September 2009

Insurance companies, agents, and buyers tend to focus on the major coverages within the Commercial General Liability policy: Liability for injuries caused by a business’s premises, operations, products, or finished projects, and liability for property damage. However, for businesses that do not own the buildings in which they operate, there’s an often-overlooked coverage that could be very important. The policy declarations refer to it as “Damage to Premises Rented to You,” although it has traditionally been known as Fire Damage Legal Liability Coverage. It provides limited coverage for tenants who cause fire damage to rented premises.

Fire Damage Legal Liability is a “give-back” coverage. Coverage A – Bodily Injury and Property Damage Liability contains 14 exclusions — clauses that describe types of losses to which the coverage does not apply. The final paragraph states that the last 12 exclusions do not apply to fire damage to premises while rented to or temporarily occupied by the insured with permission of the owner, so it gives the coverage back from the exclusions. This means that, if the insured is legally liable for fire damage to premises rented or temporarily occupied, the policy will provide coverage for fire damage to premises in the insured’s care, custody or control, and fire damage resulting from release of pollutants, among others. This coverage has several limitations:

• It usually has a limit of only $50,000 or $100,000.
• It applies only to the premises, not to contents, such as furniture or wall coverings.
• It covers fire damage only, not water damage or other types of losses.
• It provides coverage only if the insured is legally liable for the damage. It does not cover liability the insured assumed under a contract.

These limitations can leave a business at least partially unprotected in a variety of situations. Some examples:

• The business’s liability for damage to a rented space is $200,000.
• The business is an auto body shop. While a car is being spray painted, a spark ignites the fumes and causes an explosion.
• The business rents meeting space in a hotel. A projector overheats, starting a fire that damages tables, chairs, easels, and a cart holding refreshments.
• The business’s lease makes it responsible for damage to the premises, regardless of cause. A nearsighted driver crashes his car into the display window.

In all of these situations, the insured will either have no coverage or insufficient coverage. If these limitations could cause a problem, the business might want to consider some options. It could look at buying a property Legal Liability Coverage Form. This policy covers the insured’s legal liability for damage to property described in the policy and in the insured’s care, custody, or control. An advantage of this is that it provides coverage for a variety of perils, not just fire. However, it does not cover liability assumed under a contract, so it still would not cover damage caused by the nearsighted driver. A regular Property insurance policy will provide broader coverage, but it probably duplicates the landlord’s coverage and is more expensive than other options. The tenant might want to ask the landlord to remove assumed liability from the lease.

To determine which coverage options are best for a particular situation, work with one of our experienced insurance agents. We can explain alternatives, give an idea as to their costs, and provide information about various insurance companies’ claim handling practices. Get the facts early — the time to find out about your coverage is before a loss occurs.

As the manager of a business, you want to focus on those things that drive success: Productivity, innovation, performance, and strategy. As you work to grow the business, you probably do not want to deal with more mundane office matters. Sometimes, however, these issues can have a major impact on employee morale, and they must be handled well. One such issue is the employee dress code. It would be nice if all employees used common sense every day and wore tasteful, professional clothing. Taste and professionalism, however, can be in the eye of the beholder. It is likely that your organization needs some kind of guidance on appropriate dress.

If the organization has an employee handbook, it probably has a section on acceptable dress for the workplace. Is the policy too vague to be useful or overly specific? Does it comply with legal requirements? Does it require dress that is more formal than necessary given the amount of customer contact employees have? Does it allow clothing that is too informal for regular customer contact? If the answer to any of these questions is yes, consider updating it. If not, make sure that you are enforcing it. Also, it might be wise to remind employees of the dress code policy periodically. This will inform new employees and reinforce the policy with veterans.

The organization should enforce the dress code without partiality. Individuals and groups of employees should be treated equally. Federal employment laws and regulations permit employers to set employee dress codes and to treat men and women differently within social norms. For example, it’s acceptable to require men to cut their hair while not making the same demand of women. On the other hand, it might not be acceptable to require women to wear skirts or men to wear uniforms while not making equivalent demands of the other sex.

