Business Personal Property Insurance

Also referred to as ‘Contents Coverage’

For most business owners this is one of the most overlooked coverage options out there, in my opinion. Often times when I ask potential insureds if they want this coverage they quickly say NO I just need general liability. This may be ok for a few segments of business, but overall this is actually a really important coverage that doesn’t cost much more. What most business owners do not realize is that around 60% of companies that do not carry this coverage, do not reopen after a catastrophic loss. What exactly is Business Personal Property Insurance Coverage you ask? Business Personal Property Insurance (Contents Coverage) provides coverage for furniture, fixtures, merchandise, materials and all other personal property owned by you and used in your business. Coverage is generally at replacement cost. Now try to envision what this means to your business. If you are a contractor and have a shop that houses all of your tools, unscheduled equipment, etc. A loss wipes out your shop whether it was from fire or something else. Most of your tools and other items are now not usable. What do you think the cost of replacing those are without insurance coverage? This number will vary depending on the size of your company but when you start buying or adding up the value of everything you had this number escalates pretty quickly. If you had this coverage you probably have a $500 deductible but that will pale in comparison to the actual cost of replacing everything you need to function like the day right before your loss.

Business Personal Property Insurance

Lets take a look at a different type of business and show the importance of Business Personal Property Insurance Coverage. Take a restaurant for example. Lets say you open a restaurant. You are new and business is slow at first. Money is tight due to all of the start up cost associated with getting a business off of the ground. With buying insurance for possibly the first time quite a few owners are caught off guard by this cost> they may  want the bare minimum to get coverage in place to satisfy a lease, etc. Only give me general liability is what they will tell us. Its the only thing that is being requested from my landlord or lease. We recommend additional coverage that is vital in this type of operation and that is furniture, fixtures, kitchen equipment, etc. They decided well I will just add that later. Business owners are very busy especially at the start up phase and they continue to say lets just wait or I don’t have time to deal with it right now. That is a valid point, but imagine if they are four months in and they have a fire that wipes out their restaurant. They only have liability coverage. All of a sudden the dream they had of owning their own business is suddenly snatched away from them. When you way the cost of having to replace everything out of pocket to get back open, it can be crippling to your business.

The cost of this coverage varies with the amount you need to cover. For restaurants specifically, carriers often have a section where they can put the vast majority of the amount you value into a section called restaurant equipment. This is rated better than just blanket business personal property coverage and will make this coverage even that much more affordable.

At the end of the day at least get this coverage priced along with your general liability. That way you can make an educated decision on whether you want to further protect your business. It is after all your lifelong dream of being a business owner. Do you really feel like rolling the dice with your dreams.

6 Types of Insurance every Home Healthcare Small-Business needs.

Home Health Care is one of the fastest growing industries in the country. With the baby boomers moving up in age, the need for these services is growing larger every year. The need for proper insurance in these businesses is also becoming more important. For a business owner, most of the clients in this industry are nearing the end of their life. Most are not in good health. Many get hurt or are sick frequently. Protecting your business from mistakes or court costs is crucial in this industry. Below are 6 types of coverage every Home Health Care Business should carry.

Home Health Care

  • General Liability
  • Professional Liability
  • Business Personal Property
  • Hired and Non-Owned Auto
  • Workers Compensation
  • Commercial Crime/Employee Dishonesty

 

General Liability

General Liability (GL) Insurance, in most cases, is the most important insurance coverage a home health care business can obtain. In most states it is required by law and it is usually the first line of insurance purchased by a business. It protects your business from most liability exposures other than automobile and professional liability. Other coverages are usually added to this depending on the business needs, but all businesses need General Liability. Unlike Workers Compensation Insurance this coverage protects your business from liability to third parties.

 

Professional Liability

Professional Liability Insurance is coverage for professional businesses that give expert advice or provide technical services for a fee. It is designed to help protect a business against any claims of negligence. Therefore, professional liability insurance helps business owners defend themselves from lawsuits and helps pay the damages awarded in a civil lawsuit. Professional liability insurance is commonly referred to as errors and omissions (E&O) or medical malpractice.

