Risk & Business

According to a recent article in National Underwriter, www.propertyandcasualtyinsurancenews.com, anti-fraud organizations representing sectors of property and casualty insurance and health insurance are combining efforts to combat fraud. This is good news for small business owners who are annoyed when their insurance companies pay for what they consider illigitamate claims. Not only are insurance rates affected by the number of claims paid out for possible fraudulent activities but individual insured's loss histories are negatively impacted as well. As many of you might know, every claim paid out by your insurer is recorded by them and provided to any future insurance company you wish to do business with. Hopefully this is a sign of future proactive and aggressive attention to this area by insurance companies.

With the spotlight currently focused on the subprime mortgage crisis and with many prior examples of securities debacles, think Enron, it's interesting to note that insurance entities are starting to explore opportunities into this historically untouched area of investment for them. According to their website, Lloyds, www.lloyds.com, one of the largest world players in the insurance and reinsurance market, "Convergence between the capital and insurance markets is gaining pace and Lloyd's insurers are at the forefront of developments". They have formed an investment management company that will specialize in traded insurance risk. With the global industry as a whole having an extremely profitable run the past couple years due to the low incidence of insurance related catastrophes, combined with a successful run of investment profit in the stock markets, they are now exploring new ways to broaden their earnings capacity. While at face value this looks much like many...

It's that time of year again, hurricane season is upon us. According to the National Oceanic and Atmosperic Agency (NOAA) website, they are predicting a 90% chance of normal or above normal activity in the Atlantic this year. Their definition for normal or near normal is a range for major hurricanes at 1 to 3 for the season. Their definition for above normal is a range between 2 and 8 major hurricanes. The reason I bring this up is the fact that many business owners located at or near the shore, or in designated flood zones, aren't currently carrying flood insurance. While not intended to scare you, it's important to realize that your current property/casualty insurance does not cover you in the event of flooding. Take a look around your building/facility, is most of your stock and or equipment, located in an area accessible to water in the event of flooding conditions? Can you afford to self insure this material in the event of a major weather event? You may be sur...

Interesting article I ran across. Seems that with the increased gasoline costs, motorists are driving less, thereby decreasing accident rates. An analyst at Lehman Brothers upgraded major personal auto insurer Progressive Corp. as an investment due to this trend. With the recent trend of insurers decreasing their rates to win business, this would be a welcome sign for them to increase profit margins. The story stated that in the 70's, when gasoline prices increased substantially, the same trend occurred.

Those of you making the decision on purchasing commercial property and liability coverage for your business are probably enjoying the current climate in the pricing of your commercial insurance coverage. We are in the midst of a "soft market" in commercial insurance pricing and it's only makes financial sense to place your coverage with a carrier offering competitive pricing. Let's keep in mind that the lowest price isn't always the best deal. Make sure to examine carefully the alternative proposals you are receiving to make sure they match up with the coverage you currently have. Keep your agent/broker honest by insisting on no shortcuts in achieving pricing cuts. You should definitely take advantage of the pricing climate that is currently occurring. Just make sure you are still enjoying the same level of coverage you had before with the lower premiums you are now paying.

I have heard from time to time while visiting clients and new prospects that they are in need of someone to help them with their safety management program. While most agents are more than capable of providing safety management services for their clients, not just including their access to the resources provided by the companies they represent, it is important for the insured to make sure they do their part also. Many aspects of an insureds operation are unknown to the outsider coming in to make an assessment, such as the agent or company loss control personnel. While many businesses more or less operate in the same manner as many of their counterparts in related industries, many are set up and run in a variety of ways unique to their own unique requirements and owner related priorities. It's important to review your procedures/processes from top to bottom and share as much as you can with your agent and insurance company loss control personnel. If you suspect a procedure or p...

Often the small business owner is required to travel. While on the trip they may wish to rent a car. Has thought been given to the exposures faced while driving the rental car? The following liabilities come into play- third party liability due to customer's use of rental car; liability to third parties rental company's negligence which is assumed by the customer when they rent the vehicle as part of the contract; liability for physical damage caused to rental car due to customer's negligence; and liability for loss of use due to physical damage to the rental car. As you can see, a lot of liability will rest on your shoulders when you take possession of the rental car and if you aren't properly covered then you are taking on a large risk. All car rental companies offer coverage, the problem is that most coverage only matches the minimum limits required by the state the vehicle is rented in. Many assume that their personal auto policy will provide coverage. While ...

