Disasters Do Happen: How You Can Recover and Plan for the Future
By Mark T. Coke

In recent years we have witnessed the devastating impact that disaster can have upon our lives, our work and our possessions. Many disasters are of the natural kind, such as the recent series of hurricanes in Florida, floods of recent years in the Midwest, and wildfires and earthquakes in California. Wildfires and floods are not a common problem in western Oklahoma, but their smaller cousins, building fires and ruptured pipes, can be seriously disruptive. And the events of Sept. 11, 2001, dramatically punctuated our vulnerability to terrorism.

In March of 1993, while away with my family on a brief vacation to Kansas City to enjoy the Big Eight Basketball Tournament, disaster struck my office. Late Friday morning, just before lunch, one of my secretaries noticed flames and smoke coming from the adjacent building, which had been occupied by a defunct movie theater. She quickly placed a call to the Altus Fire Department which responded within about three minutes. Because the visible portion of the fire was in the adjacent building, the firefighting efforts were concentrated there for several minutes. It was approximately 40 minutes before water reached our third-floor offices which overlooked the rooftop of the burning building.

The news reached me in Kansas City late that Friday night. We left the hotel about 6 a.m. on Saturday morning and drove home. I tried to imagine the chaos I might face upon my arrival in Altus. On the drive home, I could only wonder if my insurance policy had adequate coverage.

After the smoke cleared, virtually everything was destroyed. Client files fared better than we feared and we were able to salvage approximately 95 percent of those intact, though many were charred or smoke-damaged. We lost all of our fixtures, furniture, computers, photocopier, fax machine, decorations, diplomas and a good deal of sleep.

With most disasters, insurance coverage is rarely adequate. My coverage for contents was about $29,000 short and I was under-insured by about $5,000 for valuable documents, including abstracts of title which belonged to clients. Following is an overview of some of the actions we took and some lessons we learned — the hard way.

DAMAGE ASSESSMENT

One of the first things I did was to sit down with each secretary and think out loud about which files we could recall being on each desk. Exposed files were obviously most likely to sustain the most damage, either from the fire or water. At the same time, we assessed the urgency associated with each file, that is, whether there was a statute of limitations or a filing deadline. A pocket calendar with appointments and deadlines which was taken home each night proved vital. From these sessions, we created a “to do” list.

Our next task was to identify a number of abstracts of title we had in the office. Some were salvageable. Some were barely damaged and some were almost completely destroyed. Some merely needed rebinding to remove the soot-laden covers and others had become “papier-mâché” from the water. We don’t believe any abstract was so completely destroyed that we could not at least identify a legal description, an abstract number or an owner name from the remaining pieces. From those remnants we compiled a seven-page list identifying the affected abstracts. All told, we identified abstracts containing a total of 5,368 pages that were damaged or destroyed.

Assessing the damage to our furniture and equipment was a much easier task. It was totally destroyed. We identified $62,000 of lost furniture and equipment at its “replacement value,” not including computers and electronics. Coverage for the furnishings was only $33,000, but my insurer promptly paid. We identified another $19,000 in computer equipment for which I had coverage of $15,000.

One secretary had run a quick backup to diskette before evacuating the office on the day of the fire. Another computer, though melted to resemble some odd plastic sculpture, still had a hard drive that was intact enough to be removed and hooked into the motherboard of another computer. There the data was located and downloaded to diskette. Backup disks to a third secretary’s computer were lost in the fire, as they had been placed on her desk. Since we had recently converted from IBM Displaywriters to PCs, we still had some of the original converted forms from the Displaywriter onto diskette that we were able to reload and use again. A good many client files and forms had to be retyped from scratch, but in many cases we had a sufficient computer form or salvaged document to use as a guide.

Files that were in file cabinets survived fairly intact, but metal file cabinets become convective ovens once they have been exposed to heat for a significant period of time. Because of the limited air space within a file cabinet, files did not burn, but were charred, particularly around the edges. Contrary to logic, we found that files stored within wooden file cabinets or the drawers of wooden desks fared better than files within metal drawers. It takes a good deal of exposure to flame for a fire to burn through a half-inch of solid wood. Even a paste-board box can provide some degree of insulation from the effects of the heat if it is not directly exposed to the flame. A backup tape for my desktop computer stored underneath my desk in a cardboard box was unharmed.

