Entries Tagged 'Commercial Insurance' ↓

While many are now talking about recovery, recession is still very much on people’s minds these days and some employers are planning to reduce their workforce. The last thing any business owner wants to do is to lay off employees, but you need to be prepared to deal with the negative reactions a layoff can engender both within your company and in the community.

As well as playing havoc with employee morale, there are other problems caused by layoffs: According to research by the private nonprofit mutual insurance company Louisiana Workers’ Compensation Corporation, workers’ compensation claims may increase by as much as 50% during layoffs.

If you must lay off employees, how can you avoid post-layoff claims and protect your experience modification factor? Here are five steps you can take to avoid potential workers’ compensation claims during times of layoffs or restructuring.

Step 1
Ask your workers’ compensation and employment practices carriers to help you design and implement a layoff strategy to protect your organization. But don’t rely solely on your carriers. Consider hiring a consultant with expertise in this area. Even just a few workers’ compensation claims can devastate your company’s loss history.

Step 2
Conduct exit interviews with each employee who will be laid off or terminated, and ask at least one company executive and a human resources consultant to attend the interview. This should be treated like a normal exit interview in which the employee is asked for input on items that will help ease the transition as well as for feedback on improving the corporate culture.

Use a checklist to ensure that you cover the same questions with all employees. If the employee raises concerns, be sure to answer his or her questions and write down comments made by the employee and the company representative. Document the interview; you may want to ask the employee to sign the checklist receipt so it can be included in his or her personnel file.

Step 3
Think twice before you ask an employee to sign a waiver stating he or she is not injured at the time of layoff, as some experts recommend. Waivers rarely work as intended, and asking laid-off employees for waivers may damage your company’s goodwill in the community. Ask for advice from legal counsel before asking your workers to sign waivers.

Step 4
If your plant is closing, it likely will generate publicity; be prepared for the media to closely scrutinize your handling of the situation. Keep the closure as transparent as possible, and hire a media consultant ahead of the announcement if you anticipate unwanted media attention.

Step 5
Be prepared for some laid-off employees to file workers’ compensation claims after they are terminated. Ensure that your managers and your insurance carriers thoroughly investigate any incidents that occur.

If you must reduce the number of employees, it is critical that you empathize with the feelings and stress that accompany a layoff. Treat employees with the utmost respect, but also ensure that your organization is protected during the process.

This may not be on your radar, but underinsuring your property could result in serious problems for your business.

Insurance companies base premiums on an amount of insurance that is 80% to 100% of your property’s total value. This is referred to as “insurance to value,” and insurance underwriters are concerned that you may be underrating the value of your property to keep premiums low or are unaware that property improvements and the state of the real estate market have increased the value of your building. In these instances you may be underinsured.

Some people gamble they won’t suffer a large loss. Because most losses are partial, you would normally recover in full on most of your losses. However, if insurers set your rates assuming they are based on insurance to value, they might not collect sufficient premiums. So in the event of a large or total loss, you won’t have been adequately insured.

The “coinsurance condition” addresses this issue. You must agree to carry insurance at least equal to a specified percentage of your covered property’s value. The coinsurance percentage normally used is 80%, although percentages of 90% and 100% are sometimes available for a reduced premium.

The coinsurance condition penalizes you if you do not insure to at least an agreed-upon percentage of value. If you have a loss and are underinsured, insurers reduce payment on your losses based on the actual building’s insurance to value.

Don’t gamble. Discuss your current insurance to value with my office.

How do you manage your company’s certificates of insurance?

The online educator, Investopedia, defines a certificate of insurance as a “document issued by an insurance company/broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals. More specifically, the document lists the effective date of the policy, the type of insurance coverage purchased, and the types and dollar amount of applicable liability.”

As you may know, certificates of insurance are usually requested in a business transaction whereby a vendor, or a tenant conducting business on your property, agrees to accept liability for any losses sustained in the course of the business relationship with you. The certificate of insurance is a summary of that company’s relevant insurance information and proof that the financial protection you may require in case of a loss is there.

These certificates are an important part of doing business, and the more effectively you manage them, the less likely you are to run into problems.

Nevertheless, managing certificates of insurance is a complicated task: You review certificates when they arrive, even enter them into a tracking system and hope you remember to obtain a new certificate from a vendor or tenant when the old one expires. There must be an easier way to manage certificates of insurance.

