risk report with Henriott Group, Inc.
MAY 2012
Workplace and Risk Management topics aimed at business owners, managers and other organizational leaders.
“Progress always involves risks. You can’t steal second base and keep your foot on first.”
~ Fredrick B. Wilcox
Hello? McFly? Is Anyone Reading This?
Business Interruption Continued
Henriott News & Updates
Another opportunity to win a free cup-a-joe!!!!
Key Coverage Factors Designing Your Coverage Excellent Instructional Video from Chubb
What’s your trigger point?? New! “C’Mon Man!” post
Last month we talked about what this coverage is all about and some of the key assumptions and decisions that drive the amount of coverage your organization needs. In short, the coverage is there to replace lost income and cover continuing expenses in the event your (or a key customer/supplier in the case of Contingent Business Interruption) organization suffers a covered Property Loss. Extra Expense coverage is also typically included to cover costs you incur (such as overtime, additional rent, etc.) over and above normal expenses in order to minimize the impact of the loss on your business.
Business Income: KEY COVERAGE FACTORS Some of the key factors to consider when determining the amount of coverage needed include whether you will continue to pay ordinary payroll during the period of restoration, how long it will take you to rebuild and then how long will it take to return to normal operations. How about a simple example (with a slight twist) to test your knowledge thus far:
How much would Business Interruption pay?
Company A has Gross Revenues of $3.1 million. Non-Continuing expenses = $700k Continuing expenses = $2.8 million Operating Loss = $400k
(First right answer gets the Starbuck’s card!) Hint: The purpose of Business Interruption Insurance is to place you in the same position following a loss as you would have been had no loss occurred!
Volumes could be written about the various terms and conditions of the Business Interruption policy and the devil is clearly in the details, but here are some other important factors to be aware of as you’re reviewing or designing your Business Interruption coverage: 1. Deductibles and/or waiting periods typically apply to Business Interruption policies and it’s rarely as simple as a fixed dollar amount! It’s not uncommon to see a 72 hour waiting period before coverage applies and the determination of the deductible can vary widely depending on how the policy is written. It’s usually a good idea to perform an estimate of the deductible under various scenarios prior to a loss to avoid an unwelcomed surprise later. On the plus side, no waiting period applies to Extra Expense as the whole reason for this coverage is to help expedite certain activities that can help reduce the overall loss.
2. There are different Business Interruption worksheets for different types of businesses. A manufacturer would not want to use the same form as a telecom company – so make sure you have a BI worksheet that is appropriate for your business. 3. Consider adding special endorsements – Extended period of interruption coverage, contingent business interruption, service interruption and claim preparation expense coverage are extensions of coverage that may not otherwise exist in the standard policy. 4. Be prepared in the event of a loss to deal with a host of experts and consultants – starting with accountants. Insurance companies will typically outsource the adjustment of this type of claim to forensic accountants to help determine the income lost/continuing expenses that were incurred as a result of the loss. 5. Entities that conduct research and development with such operations funded solely from grants, endowments, etc, will want to consider Loss of R&D Income as an extension to the Business Interruption Insurance to cover continuing R&D expenses. 6. If part of your income is derived from rental activities, be sure to factor that into your Business Interruption calculation as Loss of Rents.
Insurer FM Global says failure to plan puts businesses and jobs at risk JOHNSTON, R.I.--(BUSINESS WIRE)-An overwhelming majority of Americans do not feel their employers are well-prepared for, or might not recover quickly from, a natural disaster, according to research released today by FM Global, one of the worlds largest business property insurers. FM Global's new Business Risk Pulse Check finds 75 percent of U.S.-based workers feel their employer is not well-prepared for a natural disaster, and 72 percent of those polled would not feel totally safe in their workplace during a natural disaster. Additionally…(click to continue story)
After reading two Risk Reports on the topic of Business Interruption, you can probably understand the reaction we often get when it comes time to fill out the BI worksheet, discuss the underlying assumptions, etc. Most companies haven’t taken the time to perform a Business Recovery Plan that contemplates the various losses that can occur and what they would do under each scenario. It’s hard work, but critically important if a disaster does impact your organization. We hope this brief discussion of Business Interruption and Extra Expense will not only raise your awareness of the importance of this coverage but also the significance of a business-wide disaster planning effort.
For more information on this topic, just click on this link or the Chubb icon to the right for a short, interactive, instructional video from Chubb, one of the leading insurance companies in the U.S.
The Latest … Henriott News & Updates You never know what the trigger will be to cause someone to either stop doing something they shouldn't, or maybe start something they should do but haven't had the motivation. It's different for everyone. Click here to find out what the trigger point was for our very own Rick Davis..... We’ve also added to the C’Mon Man (or in this case C’Mon WoMan!) segment of our website. Click here to see the latest “One more reason the Post Office is losing money and this one is not THEIR fault!”
Check out our website blog series for real-life claims or lawsuits that we hear about in our work and make us sit back and say…C’Mon Man…Really?! Did you know that we also issue monthly reports for Employee Benefits and Personal Insurance? For a preview of these, click the following links! Live Well, Work Well Home Matters
If you would like to subscribe to either of these, simple send an email to info@henriott.com and specify which you are interested in receiving!
Henriott Group’s Milestone Risk Management program is aimed at helping your company lower its Total Cost of Risk. Talk to your Henriott professional for more information about this proprietary process.
Client Focused. Results Driven.