By Michael Perlmuter, Esq.
President and General Counsel
Alex N. Sill Company
The importance of a commercial business retaining an expert professional advisor, i.e. a certified, licensed Public Adjuster immediately following a fire cannot be over-estimated in determining whether a business will survive the catastrophic event.
A report from the U.S. Small Business Administration reveals that having a fire poses an even greater risk to small companies than originally thought, typically causing ruinous insolvency within the first six hours of conflagration.
“The data we’ve gathered reveals a consistent pattern of business failure shortly after the start of a fire, which can lead both to inventory problems and a difficulty attracting customers, who, quite frankly, do not wish to step into a retail location that is currently ablaze,” said SBA administrator Karen Mills, whose staff researched businesses that had experienced fires, in preparing the report.
The US SBA goes on to report that over 90% of businesses fail within 2 years after being struck by a disaster!
The Federal Emergency Management Agency (FEMA) reports that 40% of businesses do not reopen after a disaster and another 25% fail within one year.
It is a common misconception that insurance awards will allow business owners to fully pick up the pieces after a disaster. First of all, some events are not covered by policies. Second, many policies have policy limits that are wholly inadequate for the size of loss, or have very high deductibles, or have exclusions or limitations that severely impact recovery by business owners following a loss.
How Can a Business Survive a Disaster?
To survive, simply put, business owners must take every pro-active step available to them to avoid becoming one of the 90% of business failures.
The first step is preparedness. That is, knowing and documenting standard operating procedures, structure and personnel.
The second step is “What If?” Determine, in advance, who will do what in the event of a disaster and what contingency plans will be followed to maintain both production and service to clients.
Finally, following the loss, immediately hire a professional loss consulting firm, otherwise known as a licensed public insurance claims adjuster that has handled losses similar in size, scope and type to yours, to assist in the loss documentation and presentation process.
* Primarily, most businesses simply do not have the expertise or experience to competently review and understand their insurance policy and coverages and prepare the necessary building and personal property estimates to fully and fairly recover their actual damage. Insurance companies have in-house experts and further retain outside building experts, as well as contents experts, to place their own valuation on losses that can be, and often are, lower than a business owner’s actual loss expectations. The business owner has virtually no avenue or ability to counter the carrier’s damage estimates without the assistance of the experienced professional help of a public adjuster or loss consultant, such as the Alex N. Sill Company, North America’s leading loss consultant and public adjuster.
* Next, a business owner simply does not have the time luxury of having to communicate with the insurance adjuster, answer all of the adjuster’s questions and requests concerning information and documentation surrounding the loss and prepare the necessary loss estimates and documentation necessary to establish a claim, while at the same time attempting to maintain its clients and suppliers following a disaster. Attempting to both re-establish the business and manage an insurance claim ensures that both will be done poorly.
* Finally, the business income loss sustained by the business owner often can be the most complex and most difficult part of the loss claim to be asserted by the insured. Each insurance company may have its own methodology of setting forth a claim for loss that if not followed, can be rejected by the carrier. Calculations of business loss are highly technical, sophisticated calculations that require experienced understanding of a policy’s language as to what is covered, and what may be excluded or limited. Without the assistance of a professional certified forensic accountant as part of the public adjusting team, it is almost certain that a business owner will not recover the full business income loss.
The bottom line is that a large percentage of small business owners go out of business following a significant fire. The hiring of a professional public adjuster to represent its interests give small business owners a much better chance of fully recovering its loss while allowing the business owner to devote its full attention to retaining its customers and suppliers.