Ms. Needleman said that in the past eight years her firm has had two major business interruption losses–the 1993 bombing of the World Trade Center and the terrorist attacks that destroyed the World Trade Center last Sept. 11.

The losses were similar in some respects–they both involved all employees in the World Trade Center, about 3,500 people, and 1.5 million square-feet of office space, she noted. Property damage losses in the 1993 claim involved electronic equipment cleanup and painting of premises.

The business interruption claim in 1993, she said, was mitigated by the company's contingency plan.

Although “the best [business interruption] claim is the one that doesnt happen,” she said that business continuity planning should be a big part of the business interrupt discussion. Because the company had a facility on Varick St., they were able to work over the weekend, “and by Monday morning we were ready to trade.”

The 2001 event on Sept. 11 involved the same 1.5 million square feet of space and the same number of employees, “but in 2001 we had total destruction of the office space,” she said. “To complicate the claim, some of the documentation needed to make the claim was lost.”

At the time of her speech, she said, the company's business interruption claim was still in the analysis stage, “so we dont know the extent of it. But again, we mitigated our loss because of our business continuity planning.”

Ms. Needleman recommended that risk managers make an effort to communicate with members of their organizations prior to any loss. Meet with accounting groups and the controller, and “see who will be working with you on the claim,” she said. She also advised meeting with senior management to manage their expectations about potential difficulties that might be encountered with the business interruption process.

“It's important to communicate that this will be a long process,” she said. “It can take months or years to settle a claim of the magnitude of Sept. 11.”

Steven Ambort, senior manager, financial advisory services with Deloitte & Touche in Chicago, said that to avoid business interruption pitfalls, risk managers should:

Hire experts when needed instead of trying to do everything in house.

Develop a claims team that includes risk management, a broker, financial help, engineers, production-operations personnel, public relations and legal expertise.

Appoint a team of people who are accountable to the process.

Read and thoroughly review the insurance policy, looking at coverage limits, exclusions, and endorsements.

He advised risk managers to “lead the process, don't defer to insurance companies or adjusters.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.