Like fingerprints, no two disasters are alike. They can be natural or manmade and can strike with or without warning. Some are preventable, but for the most part, much of the havoc they wreak is unavoidable. Still, it is possible to prepare ways to cope with and ultimately recover from just about any disaster.

Over-Preparing Is Impossible
There is no one-size-fits-all plan for disasters, but that doesn’t mean contractors shouldn’t have a basic strategy. Realistically, contractors require specialized plans for different situations. Developing a plan isn’t difficult, but too many contractors neglect to carry through and take the steps necessary to continue improving their plans.

Following are five general steps all contractors should take when it comes to disaster preparedness:
  • have a plan;
  • review the plan with employees and make sure they have online access to it so they know where to go in the aftermath of a disaster;
  • test the plan;
  • highlight the plan whenever any type of potential disaster looms; and
  • revise the plan as necessary.
Keep in mind, these steps are an outline, not the entire structure of what needs to be built. Without question, part of the plan needs to be protecting the organization with proper insurance coverage. It is also vital to have redundancies in place to ensure the plan’s integrity is maintained.

The Necessities
Every contractor should have a definitive checklist of coverages. Builders risk coverage is essential, and the policy should cover the entire project and include any existing structures if the project involves a renovation. The policy also should extend coverage for “risk of direct physical loss of covered property” and include flood coverage. Additionally, the policy should include coverage for direct damage, soft costs and delay damages.

Considering a disaster could result in a multi-million-dollar legal liability exposure, excess or umbrella liability coverage cannot be overemphasized. While general power outages don’t usually impact a contractor’s ability to operate in the aftermath, disasters do impact the availability and cost of labor and materials.

Contractors must review their contracts to make sure agreements include a “force majeure” provision that will allow them to opt out of a project in the event of a disaster. Skyrocketing costs can make projects unprofitable, as well as create potential delay damages.

Many contractors also overlook the rapidly growing threat of a cyber breach. Contractors keep sensitive project documents and bid information in IT systems, and the dissemination of such information can result in the loss of bids or liabilities. As such, contractors should closely manage and protect their IT systems and purchase cyber liability coverage.

In 2014, a group of insurance companies collaborated to provide instant comprehensive cyber and identity fraud protection to small and medium enterprises. While these coverages are not a catch-all, they do give a contractor a legitimate opportunity to recover from a disaster.

Keep in mind that no insurance program can completely protect a contractor. Loss prevention and non-insurance measures are a necessary first step to first avoid loss and then to ensure that if a loss does occur, the contractor is prepared and protected to the maximum extent possible.

Individualized Enterprise Risk Management
A complete picture of what is needed can only be ascertained through a comprehensive loss control risk assessment. It’s easy to overlook things, especially when it’s not obvious that they exist. People are often so involved in their business that they can’t fathom they have missed something, but another set of eyes can make a huge difference.

A loss control risk assessment helps contractors design environmental, health and safety strategies to prevent employee injury mishaps, property damage exposures, and internal and external exposures that create a risk to the financial success and overall insurability of the business. To help reduce insurance costs, the assessment also involves consultation with contractors on the day-to-day management of regulatory compliance.

All of this plays a role in disaster preparedness. Whether it’s a hurricane, cyber attack, earthquake or tornado, identifying risk and preparing for it ultimately will allow the organization to move forward in the aftermath.


Timothy Rodrigue is director of communications for BancorpSouth Insurance Services. For more information, visit bxsi.com