F3 Tornado Damages Whitmor Industries Distribution Center
The National Weather Service (NWS) forecast office in Memphis, Tennessee, reported that an EF3 tornado passed through the center of Earle, Arkansas (near Memphis) on May 2, 2008. The NWS reported the storm reached its maximum intensity in this area, with winds ranging from 155 to 165 mph, causing severe damage to the WHITMOR INDUSTRIES Distribution Center.CASE DESCRIPTIONmore
WHITMOR INDUSTRIES designs, manufactures and distributes home organization, storage, laundry, and garment care products to major retailers around the world including Wal-Mart, Target, The Home Depot, Amazon, Kmart, KOHL's, and many others. (www.WHITMOR.com)
The buildings at the facility were a series of interconnected "Butler" Steel Buildings that were fully built-out with advanced systems for this high-tech global distribution center. Almost one-third of the nearly 300,000 SF distribution center was totally destroyed and demolition began within one week after the loss. The remainder of the complex suffered various degrees of damage to roof and perimeter wall components due to wind pressures, and the impact of flying debris. Prior to the tornado, WHITMOR had been considering expanding or relocating its distribution center to facilitate its continuing growth.
Immediately after the loss, WHITMOR retained the original contractor to provide an estimate of the extent of damage and the resultant repair costs to help WHITMOR decide whether to rebuild on-site, or at another location per the insurance contract as explained by its insurance broker. This contractor had no experience with disaster projects.
The insurer retained its preferred architectural/engineering consultant and its preferred contractor as experts to also determine a scope of repair with associated costs.
About one month post-loss, WHITMOR met with its insurer who presented its "preliminary" scope of repair report along with cost estimates. Both the insurer's and WHITMOR's estimates were much lower than WHITMOR expected, particularly because it had historical cost data from the various phases of original construction, indicating that many items had been overlooked.
At this time WHITMOR contacted DODD, providing us with the two scopes-of-repair and associated cost estimates, requesting a preliminary review of both. After submitting our preliminary findings, DODD was retained to manage the complete scope of damage assessment and subsequent costs to repair, a timeline and summary of our findings for inclusion into the insurance claim.
- The insurer's consultant specified a "generic steel building" to replace the Butler Building Systems structure that was totally destroyed, arguing that there was nothing "special" about a Butler Building in his opinion, notwithstanding the fact that there were a total of seven other Butler Buildings at this distribution center
- The insurer's consultant's specifications excluded the costs of erecting the building, equipment rental (such as cranes), and shipping to the job site.
- The insurer's engineers were of the opinion that the building could be placed on the same pedestals and footings by simply welding or modifying the existing anchor bolts that had been cut-off and or pulled-out by the wind forces, but provided no calculations to support this opinion.
- The insurer's contractor was of the opinion that no building permit was required.
- The insurer's engineers included limitation language in their reports, such as "...the items observed in this report are intended to be representative of the structural conditions observed...only visible items were observed...hidden damages may exist as destructive testing was not performed."
- WHITMOR informed DODD that the insurance policy provided coverage for the increased cost of construction due to enforcement of local codes and ordinances in effect at the time of the loss, which had changed during the life of the destroyed building. However, the insurer's experts opined that because a building permit was not necessary the changing codes didn't matter.
- DODD determined that the insurer's contractor used "Xactimate" software to determine the build-out and non-structural repair costs. Although this software is commonly used in the insurance industry, it is not intended to be used on complex losses, especially when actual bids can be obtained instead of relying square footage and regional unit prices costing. This insurer's consultants acknowledged that its pricing did not address the full extent of damage to property and equipment, and further, that they were not using the newest version of the software.
- The insurer's contractor did not believe a general contractor was necessary to repair all of the damages, and that a steel building dealer could assemble a few subcontractors to repair the facility, limiting Overhead and Profit to 10%.
- Further, the insurer's contractor estimated the entire repair reconstruction could be completed in 90 days, and allowed for no contingency. DODD's contractor's detailed schedule required 180 days for completion.
