While still dealing with COVID-related business losses, this winter may bring an additional layer of unwelcome obstacles for the fashion and apparel industry looking to ensure freezing temperatures don’t further disrupt its supply chains. According to the Insurance Information Institute (III), winter storms caused a record $15.1 billion in insured losses in the first half of 2021, almost completely due to the February 2021 winter storms that affected a large area of the United States.
The best risk management practice for fashion and apparel businesses to reduce costly accidents on their properties is by taking proactive steps to control or eliminate losses from slips and falls and other incidents on the premises. To minimize property losses and claims, follow this safety checklist before the temperatures start to drop.
• Take temporary precautions. Temporary heat can be brought into rooms at a greater risk for freezing. Temperature-sensing cables can be tied to interior sprinklers that set off an alarm when a certain temperature threshold is crossed. Extra pipe insulation can also be added in high-risk areas for very little cost.
• Annual inspections. Boilers and roofs should be inspected for potential defects at least annually, preferably just before the winter season and again after a major storm.
• Maintain temps. To prevent frozen pipes, keep thermostats at 55°F or higher.
• Clear snow/ice accumulation. Snow loading on a roof can cause deflection and sagging of the structure and, in some cases, roof collapse. Ice damming, or the buildup of ice on the eave and soffit area of a roof, can cause chunks to break off and fall, or when melting, can cause water to seep into the building. Put preventive measures in place like pre-arranged snow removal for heavy accumulations or rakes on sloped roofs to reduce the risk of falling snow/ice. Block off access under areas where potentially dangerous situations may exist.
• Make frequent use of water supply. When outside temperatures remain below freezing, it’s less expensive to run faucets regularly than to repair a frozen or burst pipe.
• Backup the backup power. Make sure you store the appropriate amount of fuel required for backup power to function as needed.
• Safely use portable heaters. The National Fire Protection Association (NFPA) reports that space heaters account for as much as one-third of heating fires each year. This can be the result of heaters placed near combustibles, heaters not properly plugged in or those lacking adequate safety features. Require employees using portable heaters to purchase only those with certification from an independent testing laboratory and ask that they gain approval from a supervisor or facility manager before using it.
• Have an official plan. Create a winter advisory plan that specifies when early dismissal or office closure is appropriate and how the information will be disseminated to staff.
Understand Your Insurance Coverage
Commercial property and casualty insurance policies almost always include “direct loss” insurance. Direct loss refers to any damage immediately inflicted by a winter disaster, accident or other events known as “perils.” If a blizzard damages a roof, a direct loss will include damage to the structure, as well as to equipment, inventory or other items damaged as a result.
However, “indirect losses” can be more damaging to a company, such as losing several months’ worth of income as a result of physical damage caused by a weather-related event. Often referred to as “consequential losses” in business insurance policies, indirect losses are not inflicted by the peril itself but describe losses suffered as a result or consequence of the direct loss.
Business interruption (BI) is one of the most common examples of an indirect loss. When the business interruption is the result of a natural disaster, BI will bridge the income gap caused by the disaster, finance a temporary relocation for the business and more.
It’s critical to review insurance policies to understand that they include indirect loss insurance and, if not, to secure business interruption and additional insurance coverage for your business, such as the following:
• Contingent business income coverage: When it is the result of an unforeseeable supply chain failure that prevents your organization B from delivering its services, contingent business income coverage (CBI) will bridge the gap of income for your business.
• Flood coverage: Most business property policies exclude flood coverage. Businesses typically buy minimum flood coverage limits without considering that floods can come from even minor storms or no storm at all.
• Cyber liability coverage: Phishing and email scams that include malware are known to increase post-storm, when companies are more vulnerable to cyber intrusion and attack. Consider cyber liability coverage if you do not already have a policy in place.
• Examine deductibles: If your business has many locations, occurrence or percentage deductibles could potentially be more costly. Many policies will have lower deductibles for wind and hail events than for a named storm.
Work with your insurance advisor to ensure you are prepared for the remainder of this winter season and the potential losses it may bring with it.
Frank DeLucia currently serves as senior vice president of Hub International Northeast, a leading full-service global insurance brokerage. With over three decades of experience, Frank specializes in building insurance and risk management programs for the real estate and apparel industries and is a long-time active member of the Fashion Service Network (FSN). Frank can be reached by phone at 212-338-2395, or at frank.delucia@hubinternational.com. For more information on Hub International Northeast, please visit hubinternational.com.
