1. TOPIC: Disaster Recovery / Business Interruption - Arnold F. Mascali, Executive Vice President & Chief Commercial Officer - InStar Services Group, LP - Jeffrey M. Pollock Esq. – Partner, Fox Rothschild, LLP - Frank Russo, Managing Director - Aon Global Risk Consulting, Property Risk Consulting 1

2. Presentation Overview  Pre-loss Planning  A Loss Occurs  The Property Claims Process  Selecting a Recovery Vendor  Tailoring Response to Policy Terms & Conditions  Understanding of how to work with your insurance company and their experts  Legal Pitfalls to Avoid 2

3. 3  $380 Billion –Economic Losses Globally (New Record), exceeding the previous record of $270B in 2005  $105 Billion –Insured Losses Globally 2011 losses were 2.5 times 2010 insured losses of $42B  $72.8 Billion –Economic Losses in the US - Represents a 129% increase over the $11.8 billion amount through the first half of 2010  $35.9 Billion –Insured Losses in the US Arising from 171 CAT Events Fifth highest year on record. Represents 51% increase over the $23.8 billion total in 2010 2011 - Highest Loss Year on Record for Economic Losses Globally Source: Munich Re; Insurance Information Institute.

4. Severe Weather Reports in New Jersey, January 1—December 31, 2011 4 Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html # http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html # NEW JERSEY Total Reports = 172 Tornadoes = 1 (Red) Hail Reports = 30 (Green) Wind Reports = 141 (Blue) There were 172 severe weather reports in NJ in 2011 (none so far in 2012)

5.  A devastating Earthquake and Tsunami in Japan  A US East Coast Earthquake  Hurricane Irene directly hits New York City The improbable is becoming the norm 5

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7. Documentation of Japan CBI losses are complex...  Earthquake?  Tsunami?  Nuclear?  Aftershocks?  Power Outage?  Rolling (Intentional) Power Outage?  All of the Above? 7

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11. Complacency sets in… 11

12. A hurricane in New York City? We were lucky this time… 12

13. Pre-Loss Preparation  Identify  Your insurance adjuster, Insurance coverage and limits, deductibles, sub-limits, exclusions  Valuation of Assets and Potential Lost Income (per location)  Key revenue generating activities that may be impacted  Critical delivery points  Any cash flow and financing concerns  Internal/External team that will lead the documentation of potential losses  Develop  Comprehensive Business Continuity and Disaster Recovery Plans  Agreements with restoration and other vendors  Internal claims manuals and timely reporting measures  Reporting & tracking claims procedures  Interviewing and selection process for other required vendors  Track  Loss history 13

14. Presentation Overview  Pre-loss Planning  A Loss Occurs  The Property Claims Process  Selecting a Recovery Vendor  Tailoring Response to Policy Terms & Conditions  Legal Pitfalls to Avoid 14

15. Ready? What’s your plan…?  For getting back to business  For accessing critical recovery equipment and/or specialists  For coordinating insurance recovery efforts  For ensuring timeliness & accuracy of information from the loss site(s)  For committing significant time to comprehensively monitor and manage the claim process  For monitoring and managing your vendors and experts  For monitoring and managing insurers’ vendors and experts  For adequately documenting your loss  For expediting your financial recovery 15

16. Building Contractor Architect/ Engineering Risk Manager Roofing Consultant Loss Adjusters Staff Insurance Company Normal Operations CEO/Board Other 3 rd Parties Restoration Contractor Media Industrial Hygienist Following a Loss Event – Resilience Requires Coordination of Many Resources and Swift Action 16

17. Presentation Overview  Pre-loss Planning  A Loss Occurs  The Property Claims Process  Selecting a Recovery Vendor  Tailoring Response to Policy Terms & Conditions  Legal Pitfalls to Avoid 17

18. Surveying the damage with your adjuster  Be careful, take safety precautions  Photograph and video footage are key  Survey the damage with your adjuster  Sets the tone for the settlement process  Discuss measurement of the loss period:  Strategies to expedite or mitigate  Betterments  Start-up problems  Provide a preliminary loss estimate / order of magnitude  Request a partial payment based on expected short- term expenditures and supportable costs 18

19. Your Catastrophe Teams/ /External Partnership/ Loss Consultants Your Local Facility Operations Your Finance/Risk Management Dept “One Voice” Insurance Company/ Third Parties Vendors Restoration Contractor Building Contractor Architect/Engineering Roofing Consultant Industrial Hygienist Lead and Control the Loss Adjustment… 19

