A Note From The Legal Helpdesk: Business Checklist for a Disaster or an Emergency
October 2, 2018
In Alabama, people and businesses are exposed to various types of disasters – injury, illness, fire, tornadoes, flooding, and hurricanes to name a few. Following National Preparedness Month[i], the Alabama REALTORS® Legal Helpdesk compiled a disaster response checklist. This list of questions will help your business be prepared when disaster strikes.
BEFORE THE DISASTER
Do you have sufficient insurance coverage and where are your policies?
- Different coverages - Insurance is available for various disaster events. Consider which events may occur to you and what coverage you may need. Consider flood insurance even if the area is not flood prone. As Hurricanes Florence and Harvey have revealed, areas that are not usually considered at risk of flooding can flood, leaving the uninsured with vast expenses. For additional coverages available for businesses, read an article by Business Alabama here, detailing the different business insurance coverages for damages from natural disasters, including physical loss, extra expenses, and losses from debris removal, business interruption and service and utilities interruption.
- Read the policy - Be sure to read your insurance policies closely so that you understand exactly what is covered and to what extent it is covered. Some policies may exclude Acts of God or place higher deductibles on damages caused by events like tornadoes or hurricanes. Being thoroughly familiar with your policies can prevent surprises after the event.
- Policy docs nearby - Keep a copy of your insurance policies in a safe, known location.
- Inventory your belongings - Having a pre-disaster, up-to-date inventory can make the post-disaster claims process less time consuming. For more information on insurance before a disaster, see this article from the National Association of Insurance Commissioners (NAIC).
Do you have an emergency plan in the event of bad weather?
- Pre-planned procedures - In Alabama, inclement weather can arise quickly. Setting procedures for bad weather prevents confusion and safeguards lives and property. These pre-planned procedures may include when to send staff home versus sheltering at work; if employees shelter at work, establishing the safest place to shelter in your building; establishing a phone chain to ensure all are safe; and securing office facilities and hardware. For emergencies requiring quick exits, building codes require emergency exit routes to be posted.
- Safety Drills - Especially for large buildings, conducting safety drills is a good way to show building occupants what to do in the event of an emergency.
- Training seminars - Work-place injuries or other health emergencies can occur anytime. Quick responses to these emergencies can save lives. Consider holding seminars or lunch and learns where employees and agents learn first aid, proper CPR techniques and/or how to use a defibrillator (if one is located nearby).
- Additional resources on plans - NAR and the federal government have separately compiled a large number of materials to review on disaster preparedness. The federal government’s website on preparedness planning for your business can be found here. The website contains toolkits, or step-by-step guides, specific to particular disasters (like hurricanes or tornadoes) and to specific topics (like staff management or program systems).
Are your records protected?
- License law on records - Alabama license law requires real estate brokers to maintain all records relating to a real estate transaction, including estimated closing statements, on file for three years.[ii] These records must be made available if and when the Alabama Real Estate Commission audits your records.[iii]
- Back-up of records - During disasters, paper records and electronic devices are subject to destruction. Electronic records stored on devices can be destroyed when the electronic device is damaged. Consider implementing a document retention plan, that includes keeping a back-up of your records in a safe, secure location. These days, secure cloud storage is relatively inexpensive and utilizing cloud storage can reduce your business's down-time in the event of bad weather, fire or cyber disasters.
Do you have back-up staff for important roles?
For real estate companies of all sizes, it is important to have back-up staff who can take over key roles when the primary staff is absent. While this certainly is necessary in emergency situations, this also applies to everyday life, like vacation, doctors’ visits or non-emergency illnesses. A business’s financial operations can be especially vulnerable without trained back-ups.
Do you have emergency contact information for agents and/or employees?
When an emergency occurs, it is important to have up-to-date emergency contact information for employees and agents in your office. Agents are often in the field, and personal safety can be a difficult thing to balance with being available for potential or existing clients. In emergency situations, communicating with the emergency contact can allow law enforcement to have as much information as possible in a short time frame. As mentioned above, an emergency contact is also important when a work-place health emergency occurs.
