Developing a Small Business Disaster Recovery Plan

Developing a Small Business Disaster Recovery Plan
Of all businesses that close down following a disaster, more than 25 percent never open their doors again. While there’s no way to lower the risk of a natural disaster like a hurricane, there are critical measures that can be taken to protect your company’s bottom line from nature’s fury. A disaster plan and adequate insurance are keys to recovery.

Develop a Disaster Recovery Plan
No matter how small or large a business, a business impact analysis should be developed to identify what an operation must do to protect itself in the face of a natural disaster. Large corporations often hire risk managers to handle this task and some companies hire consultants with expertise in disaster planning and recovery to assist them with their plans. But small businesses can do the analysis and planning on their own.

Steps for Developing a Business Recovery Plan

■Set up an emergency response plan and train employees how to carry it out. Make sure employees know whom to notify about the disaster and what measures to take to preserve life and limit property losses.
■Write out each step of the plan and assign responsibilities to employees in clear and simple language. Practice the procedures set out in the emergency response plan with regular, scheduled drills.
■Compile a list of important phone numbers and addresses. Make sure you can get in touch with key people after the disaster. The list should include local and state emergency management agencies, major clients, contractors, suppliers, realtors, financial institutions, insurance agents and insurance company claim representatives.
■Decide on a communications strategy to prevent loss of customers. Post notices outside your premises; contact clients by phone, email or regular mail; place a notice in local newspapers.
■Consider the things you may need initially during the emergency. Do you need a back-up source of power? Do you have a back-up communications system?
■Human Resources. Protect employees and customers from injury on the premises. Consider the possible impact a disaster will have on your employees’ ability to return to work and how customers can return to your shop or receive goods or services.
■Physical Resources. Inspect your business’ plant(s) and assess the impact a disaster would have on facilities. Make sure your plans conform to local building code requirements.
■Business Community. Even if your business escapes a disaster, there is still a risk that it could suffer significant losses due to the inability of suppliers to deliver goods or services or a reduction in customers. Businesses should communicate with their suppliers and markets (especially if they are selling to a business as a supplier) about their disaster preparedness and recovery plans, so that everyone is prepared.
■Protect Your Building. If you own the structure that houses your business, integrate disaster protection for the building as well as the contents into your plan. Consider the financial impact if your business shuts down as a result of a disaster. What would be the impact for a day, a week or an entire revenue period?
■Keep Duplicate Records. Back-up computerized data files regularly and store them off-premises. Keep copies of important records and documents in a safe deposit box and make sure they’re up-to-date.
■Identify critical business activities and the resources needed to support them. If you cannot afford to shut down your operations, even temporarily, determine what you require to run the business at another location.
■Find alternative facilities, equipment and supplies, and locate qualified contractors. Consider a reciprocity agreement with another business. Try to get an advance commitment from at least one contractor to respond to your needs.
■Protect computer systems and data. Data storage firms offer offsite backups of computer data that can be updated regularly via high-speed modem or through the Internet.


Review Your Insurance Plan
Make sure you have sufficient coverage to pay for the indirect costs of the disaster—the disruption to your business—as well as the cost of repair or rebuilding. Most policies do not cover flood or earthquake damage and you may need to buy separate insurance for these perils. Be sure you understand your policy deductibles and limits.

New additions or improvements should also be reflected in your policy. This includes construction improvement to a property and the addition of new equipment.

For a business, the costs of a disaster can extend beyond the physical damage to the premises, equipment, furniture and other business property. There’s the potential loss of income while the premises are unusable. Your disaster recovery should include a detailed review of your insurance policies to ensure there are no gaps in coverage. Your policy should include business interruption insurance and extra expense insurance. Even if your basic policy covers expenses and loss of net business income, it may not cover income interruptions due to damage that occurs away from your premises, such as to your key customer or supplier or to your utility company. You can generally buy this additional coverage and add it to your existing policy.