 

Business Personal Property

Business Personal Property Insurance is usually an addition to a Commercial Property Insurance Policy. It protects your business from damages to your buildings and property of your business. The personal property of your employees and the personal property of others you might be responsible for. In most policies it also provides additional coverages including: debris removal, pollutant cleanup, preservation of property, fire department service charges, increased cost of construction, electronic data, newly acquired or constructed property, off-premises property, valuable papers and records, outdoor property, and nonowned detached trailers

 

Hired and Non-Owned Auto

This type of auto insurance coverage is for when employees of a home health care business use their own vehicle or a rented vehicle to do company business. This can be as simple as an employee running to the grocery store to buy snacks for a meeting, an employee using a rented vehicle while away at a conference or using a rented truck to transport your equipment.

 

Workers Compensation

Workers’ compensation insurance differs from most other forms of business liability insurance. That is because it is specifically designed to cover your employees and not third parties. Workers Comp covers insurance claims by employees in the event they are injured on the job. The function of workers compensation insurance is to insure a business is not liable for most accidents that occur on the job and employees have comfort knowing their doctors bills and some lost wages will be covered if they are hurt on the job.

 

Commercial Crime/Employee Dishonesty

This type of insurance coverage is mainly for employee theft of money, securities, or property. Most policies include some or all of the following types of employee crimes: forgery or alteration, computer fraud, funds transfer fraud, kidnap, ransom, extortion, and counterfeit money. It is usually written with a per loss limit, a per employee limit, or a per position limit.

Lawncare & Landscaping

Lawncare and landscaping businesses are similar yet very different.

As a business owner of a lawncare or landscape company you might have had to shop for insurance. You might have had to do this to either to meet state requirements or to make sure your business is protected just in case an injury occurs to an employee. Recently I have taken many phone calls from owners of small lawncare or landscape companies that have been asked by a client, sometimes even a home owner to provide proof of work comp coverage before they are grated the job or bid. Whether you have a small or large lawncare company chances are you have had to make a call or two to obtain a work comp insurance certificate.

When going through this process have you ever wondered how your company is classified? There are two class codes that contemplate lawncare and landscaping, 9102 and 0042.  The most qualifying question to determine what class code you are in is, does your company primarily engage in maintaining already existing lawns and garden beds or is your business designing and installing landscape or flower beds. Another deciding factor is if there will be any installation of paving stones or rock beds. The class code 9102 is designated for lawncare or maintenance of existing lawns. Snow removal will also be covered under 9102 and should be discussed if there is snow removal operations in the down season of lawncare. 0042 class code is designated to design and installations of lawns and beds. Any sod laying or pavers would also fall under the 0042 class code. However both class codes do contemplate the applications of fertilizers and insecticides.

One aspect of both classes of business, that I feel I must bring up, is tree trimming. If at any time there is tree trimming the class code 0106 would need to be added to the work comp quote. Designated payroll can be added to that class or it can be added on an “if any” basis. I also must fully explain that the 0106 class code is considered high risk. It is very difficult to place with an insurance carrier.

When calling in or submitting an online quote, the first couple of questions back to you will most likely be:  How many employees not counting the owner are there and what type of lawncare are you providing? If the answer to the first question is there is only the owner, which some times is the case, that would be an owner only policy. If there is one employee or more there will need to be included a total annual payroll. At that time we would figure out how to best classify you. lawncare or landscape will find the best price and insurance carrier for your company.

Faulty Workmanship Coverage

Faulty Workmanship Coverage, offered by Builders and Tradesmen’s Insurance Services (BTIS)

One coverage that most carriers exclude is Faulty Workmanship Insurance. However, one carrier writing liability insurance is Builder & Tradesman Insurance Services (BTIS). Some might assume this would be a coverage included in Commercial General Liability (CGL), bnut many times it is not. Usually this is a standard exclusion from CGL policies. Faulty Workmanship Insurance is coverage for a contractor. It is coverage for property damage due to the contractor’s own faulty workmanship. Are you thinking why would this not be a standard coverage for CGL policies? Well, liability policies are designed to protect the insured when the contractors have defective materials or cause injury to property other that the insured’s own work or products.

