Are You Ready?
Hurricane Season is here — is your business prepared?
On June 1, it begins again — the anticipation, the anxiety, the wondering if this year a hurricane will once again at best disrupt, or at worst destroy our lives.
The Atlantic hurricane season runs from June 1 to November 30 and the Tropical Meteorology Project from Colorado State University (CSU) predicts that this season we will have a total of 13 named storms, including five hurricanes, two of which are expected to be major.
When discussing past hurricanes, many Gulf Coast residents look to Betsy, Camille and Katrina as benchmarks. Together, these three storms changed the lives of millions and effected devastating losses. A 2015 Federal Emergency Management Agency mitigation assessment team report places damages for these storms (adjusted to 2015) as follows: 1965’s Betsy — $10 to $12 billion; 1969’s Camille — $7 billion; and 2005’s Katrina — $125 billion in economic loss.
“Across six states there was $41 billion in insured losses due to Hurricane Katrina,” says Thomas McMahon Jr., president and CEO of Eustis Insurance & Benefits. “Combined, Hurricanes Katrina and Rita accounted for $29 billion in insured losses in Louisiana alone, and these figures exclude flood losses.”
A study conducted by James Richardson, an economics professor at Louisiana State University, found that in the wake of Hurricane Katrina, 11 percent of homes in the New Orleans area alone were destroyed or deemed uninhabitable. Throughout Louisiana, nearly 18 percent of businesses were in a similar state.
Businesses large and small felt the economic impact of Katrina’s wrath, and with another hurricane season upon us, now is the time to plan for the worst.
Since Katrina, new maps have replaced those from 1995 and now account for improvements and upgrades in drainage canals, pump stations and levees. In new ‘X’ zones, flood insurance will now be optional instead of required for most mortgages. Property owners can quickly determine if their rates have changed by going to maps.riskmap6.com/LA/Orleans/ for Orleans Parish or maps.riskmap6.com/LA/Jefferson/ for Jefferson Parish.
Business owners should be aware, however, of the limits of their property insurance. “It is always important to keep in mind that property insurance does not cover flood damages,” says McMahon.
Businesses should also have their building(s) inspected by a licensed professional, such as a structural engineer, to find out if their workplace is vulnerable to hurricane-force winds and what may be recommended in retrofits.
Review Insurance Policies
“In springtime, check everything,” says McMahon. “Review all your policies: flood, property and interrupted business. And make sure you’ve updated all of your equipment. For example, what do you currently have on your yard? Have you covered that new forklift?”
Mark Dufour, a certified insurance counselor with Clockwork Insurance Services, agrees that it is important for businesses to have a complete inventory list and that they need to document and photograph all of their equipment, supplies and even their workplace.
“It’s important to keep accurate inventory records,” he says. “Take into account things such as your business’s furnishings, your stock on the shelves and your computers. Also, have a redundant list that you keep on a jump drive or in a safe deposit box. I always preach that if you have all of this available, it’s much easier and faster for us to pay your claim.”
“At the time of Katrina we only had two businesses,” says Jennifer Weishaupt, owner of Ruby Slipper Café. “We had a real estate rental business, State Street Management Group LLC, and Mid-City Restorations, LLC. We had three properties that sustained wind and flood damage, and all were adequately insured. We learned from that experience the value of adequate insurance coverage and routine reviews of coverage.”
Weishaupt works with Dufour, who recommends businesses at the very least review all of their policies annually.
“Bigger businesses should review quarterly or twice a year,” says Dufour. “You need to sit down with your agent and make sure you have adequate coverage for your exposure. Things change, business owners get caught up in the business of running their businesses. We want to make sure everything is correct and updated and that you are protected.”
Insurance Contact Info
When disaster strikes, it’s important to know who to call and what information you’ll need to provide.
“Make sure to have your policy number, if not memorized, close at hand,” says McMahon. “And have your insurance agent’s number so you can reach him immediately. You want to make sure to be on the top of the claim stack.”
Interruption of business
Business interruption and contingent business interruption are also insurance options to consider. Business interruption insurance covers businesses for losses stemming from unavoidable interruptions in their daily operations as a result of physical damage.