Basic Commercial Insurance to Consider


■Building Coverage provides coverage up to the insured value of the building if it is destroyed or damaged by wind/hail, or another covered cause of loss. This policy does not cover damage caused by a flood or storm surge nor does it cover losses due to earth movement, such as a landslide or earthquake, unless added by endorsement.
■Business Personal Property provides coverage for contents and business inventory damaged or destroyed by wind/hail, or another covered cause of loss.
■Tenants Improvements and Betterments provides coverage for fixtures, alterations, installations, or additions made as part of the building that the insured occupies but does not own, which are acquired and made at the insured's expense.
■Additional Property Coverage provides for items such as fences, pools or awnings at the insured location. Coverage limits vary by type of additional property.
■Business Income provides coverage for lost revenue and normal operating expenses if the place of business becomes uninhabitable after a loss during the time repairs are being made.
■Extra Expense provides coverage for the extra expenses incurred, such as temporary relocation or leasing of business equipment, to avoid or minimize the suspension of operations during the time that repairs are being completed to the normal place of business.
■Ordinance or Law provides coverage to rebuild or repair the building in compliance with the most recent local building codes.

The cost of high productivity

The cost of high productivity

A publication called Manufacturing.net reports that Japanese workers filing work comp claims due to mental illness caused by being overworked spiked 22% last year.

New standards for certifying mental illness due to work-related issues may also be a factor, according to the story available here.

But according to the San Francisco-based Integrated Benefits Institute, research from Japan has shown that “there is a significant health and productivity difference between ‘workaholism’ and (healthy) employee engagement.”

That is important to keep in mind. As the IBI said, “in tough economic times, many employers may expect workers to put in a 60-hour work week month after month without significant business repercussions.”

But poorer employee health and reduced job performance are a potential outcome. Are increased comp claims also a potential?

The San Diego- based Disability Management Employer Coalition last year published a paper titled “Extreme Productivity: Are Your Employees Hitting the Wall?”

Several large employers, disability insurers, and mental health experts contributed to the DMEC paper. It discusses ways employers can help their employees rather than allow them to burn out due to long work weeks and high productivity demands.

Subrogation and what it is...

Suppose you’re in a car accident and it is clearly not your fault. Your car is wrecked and your neck and back have been injured. You are covered for both the damage to your car and your personal injuries, and so you call your insurance company and they pay all of your expenses relating to the accident. Later, your insurance company, realizing that the other party at fault also has insurance that will cover the damages, seeks out reimbursement from that insurance company since its insured was actually at fault for the accident. This is called subrogation.

Subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an accident after the insurer has paid out money on behalf of its insured. The general rule is that, after paying your claim, your insurer is “subrogated” to the rights of your policy and can “step into your shoes” to go after or sue the negligent party on your behalf. Not all insurers subrogate for medical bills. If they do, it could be against the other driver’s insurance, but it could also be against your own separate health insurance policy or any other medical insurance that would cover your treatment.

Subrogation may also be employed when your insurer settles your collision claim for damage to your vehicle due to another driver’s negligence. Generally, your insurer will have you sign a subrogation release that assigns your right of recovery against the person responsible for your loss to them. Insurers may not stall settling your claim until they get paid from the person at fault. Subrogation usually occurs some time after the original claim is settled. Some insurers will include the deductible when they subrogate and you will get your deductible back when the other driver or their insurance company pays the subrogation claim.

What if the accident was your fault?

If the accident was your fault, you are responsible for the damages caused. If the accident was only partly your fault, you may be only responsible for a portion of the damages depending on the laws of your state. The other driver’s insurance company will likely subrogate against you or your insurance company to pay for the damage to their insured’s car and/or their medical bills. Keep in mind that often you can negotiate the amount of damages that is being claimed and pay out the amount over time. If you don’t have insurance and a claim is being subrogated against you, it is a good idea to contact a car accident lawyer to make sure you are not getting taken.

Be patient, but keep on top of your claim.

It is best to cooperate with your insurer, within reason of course, when a subrogation claim has been made. In most cases, the two insurance companies are going back and forth to verify what happened and what amounts have been paid out. Unfortunately, this takes time – sometimes too much time. Be patient, but keep in close contact with your claims person so your claim doesn’t get pushed to the bottom of the pile!

Insurance is a funny thing..

funny motor insurance claims
"I was driving along the motorway when the police pulled me over onto the hard shoulder. Unfortunately I was in the middle lane and there was another car in the way.." (Thanks M Robson)

"Going to work at 7am this morning I drove out of my drive straight into a bus. The bus was 5 minutes early.." (Thanks N Bradley)

"I was driving along when I saw two kangaroos copulating in the middle of the road causing me to ejaculate through the sun roof." (from an Australian claim form - Thanks N Shepherd)

"The accident happened because I had one eye on the lorry in front, one eye on the pedestrian and the other on the car behind." (Thanks Sharon Burrows)

"I started to slow down but the traffic was more stationary than I thought."

