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California Wildfires: Claims and Risk Management Considerations

Posted by Robert W. O’Brien October 12, 2017

At least 21 people have been killed and more than 2,000 buildings destroyed, according to last reports, in portions of Northern and Southern California not typically threated by wildfires. California and the White House have declared a state of emergency in several counties, with federal aid being ordered to supplement state and local resources. More than 20,000 people have been evacuated from affected regions. 

For businesses in impacted areas, quick and careful action will be essential to your employees’ well-being, your organization’s continued operations, and your bottom line. 

Business Continuity

Advance planning, where possible, can make a big difference, especially as rebuilding and resuming operations in damaged areas may take some time and related services may be in high demand. Given above-average wildfire activity this year, your organization should already have a business continuity plan, which you should immediately activate. Monitor news media and government alerts and ensure that employees stay away from offices, stores, or other locations under threat. Adjust your emergency response strategies across the organization and in threatened areas until local authorities say it is safe to return. Employees should be especially cautious around trees, utility poles, and other tall objects that may have become unstable because of wildfires. 

Protecting People

You should account for all employees as soon as possible. This means having up-to-date employee contact information and providing ways for them to report their status until the crisis passes. You should also notify employees of time-off-work policies and expected return-to-work timetables. Additionally, be ready to provide humanitarian assistance, including helping employees manage insurance and FEMA claims. 

Claims Preparation and Management

As you begin the recovery process, it’s vital to monitor your resources and cash flow. Early reporting of any actual or potential property, business interruption, or loss of attraction issues to your broker and insurer can help establish the potential for advance payments. These payments can be used to cover operational costs, payroll, and rebuilding expenses. 

Without putting employees in harm’s way, document physical damage before beginning cleanup efforts; damaged items should also be kept unless they pose a health hazard. 

In the event of a business interruption loss, provide your insurer with specific information regarding: 

  • Civil authority orders mandating evacuation of your premises.
  • Road closures preventing or prohibiting access to your premises.
  • Service interruptions, including specific reasons for loss of service.

Support your claim with media reports, copies of relevant records, maps, and photos and video captured by drone or satellite given access and safety issues. Track all revenue losses and extra expenses associated with the wildfires. 

For contingent time element claims, you should immediately gather documentation of any supplier or customer contingent issues, including any supply chain impacts. 

Businesses and individuals can’t control the path of wildfires or the damage that they may cause, but you can take these proactive steps to better protect your employees, operations, and finances.

Robert W. O’Brien

Robert O’Brien, managing director of Marsh USA, Inc. is a senior property claims officer of Marsh’s National Property Claims practice.