At Hope Global in Cumberland, no one mentions the “f-word”: flood.
During the downpours in October 2005, the company’s 300,000-square-foot office was awash in water three feet deep, according to Cheryl Merchant, president and CEO of the textile company, which employs about between 260 and 275 people
Hope Global sits on the Blackstone River, and when the water ran over the river’s banks and into the building, it destroyed equipment, inventory, and even blew off shipping doors.
Luckily, Hope Global had flood insurance for $1 million. Unluckily, the company suffered $5 million worth of damage.
Today, Merchant does not doubt that a flood could happen again, which is why her company is looking into additional flood insurance in the six-figure range.
She learned two lessons from the 2005 flood: Disaster planning is necessary, as is flood insurance.“Like it or not, we need it,” Merchant said.
According to Pam Pogue, state floodplain manager for the R.I. Emergency Management Agency since 1999, there are still not enough people in the state who are aware of the risk of flooding and the need for insurance. As of last year, she said, fewer than 3 percent of Rhode Island’s 480,000 structures have flood insurance.
Adding to those troubles, she said, the state has had tremendous development for its size, and flooding has been happening more frequently since 2003.
For Pogue, flood insurance is a logical move for businesses. Why not protect your investment? “To me it’s foolish if you don’t,” she said. However, she also believes that there is a misunderstanding of flood insurance within the business community.
For instance, she said, people do not realize that they will not receive federal disaster funds if a U.S. president does not declare the area a disaster. No recent Rhode Island flood has been declared a disaster. In fact, she said, the last time a president declared Rhode Island a disaster was in 1954 after Hurricane Carol – and that was mainly for wind damage.
People also have to realize that most of the flooding does not occur on the coast, but inland along the lakes, ponds and rivers, Pogue said.
And standard insurance policies specifically exclude flood-related losses, said William K. Austin, principal at Austin & Stanovich Risk Managers in Providence. In order to have flood coverage, the client has to request it and pay separately for it.
Anyone whose business is in a flood zone should invest in flood insurance, Austin said. There are two levels: the 100-foot flood zone and the 500-foot zone, based on the history of damage sustained by properties at different elevations and distances from a body of water. In Providence, most of the businesses fall into one of these two zones, he said.
However, smaller businesses tend not to think about flood insurance as much as larger businesses, Austin said. He added that smaller businesses’ flood insurance assessments are not as good as larger businesses, either.
Another problem is changing people’s mindsets. Pogue said the mentality of “this never happened to us before” has to go. Merchant at Hope Global was one of the unlucky ones. She said that prior to the flood, she never looked up the company’s flood insurance.
Pogue added that flood insurance is relatively inexpensive for a business. But that may be relative; John C. Gregory, president and CEO of the Northern Rhode Island Chamber of Commerce, said that while the Chamber encourages members to buy flood insurance, “the cost has become pretty high, almost prohibitive.”
Patricia Ryan, president and CEO of Ryco Trimming Co. in Lincoln, which flooded a year and a half ago, said she pays about $2,015 for flood insurance, and her premiums didn’t go up after the flood. Her property insurance costs $7,100.
Ryco sells fabric, trims, ribbons and crafts, and even though the 25,000-square foot store is 16 feet from the Blackstone River, Ryan said, the building has only flooded twice – in 1954 and 2005. In fact, she said, the property had flood insurance when Ryco first moved in, and she has always dutifully paid the premiums.
In 2004, however, business was a little tough, and Ryan said she thought twice about paying for flood insurance. In the end, she paid for it.
A week after 30 inches of water flooded her main floor in 2005, Ryan said, an agent from the Federal Emergency Management Agency – which runs the program through which she has her flood insurance – came to see her, and she ultimately got a check for $500,000.
“In the long term, obviously, [flood insurance] paid,” she said with a laugh.
