Tim Ehrhart
Business owners in the southeastern United States are all too aware of the looming threat posed by hurricanes. While the 2009 season has been comparatively mild so far, the economic downturn has thrown new exposures into the mix that business owners may not have considered as elements of hurricane preparedness.
As is the case throughout the country, the economic downturn has dealt a substantial blow to the commercial real estate market in hurricane-prone states. With numerous commercial properties standing vacant, this year’s hurricane season presents a new level of risk not only to the owners of these vacant properties, but to the businesses operating nearby. Understanding the exposures vacant properties create for surrounding businesses during hurricane season is crucial for business owners looking to protect their assets. Taking precautions before a hurricane hits will position local businesses to survive both natural and economic disaster.
In the event of a severe storm, debris is one of the biggest hazards a vacant property poses to surrounding buildings. Structures with large windows, like car dealership showrooms or contemporary office buildings with extensive glass paneling, are both the most vulnerable and the most hazardous to surrounding properties. The contents of abandoned buildings also can become dangerous projectile debris. This is especially true for structures that have already sustained damage from a previous storm or that have fallen into disrepair from being neglected for several months. If a property has been foreclosed by the bank, they will likely be agreeable to protecting the building in order to preserve its value. Make sure to cover your business’s windows and doors with plywood shutters to reduce the chances of dangerous debris blowing into your space.
Aside from posing a distinct physical threat to neighboring merchants, a vacant building damaged by a hurricane can jeopardize the operations of remaining tenants who took measures to protect their business and are able to reopen shortly following a storm. For example, consider a movie rental store located in a shopping center anchored by a major grocery store chain. The grocery store sustains major damage in a hurricane and is unable to reopen due to the current economic conditions, while the video renter had less exposure and resumes business a few days later. The steady stream of customers who came in to rent movies before or after a shopping trip decreases, resulting in a substantial decrease in revenue for the video store. Business owners whose traffic is highly dependent on an anchor tenant should consider purchasing contingent business income insurance.
For business owners large and small, the recession adds an additional layer of risk to this hurricane season. By understanding exposures and planning accordingly, local businesses can weather the storm until the skies brighten again.
— Tim Ehrhart is vice president of Chubb Commercial Insurance.