Canadian Underwriter

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December 1, 2015   by Matt Johnson, President, Commercial Loss Experts, and Board Director, Disaster Recovery Information Exchange (Toronto)

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The importance of having a business continuity plan (BCP) is clear, but having a plan and keeping it current can have a significant impact on the time it takes to get a business back up and running.

Getting to that point involves focusing on a number of things, including the actual building in question and what should be included in the BCP to best reduce business interruption (BI).

A disaster affecting a building can come in many forms – consider, for example, a pipe burst, severe storm activity that causes wind damage, fire, flooding, sewer back-up and any secondary damage that can be caused when water is involved. How long it takes to dry building materials is critically important if secondary damage (such as mould) and contaminated water posing additional risks to occupants is to be avoided.

Whether an apartment building, office tower, hotel, hospital or shopping plaza, all commercial buildings inherently include complexities not present in residential structures. Complexities include different building materials, carpet tiles, commercial heating-ventilation-air conditioning (HVAC), pipes containing glycol, asbestos, elevators, escalators, high voltage, sprinkler systems, boilers, computer or filing rooms, specialized equipment and inventories and fire routes.

Despite these complexities, it is necessary to do whatever can be done to keep the business operating while restoration following a disaster is concurrently under way.

Although aging buildings and city infrastructure contribute to the increase in incidents affecting buildings, climate change is – and will be – a significant contributing factor.

Telling the Weather Story, a report released in 2012 by Insurance Bureau of Canada, cites an increase in Canada’s average temperature. “This is also the cause for the rising frequency and severity of

extreme weather events in Canada, such as floods, storms and droughts, because warmer temperatures tend to produce more violent weather patterns,” the report states.

Disasters cannot be avoided. The best recourse for managing costs is a rapid response and recovery process, mitigating damage and returning the building to an operational state in the shortest amount of time possible.


With water damage, for example, the sooner water intrusion can be stopped, any standing water removed and the building dried, the better the chances of reducing both primary and secondary damage. Consider that “clean water” (CAT 1) can become “grey water” (CAT 2) or “black water” (CAT 3) in as little as 72 hours, depending on the materials and contaminants through which the water is flowing, notes the third edition of the American National Standards Institute/Institute of Inspection, Cleaning and Restoration Certifications’ S500 Standard and Reference Guide for Professional Water Damage Restoration.

As the water degrades from CAT 1 to CAT 2 to CAT 3, the need to remove contaminated building materials rises. The degree of contamination of the source of the water – for example, sewer, toilets, dishwater or something else – will accelerate the contamination and the growth of harmful bacteria that can then become airborne and potentially harmful to occupants.

Contaminated water left untreated for as little as 24 to 48 hours can cause significant mould growth, creating a more hazardous environment for occupants and a significantly more costly remediation process, the S500 standard explains.

Mould growth requiring the removal of affected materials can transform a relatively inexpensive two- to three-day drying process into a one- to two-week mould remediation.

Not only will this increase costs associated with remediation, but it also ups the impact on the business and potential BI costs.

Effective communication and access to key building information and contacts can reduce unnecessary delays in the response and recovery process.

Using cloud-based systems accessed through smartphones or tablets allows companies to catalogue critical building information in one central system. These systems can also serve as a portal for job documentation, such as damage photos and reports, which facilitates decision-making by the building owner or insurance company throughout the recovery process.

In addition, emergency response/restoration contractors will have access to the information at the time of any loss. The idea is to keep the response tied to the building and have critical information accessible.

What approach should be taken to meet the twin goals of getting the building back to an operational state in the least amount of time possible, with minimal disruption, while also avoiding secondary damage?

Restoration expertise

It is advisable, if not crucial, that the BCP includes an experienced restoration contractor familiar with the commercial environment and who meets minimum requirements, including but not limited to, a written health and safety manual, certifications in remediating water, fire, mould, odours and asbestos, the equipment and manpower to provide emergency services 24 hours a day, and adequate insurance, namely $5 million in commercial general liability (CGL) and $1 million in coverage for mould and asbestos remediation.

Consider that a commercial environment, regardless of the specific type of building, has increased risk of liability to personal injury because of the number of occupants and public access. Exposure of one tenant in a multi-tenant building can lead to exposure for another, including as it relates to BI.

With pre-planning for rapid response and recovery, there will be less impact on BI costs. While a quicker return will save the insurer money, it can also help a business avoid a hit from which it cannot recover.

A disaster can have an impact on a business’ survival, with the Federal Emergency Management Agency reporting “40% of businesses never reopen after experiencing a disaster, and another 25% of surviving businesses will shut down within two years.”

Asbestos coverage is important for contractors since many buildings have asbestos-containing materials – including in pipe insulation, ceiling and floor tiles, boiler room insulation and drywall compound. For those providing mould remediation, they also need related coverage since water remediation has the potential to cause secondary damage in the form of mould.

These exposures must be covered through appropriate insurance. Note that “pollution coverage” may include asbestos, mould and hazardous materials such as lead, polychlorinated biphenyls and glycol.

In a residential setting, risk is typically less than commercial, likely requiring coverage limits of $2 million or less, with $1 million or less specifically for mould/asbestos.

Emergency service agreement

Another key element of a BCP is an emergency service agreement (ESA) with the contractor performing remediation and restoration work. Having in place an ESA allows a business to define the rules of engagement up front – among other things, as they relate to emergency, reconstruction, contents and documents, service process and communication protocol, pricing and payment terms – and can help to ensure unnecessary delays in the contractor getting started.

Not knowing some very simple things can lead to potentially costly delays: where to park restoration vehicles; location of loading areas; location of the breaker panel to shut down electricity; the contact number for the building’s electrician; and the location of the water shut-off valves. Easy access to this key information should come from the property manager, who must carry out proper record-keeping to ensure all details are current.

Keeping the emergency response building profile with the corporation’s building records ensures that all service providers and property management staff have ready access to accurate information.

Building profile

Emergency response can be expedited if responders and providers have access to the building profile. Having a prepared cataloguing of building features – for example, shut-off valves, location of electrical and mechanical rooms, security procedures, building contacts, tenants, specialty trades, HVAC, elevators, sprinkler systems, computer room procedures, building generator operation and hazardous materials on site – can help save time and allow for the most efficient and effective response possible.

Current Internet and mobile technology allows this information to be readily shared with property managers and service contractors. A cloud-based building profile system is a useful tool not only for cataloguing building information, but also for accessing the information when needed.

A business should also consider reviewing its building profile and performing a site survey with its commercial restoration contractor to build a knowledge base and a familiarity with the building that may prove of use during any recovery process.

Plan updates

As part of any BCP, it is important to have the most up-to-date building information, contacts and procedures, so these must be reviewed and amended on a regular basis. When a disruptive event occurs – and during the recovery process that follows – accurate information must be available to suit what, inevitably, will be many moving parts.

While a disaster event itself is unwelcome, what can be learned from the event should be embraced to help bolster the protective measures that are in place.

This improved protection can be served by completing a debriefing following a disruptive incident and then making changes to any procedures that would benefit from such an update.

Planning for the worst-case scenario will help a business protect against a particularly big event and return to full operation with minimum BI. But a solid BCP will also help minimize damage during smaller events that can, nonetheless, be costly and disruptive.

Learnings from all events, big or small, should be incorporated into BCPs.