November/December 1989
Handling losses is difficult to prepare for. But when a catastrophic fire hit this scrap recycler’s offices, he quickly learned the value of insurance and good vendor relations in rebuilding a business.
By John E. Schneider
John E. Schneider is president of E. Schneider & Sons, Inc., Allentown, Pennsylvania, and is chairman of the Insurance Committee for the Institute of Scrap Recycling Industries, Washington, D.C.
Allentown, Pennsylvania. Monday, April 25, 1989. Approximately 1:00 a.m. The phone rang. My immediate thought was, "Oh, no, not again." We seem to average about four calls in the middle of the night per year. Usually it's a call that trash is burning in the yard or turnings are smoking or that someone broke into the trucks.
This time was different. When I answered the phone, the caller said he was from Allentown Communications Center and confirmed that I was John Schneider, owner of E. Schneider & Sons. He told me to immediately report to the yard--one of the buildings was on fire.
Even though it seemed as if I just went to bed it didn't take long to wake up, get my thoughts together, and be on my way back to work. The 25-minute ride seemed to take forever. My mind was going a mile a minute. I tried to imagine all the things that could have happened. Was it the shear building? Was it the office or the warehouse? What went wrong? How did it start?
I knew things were bad when I saw the roadblock at the end of my yard, well over a block from the office. I drove around the patrol car and pulled up near the office. As I got out of my truck the officers at the scene asked who I was and what I wanted. I identified myself, told them I was the owner, and walked toward the office. One of the officers got me in a headlock and dragged me back to my truck. Apparently the circumstances surrounding the fire were suspicious.
I was told to wait in my truck until the situation was stabilized and they were ready to talk to me. I guess I was being considered an arson suspect. It's difficult to describe how helpless I felt watching my office burn--not to mention being manhandled by the police and being thought of as a suspect rather than a victim.
Soon the detective in charge came over and agreed to take me around to the back of the office. Together we tried to piece together what happened. I found the office an incredible mess. There was paper and ceiling insulation everywhere. Phones and calculators had melted in place. The safe was pulled out and lay on its back. The paneling in my office had a large hole punched in it. It was obvious that this was a burglary and the fire was either a cover-up or the result of the burglar torching open the safe.
Apparently the burglar got into the office through the washroom, breaking through the wall separating it from the office. He tried to saw his way into the safe, but once he realized that this was hopeless, he broke into the warehouse and found a mobile burning outfit--just what he needed to cut open the safe. We are not sure if the fire was the result of the sparks from the torch or was intentionally set to cover the burglar's tracks. After he was done with the torch, he laid it down while it was still lit.
The office was relatively new and was constructed mainly of plaster and masonry, so it was relatively fire-resistant. However, no matter how fire-resistant you try to make your office, it is no match for a cutting torch. To make things worse, as the fire spread it burned through the hoses for the torch; then it was fueled directly by propane and oxygen right out of the tanks.
Because fire-resistant materials were used to construct the office, most of the damage was caused by smoke and water. The roof was another story--it was destroyed.
One of the things that hurt the most was seeing my father's and grandfather's pictures on the floor, singed and broken under a pile of debris. Here were two men who worked their whole lives building this business. The frustration was indescribable. Eighty-seven years and three generations of hard work, and you don't realize how fragile everything is until you're faced with a disaster like this. You look around and try to imagine how you will survive this and wonder if it is even worth it. Then you realize that it's in your blood and you can't just give up. This is just another challenge and it has to be conquered.
Rebuilding
Since the area was no longer secure I was not permitted to leave. As dawn approached I began to formulate a reconstruction plan. Phone calls were forwarded to our other yard. I called the company that services our scale and by 9:30 a.m. they had the scale back up and operating. It was temporary, but at least we were open for business and receiving scrap. Our command center was a piece of plywood on top of a 55-gallon drum and my pickup truck, which fortunately had a mobile phone in it.
Around 6:30 a.m. I placed a call to my insurance agent to report our loss. I woke him up, but I figured the sooner we got on the road to rebuilding the better. He arrived about an hour later and told me to document as extensively as possible what was destroyed. I guess I had expected to see my agent and claims people show up in their work clothes and help us clean up. Apparently that only happens on television.
I also called my dispatcher, Brian Kerschner, and my secretary, Elizabeth Schoch, told them what had happened, and asked them to come. When they arrived they were shocked.
