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Commercial Specialty Insurance Tips Continued

Workers Compensation – Part 1

The workplace is an extremely common setting for a person to be injured. The Workers Compensation and Employers Liability Insurance Policy are used to provide insurance coverage for a company's statutory liability (coverage responsibility) under a Workers Compensation Act. It usually involves paying for medical treatment and disability. It also handles lawsuits from injured workers that fall outside of the Act.

A workers compensation policy responds to accidental injury that occurs during work with mandatory benefits. However, besides taking place at work, an injury must also be related to the injured person’s duties. Further, the policy also covers costs associated with disease or death that may be the ultimate result of the accident. If the employee’s injury does not qualify for compensation under the Workers Compensation Acts (or Occupational Disease Acts, if separate) the policy will respond to an employee who sues his or her employer, alleging negligence.

The type of business that can be insured with a workers comp policy may be an individual, partnership, joint venture, corporation, association, fiduciary, or other entity. A typical policy lists the work locations that are covered. The policy is designed to handle work-related accidents as well as diseases. The amounts that must be paid are defined by the state or jurisdiction where a covered incident occurs. The policy usually lists the other types of costs and expenses that are eligible for payment under the policy.

In other respects, a workers compensation policy is similar to other kinds of insurance. The policy benefits include being provided a legal defense against certain types of lawsuits. The policy explains that, when other sources of loss payment are available, the policy will begin any payment once the other source has paid its obligation. However, the policy will not pay for any amounts that exceed stated benefit amounts. The insurance coverage may be expanded, restricted, or made to comply with specific state requirements through the use of endorsements.

Generally, the insurer that provides coverage acquires the covered company's legal right to pursue payment from a party that may have been responsible for a workplace injury.


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Workers Compensation – Part 2

Coverage provided to workers who are injured on the job is invaluable and is, primarily, via workers compensation protection. Such protection is framed by the Workers Compensation Act which addresses payment for medical treatment and disabilities. It also replaces, largely, the need for injured workers to have to sue their employers for compensation.

However, the nation’s workers compensation system has a lot of concerns including the following:

  • Viability of Workers’ Compensation
  • Federalization
  • Affordable Care Act
  • Holes in Workers’ Compensation
  • Blurred lines between Workers’ Compensation and group health
  • Options to Workers’ Compensation
  • Evolving claims model
  • Pending Court Challenges regarding coverage
  • Bureaucracy

Workers compensation has traditionally been called the Grand Bargain precisely due to workers sacrificing a right to sue employers in place of the ability to depend on fair compensation when injured on the job. However, as is evident from the long list of issues, a number of important players are dissatisfied with the system. Insurers believe that it is plagued by arbitrarily high treatment costs and fraud. Legislators believe that it is inefficient and acts as a disincentive from business growth. Businesses see it as a burden that hampers profitability and substantially increases payroll expense.

Problems with proper worker protection are likely to increase as employers increasingly ignore the need to buy workers compensation coverage, even though it means breaking laws, facing fines and even criminal penalties. Yet, instances of absent or insufficient coverage persists due to increased use misclassified employees, manipulation of submitted payroll information, abuse of worker contractual agreements and other problems. The increased presence of sharing economy workers also complicates matters.

If you have employees, it is imperative to seek out an insurance professional to assist you with fulfilling your protection obligations.


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Active Shooter Risk – Part 1


Headlines tragically remind us quite frequently that many aspects of our lives have become unavoidably dangerous. Sadly, this danger is due to the whim of individuals and access to weaponry. The deadly risk is the “active shooter incident.”

Active Shooter Incident

An active shooter incident describes a situation in which at least one person is actively killing or attempting to kill persons in a populated area. Naturally, as we are referencing a shooter, such incidents involve firearms.

Active shootings are becoming more common. Studies made by the FBI between 2000 and 2017 indicates annual mass-shooting events rose from 6.4 per year to 30 per year. Studies also show that most shootings take place within a business or school (educational) environment. The frequency of shootings is accompanied by, on average, an increase in the number of persons killed or wounded per event.

As with any other risk that becomes significant, it is very important to find a strategy to deal with active shootings. Insurance is among the tools helpful with both pre- and post-incident planning. However, much uncertainty exists regarding protection for active shooter losses.