Faulty workmanship can also fall under a design Errors and Omissions Policy. This can mean poor building or installation by the contractor. This could also be anything from a bad roof repair or install, to bad wiring done on a remodel. Most insurance policies do not cover the cost to repair or make the errors right. For $30 in additional annual premium BTIS is able to offer that coverage on the back of most CGL policies.

Three exclusions are known as the “your work” exclusions and are excluded coverage’s by the insurer. Damage that arises out of defective workmanship, damage to the defective work and damages incurred to replace the defective work. Business owners should generally absorb their own replacement and repair losses. After all, if you accidentally did damage to either the product you were installing or did damage to the property while installing the product, you typically want to show your client it was an error on your part and fix the damage.

The annual premium on this coverage is very modest for contractors. This is one of many reasons it pays to understand and know what coverage’s are included or excluded on your liability policy.

Attention: You’re facing a nonrenewal.

Your current insurance policy is being non-renewed due to….

You may have received a notice that starts, sounds or maybe feels something like the title above. Insurance cancellations, despite popular belief are actually more common than you would think. They are very serious and should be responded to with action swiftly, but they are not always an awful “kiss of death” from the insurance industry. Some business owners I have worked with seem to think this is so. On the other side, it is something you need to respond with action to regardless.

 

We will discuss today most common insurance non-renewal or cancellations we see and how you should respond to the scenarios:

 

 …..Your reason for nonrenewal for underwriting reasons

 

What? Are you kidding me? Yes this is by far one of the most vague reasons, but more common than you think and as an insurance agent this tells me basically no reason why you are facing a nonrenewal. Generally this does mean one of two things. Either something about your operations (claims history, etc) or something in particular about your business makes the perceived risk for the insurance carrier less than satisfactory in their review. It could mean the company has changed their underwriting guidelines as a whole, which just happens to mean your company doesn’t fit with their strategy. Simply put insurance companies generally know what their company is good at and what they are not. Some insurance companies prefer to write roofing companies, but wont write clerical offices. many are just the opposite. Most companies fall in the middle which is why this becomes very common.

For Example: Transportation claims have been a leading cause of claims for several years, especially relating to workers’ compensation insurance. As a result in the last few years several insurance carriers who in the past would write these types of accounts have now decided they were no longer offering coverage for companies in your industry or class code. For some insured’s its no surprise when their claims have shown them good reason for this, however some trucking companies who have done well at controlling claims would see non-renewal notices for this type of reason. They were not seeing the non-renewal because of their claims or experience, but more because of the industry as a whole not performing well. This can be discouraging for these types of clients. Clients who take pride in controlling their claims and being very marketable risks to insure. These are the types of clients who need an experienced insurance agency on their side. Preferably one with several market alternatives to move to when this happens.

            What to do?

Discuss with your independent insurance agent what other carrier options are available. Start this process soon so you can make an informed decision on the direction you want to go without being pushed into a last minute decision. Requesting claims history reports and Experience rating worksheets from companies you have been insured with for the last 5 years is a good start as most companies will need this in order to quote.

 

 

Nonrenewal because Agent is no longer representing this insurance carrier…

 

Insurance companies and agencies have contracts come and go fairly often. More often for some agencies than others. This doesn’t mean your agency is not a good agency or that the carrier you are insured with is not a good carrier to do business with. It just means that one or both of those parties have decided they are not the best partnership at this time. This decision has absolutely nothing to do with you as the business owner with the exception that you are part of the pool. Agents within the industry call this the agents “book of business”. Sometimes, for one reason or another, the agency or carrier has decided that the partnership does not fit one o f their needs at this time.

            What to do?