Ahead of us was the immense task of cleaning up and rebuilding. Fortunately we had some favors that could be cashed in with some of our vendors to help us. We needed an office trailer as soon as possible. We had just completed a cleanup for the local rental firm and provided them with very good service. They responded with an office trailer within two days.
The phone company was right on the job, providing us with temporary phones and lines. Our electrician was quick to respond, removing the burned-out service and providing us with temporary services.
As we began to clean up and rebuild, we had to address the monumental job of identifying what was destroyed. The first thing we did was take about 100 photographs to document the damage and take a video to make sure we didn't miss anything.
It was important to know what type of coverage we had on the property and what was available for things like reconstruction of records, cleanup, debris disposal, and office rental. Fortunately, we had replacement value coverage rather than actual cash value coverage. With actual cash value coverage we would have had to inventory every item that was destroyed and attempt to determine its cash value prior to the fire. With replacement coverage we had to inventory what was destroyed only and our claim would be paid based on the cost of replacing those items.
On Friday following the fire our insurance company sent in its claims specialist for these types of losses. He met with me and the contractor who would be rebuilding the office. Together they came up with a scope of work to be completed as well as the method by which this work would be costed out. The approved method of costing was to be the National Construction Estimator. This made it very easy to define the costs of rebuilding the office.
We placed the costs of fire-related items in special accounts on the computer. We were very lucky that we had backed up our business accounts as of close of business the day before onto floppy disks and they were not in the office when the fire broke out.
As of mid-August the office was 95-percent complete.
Setbacks
They say luck runs in streaks and I guess this was our year for bad luck. On May 15, while out of town, I called in to see how things were going. I soon found out they weren't going too well: someone had broken into the yard the night before and vandalized our trucks. Their intent was obviously to wreck the trucks since only a CB radio was stolen. Dashboards were smashed, wires and headliners were ripped out.
I had my staff immediately report the loss to our insurance agent. By the time I had called in, repairs were well on their way. Since a claims adjuster would not be over for several days, we completed the repairs as quickly as possible and kept detailed records on what was damaged.
Our luck then turned from bad to worse. Soon after our trucks were damaged, we shipped a load of busheling to a local foundry. Apparently, some stainless clips got mixed with this material. If they did, they slipped past the inspection at the plant where the material was generated, passed the inspection in our yard when we rehandled it, and passed the inspection when it was charged into the furnace. The resulting analysis on the particular heat was way off specification. The analysis was so far out of line that they found it necessary to dump the heat into six 55-gallon drums.
The next day we were advised to pick up the drums and the balance of the scrap that had not been melted. Shortly thereafter we received a claim for damages from the broker who handled the transaction. The foundry had placed a debit on the account of the broker for the amount they felt they lost as a result of scrapping one heat. As in previous cases, our insurance agent was immediately notified and passed on the information to the insurance company.
Again the black cloud hung over E. Schneider & Sons, Inc., as on Friday, July 21, our scale house was completely destroyed. We had just received a load of scrap from one of our customers who delivers his scrap with a demolition-type dump trader. This trailer uses a large barn-door type of tailgate. The load had already been dumped and the driver was scaling his rig out. Apparently he forgot that his tailgate was still open and proceeded to drive off the scale. The scale house was no match for the tailgate--it was leveled. Fortunately, no one was near the scale house at the time. Again, we immediately notified our agent, who notified the insurance company.
Cover Yourself
I learned several things over the last few months as we struggled with all these losses. First of all, although the price of insurance is high, we must pay it. No scrap processing facility can operate without insurance. We must learn as much as we can about coverage, making sure we have the right type and in proper amounts. No one wants to suffer a loss and then realize his coverage is inadequate--by then it is too late. We have to maintain a constant line of communication with our agent, notifying him every time we change an operation or change a piece of equipment. We have to notify our agent of all losses immediately.
Through all the problems we recently faced, we learned a lot of other things about our business. We realized our strengths and discovered our weaknesses. In so doing, we never lost faith: we always felt that, like the phoenix, we would rise up out of the ashes to be stronger and better than ever.•
Handling losses is difficult to prepare for. But when a catastrophic fire hit this scrap recycler’s offices, he quickly learned the value of insurance and good vendor relations in rebuilding a business.