Prepare for the inconceivable
Major lessons learned from three businesses that faced unpredictable disasters
While it may sound like some kitschy insurance company advertisement, disasters by nature are often impossible to predict and can come in unexpected forms. Depending on where you live, you’ve got to be thinking about the possibility of blizzards, ice storms, hurricanes, wind storms, fires, earthquakes, oil spills, sink holes, suicidal birds and locust plagues. Joking aside, stranger things have happened.
The marine industry is no stranger to catastrophe. While everybody on hurricane-prone coasts knows about disaster readiness and recovery, crisis can strike any spot on the globe and often leave business owners feeling helpless in their wake.
There are many lessons to be learned from those who have already faced disasters at their facilities. If you’re not adequately prepared in terms of insurance coverage, disaster response planning, public relations and customer communication, one small trigger can set off a chain reaction that can cripple your business in a matter of minutes.
Boating Industry spoke with three marine businesses that faced truly unexpected situations for their take on what it was like under the gun, how they mitigated the damage, the importance of controlling of the message, speed bumps in rebuilding their facilities and what changes they implemented to better react in the future.
An errant firework
Disasters don’t get much more random than what happened at Seattle Boat Company along the shores of Lake Union on July 4, 2013. Just before 10 p.m., hundreds of the company’s customers were gathered near its SkyLaunch Marina to watch the city’s annual fireworks display. Trouble fell from the sky when an errant, privately launched firework fell into a customer’s boat being stored in the top rack of its SkyLaunch dry dock.
The crowd noticed the firework and, almost immediately, CEO Alan Bohling got a phone call while he was watching the firework show from the other end of the lake.
“When I got the phone call … I literally said, ‘No, that’s impossible, there’s no way we’d have a fire there,’” Bohling said, adding that the SkyLaunch dry docks had no boats hooked up to electrical power. Reflecting on the freak incident nearly six months later, Bohling summed up the ultimate trial of his career in one line: “We did not prepare for it, because we didn’t think it was conceivable.”
As the flames grew from the boat the firework landed in, one of Seattle Boat Company’s forklift operators quickly sprung into action, putting himself at risk, by trying to fork the burning boat out of the rack before it engulfed the rest of the rack. He was a few seconds too late, and the flames ultimately spread to 14 boats that were either damaged or destroyed. While the company appreciated the operator’s efforts, it is also reviewing whether that safety risk was appropriate.
Bohling tried rushing down to the marina, but the area was quarantined with first responders and surrounding traffic was jammed with people heading out of town after the fireworks. Unable to get down to the site, he immediately got to work by contacting senior management and the company’s public relations firm.
“Between text message and phone calls, we were talking about where each person was and who could get down there the fastest,” he said. “Our focus at that point was managing the media, making sure we didn’t say anything incorrect.”
Back at home, Bohling and the PR representative began drafting a press release within minutes to make sure the media — which had already made mistakes speculating about the fire’s cause — had correct information so employees and customers would receive accurate information.
Other first steps in the company’s instantaneous response included reaching out to the entire organization with information and assignments, as well as contacting its insurance company just two and a half hours after the firework fell from the sky.
Bohling said simple things like having pre-made, remotely accessible organizational and customer email lists made it easy to alert the staff and inform every one of its storage customers about what had happened at the marina.
By 9 a.m. the next day, after a sleepless night for much of the management team, a forensics expert and insurance loss representative from the company’s insurance provider were on the site and getting to work.
Following a crisis, Bohling advises business owners to immediately focus on communication with staff, customers and the public to make sure correct information is being dispersed. Secondly, lines of communication with key staff members were crucial, allowing Seattle Boat Company to immediately respond and get the entire company on board with the proper messaging and instructions.
He also advises companies to always follow their own protocols, including insurance contracts for storage customers that properly establish liability in the event of an incident. Safety certifications for all staff, including forklift operators in this case, would also have become a major problem for the company if they had been allowed to lapse.
In the end, after $1.5 million in damage, Bohling and the rest of the Seattle Boat Company team are focused on learning lessons from the incident, maintaining relations with its customers (all impacted parties were given complementary boat club memberships to keep them on the water) and being grateful that a bad situation didn’t end any worse than it did.
