Earthquakes: Response and Recovery

The shaking or rolling of the earth following an earthquake can severely damage property and lead to costly business interruption. Evacuation orders, destroyed inventory, damaged roads, and power outages can all translate into problems for businesses. And employees who have suffered damages to their personal properties — or, worse, sustained injuries to themselves or family members — might not be able to get to work.

The first step after an earthquake should be to check on your people and properties. This is especially pertinent if the earthquake happened during work hours. It is important to determine whether anybody was injured and if employees need help getting back to their homes or a safe location.

As companies start the process of getting back to business and preparing for subsequent potential earthquakes, they should focus on the following:

Crisis Management and Communications

Many populous cities lie on fault lines, putting them at risk of potentially powerful earthquakes that can strike at any time. It is therefore essential for companies to have robust action plans that are regularly updated and practiced and that can be triggered once an earthquake takes place.

The first step following an earthquake is to activate your crisis management teams and start implementing your crisis management plan. Get an early understanding of the damage, both to your site and surrounding areas that might make it difficult to gain access to your property or pose a danger. You should also start making policy and strategy decisions to best manage the impact of the earthquake and stay abreast of any information and announcements from authorities, including expectations around other earthquakes or aftershocks.

Protecting Employees and Physical Assets

Your people should be your priority. Once you’ve accounted for all employees and made sure that everyone is safe, be prepared to provide anyone who has been personally affected with immediate assistance as required before turning your attention to your properties.

If your site is accessible and deemed safe, you should start the process of assessing any damage both to your property and any surrounding infrastructure and take any necessary steps to reduce the potential for further losses. You should engage your own experts, as already identified in your crisis management plan or as required given the damage sustained, and collaborate with local government officials and agencies to ensure your properties have not been unduly compromised.

Keep in mind that visible cracks and ruptures are not the only threat; gas pipe leaks and resulting fires, for example, can be dangerous and destructive, while broken water pipes can exacerbate property damage and escalate recovery costs and time.

In the event of accessibility issues, you might have to make arrangements for employees to work remotely. Retain open lines of communication with your people, and keep senior leaders, response teams, and other stakeholders informed on employee and property recovery efforts. If your properties are accessible, make sure that they are safe before allowing employees to return.

Providing Humanitarian Assistance

Be prepared to provide assistance to your employees and their families, especially ones who have sustained damages or even lost their own properties, whether temporarily or permanently. Consider providing physical, social, emotional, and financial help to your people. Allow employees whose own properties were damaged to take time off to take care of personal matters.

You should also consider providing claims guidance and other humanitarian assistance to affected employees. A dedicated employee claims assistance program can complement your existing humanitarian program, and should include advisors who can provide guidance on homeowners, renters, earthquake, and personal auto insurance policies and claims.

Business Continuity

Once you have addressed all safety issues, it’s time to turn your attention to keeping your business running. You should first determine the management and logistical processes for continuing or resuming and recovering interrupted critical business functions. Coordination between your corporate headquarters and affected locations is crucial. Your recovery plan should include ensuring the availability of networks, applications, and data to help support business continuity.

Consider to what extent your contingency plans need to be activated if your properties or your suppliers are affected by power or network outages and other damage. An important part of business continuity planning and response management is checking on the condition of your customers and suppliers as interruption of their operations can significantly disrupt your own. Remember that even if you do not have locations in the affected area, you may have suppliers or customers that are impacted.

Insurance and Claims Considerations

If you have suffered damage or business interruption, your organization should look to insurance to start the recovery and rebuilding process. Review applicable insurance policies — including property, business interruption, and contingent business interruption coverage — to determine what is and is not covered.

Affected businesses should also stay in contact with their brokers, claims advocates, and insurers; report any actual or potential losses in a timely manner; and immediately start the process of collecting information that may be relevant to a claim.

Keep in mind that even if you haven’t suffered direct damage, interruptions to your supply chain as a result of damage to suppliers can have an effect on your operations. Your business can also be affected if customer demand for or access to your products and services is restricted. Some forms of coverage, such as specialty supply chain policies and parametric insurance, may respond in such circumstances.

Some elements of property insurance coverage will require the policyholder to provide specific documentation of loss. Service interruption claims, meanwhile, must generally be accompanied by a precise timeline of said interruption, evidence of notice provided to a utility provider, and details about the specific nature of the interruption, including the type of equipment damaged, the cause, and its distance from a policyholder’s insured premises. The extent of damage may lead to complex applications of deductibles. Visual evidence can be helpful, and since this can now be captured via drones, aerial vehicles, and satellites, can be collected even while properties are still inaccessible and help with starting to document losses and expedite claims.

To learn more about how you can respond to and recover following an earthquake, contact your Marsh representative.