LAS VEGAS — Ray Shroyer of Metro Amusements (Streator, IL) came to work one morning to find that one of his key locations, a bowling alley, had burned down.
The fire department pushed the remains of all of his games from that location into a giant pit of rubble and debris. Fortunately, Shroyer’s records for the bowling center were offsite and not destroyed.
Shroyer wasn’t so lucky on another occasion. A massive storm hit town, just hours after his office building’s new roof was freshly tarred.
“You don’t know when disaster will strike,” Shroyer said. “It’s not always going to be a national emergency on the scale of Hurricane Katrina. A disaster is what happens to you.”
Shroyer spoke at a seminar on disaster preparedness, sponsored by the Amusement and Music Operators Association. The session took place on September 27 in conjunction with AMOA International Expo in Las Vegas.
The association’s interest in the topic became keen after many operators from Louisiana to Florida suffered in a series of hurricanes, of which Katrina was the most notorious. From New Orleans operators whose businesses were literally washed away, to Florida operators who lost power for several days in a row, the amusements industry weathered severe business storms as a consequence of severe weather storms in 2005.
With Shroyer on the dais was insurance expert Will Giambalvo, who has much experience coping with hurricanes, floods, fires, earthquakes and other natural disasters. From Greenville, SC, he serves as area vice-president for Arthur J. Gallagher Risk Management Services, America’s fourth largest insurance broker.
Adonna Jerman, executive director of the Illinois Coin Machine Association (Springfield, IL) completed the panel. Jerman and Shroyer headed the creation of a new publication, AMOA Guide to Developing a Disaster Management Plan. The seminar, aimed to draw attention to this issue, shared many highlights and recommendations from the book.
BEAT THE INSURANCE COMPANIES
Giambalvo began by admitting that disaster insurance is “not a sexy topic.” Industry members need to evaluate how they will respond if a natural or manmade disaster strikes, or if the government restricts access to an entire region, Giambalvo said.
He reviewed a series of hypothetical situations that, for many of his clients, have become real obstacles: “What if your customers could not get to their locations because streets were closed? What would you do if you came to work Monday morning, and your building wasn’t there?” he asked.
Disasters like Katrina, which are predicted years in advance, are rare. More common is the surprise fallout, like the damage seen 200 miles inland after Hurricane Hugo in 1989, said Giambalvo. Some businesses far from shore suffered almost as much property damage as those on the coast during that disaster, he said.
Giambalvo provided guidelines to ensure that a company in the amusements industry has the necessary insurance coverage in place. He suggests:
1) Make sure dollar limits on payments by the insurance company are adequate to reflect actual replacement costs of machines, office equipment, among other things – preferably based on a professional appraisal.
2) Verify that the policy offers true blanket coverage. This means that all numbers (dollar amounts of compensation that are contracted for) apply to any and all locations.
3) Take into account that after a regional disaster, construction costs will skyrocket. In the wake of Katrina, contractors were in such demand that construction prices rose from $130 per sq.ft. to $200 per sq.ft.
4) It is better to specify an agreed amount of coverage for your business alone, rather than to rely on co-insurance with locations. This can help a policyholder receive payment for his full claim even if he is under-insured, Giambalvo said.
5) Make sure the policy specifies if deductibles are per loss, per location or per machine, and ascertain that the language spells out the policyholder’s maximum out-of-pocket costs.
6) Carefully review the meaning of any time-trigger clause related to business interruption insurance. A 72-hour policy kicks in after three days – if those hours are counted on the 24-hour clock. But a 72-hour policy kicks in after nine working days if those hours are counted against the typical nine-to-five working hours on normal business days.
7) Business insurance policies should spell out the precise definition of a location. This term can be understood to mean one building, a college campus, an entire mall, etc. He strongly advised that policies include coverage for “unscheduled” or undisclosed locations, which ensures coverage of machines that are rotated between locations or that are damaged in transit between locations.
8) A specific “location limit” is a good idea to ensure full coverage, Giambalvo said.
9) It is vital to know if a policy contains exclusions, such as for flood, windstorms, terrorism or other specific catastrophes. Some policies specifically exclude paying for office machines (computers, copiers, etc.) that a policyholder might assume are covered under business interruption insurance.