Here are some tips to help you manage the process:

• Ask for a certificate of insurance from each vendor and tenant with whom you do business. However, you should also do more than just ask for the certificate, particularly on liability policies: Ask to be named as an additional insured and request a copy of the endorsement naming your organization. This can be critical if you must request a defense under that insurance policy. Additional insured status provides you with additional rights under that policy.
• Review the certificate as soon as you receive it. Are the policy dates current? What coverages are provided? What are the policy limits? The coverage limits you require should be spelled out in your contracts. This can be very important, because the standard $1 million in liability coverage doesn’t go far with today’s juries, and you need to ensure the certificate reflects the coverage limits you need.
• Determine which endorsements apply, because some endorsements limit or exclude coverage. Most risk managers recommend that you ask for a complete copy of the policy and its endorsements. Coverage can be broad or greatly restricted, depending on the insurance company providing the coverage or the applicable policy forms. Additionally, you should verify the financial solvency of the carrier providing coverage by checking with A.M. Best Company or another reputable rating organization.
• If you do not have certificate tracking software, set a reminder diary entry a few weeks prior to the renewal date to ensure you receive an updated certificate at renewal.
• One certificate does not fit all. When working with a new vendor or launching a new endeavor, you should consult my office to discuss possible liability exposures you may face.

Business auto policies have exclusions that limit coverage. Be aware of the exclusions and compensate for them. The top five are:

• There is no coverage for injuries to your employees arising out of the use of a covered business auto. This makes workers’ compensation insurance not just a luxury but a necessity.
• There is no coverage for personal property in your care, custody and control. This is because a property policy typically covers personal property. Business auto policies are liability policies and cover bodily injury and property damage to others.
• In what is known as the “loading and unloading” exclusion, the business auto policy covers events that occur only during the actual delivery or pickup of property.
• There is no coverage for pollution losses arising from any pollutants transported, towed or handled by the insured except for pollution stemming from the covered auto’s fuel source and oils or fluids necessary to operate the covered auto. If, however, your insured vehicle hits some other organization’s tanker truck, spilling the tanker’s hazardous cargo, there is coverage for that type of pollution loss.
• There is no specific coverage for bodily injury or property damage caused by your operation of cherry pickers or similar devices mounted on an auto or truck chassis and used to raise or lower workers. When using this type equipment, your general liability policy usually covers any loss.

My office can show you how to fill these exclusion gaps.

When you are thinking about ways to manage risk, you generally believe that the insurance premiums you pay represent the sum total of your insurance costs. You may need to think again.

For example, if an employee rear-ends a vehicle in traffic, seriously injuring the other driver, once your insurance carrier pays the damages you may believe the matter is closed. It’s true that damages paid by your carrier are direct loss costs, but after quantifying the costs of insurance and direct loss costs to your organization, including deductibles or retentions, you can see there are also indirect loss costs.

If you think of a claim or injury as an iceberg, you will find that the majority of the incident’s costs lie under the water’s surface. Experts estimate that the indirect costs of accidents and injuries are actually seven times the direct loss costs.

Direct Costs

Direct loss costs are quantifiable and include insurance premiums; the amount paid to repair damaged equipment or medical costs of injuries; lost wages; fines imposed by regulators; costs to defend the claim; and deductible costs.

Indirect Costs

Indirect costs are more difficult to calculate. In fact, they may go unnoticed by your organization until you wonder what’s happening to your profits.

Indirect costs that may or may not apply include staff administrative time and cost to administer the claim and resulting damages; lost productivity and profits; the cost to hire temporary workers to meet production goals; potential failure to meet pre-injury production benchmarks and replacement or downtime of damaged equipment or tools as well as time lost by other employees impacted by the incident.

Morale suffers

Costs also might include lowered morale that inevitably occurs post-injury, especially when that worker remains off work; staff time spent investigating and defending the claim in depositions, mediations or trial; damage to your organization’s reputation after high-profile adverse events; and business costs to relocate even though you’ve purchased business interruption coverage.

Here are several steps to help you understand these costs and reduce them.

Evaluate your last few claims. Calculate direct loss costs by considering deductibles and payments made by your insurance carrier.

