TT Talk - After the Storm
The meteorologists will no doubt continue to muse about the factors leading to the emergence of a late tropical storm heading so far north before being drawn inland on the north-eastern coast of the United States, combining with other weather systems from the north and west. The reality of heavy rain and snow, on top of extreme winds and massive storm surge, are far more immediate to the tens of millions of people as they struggle with damage, and the loss of power and other services. Our thoughts are most of all with those affected by this storm - as they have been with previous natural catastrophes in places like Thailand and New Zealand.
It will, of course, be some weeks before the full extent of ‘Hurricane Sandy’ can be assessed. News and images make clear that there will be significant disruption to supply chains, either through damage to goods – often through flooding or consequential fire – or to infrastructure and equipment. As businesses start the process of recovery, we share some thoughts from the TT Club’s experience.
Infrastructure and Equipment
As you look to assess the damage and ensure that protection systems (both security and fire) are operational, be alert to potential hazards from damaged power services and the like. The immediate priority may be to protect the facility and mitigate your potential losses. For example, if equipment or machinery has been affected by water, you should take steps to dry out electrical systems and protect all parts against the development of corrosion, as well as securing buildings against further weather damage.
Notify your insurers
High on your list should be notifying your insurers – best done by phone to ensure that the message has got through (they too may face storm disruption) – and taking their instructions. Of course, this verbal first notification should be followed up in writing. It is, however, always prudent to ensure that you have your insurer’s agreement before you engage any contractor to assist you in any particular aspect of your business recovery.
Cargo may need to be segregated, subject in some circumstances to customs agreement, and spillages cleared or contained. Any hazardous material spillages will require appropriate personnel protection, under guidance from experts or emergency services. Even before a surveyor arrives, you can start making an inventory; any debris or damaged items should be photographed before moving to create a proper record.
Keep customers informed
Early and periodic communication with your customers is strongly advised, keeping them as fully apprised of the situation as possible. In the first instance, cargo interests should be told to invoke their cargo insurance, if they have taken it – policies written on Institute Clauses (as is the case with the TT Club’s cargo product) will include cover in respect of storm and flood. Keep the customer informed about intentions to engage contractors to remove cargo, and to salvage what is possible or arrange to dispose of what cannot be salvaged. It may also be possible to work with your customers’ assessors and decide on a joint basis what is salvageable.
Assert the right to recover costs on a pro rata basis for this work – unless your contract denies this. Although trading conditions may not contemplate this type of clean up, you may be successful in recovering costs on a ‘quantum meruit’ basis that your behaviour was responsible and reasonable, and you are were entitled to be indemnified for what was incurred in the common good.
Give your customers an opportunity – though not too long – to respond with their agreement to any proposals for any disposal. Even for those who fail to respond, it will help in defending any future claims to evidence your actions as having been reasonable.
Unless there is a special provision in any given contract for carriage, handling or storage which makes you liable for claims caused in Act of God circumstances, it is likely that liability for damages arising from this storm event can be declined.
It will doubtless be a painstaking process getting everything back in order, but including steps such as these in your recovery process should help. And whatever the extent of the loss you incur, plan to take time to evaluate what went well in the planning and handling of the event, and what could be improved in the future.
For additional materials, you could refer to the Club's handbook 'WindStorm II - Practical risk management guidance for marine & inland terminals', available both in printed form and as a download online. It is free to Members of the TT Club and ICHCA International in the private member's section of the website, and can be purchased by non-members at £36.00 using the appropriate order form.