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Monthly Archives

May 2012

WILL YOUR COMPANY BENEFIT FROM KEY PERSON COVERAGE?

By Life and Health

Key Person insurance is often called Key Man insurance or Keyman coverage. It is a policy taken out by a business to allow compensation for financial losses resulting from the incapacity or death of an important employee. Although there is no legal definition for it, Key Person insurance is an important type of business coverage. Another purpose of this coverage is to contribute to the continuity of the company. A policy’s term does not exceed the point of the key individual’s usefulness. Although this coverage does not indemnify actual losses, it does provide a fixed sum. The exact sum is specified in the policy’s verbiage.

Employers may obtain Key Person insurance for the health or life of a worker contributing special skills, knowledge or other contributions. To be considered for such coverage, a worker’s contribution to the company must be uniquely valuable or consume a considerable portion of the company’s worth. Employers obtain this coverage to offset the costs associated with losing the employee. Expenses such as hiring successors, decreases in business and training temporary workers are all important considerations for employers.

Who Qualifies as a Key Person. Anyone who is associated directly with the business may be considered a key person. In addition to this, individuals whose loss could result in serious financial strain usually qualify. For example, company directors, key salespersons, partners, key project managers or other valuable individuals with unique skills normally qualify.

Loss Categories for Key Person Insurance. For Key Person insurance compensation, there are four separate categories:

  1. Insurance for protection of partnership interests and shareholders. As a rule, this type of coverage enables partnership interests or shareholdings that current partners or shareholders will buy.
  2. Losses connected to the period when the key person cannot work, when temporary personnel must be provided and when it is necessary to pay for training and recruiting an adequate replacement.
  3. Insurance for any parties involved in guaranteeing banking facilities or business loans. The value of the guarantee equals the value of the insurance coverage.
  4. Insurance for profit protection. Some examples include offsetting lost income from cancellation of a business project the key person was involved in, lost sales or losses from delays. There are also several other types of losses.

The treatment of funds received and tax rules for premiums paid for key person coverage vary. In the United States, premiums are not tax deductible. To learn more about Key Person coverage, discuss the options with one of our agents.

VEHICLE TYPE HAS IMPACT ON INSURANCE RATES

By Personal Perspective

The costs associated with purchasing a vehicle do not end when you pay the dealer. When you own a car, you must pay for gasoline, maintenance and Auto insurance. The cost of Auto insurance usually varies based on your driving history, age and the type of car you drive. Although certain types of cars lower the cost of your insurance, others will raise it.

Car insurance companies determine the cost of your policy based on the risk of loss on insurance claims for the company. If the type of car you drive is associated with a larger number of expensive insurance claims, insurance companies will charge you a higher premium than it would charge if you were insuring a vehicle with fewer risks.

Insurance companies assess the risk associated with your vehicle by examining past information about the vehicle and about the type of person that usually drives it. If drivers of the vehicle usually make more claims, the insurance company will assign a higher premium. Cars that are often associated with more claims are usually those driven for pleasure, such as sports cars. Drivers of pleasure vehicles travel faster and might pay less attention to safety regulations. Sports cars also tend to become damaged more easily.

On the other hand, if the insurance company determines that your vehicle type does not usually result in many expensive insurance claims, it might assign a lower premium. For example, minivan drivers typically make fewer insurance claims and thus pay lower insurance premiums. This is because minivan drivers are typically carrying multiple passengers, so they drive more safely. Drivers of minivans also tend to travel less during peak traffic times.

Together with the profile of the driver and the safety of the vehicle, insurance companies also look at the cost of repairing your vehicle when determining your premiums. If repairs made to your vehicle would cost more than repairs made to most other vehicles, it is likely that your insurance premiums will be higher than the premiums associated with those other vehicles. In most cases, the more expensive the vehicle is, the more expensive the cost of repairs will be. For this reason, cars that cost more to purchase also cost more to insure, especially if the car is worth more than $60,000.

Regardless of the vehicle you drive, your age and driving history will also affect the value of your premium. If you are a young or inexperienced driver, your rates will usually be higher than the rate charged to a driver with more years of experience. Likewise, if you have a poor driving history with many insurance claims, your rate will increase.

