What Companies Can Do to Survive a Quake

Last week’s Bay Area Quake probably inspired you to stockpile bottled water and batteries at home, but have you thought about how your business and your employees would survive a major disaster?

Fire, safety and insurance experts say small businesses fare the worst during disasters because most are ill-prepared and under-insured for misfortune. Busy small-business owners rarely take the time to draft a disaster plan or even discuss how employees should react during an emergency.

“It’s not expensive to draw up a plan, make sure you have enough supplies and assign teams and team leaders,” said Mark Williams, president of Williams Records Management in Los Angeles. The company stores important records for hospitals, banks and other businesses.

The Williams earthquake preparedness plan calls for the purchase of two-way radios to permit employees to communicate within the company’s 450,000-square-foot, six-story building. Their plan also includes ways to transfer vital records to emergency off-site locations and calls for the purchase of supplies ranging from fire extinguishers to first-aid kits.

Williams and his brother, Doug, who is vice president of operations, started planning for emergencies about a year ago. Mark said they decided to think more about preparing for disasters because clients often asked for advice on how to reorganize an office after a fire or flood.

To heighten awareness of the need to plan, Mark Williams has been sharing his disaster plan outline with fellow business owners at Rotary Club meetings and other gatherings.

No one likes to think about tragedy, but with scenes of earthquake devastation fresh in your mind, it is the perfect time to review all your insurance coverages with your agent or broker.

“Most small-business people consider insurance a necessary evil, and most are under-insured,” said Ben Pelter, who founded a successful printing company before retiring. Pelter, who serves as a business counselor for the Service Corps of Retired Executives, said it pays to evaluate your insurance and shop around for the best prices.

Insurance company executives whose representatives have been besieged with calls from California clients this week agree with Pelter.

“Small-business owners should sit down with their insurance agent at least once a year and say, ‘Hey, here’s what I’ve got--what are my options?’ ” said Don Hurzeler, assistant vice president of marketing for Allstate Insurance Co.’s business insurance division in Chicago.

Hurzeler, who was an underwriting manager in Southern California after the 1971 Sylmar earthquake, said many small-business owners are chronically under-insured because they want to save money. To cut costs, most small-business owners buy only the bare-bones liability insurance, vehicle insurance and workers’ compensation insurance.

The majority of small- and medium-sized business owners don’t think that they can afford earthquake or business interruption insurance, although these coverages may mean the difference between a quick recovery and permanent closing after a disaster.

According to insurance executives, earthquake coverage can add 10% to 15% to the total premium. The cost of business interruption insurance, which covers all lost revenue and expenses, depends on the nature of your business. Business interruption insurance usually provides enough money to pay the bills, including rent, utilities and payroll, for 12 months.

One enterprise benefiting from its lost revenue insurance is the San Francisco-Oakland Bay Bridge, which lost a 30-foot concrete section in the Oct. 17 quake. After the seventh day of interrupted service, the bridge’s San Francisco-based insurance company, Fireman’s Fund, began covering the lost income from tolls, according to Fireman’s Fund spokesman Jim Toland. Each day, he said, the quarter-million cars crossing the bridge generate about $250,000 in tolls.

If a small business suffers earthquake or fire damage and does not have this type of insurance coverage, it might not only lose its customers but its employees. With no income, employees will have to find other jobs while the building is being repaired or new stock is being ordered.

Although many business owners would like to have earthquake coverage, less than 5% of the business insurance policies written by Transamerica Insurance include it, according to Glenn Thomas, director of commercial property insurance in Transamerica’s Woodland Hills office.

“We always see quite an influx of requests for earthquake coverage within three to six months after an earthquake, but then the requests fall rapidly,” said Thomas.

The premium for commercial earthquake coverage on buildings and inventory is based on the construction of the building and where it is located. Brick buildings cost more to insure than framed stucco or reinforced concrete buildings. Virtually all insurance companies require an on-site inspection before writing an earthquake policy.

It might cost 5 cents per $100 of value to buy earthquake coverage for a high-rise in Sacramento, compared to $3 per $100 of value for a supermarket in a brick building in San Francisco, Transamerica’s Thomas said. The average cost of commercial earthquake insurance is between 25 cents and 50 cents per $100 of value.

How much insurance you carry depends on what kind of business you run. Most insurance companies sell a basic business owner’s policy and a more expensive customized version. Optional coverages available include insurance for crime, broken glass, accounts receivable and valuable papers. Business personal property insurance covers stock, inventory, equipment and tenant’s improvements.

Panel Discussion Scheduled

“Obtaining and Keeping New Business” will be the subject of a dinner and panel discussion sponsored by the Southern California Chapter of Women in Advertising. The Nov. 1 session begins at 6 p.m. at the Country Side Inn in Santa Ana. Four Orange County ad executives will be on the panel. The cost is $24.50 and reservations are required by Oct. 30. For information, call (714) 631-6541.

Subcontracting Session Slated

A free, one-day seminar on subcontracting opportunities for minority-owned firms is set for Nov. 16. The session, sponsored by the Los Angeles Area Chamber of Commerce and the Defense Department, will run from 8:30 a.m. to 5 p.m. at the Los Angeles Airport Hilton & Towers, 5711 W. Century Blvd. in Westchester. For reservations and information, call the chamber at (213) 629-0632.

HOW TO PREPARE Sit down with your insurance agent and review all your business coverages. Weigh the cost of earthquake or business interruption insurance against what would happen to your company after a major earthquake or fire.

Create a disaster plan for your business. Make sure every employee knows what to do, who to call and where to go in case of an emergency.

Have a practice drill at least every six months to make sure people really know what to do.

Check your business for potential fire hazards. Clear all aisles and hallways. Make sure no exit doors are blocked. Be sure your fire extinguishers all work and your employees all know how to use them.

Store water, batteries, flashlights, blankets and non-perishable food in your office.