"I pulled into a lay-by with smoke coming from under the hood. I realised the car was on fire so took my dog and smothered it with a blanket."

Q: Could either driver have done anything to avoid the accident? A: Travelled by bus?

The claimant had collided with a cow. The questions and answers on the claim form were - Q: What warning was given by you? A: Horn. Q: What warning was given by the other party? A: Moo.

"I started to turn and it was at this point I noticed a camel and an elephant tethered at the verge. This distraction caused me to lose concentration and hit a bollard."

"On approach to the traffic lights the car in front suddenly broke."

"I was going at about 70 or 80 mph when my girlfriend on the pillion reached over and grabbed my testicles so I lost control."

"I didn't think the speed limit applied after midnight"

"I knew the dog was possessive about the car but I would not have asked her to drive it if I had thought there was any risk."

Q: Do you engage in motorcycling, hunting or any other pastimes of a hazardous nature? A: "I Watch the Lottery Show and listen to Terry Wogan."

"First car stopped suddenly, second car hit first car and a haggis ran into the rear of second car."

"Windscreen broken. Cause unknown. Probably Voodoo."

"The car in front hit the pedestrian but he got up so I hit him again"

"I pulled away from the side of the road, glanced at my mother-in-law and headed over the embankment."

"The other car collided with mine without giving warning of its intention."

"I collided with a stationary truck coming the other way"

"A truck backed through my windshield into my wife's face"

"A pedestrian hit me and went under my car"

"In an attempt to kill a fly, I drove into a telephone pole."

"I had been shopping for plants all day and was on my way home. As I reached an intersection a hedge sprang up obscuring my vision and I did not see the other car."

"I was on my way to the doctor with rear end trouble when my universal joint gave way causing me to have an accident."

"An invisible car came out of nowhere, struck my car and vanished."

"I was thrown from the car as it left the road. I was later found in a ditch by some stray cows."

"Coming home I drove into the wrong house and collided with a tree I don't have."

"I thought my window was down, but I found it was up when I put my head through it."

"The guy was all over the road. I had to swerve a number of times before I hit him."

"I had been driving for forty years when I fell asleep at the wheel and had an accident."

"As I approached an intersection a sign suddenly appeared in a place where no stop sign had ever appeared before."

"To avoid hitting the bumper of the car in front I struck a pedestrian."

"My car was legally parked as it backed into another vehicle."

"I told the police that I was not injured, but on removing my hat found that I had a fractured skull."

"I was sure the old fellow would never make it to the other side of the road when I struck him."

"The pedestrian had no idea which way to run as I ran over him."

"I saw a slow moving, sad faced old gentleman as he bounced off the roof of my car."

"The indirect cause of the accident was a little guy in a small car with a big mouth."

"The telephone pole was approaching. I was attempting to swerve out of the way when I struck the front end."

"The gentleman behind me struck me on the backside. He then went to rest in a bush with just his rear end showing. "

"I had been learning to drive with power steering. I turned the wheel to what I thought was enough and found myself in a different direction going the opposite way."

"I was backing my car out of the driveway in the usual manner, when it was struck by the other car in the same place it had been struck several times before."

"When I saw I could not avoid a collision I stepped on the gas and crashed into the other car."

"The accident happened when the right front door of a car came round the corner without giving a signal."

"No one was to blame for the accident but it would never have happened if the other driver had been alert."

"I was unable to stop in time and my car crashed into the other vehicle. The driver and passengers then left immediately for a vacation with injuries."

"The pedestrian ran for the pavement, but I got him."

"I saw her look at me twice. She appeared to be making slow progress when we met on impact."

"The accident occurred when I was attempting to bring my car out of a skid by steering it into the other vehicle."