HOMEOWNERS INSURANCE & LAWSUITS

By Personal Perspective

It is common for neighbors to disagree. For example, one person might think that their outdoor dog barking at people passing by is an asset for keeping them safer from intruders. However, a neighbor who enjoys peace and quiet would think the dog is a nuisance. Another neighbor might enjoy listening to his or her music at a loud volume, but others who live in the neighborhood will likely find it annoying. Some situations might not be about noise. People who live in neighborhoods with a uniform appearance might hassle a new homeowner who decides to paint his or her house a clashing color. Whether the source of the problem is noise or something else, disagreements between neighbors can escalate into lawsuits. Before this happens, it is important to know what types of provisions a Homeowners policy provides for legal issues.

Many people think that a Homeowners insurance policy covers most types of lawsuits filed against them. For this reason, people are usually not as careful as they should be about preventing them. For example, consider a new homeowner who moves into a subdivision, replaces the existing fence with higher boards and paints them contrasting colors. If the subdivision has rules about the permissible colors and acceptable maximum height of fences, they will try to get the new homeowner to comply. Homeowners who refuse might find themselves facing a lawsuit for violating the subdivision’s code. The courts will likely favor the subdivision’s rules, and a Homeowners policy will not provide coverage for the legal battle. Therefore, it is important to understand exactly what legal issues are covered under the policy.

Loud noises, eyesores and changes are all issues that do not physically harm another person. Although they might be annoying, they are not issues that would be covered by a Homeowners policy if they escalate into a lawsuit. Always remember that a Homeowners policy offers protection for two types of liabilities: Property damage and bodily injury. If the family dog bites someone on the property, a guest falls off a broken step, or one of the kids breaks a visitor’s car window, a Homeowners policy covers such issues.

Since coverage is limited to two types of physical damage, it is important to work as hard as possible to settle disputes with neighbors. For example, if neighbors complain about a barking dog, it might be best to enroll the dog in training or purchase a no-bark citronella collar. Trim overgrown shrubs or trees that neighbors complain about. Many people get angry and frustrated when a neighbor makes accusations or complains. Anger is usually what causes people to be stubborn and refuse to compromise. Always listen to what neighbors have to say, and try to understand the situation from their perspective. Use common sense to arrive at a solution that is favorable to both parties. However, the best way to avoid anger and confrontation is to fix possible nuisances before neighbors complain. For additional information about avoiding problems and lawsuits with neighbors, discuss the issues with one of our agents.

UNDERSTANDING THE BASICS OF INSURANCE DEDUCTIBLES

By Personal Perspective

To get the most out of your Auto or Homeowners insurance policy, it is important to understand the roles deductibles play. A deductible is the amount deducted from an insured loss. When a damage claim is filed, the deductible is the amount of money a policyholder must pay upfront. It may be a percentage of the policy’s total or a set dollar amount. Larger deductibles are associated with smaller premiums. To find the verbiage concerning deductibles, consult the front page of the Auto or Homeowners policy. Deductibles are subtracted from the claim amount. For example, if a person with a $500 deductible files a claim for $10,000, that policyholder will receive a check for $9,500. However, if that individual’s deductible is calculated using percentages, the amount may differ. With percentages, the variable is calculated from the total claim and then subtracted from the total.

In many areas of the United States, deductibles are increasing. This is especially true in states prone to hurricanes. Property damage deductibles work differently than those for other types of insurance. For example, a deductible applies each time a claim is filed for Auto or Homeowners insurance. However, a deductible applies only once each year for health insurance. There are some exceptions for damage-related insurance products. In some cases, hurricane coverage has a per-season deductible. The following points cover some of the most important deductible information.

Deductibles Do Not Apply to Liability Claims. Although there is no deductible for a liability claim with a Homeowners or Auto policy, there is a deductible for property damage. Deductibles apply to claims made to the comprehensive policy. In Homeowners insurance, deductibles also apply to damaged items inside the insured structure. However, they do not apply if a homeowner is sued or if a medical claim is filed by an injured visitor.

