Disaster Planning and Managing Large Losses – The Ten Commandments of Success

1. Disaster Planning and Managing Large Losses – The Ten Commandments of Success

2. Michael Horvath, Senior Vice President, Risk Management mhorvath@simon.com 317-263-7164 • Steven Sachs, EVP, Director of Real Estate and Hotel Practice, Willis steve.sachs@willis.com • 410-584-8935 • John R. Cadarette, Jr., Managing Director, The Claro Group, LLC jcadarette@theclarogroup.com 310-581-6278 • D.J. Corrigan, VP and Senior Executive General Adjuster, Cunningham Lindsey dcorrigan@cl-na.com 312-454-9200 X3911

3. Session Objectives • Practical Hands On Information For You to Utilize in Developing Catastrophe Planning • Catastrophe Planning Follows Basic Risk Management Process • How To Involve Your Insurer As Part Of Good Risk Management And Successful Win/Win Loss Negotiations

4. What to Take Away • Understand the wide-ranging impact of a successful disaster response program • Recognize the critical elements of a disaster recovery plan • Know when and how to negotiate and manage resources for large loss claims

6. Preparation Preparation of Emergency / Catastrophe Plan • Risk Manager is Facilitator • Put Together a Team - Use All Resources • Operations (field) • Disaster Tested Manager • Insurer / Broker / Consultant • Model Approach

7. Preparation • Preparation of Emergency / Catastrophe Plan • Local Customization • Quality Control Procedures • Approval • Audit • Use of Technology • Operating Units Versus Corporate Headquarters

8. Risk Management Process Identify Types of Catastrophic Situations That Could Affect Your Operations • Casualties (Fire, Natural Disaster) Use your own engineering reports / loss history EQ / Flood / Windstorm analysis by insurer / broker / consultant Cyber Attacks

9. Risk Management Process • Terrorism / Extortion • Third Party Criminal Acts • Interdependencies (or where in the food chain are you?) • Have you named all of your key suppliers and/or recipients? • ID secondary suppliers and/or recipients

10. Risk Management Process Attempt to Measure Impact to Company's Assets and/or Earnings • Liability (Life Safety) • Business Impact (maintain/improve market share) • Goodwill / Image • Lowered Productivity • (e.g., Employee Downtime) • Value of Key Employees

11. Critical Success Factors • Quick Response Team • Resources • Headquarters Operations • Share Plan With Your Underwriters • Align coverage’s and expectations • Manage Corporate expectations

12. PreparationKey Items To Be Included In Plan Specialty Emergency Contractors Communications Utilities Security Transportation Engineering Services Hot site for IT General Contractors Roofers Plumber / HVAC Sprinkler Contractors Glass / Glazers Cyber Resources Trauma Counseling

16. Pre-event HoursEstablish Home Office ResponsibilitiesEstablish Primary and Alternate Field Headquarters • Food • Clothing • Staff • Phone Book • Cash • Security (Police/National Guard) Headquarters

17. Pre-Event Hours • Conduct Pre-Event Conference Calls When Possible (Hurricane and Flood) • Establish Pre-Event Checklist to Include: • - Food - Materials/Supplies - Clothing - Contractors Committed • - Accounting Cost Codes

18. Summary • Facilitate • Bring Resources Together • Develop Model Plan • Establish Quality Control Procedures • Responsibility / Authority • Use Technology if Possible • Distribute • Audit

19. Post-Event Actions • Implement Emergency / Catastrophe Plan • Quick Response Team • Establish Objectives • Media / Public Relations • Psychological Support Services for Employees • Coordination with Insurers

20. The Ten Commandments of Disaster Planning • Preparation, Preparation, Preparation leads to “360 degree credibility” • Follow the Risk Management Process • Make sure that you have coverage and no surprises (Policy Workshops) • The Risk Manager should be a facilitator and identify the best resources inside and outside of the company • There must be Quality Control which includes: • Practice • Required Updates • Audits • Where you are exposed to Natural Catastrophes, pre-commitment of key contractors and resources is critical. • Establish a Quick Response Team is critical • Establish Home Office responsibilities • Conduct Pre-event Conference Calls when possible (commencing 7 days out on named storms) • Share the plan with your underwriters