COMMUNICATION

The bank downstairs had a vacant office in their first floor suite which they generously provided for our use. I quickly drafted an announcement for the local radio station and newspaper that read substantially as follows:

The law offices of Mark Coke were damaged by a fire that occurred on Friday, March 12. We have contacted numerous clients whose files were affected by the fire. If you had not yet heard from us, you may assume that your file survived intact and you should not be concerned. We are still making efforts to recover files and client information. Should you have any questions, telephone us at 477-1100 through Wednesday, March 17. After that date, our telephones will be working again and you may call us at 482-5474. We appreciate your patience and understanding.

Clients with pending matters or with more immediate deadlines were telephoned personally. In cases where necessary, we filed a motion for extension or simply contacted opposing counsel and were accorded a great deal of cooperation. Contact with opposing counsel also helped in evaluating deadlines and statute of limitation problems.

INSURANCE ADJUSTMENT

Your casualty insurance policy should be stored off premises. Ours was not, but fortunately it was stored inside the drawer of a wooden desk and survived intact. I contacted my local insurance agent who immediately put me in contact with the adjuster for my insurance carrier.

I would rather read the Uniform Commercial Code or the Internal Revenue Code than review my insurance policy. Besides standard coverages, there are some critical areas you want to be certain are covered. A review of the policy and a discussion with the adjuster revealed that we were covered for the following:

1. Business interruption;
2. Additional expense; and
3. Valuable document coverage.

If you are going to rely on “business interruption” to cover your lost income, you should be prepared to document the last four or five years of income, as well as your current year’s differential. In the year of our fire, because of two or three extraordinary cases which I concluded, I actually made more money the year of the fire than I had made in any preceding year. This made proof of a business interruption loss virtually impossible. After the fire, I had begun to keep what amounted to a billing file of the extra time I had spent as a result of the fire in efforts to find and replace files or abstracts. This included lost days for locating office space, running ads, buying supplies and secretarial overtime.

Keeping hourly time proved to be invaluable, since I could show no actual lost income. My insurance company paid me on the basis of my hourly rate times the extra hours spent in recovery and salvage or duplication of previous work effort. In the event of a disaster, I recommend you keep a log and document the extra time you spend in your recovery efforts.

You should be prepared to compile a detailed list of all furniture, equipment, computers or other electronics destroyed and get an estimate of its replacement value. Though your policy may have a cap in coverage, most ordinarily the coverage will be for “replacement value.”

RELOCATION AND RESTORATION

On Monday after the fire on Friday, we located a vacant office space that was in a suite of offices occupied by a real estate and insurance agency. Though it was smaller than our old offices and was not arranged particularly well for a law office, it served the purpose. We agreed to a month-to-month lease. I contacted a telephone installer and the phones were installed on Tuesday and were connected by the telephone company on Wednesday.

We had recently converted to IBM compatible, Windows-based computers in January, just before the fire in March. The timing could not have been better. We had been using IBM Displaywriters for word processing and the transition would have been much more difficult had we been required to learn a whole new system of word processing. Thankfully, our secretaries had already become familiar with the computers and the new word processing program so it was a matter of replacing our hardware, software and data.

On my return from Kansas City on Saturday, I stopped in Oklahoma City and picked up two HP laser-jet printers and brought them home with me. Those were quickly attached to a computer borrowed from a client and to my home computer which I brought to the temporary office. We ordered an additional printer from HP Direct and ordered two more computers identical to those destroyed in the fire from the previous vendor. I ordered two more similarly configured computers from Gateway by telephone.

As our print library was either destroyed or rendered unusable, it was a good time to begin electronic research. I did replace a few books, but began to rely on Westlaw and newly available CD-ROM libraries. The cost savings was substantial and we didn’t have to worry about shelving for books which was very limited in the temporary location. I had to order a duplicate of the framed certificates of my college diploma, my juris doctorate from the University of Oklahoma and my Supreme Court admission to the Oklahoma Bar.

