Whether it occurs within your business or personal life, at some point, most will have an accident or incident that leads to an insurance claim. When claims involve grain elevators, terminals or milling operations, the stress and consequences can be exponentially greater. Many within grain elevator or processing operations have not experienced a serious claim at their facility. Those who have will recognize the importance of being prepared for conceivable losses at their facilities.

Severe losses at grain elevator and processing locations can come in many forms, with the most common being explosions, fires, equipment failure, severe weather and liability related to premises or products. When a severe loss occurs, the difference between a manageable disruption and a prolonged recovery is often decided by your level of preparation prior to the incident.

When a severe claim occurs, the false impression is that insurance restores your business when, in fact, it is you, working in partnership with your carrier, who restores operations to normal. Outside of the indemnity your policy affords you, a severe loss could still cause significant suffering to your business through hidden expenses. Consider the iceberg effect of a large loss: The visible damage to buildings, stock and business personal property, along with your deductible, is easily identifiable and considered above the waterline. Below that line is a combination of additional items, such as lost capacity, hundreds of hours of management time, customer dissatisfaction, business moving to competitors, delays in capital projects and, in very large or severe cases, insurance company, lender and stakeholder scrutiny. Safety professionals have used the accident iceberg for years when discussing worker injuries. It applies to property and liability claims as well.

Preparation takes many forms, and claim outcomes are influenced by more than your insurance coverages. Effective contingency and continuity planning, a clear understanding of your policy and accurate operational records all help reduce the stress related to a loss and get your facility back into production.

When a Small Problem Becomes a Major Loss

Consider a hypothetical situation during harvest. Employees discover out-of-condition grain in a concrete annex bin that is rapidly deteriorating and generating excessive heat. Concerned that another claim could increase insurance costs, management decides to address the issue internally rather than notify its insurance carrier.

Working with the local fire department, employees begin removing the grain. Unbeknownst to them, hidden hot spots are already smoldering within the grain mass. As grain is removed through the side draw, oxygen reaches the smoldering material, and ignition occurs. Combined with combustible dust generated by grain handling activities, the result is an explosion that damages the bin and surrounding facility.

What began as a manageable grain quality issue quickly escalates into a complex loss involving property damage, business interruption, injured employees and third parties, and significant reconstruction costs. Did the delayed reporting cause the explosion? One cannot say; however, early reporting may have allowed additional resources and expertise to handle the escalating conditions.

Business Continuity and Contingency Plans

Insurance plays an important role in recovery, but keeping the business in operation is equally important. Your continuity plan should be written to address conceivable occurrences based on the operational nature of each location. Your contingency and continuity plans should focus on the hidden expenses of a claim, the iceberg below the surface. Facilities should evaluate how they will continue servicing customers following a major loss. This includes identifying alternative receiving and shipping locations, temporary storage options, backup processing capabilities, transportation requirements and assistance from neighboring facilities.

In addition to continuity plans, contingency plans detail the specific actions required to respond to various incidents. They answer the question, “What do we do if a specific event occurs?”

A well-developed continuity and contingency plan can reduce downtime, maintain customer relationships and lessen the financial impact of a significant loss.

Understand Your Insurance Policy

One important risk management activity is understanding your insurance coverages prior to a loss. Coverage discussions are far more productive before an incident than after. Property values, equipment schedules, coverage limits, deductibles and provisions should be reviewed annually with your agent. Make sure inflation adjustments, equipment upgrades, automation projects and facility expansion updates are reported to your agent and carrier. Operational changes can quickly create gaps between insured values and actual replacement costs. During your annual coverage review, the following questions should be asked:

  • Do property and equipment values represent current replacement costs?
  • Do our limits adequately reflect our current operations?
  • Do we understand any sublimits, exclusions, deductibles or valuation provisions?
  • How does our policy respond to fire, explosion, wind, collapse, equipment breakdown and business income losses?
  • Have we precalculated and reviewed our risk mitigation programs?
  • Do we have all documentation that will be required after a loss?

Your insurance coverage should reflect the operation as it exists today, not as it existed when the policy was originally placed.

Documentation That Matters

One of the more consistent lessons learned from efficiently handled large claims is the ability to support your loss with accurate records. These records can significantly improve the efficiency of the claims process. Loss events that damage inventory or commodities require extensive documentation to establish ownership, quantity, quality and value at the time of loss. The following records are key to claims settlement:

  • Inventory reports
  • Scale tickets
  • Settlement records
  • Transfer documents
  • Grain quality information, including moisture, test weight, protein, foreign material and grade information

For all equipment, maintenance records are another key component of claims investigations to understand the condition and operational history of affected equipment. Well-maintained records support claims investigations and may assist in potential subrogation opportunities when another party’s product or service contributed to the loss. Good maintenance records will include:

  • Equipment make, model and location
  • Inspection history
  • Lubrication schedules
  • Repairs and component replacements
  • Dates of service and who conducted the service

Events that generate a claim for lost business income will require several years of historical operating and financial information, including:

  • Complete financial statements
  • Production records
  • Commodity purchase and sales records
  • Historical throughput information
  • Monthly inventory reports

These records should be part of your formal record retention policies, with clearly identified storage locations and controls.

Why Early Reporting Matters

Insurance claims professionals routinely encounter situations in which an issue was known for days or weeks before it was reported. In many of these cases, the delay was driven by concern that reporting a potential claim would negatively affect future insurance costs. While those concerns are understandable, potential losses should be discussed with your agent and carrier as early as possible. Experienced insurance providers recognize that proactive reporting is often a sign of good risk management rather than poor performance. Benefits of early reporting include:

  • Access to specialized resources and experts
  • Preservation of critical evidence
  • Early application of mitigation efforts
  • Improved communication among all parties
  • Reduced delays during the claims process

Immediate Actions to Take

When a loss occurs, there are steps you should take to mitigate damages, including:

  • Protect property and inventory from further damage when it is safe to do so
  • Preserve damaged equipment and materials that may provide evidence of the cause of loss
  • Take photographs and document conditions before cleanup begins
  • Retain emergency response and mitigation expense records
  • Determine a single point of contact within your organization to communicate with the insurance adjuster during the claims process. This chosen individual must have the ability to make complex decisions

The best time to improve your claims experience is before a loss ever occurs. The investments made in preparation today can pay significant dividends when an incident happens tomorrow.

No grain elevator or processor can prevent every fire, explosion, equipment failure, severe weather event or commodity-related loss. Those risks remain an inherent part of the industry.

However, facilities that understand their coverage, maintain accurate documentation, establish continuity plans and communicate proactively with their insurance partners are often in a much stronger position to recover. When a major loss occurs, preparation is often the difference between getting back to business and struggling to regain momentum.