Higher Deductibles May Save Money. One of the easiest ways to cut expenses is to raise deductibles for Homeowners and Auto insurance policies. Increasing an Auto insurance deductible from $200 to $500 reduces collision and comprehensive premium costs up to 30%. Raising the deductible to $1,000 may result in a savings of more than 40%. Remember this is the out-of-pocket amount that must be paid regardless of the amount of the claim.

Flood Insurance Deductibles Vary. Since flooding is not covered in standard Homeowners policies, it is sold by the NFIP and private insurance companies. There are several different choices of deductible amounts for these policies. Keep in mind that some mortgage companies require homeowners to keep their deductibles under a specific dollar amount. Flood coverage for vehicles can be obtained with an optional comprehensive plan.

Various States & Companies Affect Deductible Amounts. Insurance is a state-regulated product, and insurers are required to follow their state’s rules. The laws affect how deductibles are worded in policies and how they are implemented. Since there are a wide range of deductibles found in each state, it is best to compare policies. Keep in mind that doubling the deductible may save more than 20% on the cost of a policy.

Percentage Deductibles Apply to Hurricanes, Hail & Earthquakes. Earthquake deductibles may be much less than 10% or as high as 20% of the structure’s replacement value. Insurance rates are higher in states such as Nevada, Utah and Washington. Consumers in these states may choose higher deductibles to save money. There are special earthquake policies for California residents. To learn more about areas prone to earthquakes, discuss them with one of our agents.

There are two separate types of wind damage deductibles. The first is a hurricane deductible, which applies to wind damage sustained from hurricanes. The second type is a windstorm deductible, which applies to damages sustained from any other type of windstorm. Hurricane deductibles depend on specific triggers. These are usually designated by the National Weather Service, individual states and insurers. The triggers apply when a storm is officially deemed a tropical storm or hurricane. To learn more about how these triggers work, discuss them with us. Some states allow set deductibles. However, communities in high-risk coastal areas may have mandatory percentage deductibles.

MANAGE YOUR WORKERS COMPENSATION CLAIMS

By Business Protection Bulletin

How can managing your Workers Compensation claims process protect every employee?

The first step is to file the claim right away. To this end, have claim forms available to all supervisors. Some companies keep forms near the first aid kit alongside the OSHA log. Management must acknowledge the problem to correct it, so keep good records.

Keep any information regarding preferred doctors networks or nearest emergency care facility with the first aid kit. Maps to these facilities help in crisis management.

Because of the privacy laws, keeping records of employee health concerns (hypertension, diabetes, allergies to medicines) at the ready is tricky at best. Without making the records readily accessible by anyone, they need to be available to supervisors in an emergency.

The insurance company has a depth of claims experience that no insured can have. If not treated properly, some injuries worsen over time. The company has a right to investigate and guide treatment and rehabilitation. A delay in reporting that causes the situation to worsen may create coverage problems. Dutifully report all claims immediately.

Allow the insurance company to investigate the claim. Usually, if the claim results in only medical bills and no lost time, the company will not spend time finding causation; but your company management needs to understand the progression of events that leads to any loss.

Uncover the cause. Were safety appliances, equipment, and personal protection in place and used properly? When the employee was drug tested after the claim, was that an issue?

Use any claim as an opportunity to discuss safety at your next scheduled safety meeting. Discuss the following topics as collateral to the claim:

Assure employees the injury is covered by Workers Compensation and the injured will be cared for properly. If the injured is at work, have them report on the level of care. Discuss the results of the investigation regarding the cause of the loss in neutral terms, but no personal information about the employee. This discussion is about future avoidance, not humiliation. Remind employees of the drug testing policy and explain the policy aims to protect everyone.

If the insurance company investigation implies fraud, fake injury, review safety rules or regulations in a more generic form. Perhaps discuss slips, trips, and falls prevention as opposed to that specific incident.

Risk avoidance is your best measure against Workers Compensation injuries. Maintaining a safety culture with training, meetings, and management leadership keeps a workplace safer. Having proper paperwork and first aid readily available reduces the lost production effect of injuries.

The more prepared you are to handle an injury professionally, the more you protect your workforce. Manage ahead of the crisis with proper planning.

DOES THE CGL OFFER ENOUGH POLLUTION COVERAGE?