Sit briefly with a few members of your team and ask them to describe the challenges they faced after the loss. It may have been disrupted production, added temporary workers, lowered morale and lost administrative time in handling the incident, which are indirect costs.

Considering this practical information, determine a plan to prevent future occurrences and reduce indirect loss costs should another event occur.

Call my office to help you develop a plan to reduce losses.

Keep evaluating your plan to determine its effectiveness and change it as needed.

Even better … preventing loss-causing incidents from happening can save costs, human as well as the direct and indirect losses that can hurt your bottom line.

Many people who formerly owned or rented are moving in with relatives to save costs in this troubled economy. This means many rental properties and single-family homes are sitting vacant and awaiting sale or foreclosure.

If you own a property that is vacant, is your insurance coverage adequate? Vacant houses have higher risks of vandalism, arson and other losses; if a property is unoccupied for a certain length of time, usually 30 to 60 days, your insurance coverage may cease or offer only limited coverage in the event of a loss.

To determine if you should update your insurance information with my office, ask yourself these questions:

• Do you own a rental property that you can’t keep occupied?
• Have you moved out of your home while you try to sell it or await foreclosure?
• Do you travel extensively or perhaps live part of the year in another residence?

If you answered “yes” to any of these questions and haven’t updated your status recently, it may be time to do so. Should you suffer a loss, the status of your property when you completed your insurance application greatly affects your coverage. For example, if your home was occupied when you purchased your coverage, your insurance carrier will assume that it is still occupied. If, after a loss, an adjuster determines the house was unoccupied, your claim may be denied or significant portions of coverage may be declined.

Why run the risk? Contact my office and correct outdated information.

Many people start home-based businesses to earn extra income, and these businesses can come in all types, ranging from beauty salons to bookkeepers and everything in between.

During the start-up phase, there are many factors to consider: Will you provide a product or service? If you’re providing a product, will you make it at home? How will you market yourself? Where will you look for funding, and what financing programs are available?

Carving out your own niche is the fun part of starting a business, but several other areas need decisions as well: Will you operate as a sole proprietor or form a corporation? What accounting rules will you need to know? What relevant government agencies should you be aware of? And what kind of insurance will you need to protect your new venture?

Whatever your business, if you operate out of your home, you will need liability insurance for the products you make as well as for the customers you do business with.

Be aware that your homeowners’ insurance policy does not provide this coverage. Insurance companies want you to insure a business on a business policy.

In addition to liability concerns, you may have bought materials and equipment that are specific to your business rather than part of your household belongings. These also need to be covered by a business insurance policy.

If you use your own car to make deliveries or go to appointments, your personal auto policy will not cover this and you will need business auto coverage.

Fortunately, there is an inexpensive type of policy that can give you an adequate liability limit and coverage for your business property and auto. It’s called a business owners policy, and it’s offered by nearly every major insurance carrier.

Costs can run between $500 and $1,000 per year, depending on what you need to insure.

Your insurance program should be as individual and unique as your business.

The process of defining a program that will best manage your corporate risks is called risk management. It should be included as part of your overall strategic plan.

The following will help you develop a program to meet your unique needs:

Identify and Prioritize: Risks are inherent in every business. A retail store has a high potential for losses due to theft, a manufacturer’s equipment can malfunction and a contractor should be concerned about accidents. Consider these exposures, then prioritize. Which exposure is likely to result in the greatest financial impact?

Deal With Each Risk Individually: Determine the best way to deal with each exposure. Insurance is only one way of transferring risk. Avoidance is another. For example, contractors may ‘avoid’ high-risk jobs. A third is reduction (sprinklers reduce fire damage.) When no alternative is available, insurance protects your assets so you can return to business as usual.

Implement: Follow through and protect your business against each exposure.

Monitor: Continuous improvement is an essential part of your plan. Regularly evaluate its effectiveness and tweak it as needed; for example, if a new technology becomes available.

Risk management is a vital part of owning a business, and knowing your assets are protected will give you peace of mind.

As a business owner, you may have been asked to add an Additional Insured to your insurance policy. But what does that mean and how does it work?