A Legendary oil spill
What happened on April 20, 2010, shocked the world — scenes on global news broadcasts showed an exploding oil platform 40 miles off the coast of Louisiana that had killed 11 workers and spewed an incomprehensible amount of oil into the Gulf of Mexico. When video surfaced showing the frantic environmental disaster at the floor of the ocean, residents and business owners along the Gulf of Mexico began to fear the worst. They all wondered the same thing: when would this thing finally be capped?
The answer to that question was far longer than anybody would have hoped or guessed: 87 agonizing days. Countless waterways were closed, oil slicks formed on the surface, tar balls washed up on shore and a tremendous recovery operation was launched as fishing and tourism ground to a halt.
With four Gulf locations between the closest, Gulf Shores, Ala., and furthest, Destin, Fla., Legendary Marine CEO Fred Pace quickly realized the gravity of the situation unfolding beyond the edge of the horizon.
After two crushing years of recession, economic indicators and early boat show traffic suggested 2010 would be a better year for Legendary and the marine industry as a whole. That all changed with the spill, as news coverage was dominated for months by stories of fouled beaches, deflating tourist traffic, decimated fisheries and, most vividly, that streaming video of the spill itself.
“We got to the point where we just really wouldn’t allow ourselves to watch any more TV,” Pace said. “We just had to pray that they were going to get great people in there and those people would figure out a way to fix it and cap it.”
There is no manager’s playbook for a disaster of this size. Not knowing what would come next, Pace launched a public relations campaign to show Legendary’s customers that the situation on the water — at least their stretch of the Gulf — wasn’t nearly as bad as the media portrayal burned into everybody’s minds.
With the summer selling season essentially lost, company management also focused on employee morale, which was no easy task.
“We met and realized that we couldn’t focus on it, and it couldn’t become what we were all about,” Pace said. “We had to stay [focused on] the main thing, which was taking care of the customers that were using their boats, taking care of the customers that were still coming to see us.”
Legendary’s staff also set about a massive cleaning project that included neglected maintenance, painting projects and anything else to keep people moving and their minds off the still-unfolding disaster at sea.
Because the company’s locations were not physically damaged, there was no basis for an insurance claim. However, Legendary negotiated with BP for a settlement Pace found agreeable, which softened the blow of the lost selling season. Once the oil well was capped — nearly five months later — the company threw the biggest party in its history to celebrate its capping.
“We wanted to let everybody know that it was very difficult, it was awful and all those other things, but they capped it and now we had to go back to business, let them go back to the business of cleaning it up,” Pace said. “We had to go back to the business of having fun and selling memories and great experiences for our customers and their families.”
While Legendary’s marketing efforts focused on showing the situation as it was and, admittedly, putting a spin on the situation that was as positive as possible, one of the challenges was being careful with the message in a way that respected all of its neighboring businesses — fishing, tours, parasailing to name a few — that faced an even greater impact than Legendary’s stores.
An Alabama tornado outbreak
It was 5:45 a.m., but Alred Marina’s Russ Cranford, his wife and two kids were awake and huddled in their basement as three simultaneous tornadoes roared through town. The worst lasted 20 seconds, then silence.
It was part of a three-day tornado outbreak that was one of the largest and deadliest ever recorded. In total, 358 tornadoes impacted the eastern part of the country, including three that hit Guntersville, Ala., on that Wednesday morning.
Cranford’s phone rang after it passed, a call from one of his family marina’s live-aboard residents. A twister hit the marina, several docks were completely destroyed and it was possible people could be trapped on their boats.
A 10-minute drive in normal conditions, it took Cranford 45 minutes to reach the marina. He spotted the damage from afar.
“When I came over the river bridge and looked over here, my heart just sank. I couldn’t imagine that. I thought maybe there was some roof missing or a few things like that, maybe a few boats drift because they broke loose or something like that. One pier was turned 90 degrees [from] where it used to be, the other one right next to it was picked up and moved 80 feet and dropped,” he said. “It was just a big wadded, cobbled mess and there were boats out there floating around in the harbor.”
