Insurance and Disaster Planning

Insurance and Disaster Planning
By Donald Carmichael and Steve Gartell

Post By: Insurance Top Stories

A disaster recovery plan not only assists in ensuring that the company minimizes its losses through being unable to trade, but also highlights the level and scope of various insurances required to weather the storm. Donald Carmichael and Steve Gartell write.

The facilities manager is responsible for the maintenance of a building and its services, the provision of a safe working environment for its occupiers and the smooth running of the premises for the business it supports. He/she will also maintain vacant parts to maximize potential for new tenants.

Dependent on the nature of the building involved, he/she may be responsible for some or all of the following:

1. Fabric of the building;
2. Maintenance of utilities, services and fire fighting systems;
3. Dilapidations;
4. Provision, maintenance and replacement of contents;
5. Security of the building and contents;
6. Health and safety – meeting legislative requirements and regulations such as Electricity at Work, Noise, COSHH, Pollution and Legionella;
7. Maintenance and security of computer systems and data;
8. Implementation of tenant’s improvement or refurbishment programmes;
9. Operation of car parks and collection of money:
10. Provision and/or maintenance of catering facilities;
11. Maintenance of duplicate computer and accounts records at a remote location.

All within a set annual budget
Each of these areas involve risk, either for physical injury to occupiers or visitors, or loss of or damage to property. There is also the risk of injury to third parties or damage to their property through, for example, the escape of legionella from a contaminated water-cooling system or a spreading fire.

To ensure the stability of the business, each area of risk should be assessed in financial terms, and those which are to be insured should have correct values at risk and limits of indemnity allocated, including allowances for inflation, professional fees and VAT as appropriate.


Buildings and Rent
The buildings sum insured should be based on reinstatement costs, not its current market value or original building cost. Rent should be insured for a sum sufficient to allow for future increases and for the maximum period the building could remain unoccupiable in the event of a major loss.

Are You Ready?

Damage to neighbouring property may result in access to the premises being denied; if that risk is evident insurance should be taken to cater for this eventuality.


Public Liability
The public liability Limit of Indemnity should be selected following an assessment of the potential for damage and injury. Some premises will have greater potential for injury, accumulation risks or for damage to third-party property according to their occupation and location.

In view of the level of recent court awards and the effect of inflation during the often lengthy litigation period, a limit of £2m should be regarded as an absolute minimum. City-centre office blocks and shopping precincts will need far higher limits, perhaps £50m or more, to provide adequate protection.


How Can Risk Be Reduced?
Many of the risks inherent in any building may be minimized or removed by good management.

Responsibilities under the Health & Safety at Work Act are wide-reaching and it is not always easy to identify the specific actions required. Other legislation will require more definitive actions to be undertaken relative to the use of air conditioning systems, electrical appliances and installations, lifts, pressure systems and the control of substances hazardous to health.

The facilities manager will usually be the individual with overall accountability for the wellbeing of staff. His/her duties may include:

1. Establishment of training programmes for officials and all occupants for action in the event of fire or terrorist attack.
2. Establishment of a definitive, cohesive and practised plan and a secure area for use in the event of terrorist alert.
3. Installation, maintenance and regular testing of fire and burglar alarm systems.
4. Provision and staffing of first aid facilities.
5. Maintenance of a log recording accidents or incidents at the premises.
6. General housekeeping – tidiness of common parts and ensuring the occupiers adhere to instructions on waste disposal.
7. Establishment of environment pollution controls.
8. Overseeing of catering establishments to ensure overall cleanliness and use of best practices.
9. Provision and maintenance of records regarding statutory inspections of plant machinery and water systems.
10. Control and removal of unauthorized electrical appliances.
11. Sprinkler installation and testing.
12. Liaison with emergency services.
13. Establishment and policing of No Smoking areas.

Insurance of Risk
The remaining risks once quantified, may be either carried by the facilities function or the property owner if acceptably small, or transferred to an insurer in part or in total.

Choice of insurer should not be made on the basis of cost alone. Reputation and security are essential factors. It is wise to make reference to credit-rating bodies such as Dun & Bradstreet or Standard & Poors, and to obtain a copy of the insurer’s annual accounts. Advice may also be sought from your insurance adviser.

Most major insurers offer a range of additional services to assist in the maintenance of safety and security, usually free of charge to their policyholders. Risk surveys will be undertaken to pinpoint hazardous factors, and expert advice provided on loss control, risk management and assessment, compliance with Health & Safety at Work legislation and environmental issues.


