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Monthly Archives

November 2015

Be Careful About Who You Hire

By Business Protection Bulletin | No Comments

bb-1-1511In 1999, a California plumbing company hired a man who had once been convicted of domestic violence against his ex-wife. In 2003, the man made a house call that sparked a friendship with the woman living there, a relationship that eventually grew romantic. That same year, the plumbing company fired him for a variety of offenses, including drug and alcohol use and alleged physical threats against a co-worker. Two years later, the woman he was with ended the relationship and sought a restraining order against him. He responded by shooting her to death, a crime for which he was convicted.

The victim’s daughter sued the plumbing company, alleging that it was negligent in hiring the man. Although that suit was unsuccessful, the case illustrates the vulnerability businesses have to claims of injury caused by their employees. Courts may find an employer guilty of negligent hiring if all of the following factors are present in the case:

  •  When the employer hired the person, it knew or reasonably should have known that he was unfit for the job and dangerous. For example, if an accounting firm knowingly hired a person who has served time in prison for embezzlement, a client who suffered a theft loss because of him could plausibly claim that the employer should have known that he was unfit for the job.
  • The employer should have foreseen that the employee would harm someone. The accounting firm should have anticipated that a convicted embezzler left in charge of clients’ assets would feel tempted to pocket some of them. In the California case, the victim’s daughter argued that the plumbing company should have foreseen that its employee could injure or kill a female customer. The court rejected that argument, saying that no reasonable person could foresee that the man would turn violent two years after being fired.
  •  The employer’s act caused the victim’s injury or harm. A client of the accounting firm could argue that, if the firm had not hired the convicted embezzler, he would still have $1 million in the bank. The California court said that the plumbing company’s act of hiring the woman’s killer did not cause her death because the relationship developed outside of his work duties and did not turn into romance until after the company fired him.

There are two ways businesses can obtain Liability insurance to protect themselves against claims like these. In cases of bodily injury or property damage, the Commercial General Liability insurance policy might provide coverage. Businesses should review their policies carefully with an insurance agent, however, because some policies might contain endorsements that remove coverage for liability resulting from employment practices. Also, the CGL policy would not cover a loss such as the embezzlement claim against the accounting firm because there is no bodily injury or property damage. Employee Dishonesty insurance might cover incidents such as this. Also, some Employment Practices Liability insurance policies might provide coverage, but they must have special endorsements adding coverage for liability to non-employees. Again, businesses should work with their insurance agents to verify that they have the proper coverage.

Insurance is no substitute for an employer doing a thorough background check on job applicants before hiring them. Taking steps to reduce the likelihood of a negligent hiring claim will save the business costs that insurance doesn’t cover, such as those arising from poor workplace morale, harm to the business’s reputation, and difficulty attracting skilled employees. A new employee is a significant investment for any business; making careful hiring decisions will save it long-term trouble and expense.

Costly Code Compliance Mistakes

By Construction Insurance Bulletin | No Comments

con-4-1511Complying with comprehensive legal and regulatory codes plays an essential role in constructing safe, energy-efficient, and “sustainable” buildings – and helps drive up the cost of Construction Insurance.

The International Code Council, a think tank of building officials and engineers, keeps writing increasingly complex building codes that cover every aspect of residential and commercial construction from foundation to roofs. Consider this: the ICC manuals doubled in thickness from 2003 to 2009. By adopting new ICC standards, local and state governments seek to limit their liability and protect their communities more effectively. The National Fire Protection Association and the International Fire Code Council have developed and adopted stronger building codes to protect building occupants and firefighters.

Continuing revisions and updates to building access standards under the Americans with Disabilities Act require extensive and costly improvements.

What was once seen as a moral obligation to sustainable building practices is becoming mandatory. You might have heard the terms Platinum, Gold, Silver, and Bronze, which distinguish the “greenness” of a building. More and more municipalities are requiring new buildings to meet the rigorous LEED design, construction, operations, and maintenance standards developed by the U.S. Green Building Council.

Compliance with all of these legal and regulatory requirements is boosting construction costs and lengthening timetables throughout the nation. At the same time, failure to comply with building codes has triggered a significant increase in the number and size of insurance claims – which keeps driving up premiums – and pressures contractors to recover their costs by raising prices.

To help you keep up with the potpourri of building codes, keep your Construction insurance program protecting you and keep your premiums under control, feel free to consult the professionals at our agency. We’re here to serve!

Virus Alert – What’s at Risk?