PREPARATION FOR THE FUTURE

Backup your data. The more frequently, the better. Even if you don’t have a fire or a flood or some other disaster, eventually every hard drive fails. I backup secretarial computers at least weekly and my own computer daily. My home desktop computer is a virtual mirror image of my office desktop, which includes all of my time and billing spreadsheets. I have even loaded backups from the secretarial computers onto the hard drive of my home desktop so that those files will be immediately available, if necessary.

With arrayed drives (multiple drives within the same computer or connected to a network,) backups can be automatic. Backups should be made to media which can then be stored off premises also, such as CD-ROMs, or other removable media. One of my favorite ways to backup is to connect my laptop to the office network and copy all the data files from the secretarial computers and my computer onto the hard drive of the lap top. The benefit of that is instant access in the event of disaster. That assumes you keep your laptop at home and not at the office.

One erstwhile Altus lawyer had a sign on his desk that stated: “A messy desk is the sign of genius.” That means lawyers should look pretty smart most of the time. We resolved to try to do a better job of putting files away at night and get them off the desktops so they are not exposed to the hazards of fire, wind or water. Of course, our best laid plans break down and we often will have numerous files out on the desk or conference table due to the inconvenience of retrieving them each morning. Of course, it is a lot more inconvenient to try to reconstruct them after a disaster.

For your own desktop, I recommend a wooden lateral file cabinet or a credenza in which you maintain an empty drawer that is used only for overnight storage. Each night you can rake the contents of your desk off into the drawer and restore it the next morning.

Review your insurance coverage. An excellent insurance checklist can be found in an article titled “Business Insurance: A 12-point Checklist” by Lisa Chadderdon. It appeared in the October 2001 issue of Inc. Magazine and can be viewed on the magazine’s Web site at www.inc.com/articles/2001/10/23492.html. As noted above, be certain that you have coverage for business interruption, additional expenses and valuable documents. Often, these coverages are rolled into one endorsement, but you should specifically ask your agent about each.

You might want to refer to two articles by OBA Management Assistance Program Director Jim Calloway in making your disaster preparation plans. These articles are “The Lawyer Thinks About Disasters,” 72 Oklahoma Bar Journal (Oct. 6, 2001); and "Are You Prepared for a Real Disaster?”68 Oklahoma Bar Journal 3995 (Dec. 13, 1997).

After Sept. 11, 2001, insurance carriers began excluding losses because of terrorism from their commercial liability and property policies. Thereafter, the government responded by enacting the Terrorism Risk Insurance Act, which mandated property and casualty insurers to at least offer coverage for “certified acts of terrorism.” For existing policies, the act voided any terrorism exclusions. To be covered, an act has to be certified by the U.S. State Department. Insurance carriers are not prohibited from charging additional premiums for coverage and may refuse to offer coverage to certain high risk businesses. Insurance issued in compliance with the Terrorism Risk Act has many other limitations, such as coverage only for acts of terrorism perpetrated by or on behalf of foreign, not domestic terrorists. Coverage will generally only be for physical damage to your own property. Even though your business might be adversely affected by damage to adjacent structures, interruptions of electrical power, fuel or communications, you will not be covered for a particular event in the absence of harm to your premises.

CONCLUSION

Your practice can survive a disaster. You can make survival easier by adopting a disaster recovery plan. Create a manual with insurance information, emergency telephone numbers and contact names, a list of assets and purchase prices, software licenses and other critical information and distribute it among firm members and employees. If you do nothing else in the way of disaster preparedness, do at least these two things: 1) back up your computers regularly; and 2) maintain adequate insurance coverage.

About the Author

Mark Coke received a B.A. in political science from Southwestern Oklahoma State University in 1972 and a juris doctorate from OU in 1975. He has practiced law in Altus since 1975. His practice is devoted to estate planning, estate and trust administration, real estate, business and banking law. He is married to OBA member and Altus City Attorney Catherine Coke.

Originally published in the Oklahoma Bar Journal November 6 , 2004 - Vol. 75; No.31