Terrorism Insurance
While it is impossible to defend our capital and other cities from the threat of damage by terrorists, the facilities manager can take steps to minimize the risks of harm to life and property and the disruption to business which inevitably follows.

The IRA menace is the most obvious threat to life and property but it must not be forgotten that other activist organizations have been involved, and will continue to be, in terrorist activity in the United Kingdom.

The individual design and construction of a building is all important when it comes to its inherent resistance to bomb damage.

Damage to buildings caused by the St Mary Axe bombing on 10 April 1992 showed that the effects of a blast are dependent on a great variety of factors. In some cases the blast burst through buildings. In others, the design and substance of the building forced the blast upwards, damaging roofs, sideways and even backwards. There was one example of serious damage being caused by the blast being channelled through central heating ducts into a room otherwise completely remote.

Structural continuity provides greater strength, and the maximization of venting allows pressure to dissipate. The use of ductile materials such as steel provides maximum safety margins, and framed structures prevent collapse of roofs.

Most corporate and public buildings were designed and constructed without consideration of the threat of terrorism and therefore offer little protection. Laminated glass will provide some protection against a small device, but in the event of a major blast it is likely that the window and its frame will become detached from the building.

Injury from flying glass may be minimized by the fitting of anti-shatter film (ASF), a clear polyester coating, to the inside of the windows. Bomb blast curtains, metal spiral curtains, blast resistant secondary glazing and steel roller shutters may also be considered by the facilities manager. Specialist advice should always be sought in order that the most effective and economic method is selected.

The assessment of vulnerability of a building to terrorist attack is dependent to some extent on its location and socio-political factors. However, experience has shown that the placement of a terrorist bomb is often indiscriminate and underlines the need for each of us to remain vigilant at all times.

Specialist information on the effect of bomb damage to building and steps which can be taken to minimize damage is available from most firms of chartered surveyors and civil engineers.


Risk Management
Risk management can be defined as the discipline of awareness of potential risks, the assessment and quantification of them, and the action taken to reduce or remove them where possible.

The effective management and control of risk will provide long-term insurance cost reduction, minimize disruption in the event of a loss and enable your business to operate more effectively.

It is important to remember that despite all actions taken to minimize the risk of loss, incidents can and will still occur, resulting in injury and/or damage to property and disruption to business.

Assessment of loss potential, control of identified hazards and the maintenance of adequate insurance protection are all areas where the facilities manager has a prime responsibility. Risk management should therefore be an integral part of the facilities manager’s function.

Advice on risk management is readily available from your professional insurance adviser or insurers. Other sources of information are buildings project managers, chartered or quantity surveyors, architects, police and fire services, local authorities, the Health & Safety Executive and the Association of Insurance and Risk Managers in Industry and Commerce (AIRMIC) (071 480 7610).



Future Planning
The effects of damage and disruption to business can be greatly reduced by adequate planning and preparation. A fully-trained emergency team working to a clear and detailed contingency plan will ensure that the steps necessary to minimize a loss can be rapidly implemented. The plan should be tested regularly and updated as appropriate.

All occupants to the building must be kept aware of the emergency team, the plan and the action to be taken. Consideration might be given to the setting up of an emergency staff and occupier’s information line.

The plan should contain details of relevant external support necessary to reduce the effects of the event. These will include telephone numbers of emergency services and the loss adjuster’s emergency line (as agreed with your insurers). The loss adjuster is appointed by the insurer to act impartially on the behalf of both parties to quantify the claim.

The plan should also contain the names and telephone numbers of the professionals who will assist in the reinstatement of the premises and the provision of alternative accommodation to maintain the business, computer systems and communications.

These professionals will include lawyers, accountants, management surveyors, quanitity surveyors, project managers, estate agents, construction companies, computer systems consultants and marketing consultants (it is always a good idea to tell people you are still in business!).



To cite this document:
Donald Carmichael, Steve Gartell, (1994) "Insurance and Disaster Planning", Facilities, Vol. 12 Issue: 1, pp.9-11, doi: 10.1108/02632779410049970

Donald Carmichael is Insurance Manager at Jones Lang Wootton, Chartered Surveyors at 22 Hanover Square, London, W1A 2BN. Tel: 071 306 1757. Steve Gartell is Sales Manager at Sun Alliance International, 77 Shaftesbury Avenue, London W1V 7AD. Tel: 071 957 4906.