I.I.I. Reminds Businesses To Be Prepared With Proper Insurance and a Disaster Recovery Plan For Natural Disasters and Terrorist Acts


New York Press Office: (212) 346-5500; media@iii.org

NEW YORK, September 9, 2011
— Businesses that recover quickly are those that plan in advance. This involves not only purchasing the right type and amount of insurance, but also developing and maintaining an adequate disaster recovery plan, according to the Insurance Information Institute (I.I.I.).

The I.I.I. reminds businessowners that property damage from disasters—whether natural, such as Hurricane Irene, or caused by an act of terrorism, such as the 9/11 attacks—can destroy a business. Fortunately there are steps you can take to be prepared.

Minimize the risk of damage in advance of an emergency:

  • Train employees in fire safety, particularly those responsible for storage areas, housekeeping, maintenance and operations where open flames or flammable substances are used.
  • Modernize electrical systems; faulty wiring causes a large percentage of nonresidential fires.
  • Situate your business in a fire-resistant building—a structure made of non-combustible materials with firewalls that create barriers to the spread of fires—and in a building with a fire alarm system connected to the local fire department. It is also a good idea to have a sprinkler system to douse fires.
  • Limit storm-related damage by making sure the building conforms to damage-resistant building codes.


Develop and maintain a disaster recovery plan:

  • Keep up-to-date duplicate records of both computerized and written records. Under federal law, if companies fail to maintain and safeguard accurate business records, the company may still be held liable. (For example, in the event of a data breach.)
  • Identify the critical business activities and resources needed to support them in order to maintain customer service while your business is closed for repairs.
  • Plan for the worst possible scenario. Do research before a disaster strikes by finding alternative facilities, equipment and supplies, and locating qualified contractors to repair your facility.
  • Set up an emergency response plan and train employees in how to execute it.
  • Consider the resources you may need to activate during an emergency such as back-up sources of power and communications systems. Also, stockpile any supplies you may need such as first-aid kits and flashlights.
  • Compile a list of important phone numbers (including cellphone numbers) and addresses, including local and state emergency management agencies, major clients, contractors, suppliers, realtors, financial institutions, insurance agents and claims representatives. The list should also include employees and company officials. Keep copies of the list off the premises in case the disaster is widespread.
  • Decide on a communications strategy to prevent loss of your customers. Clients must know how to contact your company at its new location. Among the possibilities to explore, depending on the circumstances, are posting notices outside the original premises; contacting clients by phone, email or regular mail; placing a notice or advertisement in local newspapers; and asking friends and acquaintances in the local business community to help disseminate the information.
  • Review your plan on a regular basis and communicate changes to key employees.



As part of your disaster plan, make sure to include appropriate coverage such as business income insurance and terrorism insurance.  

“Too many business owners fail to think about how they would manage if a disaster damaged their business premises so that it was temporarily unusable,” said Loretta Worters, vice president with the I.I.I. “A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential and it starts with having the right type and amount of business insurance.”


Insurance losses attributable to terrorist acts are covered under commercial policies for policyholders that elect this coverage. The coverage is provided by private insurers and reinsured or “backstopped” by the federal government pursuant to the Terrorism Risk and Insurance Act of 2002 (TRIA). Under TRIA, owners of commercial property, such as office buildings, factories, shopping malls and apartment buildings, must be offered the opportunity to purchase terrorism coverage. For the terrorism coverage to be triggered under TRIA for commercial policies; a terrorist attack has to be declared a “certified act” by the Secretary of the Treasury.  

If a policyholder has rejected terrorism coverage under TRIA, in certain states there might not be coverage or only limited coverage for fire resulting from an act of terrorism. War, nuclear, biological, chemical and radiological (NBCR) events are not covered under commercial insurance policies.   


Property damage to commercial buildings from a terrorist attack also may include claims for business income insurance (also referred to as business interruption coverage). More than $11 billion (33 percent) of the $32.5 billion in total insured losses (in 2001 dollars) from 9/11 was from business income, according to the I.I.I.

Business income covers financial losses that occur when a firm is forced to suspend business operations either due to direct damage to its premises or because civil authorities limit access to an area after the attack and those actions prevent entry to the business premises. Coverage depends on the individual policy, but typically begins after a waiting period or “time deductible” of 48 hours and lasts for a period of two weeks to several months.

Business income losses associated with acts of civil authority can only be triggered when there is physical loss or damage arising from a covered peril (e.g., explosion, fire, smoke, etc.) within the area affected by the declaration. The loss/damage need not occur to the insured premises specifically. Reductions in business income associated with fear of traveling to a location, in addition to closure to areas by authorities because of a heightened state of alert, would not be covered by business income policies.

The I.I.I. also recommends that businessowners take a business inventory. An up-to-date business inventory is an important component of disaster planning. It can help you:


  • Purchase the right amount and type of insurance
  • Substantiate property losses to make filing an insurance claim faster and easier


The I.I.I. is a nonprofit, communications organization supported by the insurance industry.




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