"My car got hit by a submarine." (The Navy informed the wife of a submariner that the craft was due in port. She drove to the base to meet her husband and parked at the end of the slip where the sub was to berth. An inexperienced ensign was conning the sub and it rammed the end of the slip, breaking a section away, causing her car to fall into the water. The Navy paid the compensation claim.) (Thanks Jay Kuivinen)

The English comedian Jasper Carrott has used funny insurance claims in his stand-up act for a long time, including some featured above. Here are three others, kindly suggested by Andrew Moignard.

"I bumped into a lamp-post which was obscured by human beings."

"The accident was caused by me waving to the man I hit last week."

"I knocked over a man; he admitted it was his fault for he had been knocked down before."

"A house hit my car." (A house was being moved by a large truck. My friend had his car parked on the side of the road correctly. The house began to tilt off the truck and eventually fell off the truck, landing on my friend's car. He eventually had the insurance paid, after lengthy explanation and the moving company confirming the story.) (Thanks Ben Keirnan)


funny insurance claims outside of the motor industry
(From A Reineri) - Extract from office worker's compensation claim form:
Agent of the injury: Drawer
How did accident occur: Drawer fell out and landed on my foot
Where was claimant injured: Foot

(From M Radbill) - Years ago, my husband was driving the kids to preschool in our rural neighborhood. Out of nowhere a ten point buck [a very big deer] leapt out of the side bushes and smashed into the car. Luckily the only injuries were to the car. When the insurance company was called to file the claim, they wanted to know if the buck's feet were ON the ground or OFF the ground when it hit the car. "Why?" I asked. They said this would determine whether the claim was covered or not. I asked which one was covered. You can guess the rest, but I still wonder who is looking at feet when you are being charged by a huge animal! (Incidentally, feet ON the ground was covered. Their logic was seemingly that the car was hit by something, rather than vice-versa, if that makes sense. And for those who don't know, a 'ten point buck' refers to a big male deer with ten points, or tines, on its antlers.)

(From A Whittingham) - I was reminded of one I read when working for a plumbing firm many years ago. A lady had claimed for a leaking toilet and had sent in the form like this: "The leaking toilet is reached through my back passage, but please tell the plumbers when they arrive that they must knock on the front door as my back passage is blocked with the things out of the toilet.."

(From P Clough) - I once made a claim due to a broken washing machine. I put a load of washing on before going away for the weekend. On my return I found it to be stuck in a boiling cycle and my whole kitchen was nigh on destroyed by the steam. When I made a claim through my broker to the insurance company it was denied as I was not insured for steam damage! My broker quickly pointed out that water is H2O and the same chemical compound at steam! They were not having it. The judge, in the small claims court, did not even allow the insurance company's counsel to speak. He took two minutes to read out the case, laughed and said "Water is H2O as is steam - case for the plaintif." The claim was swiftly settled by an embarrassed insurance company.

(From Angela K) - When I worked in personnel at an airline I handled claims for processing. I received the following explanation from the catering department: "Burned elbow while putting tongue into pot". Apparently the fellow was in the process of cooking tongue, which is then sliced for sandwiches. This was approximately 1960 when airlines had cooking facilities in the hangars.

Downside to Management Incentives

Connecting business unit manager bonuses to safety performance can reduce injuries and eliminate comp costs, but a grocery chain's settlement with prosecutors shows how attempts to reduce claims can go too far.


Several risk managers speaking at the Risk and Insurance Management Society Inc.'s annual conference last week discussed implementing a safety culture and reducing comp costs.


They spoke about tying manager bonuses to comp losses as one among several efforts they employ to maintain a safety culture. A couple of the risk managers briefly mentioned that the bonus practices can have drawbacks, but they didn't elaborate.


But here is one potential problem.


This week several California district attorneys announced a settlement involving Raley's grocery stores. The grocer will pay $550,000 to settle charges for alleged illegal claims handling.


According to a press release available here, store managers tried to dissuade injured employees from filing comp claims.


The prosecutors didn't say whether manager bonuses were at stake.


But the investigation “revealed a fairly widespread practice by Raley's managers of attempting to dissuade injured employees from filing claims, suggesting that injured employees use their own health insurance for work related injuries, instead of reporting accidents/injuries to the agencies required under the Workers Compensation law,” the press release states.


The charges serve as an example that manager training should accompany bonus programs and other efforts that depend on supervisors to help reduce losses.


While manager participation is often crucial, there are limits.


Part of Raley's settlement agreement requires the company to train its managers.