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March 13, 2012

Banner Supply OKs $55M Chinese Drywall Settlement

Summary:

Drywall supplier Banner Supply Company and its insurers have agreed to pay $54.5 million to settle about 2,000 claims from Florida victims of the Chinese drywall fiasco. The settlement is only for Florida, the state with the most Chinese drywall homes, because Banner only distributes in Florida.

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Drywall supplier Banner Supply Company and its insurers have agreed to pay $54.5 million to settle about 2,000 claims from Florida victims of the Chinese drywall fiasco. The settlement is only for Florida, the state with the most Chinese drywall homes, because Banner only distributes in Florida.

The settlement comes to an average of about $33,000 a claim. The high-sulfur, corrosive drywall is thought to have caused at least $100,000 in damages to each home. Previously, Banner had reached settlements worth about $11 million.

More information on the settlement can be found on the Tampa Bay Business Journal website.

Failure to control critical supply chains is the largest failure in a disaster. Each disaster reinforces this experience with fresh new examples. But other exposures arise from your supply chain. Your supply chain can create its own disruption or crisis without a disaster striking your company or a vendor directly.

Have you identified your critical suppliers? Have you reviewed their business continuity and crisis plans? Have you identified the metrics to use to evaluate their exposures and plans?

Liability
This story is an example of how the actions of your suppliers can create liability for the distributor or manufacturer. In Florida alone, hundreds of millions of dollars of liability arose as a result of imported high-sulfur corrosive Chinese drywall. Do you know the materials or ingredients of the products that you use? Are you sure? How do you know?

Even if you utilize service providers (for example, call centers, IT, etc.), as part of your supply chain, you have a responsibility to know what is happening. Have you audited your critical service providers? For example, liability for identity protection can arise quickly.

Insurance
The lessons learned here extend beyond supply chain to insurance recovery. Regularly, companies express that there is no need for planning since they have insurance. As we review exposures, insurance does not guarantee complete coverage of losses or damages.

Here the damages were over $100,000 per home, but the insurance carriers agreed to pay only 33 percent of that amount. Based on your industry and your regulatory environment you may be required to conduct audits onsite of your critical suppliers at least once every three years. When was the last time you audited your suppliers?

How Do I Leverage Business Continuity?
Companies need to implement a maturity model operational business continuity review. Such a review enables a company to evaluate this business continuity program as critical success factors using a 4-stage maturity assessment tool and creates a corporate role and responsibility matrix. The analysis framework is built on:

  • Industry-identified best practices
  • Industry standards for business continuity
  • Previous success in implementing sustainable and effective business continuity programs

As a result, a company can move the program beyond a liability through basic/minimal requirements, to a strategic value and ultimately brand differentiation. This shift creates a culture of preparedness and resiliency as the company escalates:

  • Control Breakthrough
  • Alignment Breakthrough
  • Value Breakthrough

Are you only responding to a crisis or enhancing value?

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