Disasters Raising Questions of Insurance Adequacy



...corrected when discovered. The services of a competent structural engineer or building contractor will often prove invaluable in identifying such defects. Consultation with municipal officials regarding possible building code deficiencies and the measures that would require correction following a loss may also be helpful.

Protecting Records

Another important question is: How well are records protected, given possible exposure to a catastrophic loss of the kind under consideration here?

While insurance is available to cover accounts receivable records and other “valuable papers,” in the interest of business continuity and “hassle avoidance,” it is sound, basic risk management to also have adequate file backup or duplication at a separate location, as well as fire- and burglar- resistant storage receptacles for key records.

A further concern, apart from catastrophe losses, is security for your technology infrastructure. Analysis of these exposures and setting up adequate controls may well call for the service of outside consultants.

Liability Exposures

In a major loss, persons or organizations suffering property damage or bodily injury will possibly look for a negligent or allegedly negligent party to sue to recover damages. Even when the damage is the result of an act by an outsider, such things as failure to maintain adequate security, faulty design of electrical service or lack of standby or backup electrical facilities, failure to respond properly to alleged bomb threats, and the like may give rise to suit for damages against others apart from the perpetrators.

In addition, major losses, especially in high-rise buildings, can result from causes other than terrorists, and give rise to allegations of negligence against the building owner or any tenant.

Such suits can involve substantial amounts, so building owners and occupants of such buildings are well advised to maintain high limits of liability insurance, probably including one or more layers of excess or umbrella liability insurance.

Workers Compensation

In addition to the tragic death or injury of workers involved in a terrorist attack, with the loss of employment skills and the need for replacement and training of new personnel to restore operations to their former level, the impact on future operating and workers compensation costs can be severe.

For smaller employers who have little or no experience modification in their workers compensation coverage, the effect on future workers compensation costs will be minimal.

But for larger employers, workers compensation costs are based in large measure on the employer’s own loss experience. Whether using a basic experience rating plan, some type of retrospective rating program, or a totally or partially self-insured program, the cost of these workers compensation claims can be reflected in higher workers...