Decide who you like more. If you have not been happy with the agency, call another agency. Especially one who has access to several commercial markets. A lot of times your policy could be moved into another agency book with a just few forms signed.

 

If you like the agency more than you like the carrier, discuss with your agent the alternatives they have to offer so a replacement option can be found well in advance of your renewal date.

 

 

Nonrenewal due to Claims or Non-Renewal Due to payment history issues

 

Don’t be discouraged. We all have set backs and things come up with payments. Insurance claims are the reason we buy insurance. These statements are not to enable you to continue on your path, don’t beat yourself up, but action and change is needed in these situations. Otherwise you are going to see the same situation in the future.

           What to do?

Nonrenewal due to payment issues are a sign that you want to look at things. You might have an accounting back-log or issue that’s delaying your payments (Fix the back log issue and prioritize making payments on time).  You might have cash flow issues from high accounts receivables (manage this aggressively-maybe even consider outsourcing to a collections agency if need is to that extent). Your sales are just low throughout the year or part of the year (work to improve sales or drive down costs more aggressively-most importantly budget for your known operating costs like insurance). These are the most common reasons we see cancellation of insurance. The seriousness of this issue extends into all aspects of your business and is a reason why several studies point to poor accounting practices as a leading reason why many small businesses fail.

 

A Non-Renewal due to claims do happen often. There is really no one answer to how to handle these because the scenarios are always different. Some carriers are more aggressive than others. Some are more reactive while others are more proactive. This is really where having an agent that understands these differences in carriers is vital to helping diagnose the best game plan for your business. For instance, if you had one claim that blew up into a much bigger issue and you have made the necessary corrective actions, most of the time that is not going to be hard to overcome in finding a competitive replacement for coverage.

 

But when you have shown a trend of several claims, either big or small, corrective action must be taken. If these incidents have similar reasoning than from the carriers perspective it may point to poor claims management. If sufficient corrective actions have not been made than the claims are likely to create the same or worse problems for you in the future. These types of issues must be addressed or the problem with claims and obtaining insurance will get worse over time.

 

Overall a nonrenewal of your insurance should not be taken with a grain of salt, but are also not a reason to close your business. The issues are sometimes within your control and many times they are something no one could prevent. The key to is to manage and react promptly. Get past the problem with a well thought out game plan. The help of a good agency is crucial to deal with these problems for your business.

Experience Modification Overview

The Experience Modification Rate will only apply to your workers’ compensation policy. Typically you will not qualify for a rating until you have been in business for 3 consecutive years with workers’ compensation insurance coverage. Your Experience Mod compares your workers’ compensation claims experience to other employers of similar size operating in the same type of business. If you have fewer claims than other companies of the same size and industry you will receive a lower Experience Mod Ratio. This ratio is used against your annual premium and results as a discount. On the flip side of that is if you have higher claims in a four year time period then it will result in a higher experience mod. The claims history will generally lag at least a year. What this means is your current claims history, whether good or bad, will not have an effect on your renewal experience mod. The modification only calculates policy periods that have been completed. So if you have a good year this year it will not help with your experience rating for two years. On the same note if you had a bad year it will not effect you for two years as far as rating goes. Experienced companies that monitor their workers’ compensation premium understand and utilize their experience mod annually. Understanding your experience modification rating and monitoring is another area in which you can reduce your workers comp costs. Companies who effectively manage their safety programs not only understand how this works, but also have assigned someone to monitor this on a regular basis. It has a direct correlation to how much you pay in work comp premiums.

Where to find your Experience Modification Rate: You will receive an updated Experience Modification Rating Sheet each year prior to your policy renewal date. Your experience mod is also listed on the declarations pages of your workers’ compensation policy. This will reflect last years rate. You will want to contact the National Council on Compensation Insurance (NCCI) directly or your respective State Insurance Bureau. They are able to send you a copy of your new rate, which will be used for this years premium cost. If you don’t know how to find it reach out to your insurance agent and they will be able to point you in the right direction. Most companies whose annual premium are in excess of $5,000 and have been in business for more than 3 years will receive an Experience Modification Rate. The requirements could vary per state and will if you have an individual bureau that handles the rating outside of NCCI. Each year insurance carriers report to the calculating agency your class codes, payrolls and losses for the last five years. The computing agency uses three complete years of data ending one year prior to the effective date of the rating period. For example, a rating in 2015 normally will not use 2014 but would include years 2011-2013 in the formula. Don’t forget about your current years claims. These usually present the greatest opportunity for cost reductions. Remember this years claims will affect your Experience Mod next year.

