Dealing with Catastrophe Before it Strikes
Corey B. Chase, Principal | Tenant Representation Specialist
Catastrophe! It’s as sudden and unexpected as that. Regardless of the location or time of year, news reports chronicling the latest catastrophic event at an office or industrial building—a fire, a wall collapse, a tornado, etc.—are routine.
The event can range from a simple a power outage to downed trees to a spectacular blaze (“spectacular” from nature’s point of view, not from a business owner’s perspective!). The scope of impact can be as minor as requiring a tree removal service or significant enough to necessitate a last-minute relocation of operations—whether temporary or permanent—including the transport of salvageable inventory and equipment as well as the replacement of damaged goods.
No one likes to think about these events and their ramifications. However, if lightning strikes—literally or figuratively—advanced planning, or more aptly put, risk management, will prove itself invaluable. Although risk management isn’t necessarily a real estate issue, the real estate implications are quite direct.
While it is impossible to prevent disasters or most catastrophic situations, there are a variety of ways in which business owners can minimize exposure.
Insurance is widely viewed as a necessary evil, a nuisance upon which you are obliged to spend your time and money. Unfortunately, when that perspective prevails it’s only natural to be less focused than you should be on the underlying purpose of the process: ensuring that your business is as resilient as possible against calamity. If something catastrophic were to happen, the attention you pay now—in spite of that thorn-in-the-side feeling it gives you—will be well worth it, and may allow you to come out of the situation smelling like a rose.
Some critical questions to answer and consider:
- Is the scope of my coverage adequate?
- Are my coverage amounts appropriate?
- Has equipment been added or upgraded that is not already covered?
- Have there been any changes to my business since the last renewal that may warrant increased coverage?
- Can upgrades to systems such as security alarms or sprinklers change my premium?
Ensure the building premises, including the structure and roof, are in good working condition.
- Roofs – Inspect them regularly for damage or wear; hire a professional to service rooftop HVAC units every six months.
- Smoke Detectors – Verify they are in place and connected as directed.
- Sprinkler systems – Make sure they are serviced and maintained.
- Storage of flammable materials – Adhere to OSHA regulations; the regulations exist for a reason!
- Fire hydrants – Confirm that they are routinely checked by the local municipality.
- Functional loading – Docks and levelers need to be inspected and maintained.
It pays to engage an expert who will perform a physical walk-through of the building and compile an assessment of potential trouble spots. Though it may not be necessary to have a professional inspection done annually, it makes good sense to develop a checklist that the business owner can use to mitigate risk and liability.
While certain elements of the building and premises are the responsibility of the building owner, carelessness in terms of the storage and/or disposal of materials or inhibiting access to mechanical systems can limit liability. In fact, if certain practices are found to be negligent, the liability can be transferred from owner to user and result in legal issues and significant financial consequences.
For business owners and boy scouts, it always pays to be prepared, for whatever force majeure may strike.