Stories of businesses that prepared, recovered and got better

The air horn went off a little after seven in the morning. Marianne, the office manager, figured it was another drill. They had run four in the three weeks since the evacuation plan went in. Then she saw people running to the meeting spot, not walking, and turned around. Smoke was pouring out of the building.

Five minutes after the horn sounded, the roof came down. All 33 employees were already outside.

Ken Clifton started CCF Industries in 1995, building custom cabinetry in his family’s garage. By 2014 it was a 19,000-square-foot plant making dovetail drawer boxes. Ken was on a golf trip in Florida when the alarm company called.

He had brought us in about eight months earlier, worried about people getting hurt around the power equipment. The plant had a fire alarm but nothing you could hear inside, so our safety professional mounted air horns on the walls and built the evacuation plan around them. We also changed the morning startup. Sweep up the dust that settled overnight, then turn on the dust collection system. That morning an employee came in early to finish a job, the dust collector was already running, and the steps got skipped. A spark from his air nozzle lit a spray booth filter. The booth’s suppression system misfired, and the dust collector pulled the burning particles into the ducts.

The procedures didn’t stop the fire. The drills got everyone out. Ken is still in business and doing well, and I’m proud of that. That nobody got hurt matters to me just as much.

His insurance had been rebuilt too. Ken had been with his old agent for more than ten years, the one everybody in his industry used, and nobody who quoted against it could beat the price. Under that program he would have been about $1.3 million short just to rebuild. Worse, he would have been more than $2 million short of what it took to keep the business afloat and hold onto his customers while he did. Over $3 million he didn’t have. We raised the building limit, brought the foundations, spray booth and dust collection system into the definition of building, added about $500,000 for code upgrades, and rewrote his business income to last through a long shutdown. The drop in his workers’ comp premium from the safety work paid for most of it.

It was an $8.3 million loss. Investigations held the site for months, and one of the hardest winters in years froze the mud inside the shell. There was no temporary plant to move into. Every available building nearby needed more than $1 million in improvements before the municipality would issue an occupancy permit. So Ken farmed out production to more than a dozen manufacturers, one of them in Arizona, and held onto about 60% of his business that way. Three months in, the business income adjuster called to shut that down because it cost too much. I had the adjuster on a call that afternoon. Extra expense coverage is there to reduce the damage to Ken’s business, not the insurance company’s bill. He went back to the policy and apologized.

Not everything was covered. A modern, airtight building needed a much bigger HVAC system, and the code work ran about $140,000 past our $500,000 estimate. That was 1.7% of an $8.3 million loss, close enough for Ken to afford to rebuild. Under his old program, he couldn’t have afforded to rebuild at all. On September 21, 2015, Ken and his team moved into a new, larger plant, with most of their customers still with them. Ken later wrote the foreword to Insured to Fail.

“David took the time to understand what our needs were, and totally changed our insurance program. I would be out of business today if it wasn't for David Leng and Duncan.”

Ken Clifton, OwnerCCF Industries

An earlier version of this story ran on Duncan’s Premium Reduction Center.

A month after the fire, the adjuster sat down with Jack Kirsopp and told him to lay off his crew. File for unemployment. It would save the insurance company money.

Jack had 18 people, most of them with the shop for more than 15 years. Good body mechanics who can work on tractor-trailers are hard to find, and he knew if they went on unemployment, most of them would go somewhere else. We said no. Six months earlier, when we took over his account, we had written his business income coverage to include ordinary payroll for every one of them. None of them missed a paycheck in the 9½ months it took to rebuild.

The fire started in a three-year-old furnace on the night of November 14, 1997. It brought down the roof and most of the walls and destroyed everything inside, trucks included. The fire marshal held the site for about 75 days. There was nowhere to go in the meantime. Nothing nearby could take a 100-foot spray booth, and none of the surrounding communities wanted a truck shop.

What saved Jack was what we found before any of that. His old agent had the building insured for $274,000. Every agent who quoted it just copied that number, year after year. It would have cost $865,000 to rebuild the same building. The building also sat in a floodplain, so a rebuild had to be raised. It was too close to the property line, so it had to move. Code now required a sprinklered spray booth. A standard policy pays to rebuild what was there, not what the code demands, and we put that gap at close to half a million dollars. Moving the building also meant a new foundation, which the standard policy doesn’t cover at all. We added both.

It still didn’t go perfectly. The soil under the new site was soft, and the building needed caissons driven 18 feet down to rock. About $75,000 nobody saw coming, and the code coverage picked it up. Then, after the fire, the community passed an ordinance requiring a decorative front. Another $60,000. The forms back then didn’t cover a code passed after the loss. Jack paid about $80,000 out of pocket on a $3.5 million fire, most of it for that front. Today that gap can be covered, and we build for it. Then, it could not.

He reopened to a backlog of work, in a shop laid out better than the old one, and turned out the same work with one fewer person. His daughter owns the business today.

“When I look back at my old insurance policies, I now realize that if it were up to typical agents and the terrible traditional quoting process… I would be out of business today.”

Jack Kirsopp, OwnerKirsopp Auto Body

On a Sunday in June 2004, Tony Vecchio came in to weld a patch under a friend’s pickup so it would pass inspection the next morning. He did his 45-minute fire watch, then walked across the street for lunch. Half an hour later, the waitress ran over. Smoke was pouring out of his building.

The fire company got it under control, but not before the roof fell in and pushed the front wall out. Tony moved fast. Within three weeks he was working out of a closed repair shop half a mile down the road, lifts still in place, and a friendly competitor handled his state inspections until his new license came through. The adjuster said it was one of the quickest reopenings he had seen.

Then the code officer looked at the building. With the front wall and roof gone, and the foundation cracked, the whole structure had to come down and be rebuilt from the ground up, including the three walls that never burned. The contractor put the undamaged portion at about $204,000, nearly half the cost to rebuild. Tearing it down and digging it out added another $38,000. A standard property policy doesn’t pay for either.

Before the fire, when we compared programs with Tony, two of them looked almost the same. One had $50,000, combined, for all of his building code costs. The other covered the undamaged portion up to the full building limit, plus more for demolition and code upgrades. It cost about $1,000 more a year. Tony took it.

Under the cheaper program, he would have been about $192,000 short. He was back in his own building in about nine and a half months.