By Business Protection Bulletin

When the Commercial General Liability policy was formed, the creators did not intend for pollution events to be covered. The effects of these events are very costly, and special policies are required for businesses facing such risks. These special policies are designed by companies that have expertise in pollution events. Routine events are what the CGL form covers. Falls, construction accidents and property damage are some examples of such routine events. Contractors who have accidents that result in irritants, fumes or other harmful substances being released may still receive some coverage from a CGL policy.

It is important for contractors to understand the extent of pollutant coverage. The CGL form extends coverage for pollutants released only on properties not owned, rented or occupied by the general contractor. However, coverage is not extended for personal property. For example, if a contractor accidentally cracks a gas pipeline at a fuel station, coverage may be extended because the contractor does not own, rent or occupy the station. However, if the same contractor knocked over a large oil drum on his own business property, the effects of the incident would not be covered by the policy.

Contractors also have coverage for any pollutants released on a job site that were not provided by them. Consider the previous example. Since the gasoline at the fuel station was brought by a supplier, it was already in the pipelines when the contractor arrived. However, if that same contractor had brought some chemicals to take to the next job site and spilled them while at the station, he would not be covered. Chemicals and pollutants brought by the contractor may only be covered if they were brought for that specific job. If the chemicals were brought for the fuel station job instead of the following one, the spill may be covered. For example, if a contractor is painting inside of a building and others get sick, he is covered. The policy also covers pollution from completed operations. If pipelines carrying damaging chemicals started leaking several months after being installed, the contractor would be covered.

In most construction contracts, the subcontractor’s CGL policy must include the general contractor and project owner as additional insureds. The policy does not include pollution incidents occurring at places that were not owned, rented or occupied by an insured. However, exceptions are made for premises belonging to any entity named as an additional insured. This means that subcontractors would not have pollution coverage on most job sites without naming the general contractor and property owner as additional insureds.

Keep in mind that the CGL’s pollution coverage is not complete. For example, if a contractor brought a front-end loader to a job site and fluid spilled everywhere, the cleanup would not be covered. In addition to this, the policy does not extend coverage for pollutants released in connection with a contractor’s environmental remediation work. It also does not cover such work performed by hired subcontractors. For contractors and subcontractors who do this type of work, a special Pollution Liability policy is required. It is important for all contractors to discuss their operations with an agent. This will help the agent determine whether current coverage is sufficient. If it is not, an agent will be able to recommend insurance products that close any deficiency gaps. Pollution fines and cleanup expenses are very costly, so it is important to be prepared before an incident happens.

TO GOOGLE OR NOT DURING THE HIRING PROCESS?

By Business Protection Bulletin

Thanks to the widespread popularity of social network sites like Facebook, MySpace, Twitter, and LinkedIn, it’s easier than ever to find personal information about an individual. There’s little hesitation or forethought as users of these sites post everything from their vacation schedules and photos to the most mundane and taboo details of their personal lives. Such information might be intended for the user’s friends and family, but, in many cases, anyone with access to the Internet can see it if they’re looking.

The information an employer can uncover about an existing or potential employee from a simple Google search is often far more detailed and reflective of real life than a job application, resume, and interview combined. On the good side, an employer might find positive articles written by or about an applicant, marks from professional peers, and volunteerism efforts. However, on the bad side, an employer might find unappealing, profane language; graphic videos or pictures; derogatory comments about an employer; or text that clearly shows an unscrupulous demeanor. Good or bad, many of these finding will directly influence an employer’s decision to hire or pass.

Although a quick Google search of a job applicant can be extremely revealing, many employers still wonder if it’s wise for them to conduct one.

One complication would be an employer discovering information that would bias and complicate their hiring decision. Let’s say an employer does an Internet search on a female applicant, discovers that she has several children, and therefore decides not to hire her because her status as a mother might interfere with her ability to put in extra hours at work. If the applicant was to discover that the search was done by the employer and decide to pursue legal action for discrimination, then the employer could be burdened with proving his hiring decision wasn’t based on the applicant’s status as a mother.

Another complication would be an employer using an applicant’s off-duty, legal activities as a basis for discrimination. Let’s say an employer does a search, finds that a male applicant is involved with a political or social cause they don’t necessarily agree with, and therefore doesn’t hire him. Many states actually have laws prohibiting such employer discrimination, meaning an employer can’t legally deny an applicant a position based on political or social views that aren’t relevant to his/her work duties and only take place during off-duty hours. There must be a legitimate business reason for the hiring decision.

