Earthquake Resilience: Loss Prevention and Insurance Recovery Considerations

The 7.0 magnitude earthquake that struck Anchorage, Alaska, last month caused major damage to roads and buildings, power outages, and closures of schools, government offices, and businesses. The good news is that no fatalities or major injuries have been reported and many roads have been quickly repaired. The bad news is that full recovery from the destruction of key infrastructure and other property damage will likely take many months and may pose hidden dangers.

Many of the world’s most populous cities lie on fault lines, putting them at risk for potentially powerful earthquakes. Coupled with the inability to predict when an earthquake may occur, it’s paramount that global organizations have plans of action to respond to earthquakes.

Preventing Further Losses

In the immediate aftermath of an earthquake, you should first check on employees and determine how to assist those whose own properties suffered damages or may be injured. You should also identify any potential employee safety impacts at or near worksites.

Visible cracks and ruptures are not the only threat to earthquake victims and employers. Gas pipe leaks and resulting fires, for example, are not rare occurrences, while broken water pipes can exacerbate property damage and escalate recovery costs and time.

When access is possible and it is safe to do so, businesses should start the process of assessing damage to their properties and surrounding infrastructure and take appropriate steps to reduce the potential for further losses. It’s essential to engage your own experts and work closely with local government officials and agencies to ensure your properties have not been unduly compromised. You should also check on the utilities and services you connect to and assess road and transportation infrastructure reports from across the region, as impairments may limit your operational capabilities and employees’ movements, customer access, and deliveries of goods and services.

Starting the Road to Recovery

Once damage has been assessed, your organization should look to insurance to start recovering and rebuilding. Keep in mind the following:

• Business interruption, which can be significant following an earthquake, can be mired in coverage confusion. How does a key supplier’s closure or impeded access to your business affect a potential claim? What happens if the government shuts down an area or otherwise prohibits access to critical locations?
• Ongoing service interruptions are likely after an earthquake and can lead to similar questions. Are services like electricity, telecommunications, water, and sewage covered by the policy? Are there distance limitations? Is damage to transmission and distribution lines covered? 
• Even if you don’t suffer significant direct damage, your business can be severely affected if customers stay away.
• The extent of damage may lead to complex applications of deductibles.
• Loss management plan decisions — especially those related to reinstatement, replacement, and mitigation — will need to be made quickly and effectively.

Getting back to work after an earthquake could take time and significant effort. Having a clear understanding of your property risks, actions to take in the immediate aftermath, and the scope of your insurance coverage will better position you to start the recovery process.