James asks about coverage for paper. This is also known as "Valuable papers" coverage just as Peter notes. We have this coverage and I can speak to the issue from experience. Within a 12 month span of time we experienced disasters at four different offsite storage locations. The four situations were at three different companies and in three different metro locations.
Loss number 1: Building collapse with water incursion from pipes and rain in the DC metro area.
Loss number 2: Shelving collapse in St. Louis.
Loss number 3: Water supply line ruptured resulting in wet records in Chicago.
Loss number 4: F3 tornado strikes warehouse in St. Louis metro resulting in wet records.
In each case the disaster recovery (DR) was handled by the vendor who activated a DR plan. Results and satisfaction varied. Three of the situations were handled professionally, one was not. And in three of the situations the vendor covered all costs related to the recovery. The lone exception was the tornado. We had to pay a negotiated rate indexed to the mitigation/recovery efforts applied.
As I mentioned at the beginning, we have valuable papers coverage. This applies to the physical records onsite in our buildings and the records at all offsite locations. Please note that the terms "valuable papers" and "physical records" actually apply to all physical information, not simply to records-worthy materials.
It is an annual effort to perform the review and valuation of the materials. As has been mentioned by others, you can find a lot of discussion and debate regarding how to go about determining a value for your materials. It is, at best, an inexact science. I combine a number of factors:
What is the cost to totally recover a 1.2 cubic foot box of paper?
What would it cost to pay a professional (for example a paralegal) to do the work to recover the materials that were destroyed?
Are the physical records that were damaged/destroyed necessary? In other words, do you want or need to recover them?
The worst-case scenario is a total event at one of our locations. If the materials were destroyed beyond recovery that cost would be to, as much as possible, recreate the contents. Very expensive to accomplish! If the materials were all damaged but recoverable then everything would have to be restored. This would probably be in the form of freeze drying. Very expensive to accomplish!
The reality is that we would hardly need to recover everything. This is where having a great records program demonstrates its value. If you know what you had at the location, you can make intelligent choices about what to recover and you can even prioritize the recovery efforts. A large percentage, in our experience, would simply not be recovered. This drops the total cost of recovery significantly. Our valuation is the cost to totally recover a percentage of the total volume. Thus, rather than coverage at something like $85/box for everything, we may cover at an average value of $35/box. Only a percentage of the collection, in the worst-case scenario, would be recovered/recreated.
Reviewing the collection on an annual basis is required in our situation. We have found that our locations, floor plans, and even the offsite warehouses change frequently enough that we must review each year. Warning: I am not an insurance expert, but I believe you will be hard-pressed to get coverage on a collection you have not identified to your provider so keep the coverage accurate and up-to-date. You also want to avoid paying for coverage on materials/locations that no longer exist.
Be aware that your coverage requires the physical addresses for every building. This includes offsite vendors. So, for example, Iron Mountain in St. Louis stores our materials in multiple warehouses. I have to provide the physical address for each of those locations.
Finally, there will be a deductible. Keep that in mind as you budget and in your DR preparations. Many events will not reach the deductible amount. And in other situations the expense may not go over the deductible by a great amount. Each organization will weigh those factors in their decision about accessing insurance funds. If you have a deductible of $20,000 and the DR cost for an event is $31,725, is it worth it to activate the insurance for $11,725? What would using the insurance do to your rates in the following years? Each event carries unique characteristics that must be weighed.
I know this has been an incredibly long response. Some of you might think that I am trying to outdo my friend Hugh!! Seriously, I have "been there done that" when it comes to this topic. I wish I wasn't so experienced. But this is something that might help only one colleague. If so, it was worth it to me to share. You know where to find me if you have any questions. Happy Easter!
David B. Steward
Director of Records
HUSCH BLACKWELL LLP
4801 Main Street, Suite 1000
Kansas City, MO 64112-2551
Direct: 816.983.8860
Fax: 816.983.8080
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huschblackwell.com
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