21. Managing Large Losses • The Story

22. Managing Large Losses • The Challenge • Negotiating Large Losses • Technical Expertise • Negotiation Skills • Really Understand the Provisions of Your Policy

23. Managing Large Losses I. Determine Management Objectives A. Meet with Management 1. Identify Issues Specific to Location • Designate single person in charge of claim A. Brokers will be critical to providing initial notice and updating carriers on a regular basis B. Calendar deadline for filing Proof of Loss

24. Managing Large Losses III. Meet with Company Disaster Recovery Team A. Confirm Objectives B. Agree on Roles C. Develop Detailed Scope of Loss on First Day CRITICAL – Establish internal cost code to track all time and expenses D. Team Should Meet Once or Twice a Day and Revise Scope at End of Each Day

25. Managing Large Losses • IV. Timely and Strategic Communication • A. Internal – key to have main point of contact to maintain control (may want to have under the direction of in-house counsel to establish privilege) • B. External – should coordinate with corporate communications department or specified person Caution: every analysis, email, memo or press release eventually may be viewed in litigation context . Do not speculate in writing and think, “would I enjoy being cross examined over this?”

26. Managing Large Losses V. Involvement of Insurer - The Objective is to Make Insurer a Member of Your Team A. Communicate Story of the Loss B. Create Win - Win Relationship C. Identify Your Business Objective and Strategic Issues – Realistic Claims Philosophy 1. Establish early on that you are carefully and fully preparing a fair, credible claim for all losses to which you are entitled under relevant policies

27. Managing Large Losses • 2. Do not include obviously non-covered claims as it will impair your credibility • D. Establish a Core Team as soon as possible • 1. Risk Management, Legal, Business Unit Reps, Development, Construction, Operations • 2. Outside Consultants: claims preparation experts, brokers, attorneys, technical experts E. Use Insurer as Resource 1. Equipment, specialty contractors, materials, etc.

28. Managing Large Losses F. Involve Insurer in Business Versus Insurance Meetings G. Discuss Advances and Payment Requests H. DOCUMENT ALL MEETINGS! • Written minutes at all meetings with emphasis on who, what, and when • Have specific action items and review at next meeting

29. Managing Large Losses VI. Business Interruption Loss A. Promptly Set up Meeting with Insurer, its Consultants and Your Management and Accounting Personnel B. Define How Income/Revenue is Earned and Is Impacted at The Facility C. Agree on Information and Method of Documenting Loss

30. Managing Large Losses VI. Business Interruption Loss (cont.) D. Establish Time Frame E. Attempt to Identify Issues Prior to Final Negotiations F. DOCUMENT ALL MEETINGS!

31. Managing Large Losses VII. Meet With Underwriters • Review Loss/Lessons form Loss in detailed, principled manner to ID possible policy changes

32. Managing Large Losses Conclusion: A Time To Shine In The Midst Of Darkness

33. Ten Commandments of Managing Large Losses • Provide notice to all relevant carriers • Determine management objectives and identify issues specific to the location • Communicate with Disaster Recovery Team to: a. Confirm objectives b. Agree upon roles • Develop detailed scope of loss by the end of the first day and update • daily at scheduled team meetings • Utilize a Win-Win strategy • Include insurance adjuster in business meetings versus insurance meetings

34. Ten Commandments of Managing Large Losses • 7.Discuss Advances and Payment requests early in the process • 8. Document all meetings • a. Who attended • b. Actions agreed upon and to be accomplished by whom • Require Insurer’s consultant be identified and on site as soon as possible • Business Interruption Loss – have an immediate meeting with Insurer’s “Accounting Firm” and your financial personnel and management to educate them as to how you earn your revenue in the context of the policy and agree upon information required to document the loss (document the meeting)

35. Contact Information • Michael Horvath, Senior Vice President, Risk Management mhorvath@simon.com 317-263-7164 • Steven Sachs, EVP, Director of Real Estate and Hotel Practice, Willis steve.saachs@willis.com • 410-584-8935 • John R. Cadarette, Jr., Managing Director, The Claro Group, LLC jcadarette@theclarogroup.com 310-581-6278 • D.J. Corrigan, VP and Senior Executive General Adjuster, Cunningham Lindsey dcorrigan@cl-na.com 312-454-9200 X3911