McCormick, Roy C

Chicago conflagration spurs development of guidelines for insurance and loss prevention

A regrettable fact of life is that we often learn from the misfortunes of others how to minimize future problems through the use of sound insurance protection and the establishment of tested loss control measures.

On October 17, 2003, stairwell smoke claimed six lives during the tragic fire in the 35-story Cook County Administration Building in the heart of downtown Chicago. This brings to mind the 1980 MGM hotel fire in Las Vegas, in which 84 people died, and a building fire in New York five years ago when four died of smoke inhalation in a stairwell.

Guidelines developed from these occurrences are particularly applicable to high-rise commercial buildings. They can be put to good use by insurance providers in discussions with those clients who are building owners, building managers and leasing agents, lessee occupants, and others concerned with loss control.

A major question is if, when, or how occupants should evacuate a multi-story building when fire threatens their safety. Certainly the establishment of emergency fire procedures is basic. But that is not always enough. Military standing operations, for example, take into account situations when split-second action is required and there is no time to deliberate.

However, no complete set of rules can be applied to all high-rise buildings. There is no uniform answer regarding what building occupants should do in the face of a fire, according to the National Fire Protection Association. A number who died in the MGM Grand fire might have survived if they had left quickly. But those who died in a stairwell in the New York fire might have lived had they not attempted to leave the building.

A major problem encountered in the recent Chicago fire was the locking of stairwell doors, which prevented people from reentering building floors when they encountered heavy smoke in a stairwell. It is a common practice for this to be done for security reasons at the end of business hours in order to prevent criminals from entering offices, committing theft and leaving by stairwells. Locking is also recommended to prevent the spread of fire and smoke. A chimney-like draft can occur when doors between stairwells and floors are open.

Those who maintained Chicago and Cook County records, such as tax, car registration and the like, expressed concern for the potential loss of essential information. It appears that the system that was in place was not impaired, but the potential for such loss in high-rise commercial buildings is obvious and calls for renewed attention to the exposure.

A recent Harris poll of Fortune 1,000 companies determined that onethird of respondents were no better prepared to preserve their records than at the time of the 9/11 disaster. At least 40% of executives were concerned that less than 10% of their employees knew what to do to recover data following a catastrophe.

When duplicate discs and tapes of vital information are kept in a location distant from where such records are primarily developed and maintained, the exposure is clearly minimized. In addition, however, there must be people on hand who are trained to respond quickly to restore needed information. Extended downtime can seriously impact business operations.

For insurance providers who have previously encouraged the duplication of vital data and storage of that information at a second location, as well as the training of employees to quickly utilize that information, this is a good time to review the entire process with the insured. Applicable insurance should also be checked regarding computer equipment used to develop data. Significant changes can occur over a period of several years.

Catastrophes demonstrate the importance of maintaining protective safeguards that are required by applicable property insurance. Insurance agents, brokers and counselors provide a major service by emphasizing that protective safeguards should be in place and continuously maintained. Protective safeguard systems, devices and practices that must be maintained include automatic fire alarms, automatic sprinkler systems, automatic burglar alarms, video/surveillance cameras, night watchperson schedules, and valuable papers and records storage.

A case in point: The Cook County (Chicago) Administration Building was not required to have an automatic sprinkler system because it was not mandatory when the building was constructed. In addition, if such protective measures have been installed in a building but are not functioning (as required by insurance) because of poor maintenance, the problems are evident.

The City of Chicago released a summary of its investigation of the October 17 Administration Building fire. Cited as actions which contributed to the problem were the locked stairwell doors, a total evacuation order by a building employee, and prolonged search of the 35 floors by firefighters. Guidelines provided by the Chicago Fire Department call for the emptying of only eight floors in a fire area.

It is urgent that high-rise building owners, managers and fire department officials get together in advance of a catastrophe to establish procedures and lines of authority. The locking of stairwell doors is an important subject for discussion, as well as is the fixing of authority for evacuation orders prior to control by the fire department.

Systems are available that automatically release the locks on stairwell doors on all floors when a fire alarm is sounded; others make it possible for a person in authority to open the locks on all floors from a central location. Occupants should close but not lock stairwell doors when they vacate a floor during a fire to prevent drafts.

The insurance provider should double check the security of valuable records data and the readiness of designated employees to implement their use to minimize “down time” that impacts business operations.

The Chicago fire provides a powerful incentive for insurance agents and providers to regularly review the insurance program that they designed and maintain for any of the principals involved in a high-rise commercial building. They include the building owner(s), the building management and/or rental agent, and tenant occupants. Is building coverage proper and adequate in light of current exposures and property values? Is personal property and time element insurance in need of modification? And, of vital importance to each entity involved. Is current liability insurance in line with the potential for claims?

All parties profit from well-planned loss prevention efforts. The insurance market for high-rise building protection bears the additional burden of 9/11 considerations on top of traditional underwriting factors. Teamwork in addressing exposures is the best medicine to assure the availability of sound insurance for each entity.

The author

Roy C. McCormick is a contributing editor with The Rough Notes Company.

Copyright Rough Notes Co., Inc. Mar 2004

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