Business Insurance

Business Interruption and Catastrophe Plan

The phone rings late on a Friday evening. A stress-ridden voice informs you that your facility is on fire. You immediately drive to the building only to find a half dozen firetrucks fighting an enormous blaze! The damage looks crippling and you are left with many thoughts …

Have you ever asked yourself what you would do? Whom would you call? How would you inform your employees? How would communication take place among leadership? What steps are in place to initiate a recovery plan? And, oh … do you have the right insurance program and is it enough?!

This is exactly what happened to executives of Tyson Fresh Meats last month, when a fire destroyed their biggest facility in Holcomb, Kansas. (Read more about the impact of this on Food Dive.) Fortunately, no one was injured and the catastrophe plan in place did its job!  However, their loss was two-fold – encompassing direct losses as well as indirect losses, which are still adding up.

Business interruption can be the result of many different scenarios: fire, utility interruption, computer and cyber-attacks, and product contamination, to name a few. We all hope it never happens and often it’s the last thing on your mind. However, have you and your leadership taken the time to analyze down to the specific details what plans to enact in the event of a catastrophe at your facility?

I am specifically speaking about catastrophe plan. In our experience, one of the best ways to create a plan is by finding answers to questions and walking through a scenario. Below are some things to think about:

  • How will we communicate with the company leadership?
  • How will we communicate with employees?
  • How will we communicate with customers?
  • How will we communicate with suppliers?
  • What do we need in place to get our computers back online?
  • Is there a facility we can outsource our operations to?
  • If we need to obtain a temporary facility, how much will it cost and is it in a good location?
  • If equipment can be salvaged how will we transport it to the new or outsourced facility?
  • How long will it take for all parts of the plan to develop and complete?
  • Who is responsible for all the above tasks?

Business interruption insurance is one of the most important lines of coverage needing analysis as it can save you in times when your facility suffers a loss. There are many instances that require the response of a business interruption policy, including fire, utility failure, water back up, product contamination, main supplier reliance, etc.

It is important to understand the nuances of business interruption coverage and to have an insurance professional analyze your unique situation as exclusions lie in the details. Some can be removed, and some cannot.

Lastly, over 80% of businesses that close permanently after a major loss closed because they did not have adequate business interruption coverage! Don’t let that be your company.

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