- The insurer's consultants believed that the visibly damaged roof panels and supports that were damaged in hundreds of locations could be repaired in place. And, since interior roof surfaces and supports could not be seen in the remaining 230,000 SF of roof surface - due to the presence of vinyl-backed insulation - the consultants assumed no additional roof damage occurred.
- DODD knew from experience that tornado-damaged steel buildings such as these can suffer widespread damage from wind forces that can be difficult to see but will cause water leakage over time through penetrations, lap failures, and at deformations around fasteners with gaskets long after the insurance claim is settled.
- WHITMOR's contractor was not qualified to act as a general contractor for this project. They focused on replacing the totally destroyed envelope building but did not have the ability to prepare a complete scope of repair, provide detailed costs, nor a time period for reconstruction for the entire build-out and specialty systems.
- WHITMOR initially did not retain a structural engineer for the replacement building design or foundation repairs because it was relying on its contractor who did not know WHITMOR was entitled to a new building with code updates.
- DODD made an initial visit to the loss site and inspected the damages to the slab and pedestals in the area where the 70,000 SF building had been demolished and the remainder of the roofs and building interiors. DODD immediately assembled a team of post-loss structural engineers, and an experienced General Contractor capable of completing this project. We also selected an experienced foundation specialty contractor to examine the missing and damaged anchor bolts and damaged floor slabs in order to develop repair costing based on the designs of the structural engineers.
- DODD knew that the Butler Building Systems corporation has an in-house Technical Support Group with knowledge and experience upon which engineers, architects and builders can access when the need arises. Fortunately, Butler had records of the building that was destroyed and, as a courtesy to WHITMOR, they provided the specifications and resulting foundation loads for a replacement building in like kind and quality, based on current building codes provided by DODD's engineers.
- Butler also provided manufacturer's approved methods to repair the other portions of the damaged roof areas for our engineering team to consider.
- Based upon the information Butler provided to our engineering team and contractors, DODD oversaw the design and cost schedule for an appropriate replacement building, floor slabs and foundation repairs as well as repairs to the remaining buildings.
- The General Contractor worked with WHITMOR and its managers to determine the detailed build-out design for the destroyed building, and with our engineers to determine the repair methods for localized damages in the buildings that remained standing.
- DODD then assembled all of the relevant information, and submitted it to WHITMOR for inclusion in its claim.
The CEO of WHITMOR had an excellent understanding of what was due WHITMOR under the property portion of its policy.
The insurer realized that the Owner had assembled a highly experienced professional team, and after a careful review of the property claim, provided payments for each of the disputed items, and then negotiated the costs and depreciation - which was expected - but primarily for the lower cost line items. The insurer always wanted to resolve the claim fairly, but its consultants were providing inaccurate or incomplete information.
After DODD's team provided the CEO with the technical counter arguments and supporting cost data for the disputed items, WHITMOR was able to negotiate a final settlement that was over 400% more than the insurer's first offer.
WHITMOR used the proceeds to help fund the construction and build-out of a new state of the art global distribution center at a new site in Southaven, MS. WHITMOR has maintained a good relationship with the insurer.
Excerpts from Whitmor.com and a letter from Mr. Peter Felsenthal, CEO, WHITMOR Industries to DODD:
"As a fourth generation family owned and operated business, we take great pride in meeting the many challenges that have presented themselves to our company throughout our 60+ year history."
"...after successfully overcoming the aftermath of a devastating tornado that destroyed our global distribution center in Earle, Arkansas in 2008, in mid 2009 WHITMOR relocated to its new world headquarters and state-of-the-art distribution center in Southaven, Mississippi, located only minutes from the Memphis International Airport. Our new facility provides us with the foundation for continued operational excellence and growth."
"Brian, it has been a pleasure working with you on this claim and your participation certainly was meaningful in helping us reach an acceptable settlement on the property portion of the claim. We are pleased with the settlement..."
Regards, Peter Felsenthal, CEO