THE BEST INSURANCE

When looking at the issues facing businesses post-earthquake, and the limited resources to do much about it pre-earthquake, many business owners are stuck in determining how and where to spend their mitigation dollar.

Do I buy more than enough insurance?  Do I focus on life safety?  Business Continuity?  Asset Protection?  Do I focus on reducing down time, or concentrate on doing all I can to keep from getting sued?  Is my building the problem, or the stuff inside the building?  Hellllllllllllllllllllllllllllllllp!

Here are a couple of factors that may help make the decision for you when prioritizing where to begin.

1. It’s great to have excellent car insurance, but even better to never need to use it.  If I could take specific actions to avoid damage to my car and my body it is to my benefit.  The same is true with earthquake damage prevention.
2. FEMA estimates that 75% of future earthquake losses and insurance claims will be to the non-structural components of buildings.  Check out this article:  http://www.jacobsschool.ucsd.edu/news/news_releases/release.sfe?id=690. 

So since I can do something pre-earthquake that can improve my business continuity post-earthquake, and 75% of my vulnerability is to non-structural elements, the low-      hanging mitigation fruit is my non-structural components.

The University of Oregon has done some cutting edge work on developing a prioritization methodology.  They map out on their huge campus things like the value of contents, the number of people that work there, and the revenue generated in research.  Overlapping the results of each measurement creates a specific relative vulnerability to each area.  City of Hope National Medical Center simply made it a priority  to brace everything that can cause life safety or business operation issues in an earthquake, fastened it all in one huge project, and then has deftly maintained the bracing program, for over a decade!

On the other hand, one Fortune 50 company facilities manager shared with me that they don’t want to even do a building by building assessment out of fear that if the assessment was done, then that information could be held against the company if the quake hit and people got hurt, if the mitigation efforts had not been implemented.  I shared with him the fact that many groups were sued follow the 911 attacks because they failed to prepare for a known threat, so assessing the specifics of disaster prevention doesn’t logically add to the risk of litigation.  As far as I know, not only is the mitigation not done at this company, neither has the assessment of risk.

More and more, companies are looking at implementing engineered systems that reduce earthquake damage before spaces are occupied.  Stanford University is doing that at their new stem cell building.  Once done, the building contents can switch out over the next few decades (as they invariably will), but the system is in place to secure new items without having to start from scratch.  It’s the best kind of insurance.  Most of it is paid for right from the start, and the coverage lasts for years.