By Cyber Security Awareness | No Comments

cyber-1511-1When people talk about viruses and malware and worms, they might say something like “Won’t that mess up my computer?” In truth, viruses cannot damage the hardware directly. All a virus is is a piece of code that self-replicates to attack the data on your computer.

There is something of a gray area there, of course. There are instances where viruses can stop your hardware from working properly, but they can only do this by messing  with your data. In other words, anyone who tosses a computer in the trash because viruses brought it to a halt is probably throwing money away.

If your hardware stops working after a nasty infection, you’re probably looking at malware that has attacked your driver software. By deleting or corrupting the software that, say, allows your keyboard to communicate with your motherboard, it may seem as if the virus has just broken your computer, but all you really need to do is eliminate the virus and then download the driver software again.

A virus could, in theory, damage the hardware by causing overheating, but this is hardly a concern with modern computers. Back when you only had about half a GB of storage space, a virus could stop your fans from working, for instance, and if you keep running your computer in that condition, then yes, overheating and eventual hardware damage may take place. This is hardly a concern for computer users in the 2010’s, though. Computers are considerably more durable today.

Any damage that a virus can do to your computer can be reversed with a fresh install. You might lose some data in the process, which is why regular backups and cloud based computing are always a good idea. Generally speaking, hardware damage is not a real concern when it comes to viruses. Viruses seek to mangle your data, not your hard drive.

What is Product Liability Insurance?

By Business Protection Bulletin | No Comments

bb-4-1511Product Liability Insurance helps protect your company from damages for losses related to manufacturing or selling products or other goods.

These claims can, and do, put businesses out of business – just ask the officers of any asbestos manufacturer.

Companies are vulnerable to three types of products claims

  1. Manufacturing or production flaws that create an unsafe defect in the product. For an example, just recall the recent claims against Chinese manufacturers for using dangerous chemicals in their products.
  2. Design defects that make the product inherently unsafe. (The series of lawsuits against Toyota vehicles for defective acceleration controls during the past two years comes to mind.)
  3. Inadequate warnings or instructions, such as failing to label a product properly or advise consumers about potential risks. A famous example is the McDonald’s “hot coffee case.”

Damages can include medical costs, compensatory damages, economic damages, and (in some instances) attorney fees and costs, as well as any punitive damages. Some sellers and retailers choose not to buy Product Liability Insurance because they don’t actually “manufacture” anything. However, most states follow the “stream of commerce” model of liability, meaning that if your company sells a product, you can be held liable for damages to the end user. “Business Owners” and Commercial General Liability policies usually include some type of Product Liability Coverage (Sometimes known as Product/Completed Operations Insurance).

Premiums are based upon the type of product and sales volume. If you try to reduce premiums by underreporting sales or insuring only a percentage of your sales, you’ll probably face a hefty “underinsurance” penalty. Make sure to identify your products properly, too. For example; if you supply stepstools, you don’t want them categorized as ladders, which have a higher premium because of their greater risk potential.

Business Insurance: What to Purchase?

By Business Protection Bulletin | No Comments

bb-2-1511Most business owners would agree that it’s important to maintain insurance to protect business assets. When they think about insurance, business owners generally consider protection against hazards such as fire, flood or theft at their company sites. This is obviously an important protection to have. However, there are other types of hazards that may not be quite as high on the list, but protection could be every bit as important to offset significant financial losses. Here are five examples that underscore the need for comprehensive business insurance protection:

Company vehicle contents: If you operate a business with employees on the road making service calls to customers, chances are there is valuable equipment contained in the company vehicles. But a typical auto insurance policy would probably not cover the contents of a company vehicle if that valuable equipment is lost or stolen.

Tenant property improvement insurance: Do you rent space to conduct your business? Have you built out the interior of your space or made improvements to accommodate your business needs? If so, you probably made a considerable investment in the improvements. But many property insurance policies don’t include the value of the improvements made by a tenant to the existing structure. If you’ve invested in improvements, it’s worth taking a look at securing coverage to protect it.

Home-based business equipment: More and more people are working at home at least part of the time, even if they maintain an office or site elsewhere. Most don’t have insurance on the business equipment they keep at home; many assume their homeowner’s insurance would cover it. However, homeowner’s insurance generally does not cover business equipment. If you have expensive business equipment at home, you may want to consider purchasing additional protection.

Business interruption insurance: Remember the series of hurricanes that hit Florida? The wild fires that damaged cities and towns in California? The flooding that disrupted life in the Midwest? In addition to the effect that disasters have on individuals, they can bring businesses to a standstill for weeks or even months. Business interruption insurance can provide a way to get back on your feet.

