Disaster Planning and Managing Large Losses – The Ten Commandments of Success

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Disaster Planning and Managing Large Losses – The Ten

Commandments of Success


• Michael Horvath, Senior Vice President, Risk Management [email protected] 317-263-7164

• Steven Sachs, EVP, Director of Real Estate and Hotel Practice, Willis [email protected]

410-584-8935

• John R. Cadarette, Jr., Managing Director, The Claro Group, LLC [email protected] 310-581-6278

• D.J. Corrigan, VP and Senior Executive General Adjuster, Cunningham Lindsey [email protected] 312-454-9200 X3911


Session Objectives

• Practical Hands On Information For You to Utilize in Developing Catastrophe Planning

• Catastrophe Planning Follows Basic Risk Management Process

• How To Involve Your Insurer As Part Of Good Risk Management And Successful Win/Win Loss Negotiations


What to Take Away

• Understand the wide-ranging impact of a successful disaster response program

• Recognize the critical elements of a disaster recovery plan

• Know when and how to negotiate and manage resources for large loss claims


PreparationPreparation of Emergency / Catastrophe Plan

Risk Manager is Facilitator Put Together a Team - Use All Resources

– Operations (field)– Disaster Tested Manager– Insurer / Broker / Consultant

Model Approach


PreparationPreparation of Emergency / Catastrophe Plan

Local Customization Quality Control Procedures

– Approval – Audit

Use of Technology Operating Units Versus Corporate Headquarters


Risk Management ProcessIdentify Types of Catastrophic Situations That Could Affect Your

Operations• Casualties (Fire, Natural Disaster)

Use your own engineering reports / loss history

EQ / Flood / Windstorm analysis by insurer / broker / consultant

Cyber Attacks


Risk Management Process

• Terrorism / Extortion

• Third Party Criminal Acts

• Interdependencies (or where in the food chain are you?)

– Have you named all of your key suppliers and/or recipients?

– ID secondary suppliers and/or recipients


Risk Management ProcessAttempt to Measure Impact to Company's Assets and/or Earnings

Liability (Life Safety)

Business Impact (maintain/improve market share)

Goodwill / Image

Lowered Productivity

– (e.g., Employee Downtime)

Value of Key Employees


Critical Success Factors

• Quick Response Team

• Resources

• Headquarters Operations

• Share Plan With Your Underwriterso Align coverage’s and expectations

• Manage Corporate expectations


PreparationKey Items To Be Included In Plan

• Specialty Emergency Contractors

• Communications • Utilities • Security • Transportation • Engineering Services • Hot site for IT

• General Contractors• Roofers • Plumber / HVAC • Sprinkler Contractors • Glass / Glazers • Cyber Resources• Trauma Counseling


Pre-event HoursEstablish Home Office Responsibilities

Establish Primary and Alternate Field Headquarters

• Food

• Clothing

• Staff

• Phone Book

• Cash

• Security (Police/National Guard) Headquarters


Pre-Event Hours

• Conduct Pre-Event Conference Calls When Possible (Hurricane and Flood)

• Establish Pre-Event Checklist to Include:

- Food - Materials/Supplies

- Clothing - Contractors Committed

- Accounting Cost Codes


Summary• Facilitate

– Bring Resources Together

• Develop Model Plan

• Establish Quality Control Procedures

• Responsibility / Authority– Use Technology if Possible

• Distribute

• Audit


Post-Event Actions

• Implement Emergency / Catastrophe Plan

• Quick Response Team

• Establish Objectives

• Media / Public Relations

• Psychological Support Services for Employees

• Coordination with Insurers


The Ten Commandments of Disaster Planning1. Preparation, Preparation, Preparation leads to “360 degree credibility”2. Follow the Risk Management Process3. Make sure that you have coverage and no surprises (Policy Workshops)4. The Risk Manager should be a facilitator and identify the best resources inside and outside of

the company5. There must be Quality Control which includes:

o Practiceo Required Updateso Audits

6. Where you are exposed to Natural Catastrophes, pre-commitment of key contractors and resources is critical.

7. Establish a Quick Response Team is critical8. Establish Home Office responsibilities9. Conduct Pre-event Conference Calls when possible (commencing 7 days out on named

