On June 28, 1925, the residents of Santa Barbara went to bed on a hot, humid, and still night. At 3:27 A.M., the pressure gauge at the Santa Barbara Water Department recorded the shaking caused by a small earthquake, and the city manager, Herbert Nunn, awoke to the strong odor of crude oil seeping onto the beach 85 feet below his bluff-top house.
At 6:44 A.M., a magnitude 6.3 earthquake rocked the city, causing widespread damage. While most homes survived the earthquake in relatively good shape, commercial buildings did not fare as well.
Along State Street, the rubble was so thick in the middle of the street that cars could not pass. Several hotels partially collapsed, some other buildings completely collapsed, and the Sheffield Dam cracked-open, sending a wall of water surging straight to the ocean. Thirteen people were killed, many fewer than would have been had the earthquake occurred several hours later, once citizens had ventured outside to start their day.
By destroying much of Santa Barbara's commercial district, the earthquake proved a boon to Santa Barbara's businesses. City officials seized the opportunity to enforce a stricter building code, requiring commercial buildings along State Street to conform to a Spanish-Moorish style of architecture. Thus the 1925 earthquake is responsible for the distinctive architecture we enjoy in the city today, which has help make Santa Barbara a popular tourist destination for over 70 years.
In the past few weeks, the number of earthquakes in the general area of Santa Barbara and Los Angeles seems to have increased, especially those of magnitude 2 or higher. Given the city’s history, and the destruction we experienced, particularly for businesses, and in light of our recent brush with near disaster with the Jesusita Fire, I thought it would be of value to address some of the ways in which businesses could prepare for a disaster.
In this article, I will discuss three important aspects of business preparedness that all business owners and managers should address: appropriate insurance coverage, data protection, and preventative measures to reduce employee injuries.
According to the California Governor’s Office of Emergency Services (OES), after the 1989 Loma Prieta earthquake, 400 businesses were destroyed and more than 3,500 others were damaged. Additionally, after the Northridge earthquake in 1994, more than 89,000 businesses requested financial assistance from the Federal Government.
Most commercial (and homeowner) property policies exclude coverage for earthquake damage and earthquake sprinkler leakage. The commercial earthquake insurance policy, more commonly known in the industry as the D.I.C. or Difference in Conditions policy, is needed to cover the additional risks associated with floods and earthquakes. Minimum policy premiums are established to reflect current conditions and expenses including, but not limited to: catastrophe reinsurance capacity, portfolio probable maximum loss analysis, and individual risk evaluation and exposure to known earthquake faults, flood zones, etc. Actual D.I.C. premiums are based on an analysis of the individual risk, the application of the appropriate rates, and the underwriter’s judgment.
Difference in Conditions policies provide coverage beyond that normally provided by standard fire policies. The most commonly provided additional perils are earthquakes and flood. However, additional peril coverage may be provided depending upon the business’ needs and the specific, individual risks.
Coverage of up to $10,000,000 on any one policy or risk is available from a variety of carriers that specialize in D.I.C. policies. Reinsurance in approved companies may be used to provide up to $15,000,000 in coverage. A D.I.C. policy covers direct losses resulting from an earthquake (or flood), as well as the loss of business income, which could make the difference between a company surviving a quake and failing.
A D.I.C. insurance expert is needed for this type of coverage. General insurance brokers here in town can refer businesses to brokers that specialize in D.I.C. policies to help them find the coverage they require.
Business owners may not always think about earthquake insurance, since the likelihood of a major quake is small, but every business should have earthquake insurance. The consequences of not having it could be devastating or even fatal to the business.
One of the most important assets a company has is its information. Whether we are talking about client files, accounting records, or technical information, such as architect’s drawings, schematics, and medical imaging, protecting information in the event of a quake is of paramount importance. Even if a business’ physical location is spared complete destruction, a power surge or the destruction of computer systems through fire, water from sprinklers or firefighters, or falling debris could devastate a business.
Business owners and managers should have active, regular backup policies and procedures in place, with copies of all data kept offsite and secured. There are a variety of services that specialize in data storage, protection, and maintenance.
Sean Callow, co-owner of Great American Records Management (805.968.1960) states; “Every business in Santa Barbara needs a business continuity plan. This plan should include everything from emergency contact numbers, to file recovery, both electronic and hard copy, to the sequence of actions necessary to restart the business for each potential disaster (fire, flood, earthquake).”
Preventative measures to reduce employee injuries
Dallas Jones, Director of the Governor’s Office of Emergency Services, suggests that businesses could reduce the potential effects of earthquakes and other disasters by taking simple, cost-effective, and proactive measures prior to an earthquake. He recommends that businesses conduct first aid and CPR training for members of in-house emergency response teams or sponsor educational activities to increase the home and workplace preparedness levels of employees.
“Reducing hazards in the workplace can also greatly reduce the risk of injuries following an earthquake,” says Jones. “Repositioning furniture in offices and securing bookcases, file cabinets, computers and other nonstructural items can greatly reduce injuries to employees and customers without a substantial investment of money.”
Additional mitigation steps recommended by Jones include retrofitting unreinforced masonry and other vulnerable buildings, securing tall industrial storage racks and hazardous material containers, and using restraints to prevent fragile inventories from falling off shelves.
“Some of these measures are more complex and expensive than others, but each of them will help small businesses and large corporations alike improve their chances of continuing to function after a damaging earthquake or another emergency.”
“The time and energy a company puts into preparing for disasters and addressing recovery issues can make the difference between surviving and failing,” Jones said.
All businesses in Santa Barbara should think proactively and develop business continuity plans that incorporate the key points outlined in this article. For those businesses needing assistance, there are experts like Mike Limotta of Limotta Internet Technologies in Solvang (805.693.0136), who can help design a business continuity plan that fits each company’s specific needs.
My family was in the security alarm business in Houston. I cannot count the number of phone calls we would receive after someone had been robbed, where the caller was desperately trying to buy a security system. In Texas, we call this closing the barn door after the horse done run out.
My best advice is: Don’t wait until after a disaster to decide it is time for you to get insurance, design a business continuity plan, or make your company a safe place for employees. Take action now and protect your business, your livelihood, and your employyes.