“Business interruption insurance was an ‘overlooked’ coverage prior to Katrina,” says Trey Maddox with Morrison Insurance Agency. “Many business owners could have been paid for the time they were displaced if they had had business interruption included in their property policy.”
McMahon agrees that after property loss, the loss of income is an important factor to consider when reviewing insurance policies.
“You could lose your income stream up to six months,” he says “It is important to be on the lookout and be prepared. Make sure you are fiscally protected and have the proper coverage with a deductible you can afford.”
Rev. Tony Talavera, owner of the French Quarter Wedding Chapel, says his business was hit hard by Katrina.
“We were canceling weddings on the way out the door,” he says. “We usually don’t offer refunds, but we returned $20,000 in deposits alone for Katrina.”
“The other equally important part,” says Doug Mills, with Gillis Ellis & Baker, “is making sure you have coverage for the expenses needed to restart your business. If you’re evacuated or closed for a time, you may have to rent temporary office space, relocate employees or advertise to reach clients. The right policy anticipates and covers these costs.”
Protect Business Data
Businesses should protect their data with backup files. It’s also important to prioritize servers and mission-critical apps because not all servers in a computer room are of equal importance to a business.
“We weren’t prepared,” says Talavera. “I loaded up cats, dogs and even my mother-in-law into the car and hit the road. At the time, we had three computer towers and we had to pack them into the car too. Now we back up all of our info and use laptops. It’s so much easier.”
Have Cash On Hand
Another suggestion to prepare for a hurricane is to make sure your business obtains sufficient cash for business operations. Keep in mind that banks and ATMs won’t be in operation without electricity and few stores will be able to accept credit cards or personal checks.
“Our bank was underwater,” says Talavera. “It was very challenging.”
It is critical for businesses to have a disaster recovery plan in place and for all departments to be able to communicate and coordinate.
Katrina helped kick-start Mullin Landscape Associates. The company was started in February 2007, during the peak of the rebuilding effort.
“I’d suggest that businesses have a hurricane preparation plan,” says owner Chase Mullin. “Within that, they should have all team members’ contacts, as well as a plan for clients to be able to contact them. Primarily, we encourage all employees to evacuate or seek safe shelter, and we developed a plan to get people back in place post-hurricane.”
Jennifer Weishaupt agrees. “We currently have more than 200 employees, so in the case of a storm, we have a call/text hierarchy so employees can report their whereabouts and status.”
It is also important for businesses to contact their customers and suppliers and share your communications and recovery plan in advance with them.
“We opened just three months after Katrina hit, but our biggest challenge was to keep serving our clients who were located all over the country,” says Kathleen Turpel, owner of Imaginal Marketing Group.
Talavera says the most important thing is to be adaptable. “We couldn’t do weddings for a long time after Katrina and that’s our business, so we moved things out and began renting cots,” he says. “We also added washers and dryers and a vending machine.”
He says he’s learned from the past and is much better prepared for another bad storm. “We now have a motor home, a generator and laptops. We still may not have the best insurance, but it’s what we can afford.”
McMahon cautions that businesses not look to past hurricanes for guidance.
“You know humans tend to look back,” he says. “They prepare for the future based on the past. So before Katrina, people looked at Betsy or Camille and said we didn’t flood then, so we won’t flood this time. But that may not be true because storms are unpredictable. No two storms are the same, so you have to hope for the best and prepare for the worst.”
A Few Helpful Resources
Check out the full JEDCO Hurricane Preparation for Businesses Checklist at Jedco.org/2016/06/hurricane-prep-for-businesses/ for more on what to do before, during, and after a storm.
A good resource for personal and business hurricane preparation is “A Season of Resilience,” by the Episcopal Relief and Development — a new resource designed to encourage developing disaster preparedness in small steps. Each week for five weeks, individuals are asked to take on small tasks or small purchases to build up their emergency kits.
“Living With Hurricanes,” a guide developed by the LSU AgCenter, includes information on planning for wind and water damage, preparing emergency supplies and items needed for evacuation, and developing a family emergency plan. The guide, which is available online in the Publications section of www.lsuagcenter.com or the special hurricane section of that site at www.lsuagcenter.com/hurricanes, provides details on the extent of damage wind and storm surges can inflict on property.