With many businesses providing cell phones to their employees for business use, a potential hazard is cropping up that many business owners are probably unaware of. What about their potential liability for their employee's use of the cell phone? A couple things to consider are the risks associated with cell phone use while driving, either texting or dialing, which necessitates the employee taking their eyes off the road for a brief period of time. Apparently cell phone litigation is on the rise across the country and employers that provide cell phones are increasingly on the hook for liability suits associated with cell phone use. Even if the employee is using the company provided cell phone while not on company business, the potential liability still looms large. Studies have shown that those using cell phones while driving are four times as likely to be involved in serious crashes. Furthermore, studies suggest that banning hand held cell phones and switching to hands free o...

In many instances, punitive damages, along with compensatory damages, are applied to punish a negligent party, while also being used to discourage others from the same type of behavior. Whether punitive damages are insured depends on state law and the policy itself, along with applicable court decisions. Depending on your specific risk it might be prudent to take a few steps to deal with this liability beforehand. One action to take is to request from your agent/broker,to check into the possibility of having punitive damages coverage included in your policy or to have them search elsewhere for extra coverage for this specific liability. It's always best to deal proactively with these types of concerns before something happens rather than waiting until after the fact when it's normally too late.

The Pittsburgh Penguins play their home games in the 47 year old Mellon arena. The seating capacity has been increased from the original 10,500 for hockey to 17,000. By today's hockey league arena standards the place is a dinosaur. Philadelphia's home ice is the Wachovia Center, first opened in 1996. The seating is over 19,000 and it hosts far more amenities than it's counterpart to the west. Due to it's age would the Mellon arena's owners insure to Replacement Cost or Actual Cash Value? A possibility would be ACV due to the arena's age and that most likely a rebuilt structure would be much larger and boast more extensive amenities. We're fairly certain that the Wachovia Center would be insured on a RC basis, due to it's relatively new status, although I suspect that it's corporate parents use a mix of self insurance as well. Of course you can't forget the myriad other insurance considerations for both these structures, business income b...

In my previous post I had discussed ways to arrive at property damage limits. While instructive, it was only the beginning. Once you have arrived at the Actual Cash Value ACV or Replacement Cost RC, of the property, and whether to insure 80 % of it's value or higher, it is also important to assess whether the property is susceptible to damage by a single loss. Those properties that may be deemed susceptible to a large single loss are coastal properties, property near heavily wooded areas, etc. Also, remember that the coinsurance requirement must be carefully examined and adhered to. Just having a policy with an 80% coinsurance, without faithfully revisiting your property value(s) each year, can leave you on the short end of the stick when the time comes for the insurance company to pay out after a major loss, due to being underinsured. If you have only one location you might give major consideration to insuring up to 100% of the location's value, since a fire or other di...

One of the more difficult areas for the small business owner to address when setting up their business insurance policy is setting up the property damage limits. There are 2 standard approaches, either using replacement cost, (RC), or actual cash value, (ACV). Replacement cost is defined as the cost to replace the property new today with material of like kind or quality. ACV is replacement cost less physical depreciation. Remember that when insuring real property, either through the RC or ACV options, to exclude land value value since nearly all policies exclude coverage for any damage to land, landscaping or pavements. Usually the best place to start is with a professional appraisal when arriving at insurable values. The best place to start is in your local directory or by searching locally on the internet for appraisal firms. Typically, appraisals are prepared for the market value of the property, using either a cost approach, an income approach or a market approach. The inc...

When a small business owner is setting up a property/liability policy for their business, an important area, not often given enough consideration, are properly identified insureds in the policy. Remember, the insurance policy is a contract, and while you expect the insurance company to fulfill it's obligations should a covered loss occur, the same is expected of you. Remember, an entity not identified in a specific schedule of insured entities will not be covered for its insurable interest in direct damage to its real and personal property. Additionally, real and personal property of an entity not identified as a named insured may be overlooked when creating a schedule of insured locations and insurable values. The best way to ensure you have all entities covered is to create a master list showing all entities to be covered under the policy and including their insurable interest and any location or locations their interest applies to. Remember, many small business owners m...

Most of you are aware of business income coverage, coverage that protects against loss of revenue due to a covered loss of property. While this is the most often used income coverage, there is another out there that you might not be aware of and it could possibly be of great importance to some of you. The coverage in question, Contingent Business Interruption Coverage is for loss of income due to damage by an insured peril to non-owned property. Many of you have a contingent business interruption exposure that you might have overlooked if you haven't thoroughly reviewed your exposures. The exposures this coverage would apply to are - Key Suppliers - if a sole supplier of a key component used in the insured's product suffers a major property loss and the insured is unable to replace the product with another, the resulting loss of revenue can be insured; Key Customers - if 10 percent or more of revenue is dependent on a single customer, coverage can be purchased to insure the...

