Public entities (PEs) are in a unique position as policyholders with a vast saturation in relatively tight geographic markets. Recognizing the larger sociopolitical and financial impact of loss to PEs, even finite events can yield devastating effects with widespread ripples throughout the constituency. In the face of potential disaster, one question prevails: Since all property hazards cannot be eliminated, how can a disaster be kept from turning into a nightmare? At the risk of sounding trite, failure to plan becomes a plan to fail.

Preparing for disaster before it strikes

Rarely is this failure intentional, but the effects can be devastating. Fortunately, review of existing protocols and coverages paired with the drive to reevaluate, update and if necessary, correct, will help ensure a smooth post-loss recovery. Spanning nearly 2,800 miles coast to coast, weather (and associated catastrophic events) varies greatly across the United States. Recognizing the limitations of common denominators, let’s consider a potential category three hurricane — combining wind and water — the only two natural perils without geographic restriction. This well-formed 120mph storm will cause widespread, devastating damage — spanning the entire PE-served geography. Citing the National Hurricane Center, “well-built framed homes may incur major damage or removal of roof decking and gable ends. Many trees will be snapped or uprooted, blocking numerous roads. Electricity and water will be unavailable for several days to weeks after the storm passes.” While this storm is weeks, months or even years away from formation and impact, the time to prepare is now.

Nearly every public entity has some form of natural disaster plans. Most commonly, those plans include evacuation routes, emergency shelters or other mechanisms to maintain a level of service to the public. While the mission of PEs is to serve the constituency, when is the last time this effort was focused inward? Without ensuring its own post-disaster stability, how can it continue to serve the public?

Depending on the size, scope and financial feasibility, it’s understandable that most PEs nationally do not have a qualified, dedicated risk management professional. All too often this role is served by administration pulling double duty, with this a position they were likely voluntold for. Recognizing that this is not the person’s primary daily function, it’s very likely that the points of discussion below have sat unaddressed for some time.

• Policy coverages: Are all regularly occurring natural perils covered by some policy? Do earthquake or flood endorsements need to be examined?
• Statement of values: When is the last time this list of insured property was cross-referenced?
  • Property insured
    • Still paying for insurance on a building sold or torn down three years ago?
    • Was that new addition for the south wing ever integrated into the main building?
    • Are those leased portables on the policy? Does the lease say insurance must be carried?
    • Is there an accurate inventory of contents within a given building or room?
  • Valuation: In light of the pandemic, the international shipping and supply crisis, and current inflation, is the amount of insurance carried appropriate to restore or replace damaged items?

The agent or broker will be able to assist, at minimum, with a copy of the current schedule. Cross-references with historical sales, etc., will need to be reviewed in house, since each PE knows what it owns or leases.

Pricing is a complicated situation. Since the pandemic began in 2020, construction pricing nationally has skyrocketed, leaving many policyholders (PE or otherwise) in a position where their statement of values (SOV) predates these market fluctuations. Claims are adjusted based on date of loss or post-loss pricing, reflecting real time. Unlike any time in recent history, this places the pre and post-loss in conflict, most often to the detriment of the policyholder. Whereas a 80% coinsurance provision was well-met in 2017, today that same dollar may yield a 55% insurance to value (ITV). Deltas, while usually unintentional, can be vast, resulting in substantial dollar adjustments. If these figures are untouched, or adjusted regularly on a purely percentage basis, engaging a building valuation expert, such as Sedgwick, can substantiate any necessary SOV increases.

Looking ahead

The time to prepare for a potential disaster is now; it’s not a matter of if, but when a catastrophe will strike. While there will always be evolving challenges for public entities to consider, the steps outlined below are always good points to revisit on a regular basis.

Establish a team

Who will run the show in a post-loss event? After a disaster event, employees are likely to be victims, as well as community leaders. Identify talent within the organization to create an internal triage team for insurance.

• Who will be the main point of contact? Who is their backup in the event a tree is through their house?
• Who will be available to walk the adjustment team through all impacted properties? These long days may require overtime.
• Who has keys to every single door in the public entity? Do they all work? Are there backups?

Identify and nominate an account adjuster

Public entity, like any other specialty, requires a deep understanding of large-scale account management, in addition to the nuances of public service in an often politicized environment.

• Post disaster, restoration companies will flood the area. Has the PE considered signing a service agreement with one ahead of a disaster? This will ensure agreed pricing and guaranteed service by a known and trusted partner
• Does the PE regularly work with an architect, contractor, engineer, accountant, etc.? Consider establishing that in a post-loss environment, they will be onsite, walking with adjustment for resolution in real time. Agreement up front can vastly reduce discrepancies down the line.

Virtually introduce all parties

• Identify and preserve the documents: Are these readily available? Chances are, someone will be asking.
  • Digitize blueprints for all impacted or owned structures.
  • Are ACM books updated?
  • Scan important documents into a file share system. Even without house power, anyone can send a link from their phone nowadays, or just share with the account adjuster long before they’re ever needed.

Preparation sounds like a daunting task, and sure, it will take some time (and perhaps money) to ensure success. However, while there’s always hope that it will be time wasted, it’s much more likely to be time well spent.

This blog is the first installment in a series where our experts highlight actionable pre-event, event and post-event adjustment and reconstruction for public entities. Stay tuned for the second blog, which is coming soon.