How claims affect the Experience Mod:

Medical-only claims Claims that require medical treatment only are usually less severe so employers should not be penalized when they occur. Consequently, any medical only claims are reduced by about 70% before they enter the formula. You can take advantage of this by ensuring that injured employees remain at work when possible or return to work within the waiting period. This is where an effective claims management and return to work program can have a dramatic effect. Should you need help in establishing a program, Western National Loss Control Consultants can help.

Lost time claims The first $5,000 of a lost time claim is counted at full value. The dollar amounts after $5,000 are discounted. There is also a large claim cap limit to protect you from a catastrophic loss. Because the first $5,000 of each loss goes into the formula dollar-for-dollar, severity is a factor. A single claim valued at $20,000 has less effect on your Experience Mod then 10 claims valued at $2,000.

 

 

EPLI (Employment Practices Liability Insurance)

What you need to know about Employment Practices Liability Insurance (EPLI)

 

The Need

I’ve seen numerous places that the Equal Employment Opportunity Commission (EEOC) receives around 100,000 charges of employment discrimination a year — hardly a drop in the bucket.  Employment discrimination claims are only one type of claim covered by EPLI Insurance. Furthermore, businesses are three times more likely to be sued by an employee or former employee than to experience fire damage (something nearly every business insures against occurring). In addition to heavy defense costs, the average compensatory award in a federal employment discrimination case is around $500,000 and growing. This excludes defense costs and punitive damages. In summary, EPLI related claims are relatively common and are growing in frequency. Such claims can lead to a devastating liability for businesses.

Basic Overview

As similarly described in resources devoted to the ins and outs of insurance coverage, like www.IRMI.com, EPLI is a type of liability insurance covering wrongful acts arising from the employment process. EPLI provides protection against many kinds of employee lawsuits, including claims of:

Wrongful termination
Retaliation
Sexual harassment
Discrimination
Breach of employment contract
Negligent evaluation
Failure to promote
Wrongful discipline
Deprivation of career opportunity
Wrongful infliction of emotional distress
Mismanagement of employee benefit plans

The most frequent types of claims covered under such policies include: wrongful termination, discrimination, sexual harassment, and retaliation. The policies generally cover management personnel, directors and officers, and even employees as insureds. The most common exclusions are for bodily injury, property damage, and intentional/dishonest acts. EPLI policies are written on a claims-made basis. The forms contain “shrinking limits” provisions, meaning that insurer payment of defense costs—which are often a substantial part of a claim—reduce the policy’s limits. This approach contrasts with commercial general liability policies, in which defense is covered in addition to policy limits. Although EPLI is available as a stand-alone coverage, it is also frequently sold as part of a management liability package policy.

 

 

EPLI coverage can vary substantially among insurance carriers. Some of the most important considerations include whose acts are covered which is beneficial to be as broad as possible. This is especially beneficial to independent contractors, a company’s board of directors (and it’s affiliates) and leased or seasonal employees and volunteers. The definition of which claims are covered can vary. It is beneficial to the insured for the definition to be as broad as possible. Another relevant clause related to EPLI coverage is the “hammer clause”. A strict hammer clause means an insurer must seek an insured’s approval prior to accepting a settlement offer. This requires the insured to be responsible for all additional costs which accrue above the cost of an offered settlement. Typically the insurer recommends the insured accept. A soft hammer is sometimes available which is similar to the hammer clause. Except that the insured and insurer split the costs above the cost of the settlement at some agreed upon percentage (often 50/50). Retention limits and limits of insurance are also relevant. There are often higher deductibles/retention associated with EPLI claims than other types of insurance. Retention levels and limits of insurance substantially affect the cost of EPLI policies.