In reviewing your policy you probably have seen the above term, "Ordinance or Law Coverage" and probably didn't pay much attention, believing it to be just another of those insurance terms stuck in to your policy having no real impact upon you and your coverage. It might be important for you to pay attention to this coverage and how it impacts you. Ordinance or Law Coverage protects against the increased loss incurred by the insured due to the enforcement of building, zoning, or land use laws. Such costs could include changes to comply with the Americans with Disabilities Act (ADA), new earthquake reinforcement requirements, or new life safety requirements. This coverage would most likely be of greater importance to those business owners that own their own building. This coverage can be broken down into four parts - Demolition Cost - Pays the cost to demolish and clear undamaged parts of the property due to enforcement of building, zoning, or land use laws...

Oftentimes clients have called in requesting a performance bond on a new job they have successfully bid on. While access to these types of bonds is fairly easy to obtain, more often than not most insureds are unaware of the actual implications of the bond and what is required to successfully obtain one. The typical bond required by most construction type risks is the performance bond. A performance bond is a type of surety bond that is typically required to obtain the contract and provides financial guarantees to the owner that the contractor will fulfill the contract according to the parameters laid out in advance. In order to obtain the bond the surety company will conduct an investigation into the contractor's fiscal health, usually through the use of tax returns, corporate financial statements, etc. Once the surety is satisfied then a bond is issued in the amount specified under the contract. An important note for the contractor to take into account is that if they fail t...

As a business owner suffering a downturn in sales/business, such as what many are going through now, one of the first bills to be left unpaid is the monthly insurance premium. This is usually the case since insurance is perceived as a non-tangible asset, not utilized unless a loss occurs. The problem with this approach is that it leaves the business owner vulnerable to a multitude of potential hazards by leaving themselves unprotected with the loss of their insurance coverage. I would suggest taking another step, somewhat less drastic. If times are tough and the wallet is feeling the pinch, pull out your policy and review your coverage carefully. Make a list of all the items covered under your property section and pare down or even eliminate those items you think you can do without. Many businesses have extra vehicles and equipment listed on their policies that, given some thought, they can do without. If you can continue to provide the level of value and service necessary to ru...

During the course of the work day a situation might occur, such as a customer slipping on your premises and falling. While you promptly help them up and they assure you that they are okay, don't make the mistake in thinking that everything is fine and dismiss it out of hand. Remember, policy conditions require that you promptly notify the insurance company of any occurrences that occur that may result in a liability claim. The reason for this is to give the insurance company sufficient time to investigate the possible claim while everything is still fresh in everyone's mind. The company has the right to deny coverage for just this very instance, failure to promptly notify. Put into effect at your place of business a system of reporting any potential claim to the appropriate department, i.e. claims manager, office manager or even you. All insurance companies that may have a potential stake in the claim should be notified promptly. While a claim can be denied for failure t...

A common practice among many small business owners is to put their insurance policies out for bid annually among as many agents as they can identify in the local yellow pages. Unfortunately they are oftentimes shooting themselves in the foot by approaching their insurance program pricing in this manner. This common perception, having as many agents as possible quote for the best possible price, often leads to a steadily decreasing market from which to draw from when they are in the market to solicit bids on their insurance. It's important to be aware of the fact that while there may be many agent listings in the phone book, most, if not all of them, represent many of the same companies. While one agent may place an application for coverage with a company, a competing agent, most of the time, will find themselves blocked from also approaching the same company. While this is good, since the insurance company could end up getting two very different applications on the same busine...

An often overlooked, but important, part of the property coverage in every business insurance policy is coverage devoted to debris removal. Most business owners, and insurance agents for that matter, tend to take this part for granted, without giving any real thought to the coverage and it's potential importance should a claim occur requiring it's implementation. If a major property loss occurs, there often tends to be a large amount of debris. The more debris from the loss, the cost to remove it increases. This doesn't take into account costs associated with types of debris removal. If the insured is in an old building, there may be hazardous material that needs to be removed, possibly asbestos, which would further drive up the cost of removal. It's important to remember that in most policy forms the coverage limit for debris removal is part of, not in addition to, the overall limit for covered property. If you don't take this into consideration when settin...