WHAT TO INCLUDE IN A DISASTER CONTINGENCY PLAN

While you may not be able to avoid Mother Nature, having a contingency plan can help a company to mitigate loss. A contingency plan should include steps before a loss occurs, emphasized Mel Bangs, director of risk management for Omni Hotels.

Based on her experiences, Bangs recommended companies create an internal team and appoint leaders who are in charge of responding to the loss. She recommended businesses establish a team of outside experts, including the insurance broker, accountants and outside legal counsel.

A contingency plan also should include maximum probable loss calculations. “Consider internal interdependencies and external contingencies,” Bangs said. “And take steps to reduce the risk or new perils.”

A schedule of property values and business interruption losses can be used to establish premiums, set sublimits and set deductibles, she noted.

Then immediately after a loss occurs, businesses should collect all insurance documents; consider additional insured coverages, placement files and broker files; take appropriate steps to protect and preserve property and to record loss; and take steps to preserve evidence.

There are things you can do to avoid second-guessing and assist in communication when processing the claim, Bangs said. She recommended risk managers:

• Immediately video or photograph the site to document the loss.
• Establish a system to document control and preservation, which anticipates completion of the claim, as well as the potential for later discovery requirements.
• Generate and preserve documents that evidence proof of the repair or replacement of property. Those documents should evidence what was done, when, where, by whom and at what cost.
• Document the decisional basis on which the decisions to repair or replace were made.
• Find and preserve witness memory through affidavits or other means.

During the loss adjustment period, managing the relationships between insurers, adjusters and policyholders is key, Bangs indicated. It’s important to understand early on what the options are. So a company should have a spokesperson to deal with insurers, update information promptly as it develops and respond to insurers’ communications to avoid waiver.

Companies should preserve the confidentiality of internal communications and draft reports, recognizing that documents not privileged may be discoverable, she said.

Last but not least, a contingency plan should consider dispute resolution, Bangs said. “Develop an effective settlement strategy,” she recommended. “If litigation is an option, determine where litigation could and should be brought,” she said.