When you run a business, you form relationships with your customers, vendors, landlords, bankers and subcontractors. In some of these relationships, you enter into contractual agreements with these parties. There are instances when the other parties want to limit their liability. To do that, they ask you to share your liability coverage by adding them as an insured on your policy. This will give the other party status as an insured on your policy, which allows them a certain amount of rights and coverage in the event of a claim.

This is most often seen when “the big guy” asks “the little guy” to take on this additional risk.

In the construction industry, a general contractor (GC) who builds new residential homes needs to hire many types of subcontractors to get the job done. These include carpenters, electricians, plumbers and any other specialty trade needed for a particular job. When these subcontractors are hired, the GC asks to be named as an Additional Insured on the sub’s policy. If someone goes onto a jobsite and is injured due to negligence, the injured person would sue the GC and the subcontractor because they are both at the location. The GC would want the claim handled on the sub’s policy, and as an “Additional Insured” this can happen because the GC has the rights of an insured on that subcontractor’s policy.

Vendors and landlords are a few other groups that also routinely request “Additional Insured” status to protect their interests.

Many small-business owners feel if they don’t agree to such terms, they won’t get the job. However, this can and should be negotiated at the time the contract is being created. Many large corporations use standard contracts whether they are dealing with another large corporation or a one-man operation. A good rule is never sign a contractual agreement without knowing the amount of liability you are asked to take on.

This is where your insurance agent can be worth his or her weight in gold. Your agent can review the terms of the insurance section of the contract and advise you on your options. You can then make an informed decision about the job.

The good news is that insurance carriers realize that adding “Additional Insureds” to your policy is part of the cost of doing business. The coverage is approximately $50 to $100 per “Additional Insured.” Endorsements are also available that allow you to add as many “Additional Insureds” for certain relationships for a higher one-time charge. Nonstandard requests can be reviewed by your insurance company, and the company may charge a bit more, depending on the contract requirements. If the insurance company agrees to take on more liability, the company will want to charge appropriately for it. Typically, business owners then pass that additional charge on to the person they are contracting with as part of the cost.

The prospect of adding third parties to your liability insurance can be scary. Having a trusted agent to rely on can give you the peace of mind to make the business decisions that are right for you.

A little-known but very useful insurance coverage for small- to midsize-business owners is Ordinance and Law coverage.

Basically, this is Property coverage available to building owners and landlords of either residential or commercial units.

Ordinance and Law coverage fills the gap in your property coverage if you own a building that is 25 years old or older.  

If you have a partial or total loss of your building, property insurance will cover only the repair or rebuild of the structure. It will not cover any upgrades that need to be done to comply with today’s building codes.

The most classic example would be a requirement to install wheelchair ramps on the rebuilt portion of the building. If the ramp wasn’t there at the time of a loss, then property coverage will not pay for it.

Ordinance and Law closes that gap in coverage. If adding a ramp is required by law, the Ordinance and Law coverage will pick up the cost of doing the work.

Building codes could require any number of changes: installing sprinkler systems; updating fire walls in apartments; accommodating fire codes for safe evacuation in the new structure; and making a building strong enough to sustain heavy weather like hurricanes, high winds or floods, and the list goes on as building commissioners change and evolve codes.

Ordinance and Law coverage is broken down into three sections:

Coverage A – Loss to the Undamaged Portion of the Building:

If there is a partial loss of 50% of the building, many cities and towns want you to demolish the entire building and rebuild according to today’s codes.

The coverage will pick up the cost to replace that undamaged portion of the building.

Accordingly, the limit of coverage is usually the same as the building limit listed in the Property coverage.

Coverage B – Coverage for the Cost of Demolition:

Now that you have to demolish an entire building that was only partially damaged, your expenses just skyrocketed, right? No. Coverage B will pay for bulldozing the undamaged portion of a building. This limit of coverage is usually a percentage of the building limit coverage.

Coverage C – Coverage for the Increased Costs of Construction:

This is the portion of coverage that pays for making all the changes that bring the building up to code. This limit would be determined by the amount you would need to make any changes.

This might take a bit of research of your town’s laws to see what changes you would need for your building. But it is time well spent should a loss occur.

Once changes have been made, you can adjust your building limit to include the new total value of your “up to code” building.

However, it is still wise to keep Ordinance and Law coverage, since laws are moving targets.

You don’t want to be caught short at the time of a loss if you need to comply with new building codes.