Federal law requires employers to make a disclosure if they use an applicant’s credit history to take adverse actions, and some state laws are similarly requiring employers to disclose any adverse information they find in public records about an applicant. Such disclosures are certainly a costly inconvenience to employers. There’s also a question of just how reliable the information is since the information could be pertaining to a different person with the exact same first name and surname as the applicant. Furthermore, it doesn’t take 30 minutes for a begrudged or vindictive individual to create a web page to discredit another individual by passing off false, misleading, or distorted information as fact.

The above points certainly show a liability risk for employers doing Internet searches. However, there’s also a risk in not thoroughly researching potential employees. Let’s say an employer fails to do an Internet search on an employer that later commits a workplace crime. Had the search been done, the employer would’ve found that the employee had a violent past and criminal inclinations. In such a scenario, the employer could face a lawsuit from the employee’s victims for not conducting a thorough evaluation.

When it comes to hiring, the best approach in making an informed, legal business decision is usually to not use one or the other, but rather combine public Internet information with reference checks, interview processes, applications, aptitude testing, and any other credible source of information. Remember, the Internet can be an invaluable hiring tool, but only if used wisely.

TIPS FOR STAYING SAFE WHILE USING A LADDER

By Construction Insurance Bulletin

Many buildings and homes have ladders for various purposes. Although they are useful, they come with many safety risks, and it is therefore important to take the proper steps to prevent accidents. For example, never leave stepladders or ladders unattended. If a ladder falls, passersby, children and even pets can be severely injured or killed. Whether the ladder falls or someone climbs on it, the results often include a hospital visit. Keep safety in mind at all times while using a ladder, and make sure the ladder is secure before climbing on it. Stabilizing it takes only a few moments, and the result yields a much lower risk for disaster. To make ladder use as safe as possible, consider the following suggestions:

  • Carefully analyze the ladder before using it. Look at all of the rungs, and make sure they are sturdy. If they do not have skid-resistant strips, attach some immediately.
  • Prop up the ladder in a way that makes the distance between the wall and base one-fourth of its length up to the support point.
  • Watch carefully for signs of splits and cracks. If rungs are bent, repair them prior to using the ladder. Bent rungs are very unsafe and should never be present above the lower three feet of the ladder.
  • While climbing up or down the ladder, always position the face toward it. Keep at least one hand on it at all times. People who perform ladder jobs requiring both hands should firmly secure themselves to it.
  • Although extension ladders offer additional reach, it is necessary to make sure the overlap is at least three feet. Be sure the rung locks are clicked into place securely.
  • Avoid using aluminum ladders near sources of live electrical currents.
  • Never open a stepladder halfway up. They should always be opened fully, and the braces must be locked tightly.
  • Make sure the ladder’s feet are on a dry and even surface. If a surface is wet or uneven, the potential for danger is heightened considerably.
  • Never climb higher than the ladder reaches. Absolutely avoid climbing so high that the hips are above the ladder’s final rung.
  • Avoid having more than one person on a ladder. It is also important to ensure nobody is standing directly below the person on the ladder. If the individual climbing it dropped an object or fell, the person below could suffer severe injuries.
  • Store all tools and equipment in a sturdy tool belt. This lessens the need to climb up and down the ladder multiple times.
  • Always read all of the instructions and warnings accompanying a ladder before using it.

UNDERSTANDING WHEN ADDITIONAL INSUREDS ARE COVERED

By Construction Insurance Bulletin

With construction contracts, a general contractor must be added as an additional insured on the subcontractor’s Liability insurance policy. Most contracts require liability coverage because there may be claims arising from completed or ongoing work. This also means that the general contractor runs the risk of facing a lawsuit from the flaws in the subcontractor’s work. For this reason, subcontractors need Completed Operations insurance.

