2 ADJUSTINGTODAY.COM In fact, because there are aspects of catastrophic losses that even the most seasoned managers would not believe possible, we’re convinced that one of the most important keys to survival is expecting the unexpected part of a catastrophe. Although most firms accept the need to pay insurance premiums, they too often rate their coverage on its cost rather than by taking the claims perspective of how the policy would actually perform in the event of a loss. The most important part of establishing a comprehensive disaster recovery program should be adopting the philosophy that you can best protect your firm not just by assuming that you’re covered, but by digging deeper into potential problems and exposures and by expecting the unexpected part of the unexpected. For a better idea of what the unexpected can entail, here are some examples of actual disaster experiences with which some companies around the world have had to deal. Some Actual Catastrophes A hotel fire claimed many lives, resulting in the owners losing ownership of the property because they lacked adequate liability insurance. In this case, the owners lost the involved property because enormous liability claims threatened to pierce the corporate barrier. A warehouse holding $1.5 million worth of merchandise was broken into in the midst of a hurricane, with hundreds of people literally carrying the stock away. Because the looting was not a direct result of the hurricane, it was not covered under the company’s insurance policy. Coverage could have been obtained, however, had this type of exposure been anticipated. Another hurricane story, but with a happier ending. An animal feed processor lost its entire poultry feed market because most of its customers’ chickens were destroyed by the hurricane. The birds actually blew away in the storm, leaving little need for the insured’s feed products. Fortunately, because they purchased an unusual insurance policy endorsement called the “Customers and Suppliers Endorsement” beforehand, the company was almost fully covered for this indirect loss. An electronics company experienced an internal theft of gold, for which it was not covered because their policy specified that such a loss had to be supported by proof that an actual theft occurred. Employee dishonesty policies generally require more than the appearance of a shortage supported only by an accounting calculation. In this case, the company could not identify the person or persons responsible. As a result, the firm suffered a major financial setback. An earthquake damaged a major food-processing facility, resulting in its inability to process fields of vegetable crops. Forty acres of crops rotted “on the vine” due to the lack of a facility to pack and ship them. The company lost an entire packing season, which translated into lost selling space on supermarket shelves. Unfortunately, the loss to the field crops wasn’t covered, and the
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