Be aware that federal and state laws protect employees from discrimination on the basis of religion. Employers must make reasonable accommodations to employees who want to dress a certain way for reasons of religious observance. Some men might cover their heads or wear beards for this reason; women might wear clothing that almost completely covers them up; employees of both sexes might wear certain pieces of jewelry. Unless complying with these requests would pose an undue hardship for the organization, the employees’ wishes must be honored. Employers may refuse such requests if the clothing or style creates a safety hazard; in most other cases, they must make the accommodation.

On the other hand, the law does not require employers to allow workers to display tattoos and body piercing. Rather, employers are free to make business decisions about the display of these styles. Some employers might permit it for employees who seldom or never interact with customers. Others might permit it for everyone, especially if their customers frequently have tattoos or piercings. Still others might decide that it’s inappropriate for their businesses in all cases. The decision is entirely the employer’s, based on the balance between business needs and the need to attract and retain good employees.

This is really what dress codes are all about. Every business projects an image, and how its employees dress affects that image. Managers naturally want to put their best foot forward with customers. At the same time, a good workforce is not easy to build and retain. A too-strict dress code will repel good job candidates and could cause valuable employees to consider leaving. Inflexibility might violate anti-discrimination laws and inspire workers to file lawsuits. It is in an employer’s best interest to develop a dress code that reflects well on the business and keeps employees happy.

Occasional severe injuries are an unfortunate part of the construction business. When they happen, a contractor may be looking at a very large lawsuit and will seek coverage under its Liability insurance policy. Undesirable side effects of Liability insurance claims include disputes between the contractor and the insurance company. Bad feelings can begin with the claim notice from the contractor, build with a letter from the claim adjuster listing every policy condition that might mean no coverage for the claim, exacerbate when the adjuster balks at the defense attorney’s bills, and erupt during negotiations over a settlement.

A contractor cannot control a claim adjuster’s actions, but there are things that can be done to influence the adjuster’s behavior for the better, minimize areas of disagreement, and make the whole process a little smoother. Claim adjusters find it frustrating when they receive initial claim notices that provide limited information. When giving the initial notice of a liability claim to its insurance company, the contractor should provide at minimum the following information:

• Basic information, such as the date and location of the loss, names of injured persons, nature of injuries, and so on.
• If the contractor has already hired defense attorneys, an explanation of its reasons for selecting that firm. For example, a particular firm might have significant experience defending contractors of the same type; the notice to the insurance company should state that.
• A statement of what the contractor expects from the company during the claim process. This should present several questions for the company to answer, such as whether the attorneys will act as the conduit for information between the contractor and the company, whether the company will hold an early meeting with the contractor to discuss the case, and the confidentiality of certain communications.

It is a good idea for the contractor to seek an in-person meeting with the claim adjuster within the first few months after making the initial notice. This meeting will separate the contractor’s claim from the dozens of other cases on the adjuster’s desk. It will facilitate an exchange of information, introduce the adjuster to the attorneys, educate the adjuster about the case, and allow both sides to discuss their expectations for the claim process, such as frequency of updates and the payment schedule for the attorneys.

Even with a detailed initial notice and an early meeting, disputes between the contractor and the company can still arise. If the two parties can define the issues specifically, they can limit the disagreements and focus on producing a successful claim resolution. Even if they disagree on whether the policy will cover the claim, a specific description of each side’s concerns can help narrow the areas of disagreement and reduce uncertainty. Therefore, it is in the contractor’s interest to be specific about its questions and concerns in all communications with the company. This should give the company an incentive to be clear about why it might not cover the claim. Armed with this information, the contractor can decide more easily how to proceed next — whether that will be to mediation, appeals to the company’s management, litigation, or other alternatives.

During this process, the contractor should not overlook his insurance agent as a resource and advocate. Agents deal with claim situations on a daily basis and can provide valuable information on what to expect and ways to make the process easier. Workplace injuries are upsetting and disruptive; ensuing lawsuits are stressful and take a contractor away from his real business. Following these steps can reduce the amount of stress and help bring the claim to a conclusion with which all parties can live.