Key person insurance: In many companies, the knowledge and skills of a single person or a top few are absolutely essential to the enterprise’s success. Key person insurance can help a company recover if an essential employee dies or becomes disabled for a lengthy time. The coverage can provide needed funds that allow the company to continue operating during a search for a successor or until the key employee returns.

As you can see, there are many hazards businesses face that aren’t covered under a typical insurance policy. However, you can get extra protection with the types of coverage outlined here. Since you invest so much time, money and effort into your business, it pays to make sure you have the protection you need.

Your Business and Social Media

By Business Protection Bulletin | No Comments

bb-3-1511By the beginning of 2011, the social networking Website Facebook had more than 600 million users. An estimated 200 million people use micro-blogging service Twitter. The business networking site LinkedIn has reported that it has more than 100 million members. In addition, the Internet hosts millions of blogs and tens of thousands of podcasts. These sites and media, popularly known as “social media,” have opened up new ways for people and businesses to communicate with each other. As the numbers show, they have become extremely popular. Consequently, businesses are increasingly using social media to reach current and potential customers.

However, use of these services presents risks together with the potential benefits. For example:

  • Employees making posts on these sites might make inaccurate statements, particularly when not all the relevant facts of a developing situation are known.
  • They might inadvertently release confidential information.
  • They might make statements that embarrass the company, such as negative remarks about racial or ethnic groups.
  • They might make statements that violate a person’s privacy.
  • Disparaging statements might provoke others to sue the company for libel. For example, if an employee of a restaurant posts on Twitter that a competitor’s stew looks and tastes like cheap dog food, the competitor might sue.
  • Blog posts that offer advice might expose the employer to lawsuits if others take the advice and get undesirable results.
  • Disgruntled customers, employees or competitors might post disparaging comments about the company.
  • Any of these situations can harm the company’s reputation.

The company’s General Liability insurance policy might not pay for the costs of defending against these claims or paying settlements. For example, the insurance will not cover losses resulting from:

  • An injury caused by or at the direction of an employee when he knew that the action would violate a person’s right to privacy.
  • An injury caused by or at the direction of an employee when he knew that a statement was false.
  • Claims that the business’s products or services do not live up to statements about their quality.
  • Injury arising out of statements made on Internet chat rooms or bulletin boards the business owns or over which it has control.
  • Unauthorized use of someone’s name or product in a manner that misleads that company’s potential customers.

In addition, the insurance only covers liability for certain types of injuries that are not bodily injuries. It will not cover a lawsuit filed by someone who suffered financially after relying on advice on the company’s blog. To reduce the chance that an uninsured loss will result from the use of social media, businesses should consider:

  • Written procedures for employee use of social media, including:
    • Who may post on the company’s behalf.
    • Definitions of acceptable and unacceptable behavior.
    • Employees’ personal sites should make clear that that the employees are not speaking on behalf of the company.
    • When a discussion should move offline and into the company’s regular workflow (for example, when a customer has a specific complaint that should be handled out of public view).
    • The consequences of non-compliance.
  • Company policies regarding employees’ ability to link to the company’s Website on their personal social media pages. The policy should also address employees’ use of the company name, logo, or other advertising on their sites.
  • Company policies on the content that employees may post on blogs, both those of the company and others blogs where the employees post on the company’s behalf.
  • Purchasing special insurance to fill in gaps left by the General Liability coverage.

Social media offers exciting new opportunities for businesses to build relationships with customers. However, they need to approach it with care and proper planning if they want to reduce the risks.

Understanding Your “Triggers”

By Construction Insurance Bulletin | No Comments

con-3-1511A “coverage trigger” is an event that causes your Liability policy to pay a claim. There are two basic types of “triggers”: occurrence and claims made.

An “occurrence” trigger means that the policy will cover any injury or damage during the policy period. For example, if a roof that you installed four years ago collapsed last week, injuring five people, the occurrence trigger will apply and the policy will pay. It doesn’t matter when the roof was built or when the claim was filed – only when the actual injury took place.

A “claims-made” trigger, as the name suggests, focuses on the date the actual claim is made. Underwriting and rating provisions might limit how far into your past the policy provides coverage. However, the key question is: “did the claim come in during the policy period?” If so, a “claims-made” Liability policy will pay. Using the example of the collapsing roof, it doesn’t matter when the roof was built or when the event took place, the trigger won’t apply until the claim is filed.

