Proper property protection

Success in business consists of a complex system of interrelated forces. Managers work tirelessly to balance out the competing pushes and pulls of daily operations. But they also need to secure the foundation of their operations. Proper risk management and insurance coverage protects businesses from ruin caused by large property losses.

“The primary causes of large property losses are fire, wind, collapse and water damage,” says John Hudak, complex claims analyst at Westfield Insurance. These types of losses can come at any moment and result in complete devastation. Therefore, it’s essential to address these risks before the situation occurs.

Smart Business spoke with Hudak about business property losses and how to minimize the impact of these events.

What types of property losses can businesses experience?
They can experience loss to property they own or rent including: indoor and outdoor fixtures; permanently installed machinery and equipment; property used to maintain or service a facility, such as fire extinguishing equipment or outdoor furniture; floor coverings; and appliances. Businesses can also have loss to business personal property, which may include furniture, fixtures, machinery, equipment and stock. Businesses should be aware of the value of improvements they make to a building, including fixtures, alterations, installations or additions. In the case of leased personal property, companies usually have a contractual responsibility to insure the items.

How can large property losses affect a business?
The reduction in operations in whole or in part is one of the largest impacts of large property losses. Businesses that suffer losses need to focus on maintaining their revenue streams and customer bases.

The key to keeping a competitive edge is rapidly making adjustments to continue operations and therefore protect their market share. Companies should have a clear understanding of which customers they cannot afford to lose. In the case of large property losses, businesses must direct their efforts toward maintaining key customers.

What steps should companies take to prevent large property losses?
They should develop and implement a risk management plan. The benefits derived from risk management include: increasing the ability to invest money in loss control and reduction; reducing expenses and inefficiency which might result from losses; and enabling planning for an organization’s future.

Risk management departments develop two types of goals. Pre-loss goals should be accomplished even if losses never happen, and post-loss goals are accomplished only in the event of an actual loss. An example of a pre-loss goal is to know exactly how much risk an organization can afford. Post-loss goals include planning for and implementing strategies for operational continuity, marketplace survival, revenue maintenance and profit stability.

What actions can help reduce property damage in the event of a loss?
Risk control techniques — such as loss prevention, loss reduction, separation, duplication and diversification — can reduce loss frequency and severity. Developing a comprehensive protocol and taking immediate action after a loss also reduces or limits property damage.

In addition, timely attempts to preserve the damaged property and promptly notifying insurance carriers are vital to reducing the severity of the property damage. Insurance carriers will need to know exactly which property was involved, including inventories of the damaged and undamaged property, in order to investigate and settle the claim.

In addition, companies should have copies of important corporate documents stored off site. The business should also consider separating loss exposures, if feasible. This means dividing operations between different locations, depending on the size and type of business.

How can insurance coverage reduce the impact of large property losses on a business?
Insurance shifts costs from the insured organization to the insurer. This is one type of risk financing, which can provide money to pay for losses that risk control techniques cannot eliminate. By transferring the risk to an insurer, the business can also share the insurance carrier’s skill and experience. A large loss property handler can assist business owners in establishing the most cost-effective protocol to restore their business operations as quickly and thoroughly as possible.

What other resources can business executives use to make decisions after a large property loss?
Business executives should have a disaster recovery team to plan and identify the key resources that might be needed to respond to a given situation. Once the first action steps are in place, the team of experts can turn to repairing or replacing buildings or personal property in the most effective manner. Because of the complexity of large property losses, having an available pool of experts in various fields of expertise is critical to successful recovery.

JOHN HUDAK, a complex claims analyst at Westfield Insurance, can be reached at (330) 887-6195 or [email protected]. In business for more than 157 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product Westfield offers is peace of mind, and a promise of protection is supported by a commitment to service excellence. For more information, visit