20. Loss Reserve is Key Scenario 1 Adjuster visits loss site unattended Adjuster sets Loss Reserve set at $10M Total Incurred Loss after all is known = $14M 12 months to settle Scenario 2 Adjuster visits loss site with a prepared risk manager. Risk Manager provides detailed order of magnitude Adjuster sets Loss Reserve set at $17M Total Incurred Loss after all is known = $14M 7 months to settle Major fire at a retail distribution center 20

21. How claims become complex  Delays in repair / reconstruction  Cause & Origin Investigations  Subrogation analysis  Result from delays  Mold  Additional damage from rainfall & other perils  Second event prior to completion of repairs  Difficult to quantify / segregate  Code upgrade issues  Identifying code issues can take time  Delays in analysis and adjustment of damage by insurers occurs during widespread catastrophes  Pricing and timing of repairs increase significantly following widespread events 21

22. Business Interruption – What is Usually Covered?  Physical damage by an insured peril to insured property triggers the time element coverages  Contingent BI for insured damage to direct suppliers and customers  Interdependency losses between internal operational areas  Service interruption - damage to property of the type insured, by an insured peril (that is not excluded for SI)  Civil authority – limited to a number of days  Ingress/Egress – limited to a number of days  Other exposures in your organization (ex. H1N1 Flu) – insured or not insured? 22

23. Recovery and Settlement Expedited by Aligning the Appropriate Experts Shareholders/Investors CFO Risk Manager Operations Construction Legal Accounting Reinsurers Other Experts Legal Underwriters Insurer Account Executive Insurer Claims Manager Insurer Claims Dept. Loss Mitigation Consultant Specialty Consulting Estimator/ Engineering Forensic Accountant Salvor Specialty Consulting Estimator/ Engineering Auditors ProjectManager Adjuster Insured Team Insurer(s)Te am 23

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25. Presentation Overview  Pre-loss Planning  A Loss Occurs  The Property Claims Process  Selecting a Recovery Vendor  Tailoring Response to Policy Terms & Conditions  Legal Pitfalls to Avoid 25

26. Restoration and Remediation – The Basics  Coverage Areas – national, regional, local  Equipment – owned, leased, rented  Services Offered – emergency response, restoration, rebuild 26

27. Restoration & Remediation – Beyond the Basics National Network – Local Response “black dots vs. black hole” Specialty Certifications Project Management & Subcontractor Standards Continuing Education Requirements Financial Strength (timing of payments) Leverage of Relationships- fuel, power, & access Accounting Methods and Billing Processes Look for Innovation 27

28. Presentation Overview  Pre-loss Planning  A Loss Occurs  The Property Claims Process  Selecting a Recovery Vendor  Tailoring Response to Policy Terms & Conditions  Legal Pitfalls to Avoid 28

29. Restoration & Insurance = Hand-in-Glove Marrying Terms & Conditions with Disaster Response –Ex. Extra Expense vs. Expediting Expense vs. Expense to Reduce Loss –Number of Deductibles –Sue & Labor Collaboration Not Confrontation - Work with insurance adjuster and carrier on scope - Demonstrate loss mitigation mindset Act with Due Diligence & Dispatch - Reasonable conduct under the circumstances - Period of Indemnity – Actual vs. Theoretical 29

30. Presentation Overview  Pre-loss Planning  A Loss Occurs  The Property Claims Process  Selecting a Recovery Vendor  Tailoring Response to Policy Terms & Conditions  Legal Pitfalls to Avoid 30

31. Planning for Catastrophe  Types of Coverage to Consider: Business Interruption Coverage Contingent Business Interruption Coverage Contingent Extra Expense Coverage Legal Expense Insurance Claims Preparation Coverage Civil Authority Coverage Ingress/Egress Coverage Punitive Coverage 31

32. Areas Requiring Immediate Consideration You will be addressing claims under bad conditions—get some help from an insurance professional  Providing Notice  Bermuda Form Coverage (be careful) (Integrated occurrence trigger)  Preserving claim while repairing damage  Claims preparation is complicated 32

33. Front-End Litigation Considerations  Notice  Forum—in tough cases, forum is decisive  Documentation (counsel should coordinate with broker and client. Don’t repair without documenting!)  Think team (risk manager/claims adjuster/counsel must work together) 33

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