Do you have emergency savings?
Maintaining an emergency fund can provide security in the event of a disaster. Alabama has an amazing tool to help homeowners save. Alabama property owners can open a catastrophe savings account to cover deductibles and uninsured portions of the loss from hurricanes, floodwater, or other catastrophic wind events. Contributions and interest are income tax free, but contributions are limited. See endnote below for more information.[iv]
Will the event disrupt any key dates related to your clients’ real estate transactions?
Due to technological advances, we sometimes have some warning before disasters occur. It is imperative to take advantage of these warnings and to prepare your clients and upcoming real estate transactions for the disaster. When a warning is received, discuss with your client whether to amend the purchase agreements to delay upcoming important dates, like the inspection period or closing, that may be impossible to meet after a disaster.
AFTER THE DISASTER
Have you communicated with your agents, staff and clients?
After a disaster, it is important to establish contact with your agents, staff and clients. Now would be the time to initiate a staff phone chain, if you have one. Prioritize the clients with houses for sale and with houses under contract that are potentially affected by the disaster.
Has your property or any properties owned by your clients or that your clients had under contract suffered damage?
- Determine the damage - Before cleaning up, it is important to assess the damage to properties. If properties under contract are damaged, Alabama’s law places the liability on the seller, but the contract can change the liability to the buyer so check the purchase agreements for this language.[v]
- File with insurance - Insurance plays a large role after a disaster. The NAIC has an article providing information and a checklist for insurance claims after a disaster. Basically, the NAIC states – 1) assess/account for the damage with videos, photos and lists, 2) start your claim within the time requirement, 3) meet with the adjuster, 4) consider requests to assign your benefits skeptically, and 5) watch out for fraud. See that article here.
- Client contact the lender – After a disaster, buyers or owners should communicate with and update the lender or mortgage servicer. For owners of damaged houses, it is important to talk to the lender about mortgage forbearance, if needed, after a disaster. Some lenders will work with the owner to delay payments. For buyers, the lender will need to be notified if the house has been damaged so the lender can assess whether closing can move forward or not.
Are you aware of the assistance available after a disaster?
- Federal assistance available – During some disasters, federal assistance may be available. Assistance may range from the more immediate need for shelter or food to the more long-term grants and loans to get people affected by a disaster back up on their feet. For more information on federal disaster assistance, go to disasterassistance.gov.
- REALTOR® assistance – The Alabama REALTORS® Disaster Relief Fund was established in 2004 to assist REALTORS® and consumers after disasters occur in Alabama. Check the website here for more information.
- 5 Tips for Using A Generator
- Transaction Guidance After Natural Disaster (NAR)
- Additional Resources from the Federal Government on Natural Disasters (NAR)
- Homeowners Lack of Flood Insurance Could Cost Billions (NAR)
[i] For resources compiled for National Disaster Preparedness Month, go to www.ready.gov/september. Also, see this document from NAR - Real Estate Community Focuses on Disaster Preparedness.
[ii] Ala. Code §§ 34-27-36(a)(31); 34-27-36(a)(8)(c). See also Ala. Admin R. 790-x-3-.04.
[iii] Ala. Admin. R. 790-x-3-.09; and Ala. Code §§ 34-27-36(a)(28); 34-27-36(a)(30).
[iv][iv] If a homeowner’s insurance deductible is $1,000 or less, the homeowner may contribute $2,000. If the deductible is greater than $1,000, the contribution limit is the lesser of $15,000 or double the deductible. If the homeowner self-insures, the contribution is limited to the value of the home up to $250,000. Ala. Code §§ 40-18-310 to 313.
[v] Alabama Farm Bur. Mut. Ins. Serv., Inc. v. Nixon, 105 So. 2d 643 (Ala. 1958).