storms)10. Share the plan with your underwriters


Managing Large Losses

The Story



• The Challenge

• Negotiating Large Losses

– Technical Expertise

– Negotiation Skills

– Really Understand the Provisions of Your Policy



I. Determine Management Objectives

A. Meet with Management

1. Identify Issues Specific to Location

II. Designate single person in charge of claim

A. Brokers will be critical to providing initial notice and updating carriers on a regular basis

B. Calendar deadline for filing Proof of Loss



III. Meet with Company Disaster Recovery Team

A. Confirm Objectives

B. Agree on Roles

C. Develop Detailed Scope of Loss on First Day CRITICAL – Establish internal cost code to track all time and expenses

D. Team Should Meet Once or Twice a Day and Revise Scope at End of Each Day


Managing Large LossesIV. Timely and Strategic Communication

A. Internal – key to have main point of contact to maintain control (may want to have under the direction of in-house counsel to establish privilege)

B. External – should coordinate with corporate communications department or specified personCaution: every analysis, email, memo or press

release eventually may be viewed in litigation context . Do not speculate in writing and think, “would I enjoy being cross examined over this?”


Managing Large LossesV. Involvement of Insurer - The Objective is to Make Insurer

a Member of Your Team

A. Communicate Story of the Loss

B. Create Win - Win Relationship

C. Identify Your Business Objectiveand Strategic Issues – Realistic Claims Philosophy

1. Establish early on that you are carefully and fully preparing a fair, credible claim for all losses to which you are entitled under relevant policies



2. Do not include obviously non-covered claims as it will impair your credibility

D. Establish a Core Team as soon as possible 1. Risk Management, Legal, Business Unit Reps,

Development, Construction, Operations 2. Outside Consultants: claims preparation

experts, brokers, attorneys, technical experts E. Use Insurer as Resource

1. Equipment, specialty contractors, materials, etc.


Managing Large LossesF. Involve Insurer in Business Versus Insurance

Meetings

G. Discuss Advances and Payment Requests

H. DOCUMENT ALL MEETINGS!

– Written minutes at all meetings with emphasis on who, what, and when

– Have specific action items and review at next meeting



VI. Business Interruption Loss

A. Promptly Set up Meeting with Insurer, its Consultants and Your Management and

Accounting Personnel

B. Define How Income/Revenue is Earned and Is Impacted at The Facility

C. Agree on Information and Method of Documenting Loss



VI. Business Interruption Loss (cont.)

D. Establish Time Frame

E. Attempt to Identify Issues Prior to Final Negotiations

F. DOCUMENT ALL MEETINGS!


Managing Large LossesVII. Meet With Underwriters

– Review Loss/Lessons form Loss in detailed, principled manner to ID possible policy changes



Conclusion:

A Time To Shine In The Midst Of Darkness


Ten Commandments of Managing Large Losses

1. Provide notice to all relevant carriers2. Determine management objectives and identify issues specific to the

location3. Communicate with Disaster Recovery Team to:

a. Confirm objectivesb. Agree upon roles

4. Develop detailed scope of loss by the end of the first day and update daily at scheduled team meetings5. Utilize a Win-Win strategy6. Include insurance adjuster in business meetings versus insurance

meetings


Ten Commandments of Managing Large Losses

7. Discuss Advances and Payment requests early in the process 8. Document all meetings a. Who attended b. Actions agreed upon and to be accomplished by whom9. Require Insurer’s consultant be identified and on site as soon as

possible10. Business Interruption Loss – have an immediate meeting with Insurer’s

“Accounting Firm” and your financial personnel and management to educate them as to how you earn your revenue in the context of the policy and agree upon information required to document the loss (document the meeting)


Contact Information

• Michael Horvath, Senior Vice President, Risk Management [email protected] 317-263-7164

• Steven Sachs, EVP, Director of Real Estate and Hotel Practice, Willis [email protected]

410-584-8935

• John R. Cadarette, Jr., Managing Director, The Claro Group, LLC [email protected] 310-581-6278

• D.J. Corrigan, VP and Senior Executive General Adjuster, Cunningham Lindsey [email protected] 312-454-9200 X3911

Disaster Planning and Managing Large Losses – The Ten Commandments of Success

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