Claims Examples

The Hartford, one of the leaders in providing EPLI insurance, provides numerous claims examples. One example includes a retaliation claim where an employment offer was rescinded. The claimant alleged the offer was rescinded due to complaints about sexual harassment where as the employer claims the offer was rescinded due to the applicant’s overreaching in the hiring process. The case didn’t settle due to the applicant’s hefty demands. While the insured prevailed at trial with a defense verdict, they were left with $254,000 in defense costs (which are generally covered under EPLI policies). As with many examples, the insured may prevail in the claim (or make a modest settlement), but defense costs often run up into the hundreds of thousands. Without adequate EPLI insurance, that could lead to devastating liability for insureds (or lead to ill-advised settlements to avoid defense costs).

Data security becoming a bigger issue for hotels

The hotel industry is seeing a rapidly growing trend of data security breaches that are part of the latest trend of industries targeted by cyber criminals. The trend is now reaching the radar of the general public, after Hilton Hotels & Resorts acknowledged hackers stole credit card information from a large number of the franchise locations in November.

According to Barry Kouns, President & Chief Executive Officer at Risk Based Security, there have been 49 reported data breaches from the hospitality industry between 1/1/14 and  11/31/15. Kouns acknowledges that many breaches go unreported by organizations. Of the group of reported breaches, almost 60% exposed client credit card numbers, according to Risk Based Security.

This two-year long trend first received some notice after hotel owner, developer and management company White Lodging acknowledged a cyber hack in the first quarter of 2014. That attack (as has been the case with the Hilton breach and the Mandarin Oriental data breach) targeted point-of-sale devices inside of restaurants, coffee bars and gift shops located within the 14 hotels breached. The White Lodging  cyber attack was where the issue really first came on the radar for the hotel industry.

In fact, that attack prompted John Buchanan to write his article “Sources: Data breach shows industry liability” on Hotel News Now.com. In that report, Buchanan sites an expert who discusses how the industry is being threatened and is seen as a good target for cybercriminals — especially for franchise chains within the industry.

Part of the reason franchises make such an attractive target is because the franchise models typically have a standardized model, even within their computer systems. Because of that standardization, when a security deficiency exists within a specific system, it can be used against the entire franchise.

Former Washington Post reporter Brian Krebs broke both the Hilton and White Lodging breaches on his blog, Krebs on Security. White Lodging confirmed a second data breach in February 2015, attacking the same systems in different hotels.

What can hotels do to protect themselves?

The biggest issue most hotels seem to struggle with centers around their inability to quickly implement security patches in their networks. One of the easiest suggestions Mr. Kouns offers to those in the hospitality industry is for the company to conduct regular network scans and to fix issues.

Another key implementation step is to make sure that anti-virus software and definitions are kept updated. New viruses come out every day and the anti-virus protection software is usually pretty good at staying on top of the new viruses, offering fixes regularly. If a company isn’t updating their anti-virus software, that company is leaving itself exposed for a potentially avoidable hack.

Risk Based Security is one of several companies that offers different solutions to businesses to help them mitigate their risk of a data breach. They offer a subscription service designed to provide clients with the tools, services and resources to stay informed about the latest security threats and have ready access to security expertise while maintaining a continuous improvement posture.

Another key element is providing training to employees regarding cyber security. Many data breaches occur when an employee has either visited a website or clicked on an email that corrupts the computer. Most of the time, the employee is aware that they have made a mistake … but since nothing obvious happens right away the employee is tempted to stay quiet rather than bring up the issue to their IT department and potentially get in trouble.

Some of the most successful companies to avoid data breaches discuss open communication and react in a supportive way when a computer is attacked. That reaction encourages employees to report potential data breaches, which can make the difference between catching an issue quickly, or having your company’s name attached to the next data breach report.