If this claim is made during the current policy period, your insurance company will pay it. However, suppose the claim isn’t made for several weeks; and by the time it arrives, your current coverage has expired and you’re into a new policy period? In this case, the “claims-made” policy will pay the claim, since it was made during the new period.

One type of trigger isn’t necessarily better than the other. However, it’s almost always wise to keep the current type in order to provide relatively seamless coverage.

If you’re offered a Liability policy that offers broader coverage or more attractive pricing – but has a different trigger than your current insurance – consult with us before you make a decision. The only way to be sure you get the protection you need at a fair price is to consider all possible underwriting considerations and how the change in trigger might affect your liability needs.

Builder’s Risk Insurance Protection

By Construction Insurance Bulletin | No Comments

A gas line explosion…A short circuit that fries electric wiring…Even a lightning strike…Any building site under construction or renovation is highly vulnerable.

Builder’s Risk insurance will pay for loss or damage to a structure (and, in some cases, of the materials, fixtures and/or equipment used to build or renovate it) caused by a variety of perils – such as windstorms, hail, theft, and vandalism. The policyholder can also extend coverage to include;

  • Property in transit to the job site or stored at a secure offsite location.
  • Scaffolding, construction forms, and temporary structures on the site.
  • Removing debris from covered property.
  • Paying firefighters to save or protect property.
  • Replacing blueprints or construction plans.

As a rule, Builders Risk insurance does not cover losses due to mechanical breakdowns, floods, earthquakes, water damage, or rioting.

These policies are often written for a three month, six month, or 12 month coverage term. If the project is not completed by the end of the initial term, it may be extended in many cases, but usually only one time. Coverage ends when the property is ready for use or occupancy.

The amount of coverage, usually based on the project budget, should reflect the total completed value of the structure (including costs of materials and labor), but not the value of the land. Depending on the circumstances, either the building contractor, developer, or owner(s) can buy Builders Risk. If a bank issues a construction loan, it will usually require the borrower to purchase a policy. In many cases, showing proof of insurance might be mandatory under city, county and state building codes

Subrogation Defined

By Construction Insurance Bulletin | No Comments

con-1-1511Subrogation occurs when an insurance company pays a claim and then uses the insured’s right to sue the other party for causing the loss as a way to recover their funds. This seems reasonable, so why do business contracts commonly include a “waiver of subrogation” clause?

Business contracts often require that one party or the other be primarily responsible for providing insurance. The purpose of including a waiver clause is to have the party carrying the insurance waive any rights of recovery against the other party for claims covered by the insurance. The intent is to reduce risks significantly by preventing the insurance company from circumventing the contract’s intent of making one party financially responsible for the losses through the purchase of insurance.

However, it’s also possible that overly broad language in the contract might leave the insured agreeing to take on far more responsibility than is reasonable. In such a case, agreeing to a blanket-waiver of subrogation might not be in the best interests of you and your insurance company. The party that transfers all of its responsibilities onto the insurance of others distorts the basic principle of liability, which is that the guilty party should pay.

Whenever you’re presented with a contract that requires you to purchase insurance for the interests of another and includes a waiver of subrogation, be certain to review the provisions with your attorney — and with us.

Cross-site Viruses

By Cyber Security Awareness | No Comments

cyber-1511-3The general understanding of viruses is that you can pretty much avoid them if you just never download anything that ends in dot exe, unless it comes from a source that you know for certain is legit. What some might not know is that simply browsing an unsafe website can infect your computer with a virus.

You’re probably thinking of those scuzzy websites that offer illegal torrents, adult content and so on. In fact, one of the worst places to go without any security software in place used to be MySpace. Youtube and Facebook have both been afflicted with cross-site scripted viruses and worms, as well  (in other words, there may be more than one reason to restrict your employees from checking their social media accounts at work if you enforce that policy).

The way it works is fairly simple: Cross-site scripting means that if Youtube or MySpace grants a website permission to cross-post content from their own site, then they may also grant them permission to post any content from that site. The website may take advantage of this to spread viruses and worms without even needing to host them on Youtube, simply using an ad placement or a comment thread as a channel through which to spread viruses from their own site.

Why do people do this? In some cases, cross-site scripting may allow them to gain higher access levels to the content on the targeted site, such as user information. On the other hand, some people who write viruses are just vandals and they like the idea of messing up your private data.

Most major websites are fairly vigilant when it comes to seeking out and dealing with cross-site scripts. Making sure that the right software is installed should generally help to keep your hardware from being infected, but if something seems off, don’t write your concerns off simply because you haven’t downloaded anything recently.