In the past several years, the insurance industry took steps to remove completed operations coverage from the policy forms commonly used for additional insureds. The ISO Form CG 20 10 of 1985 offered coverage for the organization or person listed on it. The named party was covered for liabilities arising from their work or work performed for them by someone else. Materials and equipment were also covered. From the wording on the form, the courts decided that additional insureds were covered for any completed operations. However, ISO revised the form in 1993. ISO had never intended to extend this coverage, so the form was changed to offer coverage only for the named insured’s ongoing projects. At the same time, Form CG 20 37 was introduced. It provided liability coverage for additional insureds helping with the named insured’s operations. However, operations were only covered if they were away from the premises rented or owned by the named insured.

To understand how this works, consider an example scenario. Company A is subcontracted to do electrical work, and Company B is subcontracted to do plumbing work for a new project. Contractors from both companies are working at the general contractor’s work site on the same day. While a plumbing worker from Company B is installing parts in a bathroom, the electrical contractor from Company A accidentally drops a tool on the plumbing worker. The Company B employee is injured, so he sues the general contractor and Company A. Company A’s CGL policy has the CG 20 10 endorsement with the general contractor listed as an additional insured. Since the injury took place during ongoing operations, the policy will cover the general contractor in the lawsuit filed by the injured worker.

However, if an electrical contractor performs work and leaves without intention of returning, it is the general contractor’s responsibility to ensure quality work. If the general contractor accepted it and a fire started because of faulty wiring after the job was done, the building owner could sue the general contractor. Since the electrical contractor’s work was finished and approved, the CG 20 10 endorsement would not apply. In order for the general contractor to be covered, the policy would have to include the CG 30 37 endorsement. No losses would be covered by either endorsement if the general contractor was at fault. To qualify for coverage, an incident must be at least partially another party’s fault.

Since construction is risky business, it is important for all contractors to discuss their insurance questions with an agent. Contractors must fully understand their contractual obligations and what coverage is available to meet their needs. Our agents are able to provide information about policy terms, costs and additional insured options. It is crucial to have ample coverage before taking on a project where losses are likely to be incurred.

INSURANCE IMPLICATIONS FOR GREEN CONSTRUCTION

By Construction Insurance Bulletin

One of the most popular types of construction in the United States is green construction. This eco-friendly technique gained popularity because of rising energy costs, global climate change and the United States’ dependence on foreign energy providers. People nationwide are taking steps to reduce the carbon footprints of their homes and businesses. However, this type of construction has very important insurance implications, of which all consumers should be aware.

Buildings that are considered green have met several requirements for LEED, which is a certification formally known as Leadership in Energy and Development. LEED was developed by the U.S. Green Building Council in the late 1990s. It was designed to help building owners identify and use construction, maintenance, operations and measurable designs that are better for the environment. In comparison with standard structures, green buildings use water and energy more efficiently. They also have healthier indoor environments and produce less carbon dioxide.

Several municipalities and states have adopted special building codes that require green construction elements. Stricter water efficiency standards have been enacted in California for new residential structures. Tighter energy use standards are under consideration in New York City. Green building requirements have had a major impact on construction costs, which vary by location. Although green construction demands special procedures and materials, contractors who are up to speed with these requirements are hard to find. This means that the cost of complying with such requirements may be considerably higher than the cost of using standard methods and materials. This cost issue will also affect insurance coverage

These factors influence insurance claims:

  • What is defined as a major renovation by the code, and what percentage of the building’s area is affected.
  • Whether qualified contractors are available in the area.
  • Whether green building codes apply to renovations or only to new construction projects.
  • How new materials will work with existing components, and whether integrating them will increase the cost and time required for rebuilding.
  • How the use of green materials will affect the appearance of the building.
  • Delays for obtaining special materials and contractors.
  • The likelihood of longer wait times for special contractors after a catastrophe happens.
  • The likelihood of waiting for special building inspections and approvals after a catastrophe happens.
  • How the building code applies if a natural disaster occurs.
  • What standards property owners must meet following a widespread disaster.

Within the next few years, experts predict that the market for non-residential green construction will grow substantially. This means that insurance companies and property owners will have to address serious questions, and the best time to get answers is before losses occur. Commercial and standard Property insurance policies offer very little coverage for ordinance or law losses. These are extra expenses incurred to comply with special requirements. However, additional coverage is available. People who own properties in areas where green building codes exist should discuss these options with an agent.