricanes made landfall on the West Coast of Florida causing $8 billion in damages and creating over 7 million power outages that took 6-8 days to restore.
  • October 2009 Superstorm Sandy hit Atlantic City and 48 hours later, approximately 5 million people in 15 states were without electricity
  • October 2013 the government shutdown caused business interruption losses to industries such as tourism, hotel and restaurant services, and government contractors.

Standard Business Income/Interruption coverage is normally triggered by unintended and direct damage to property (some forms require damage to occur to property owned by the insured). However, as seen in the cases above, some business can be significantly impacted by damage to property actually owned by others. These businesses should consider the need to purchase Contingent Business Income coverage for events that could impact their normal income caused by a direct damage loss to a supplier or key customer.

Other important business income coverages to consider are:
(note that key terms and conditions apply to each)

  • Off Premises Power Failure – losses caused by loss of gas, telephone, water or power service utilities due to direct damage that occurs away from the business premises
  • Civil Authority – losses caused by unexpected actions taken by the government, such as restricted access, curfews, and evacuations
  • Ingress-Egress – losses incurred when employees, suppliers, distributors, &/or customers are prevented from accessing the premises due to a covered cause of loss (fire, explosion, water, etc.)

What lessons can we learn? Standard coverage may not be enough. Business Income/Interruption coverage is a specialized coverage that requires a comprehensive risk analysis. Ask your agent how they can help you build a strategic plan for business continuity in the event of a loss that impacts your income – one that will respond effectively for your business.

Topics: Business Interruption, catastrophic damage, risk analysis, Business Insurance

Health Care Practices Should Have Disaster Plan in Place

Posted by the knowledge brokers

Tornado_Flood_PoweroutageI found a great article about disaster planning for physician practices, and an even better comment at the bottom of the article I felt worth sharing. It's from Bear Rock Electric located in Maryland. They sum up some concerns that practice managers should think about in a nice, concise way. I am also including a link to the whole article from MDNews.com about power outages and it's affect on practice management: Small practices and clinics have to prepare, too. This really applies to all health care facilities - not just small physician practices. Assisted Living, Nursing homes, Urgent Care Centers, CBRF.

Here's the comment from Bear Rock Electric:

Bear Rock Electric services the Maryland community for emergency preparedness and power outages and we thank you for such an insightful article. Medical processionals do face very unique situations during storms and power outages and we couldn't agree more that a plan should be in place. Not only do they have the same problems as anyone else, but they also face the tremendous disruptions caused by hours or even days of long nuisance outages.

We ask them to think about the following questions:
•What if you're in the middle of an office procedure?
•What happens to the day's schedule and the rest of the week?
•What about your refrigerated supplies?
•Where will your patients go? Does the ER have your specialty or dental facilities?

Standby power solves all these problems and if they own their building, it also protects that building from a devastating mold infection that could render it uninhabitable or require expensive remediation. It only takes 72 hours for black mold to get started behind sheet rock.

Topics: Practice Management, Business Interruption, Healthcare, Business Insurance

85% of Companies Experience Supply Chain Disruption

Posted by Scott Brookes

A recent survey indicates that a significant percentage of companies were affected by supply chain disruption over the last 12 months. In the survey sponsored by Zurich Financial Services Group and conducted by the Business Continuity Institute (BCI), 85% of companies say they experienced at least one supply chain disruption.

Adverse weather was cited as the main cause of disruption by 51% of respondents. Weather was also a prominent cause of disruption in a similar survey last year. Some of the other findings from the article are listed below.

  • The earthquakes and tsunami experienced in Japan and New Zealand this year, affected 20 percent of responding organizations, which were headquartered in 18 different countries.
  • Cyber attacks became a top three source of disruption in the financial services sector.
  • Supply chain incidents led to a loss of productivity for almost half of businesses along with increased cost of working— 38% of respondents—and loss of revenue—32% of respondents.
  • Longer term consequences of disruption in the supply chain included shareholder concern, 19% of respondents, damage to reputation—17%—and expected increases in regulatory scrutiny—11%.
  • For 17% of respondents the financial costs of the largest single incident totaled a million or more Euros. This figure almost doubles to 32% where less resilient supply chains are evident in the research.
  • Loss of talent or skills rose from 14th place in 2010 survey to 6th place in 2011. This represents a warning that lay-offs among supply chain partners is leading to increased disruption, the report says.
  • Seventy-four percent of respondents either strongly agreed or somewhat agreed with the proposition that outsourcing and just-in-time/lean strategies were making their organizations more vulnerable to supply chain disruption.

If you have questions on how to evaluate your business income exposure including evaluation of dependent properties, interdependencies between locations, and how to develop an adequate limit, please contact Scott Brookes. I have taught courses in business income including how to evaluate your exposures, develop a limit, and possible risk management solutions to minimize the exposure.

Topics: Cyber Liability, Scott Brookes, Business Interruption, business continuity institute, Business Insurance, disruption in the supply chain, how to evaluate your business income exposure, Supply Chain Disruption, evaluation of dependent properties, how to evaluate your exposures