10) Be cautioned that clerical errors in an application for claims coverage can easily cause the claim to be delayed, disputed or even denied.
11) Carefully study any written document before signing it, to ensure that the terms verbally agreed to are faithfully reflected in the written language.
12) All claims should be meticulously itemized and documented. He revealed that putting all claims and documentation into a handsome, well-organized notebook helps ensure that processing will be expedited.
13) Policyholders should begin their initial meeting with a claims adjuster by explaining their industry and how business is done in that industry, he said.
14) Take complete notes during all meetings with claims adjusters, and promptly send copies to the insurance company. These MORs (memorandums of understanding) should confirm objectives, scope of damage, and agreed repair, replacement or reconstruction price ranges that are discussed verbally with the adjuster.
CREATING A DISASTER PLAN
ICMOA’s Jerman focused on key steps in creating a disaster preparedness plan for the typical operator. The U.S. Occupational Safety and Health Administration requires all companies to have a disaster plan, she said. Companies with 10 or more employees are required to put that plan in writing.
In addition, she said, the U.S. Homeland Security Department requires all American businesses to ensure that the company’s disaster plan is accessible to all employees.
Planning begins with assessing the risks to assets, systems, plant and personnel, said Jerman. She reminded listeners that disasters include natural catastrophes, but also a range of man-made problems such as arson, chemical spills, bio-terrorism and riots.
Next, she advised operators to pick a crisis-response team. This distributes responsibility throughout a company, and ensures broad employee involvement and support for the final plan.
Jerman urged operators to visually document all assets by using a scanner, copier, camera or camcorder. Assets include games, jukeboxes, office equipment, cellphones, radios, vehicles, furniture and repair equipment. The list should be backed up weekly on a zip drive, and a duplicate copy should be stored off-site, along with copies of the written disaster plan, she said.
Jerman and Shroyer both urged operators to create remote bank accounts with reserve funds, unless their local bank has many national or regional branch offices that could not be compromised in case of large-scale regional disasters.
An operator’s disaster plan should include a building exit plan, in case of fire or other emergency, Jerman said. It should note locations and give direction to operate shut-off valves for water, power and gas.
Each employee should have an emergency kit in his or her vehicle, containing a hand-crank radio, a flashlight, food and water supplies for three days, a manual can opener, blankets and a first aid kit. Kits of this nature are available inexpensively from online suppliers, Jerman said.
The emergency kit and the disaster plan should both contain lists of key phone numbers, said Jerman. These numbers must include police, fire department, and ambulance service, and should include the company’s plumber, electrician, banker and insurance agent. Many copies of the emergency phone numbers list should be posted both inside and outside of the operator’s building, Jerman said.
The plan must specify a meeting place for staff, in case of local or regional evacuation. This spot should not simply be an intersection somewhere in town, because people loitering in such a spot may well be ordered to “move on” by police or firefighters. A building or location where people can comfortably wait for long periods is recommended, such as a school, hotel or public library.
An emergency communications system is a crucial component of any good disaster preparedness plan, Jerman said. A “phone tree” should be created to help spread information through the company. The contact information of a local radio station should be listed, in case the company needs to submit an announcement for broadcast.
USING PREPAREDNESS MANUAL
Ray Shroyer pointed out that the AMOA Guide to Developing a Disaster Management Plan includes numerous forms for operators to help them prepare for emergencies. He said that as a test, he hired a college student to complete the forms at a low wage. The student completed the task in 30 hours.
Updates to these forms and documentation should be performed annually, and require only five hours’ labor, Shroyer said. The CEO’s initial involvement takes 10 hours of his personal time, but the investment is well worth it, Shroyer said.
“What is the resulting book worth?” he asked. “It is worth what my company is worth,” because the documentation could be the crucial tool that enables an operating company to recover fully from a disaster, said Shroyer.
Shroyer confirmed Jerman’s advice that each person should have an emergency kit on hand, and added that each person should also have a kit at home. Calling it a “grab and go bag,” Shroyer advised business people to keep kits near the doors of their homes and establishments. “It’s not very expensive, but if you have it when you really need it, it’s priceless,” he said.
A copy of AMOA Guide to Developing a Disaster Management Plan is free to every member of the association. For details call (800) YES-AMOA or visit amoa.com.