In seconds, winds ripped through causing $2.7 million in damage. Having good insurance, Cranford found, wasn’t enough to prevent a significant hardship for the business in lost customers, lost revenue and insurance premiums that tripled after such a large claim.
All told, 20 boats were damaged at the marina, seven were total losses. Some were damaged from the falling dock, while others were damaged from debris flying through the air.
Alred’s insurance claim took longer than he would have liked. With nowhere to put boats, customers had to take them somewhere else during the recovery. For a variety of reasons beyond the business’ control, 35 never returned.
“We’re kind of a destination place, it’s not like the coast where people are passing by all the time,” he said. “You have to want to come here, so that’s been the hardest part of recovery.”
As his wife’s family business previously experienced a significant loss, Cranford immediately began taking pictures of the damage and working to contain oil slicks in the water.
Cranford took issue with his insurance company’s response after the fact, as the structural engineer it sent had no marina experience. After seeing his initial report, which he said included significant inaccuracies and undervalued the cost of the repairs, Cranford hired a professional loss consultant to represent his interests with his insurance provider.
The initial insurance settlement offer was between $1.5 and $1.6 million. Upon hiring Keith Hayman, a catastrophe team specialist at GGG/Adjusters International, Cranford no longer had to deal with his insurance company personally. Hayman handled all communication from that point as he negotiated a better offer for the business.
The hire paid off, as Hayman was able to increase the final settlement by approximately $750,000. That additional money allowed Alred to rebuild its docks and begin a marketing campaign to attract additional customers to its new docks.
Alred Marina also lost money through its business interruption insurance, which insured the business for up to 30 days in the event of an incident that prevented the company from operating. By coinsuring a portion of the loss, as well as underestimating its business income on the policy, the business incurred a penalty and only received 59 percent of its business loss.
“The biggest deal is just trying to stay in touch with your customers and make sure you’re insured properly,” Cranford said. “Everybody can be insured, you’ve got to be insured properly, that’s the key.”
When to hire a professional loss consultant
Alred Marina’s journey through the insurance claim process, along with the stories of Legendary Marine and Seattle Boat Company, illuminates the burden that falls to business owners trying to rebuild after a disaster.
Few business owners are well read in the minutiae of commercial insurance policies. To understand what can be done in advance, we spoke with Keith Hayman, a professional loss consultant from GGG/Adjusters International who guided Alred Marina’s claim through the process.
Given their steep cost, Hayman suggests that business owners should consider the service of a loss consultant when a claim exceeds $50,000. He added that many insurance professionals have begun to expect the addition of loss consultants to major claims, as it’s often in their best interest.
“Then they realize they’re going to have to pay what they’re supposed to pay on the claim,” he said. “They try to deter their policy holders from hiring us, but it’s their right … it’s actually the insured’s right to be able to hire an advocate.”
In business claims where totals can easily exceed $1 million, Hayman likens the situation to a large, complex business deal where most people aren’t comfortable or familiar with the process.
Professional loss consultants often cost 10 percent or less of the total claim, which can vary by situation. Hayman suggests business owners hire a loss consultant immediately in the event of a large-scale disaster. He added that insurance companies often underestimate labor and materials costs, which can spike in the aftermath of a large-scale disaster like Hurricane Sandy, as well as things like overhead and profit that some policy holders can be entitled to.
Aside from taking photos of your facility and storing them in the cloud before any disaster strikes, Hayman also advises business owners to keep and review the full copies of their insurance policies to make sure they understand their coverage before it’s too late.
“Review your coverage and make sure you’re adequately covered because business income changes each year, valuations of boats change each year,” he said. “If you own your building, valuation of your business and the cost of construction changes.”
Hayman recommends exploring coverage with an extended period of indemnity, which provides assistance after the date of restoration as a business slowly regains its momentum. Such periods are often 60, 90 or 180 days, which is an area where Hayman said insurance companies will often dispute.
He also suggests business owners conduct regular inventories, and keep facilities maintenance records so insurance providers can’t argue a pre-existing condition with the building or grounds.