First, there is customer expectations. Insurance consumers may be under the impression that damage and injury created by shooters are covered. Second, the insurance market is fragmented over the issue depending upon how incidents are interpreted. Coverage may be sought from existing policies that individuals, commercial or non-profit entities may already carry, including General Liability, the Liability portion of Homeowners, or Workers Compensation. On the other hand, responsibility for harm due to a shooter may need to be covered by a form of professional liability policy as the obligation to protect against shootings may considered as a failure to provide adequate security.

Confusion may also be caused by insurance policies via the silent coverage problem. An insurance form is considered silent when it neither specifically names nor excludes a source of loss, such as shootings. It can be chaotic during the time it takes to clarify coverage gaps.

The insurance sector has a reputation as being slow to react to change. Of course, speed is never at the level that most would wish when new coverage issues arise. However, the insurance market has been stepping up and addressing the serious active shooter exposure. While there is the option of trying to amend standard policies to add protection, other ways that coverage is being addressed are separate policies that supplement insurance protection with a variety of services.

Please see part two for more information on this issue.


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Active Shooter Risk – Part 2


As we mentioned in part one of this discussion, a strategy for dealing with this exposure involves a significant amount of pre- and post-incident activity. Active shooter programs commonly involve the following:

Non-Insurance Services

Pre-event

Risk Assessment

Employee Crisis Training

During Event

Crisis Management

Second (Event) Responders (those who supplement initial, emergency action of fire, medical and police [first responders] and handle return services and site clean-up.)

Post-event

Counseling Services

Psychiatric Care

Public Relations Disaster Team

Investigation Assistance Funds (Rewards)

Expenses for additional, temporary security measures

Insurance Services

Liability Coverage for Lawsuits due to loss created by active shooting incident

Limits vary from $250,000/$500,000 up to multi-million dollar maximum

Business Income and Extra Expense

Limits vary from $1 million up to $100 million

Emergency medical care

Rehabilitation Expenses

Funeral and Burial Expenses

 

Please see part three of this discussion for more details regarding active shooter preparation.


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Active Shooter Risk – Part 3


In part two, we discussed what makes up an active shooter program. We wanted to expand on a couple components.

 

Active Shooter Risk Assessment.

 

The objective is to identify access points, determine plausible outside threats to your business and evaluate existing security and precautions. The outcome is a measurement of your operation’s current level of vulnerability. With an accurate snapshot of current conditions, you can then take steps to reduce a deadly exposure.

 

Note: objectivity is very important. An assessment should be done by eyes that are fresh, free from blind spots that would reduce the ability to identify weaknesses.

 

Environmental Awareness

Awareness among your managers and employees is a key consideration for minimizing the danger of active shooting incidents. Thankfully, every operation’s norm is a safe working environment. The task is to have a firm grasp of the default, safe position and then, be consistently aware of differences that may signal a change. The following are helpful strategies:

 

Use Of Awareness Training – your workers should be taught what is needed to observe behavioral changes that may indicate danger. Recognition of changes increases the chance that developing situations may be defused.

 

Use Of Awareness Reporting – Once workers know what changes to look for, they must take the next step. Changes should be reported to superiors in order to further evaluate possible threats.

 

Implement Training And Regular Drills – knowing what to do if an active shooting occurs is useless if employees don’t quickly react. Once safety procedures are taught, they must be reinforced with drills to embed employee responses.

 

Drug Policies And Testing – due to drugs being cited as factors in some shootings, it may be prudent to establish regular testing to mitigate this source.

 

Marketing for this product should focus upon business classes that, historically, have been most vulnerable to this exposure such as Educational institutions, Entertainment organizations, Hotels, Healthcare providers, Religious institutions, Retail organizations, Shows (ex. Fairs, Trade Shows and Rodeos.)


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The Silica Problem – Part 1


"Silicosis" refers to a lung disease that is triggered by long-term, inhalation of silica particles. The Occupational Safety & Health Administration (OSHA) estimates that nearly two million American workers are vulnerable to contracting the disease and that the disease accounts for several hundred deaths per year. 

Sources of Exposure

Persons in the construction industry are particularly at risk. The risk of silica particle exposure is greatest in jobs involving abrasive blasting, mixing/making concrete (or brick) and drilling masonry material. Other areas of concern (again according to OSHA) include the following: 

·         any job using abrasive blasting for cleaning, smoothing or etching 

·         asphalt pavement manufacturing 

·         ceramics (& china) manufacturing 

·         demolition work 

·         tool and die industry 

·         mining/tunneling 

·         road construction 

·         shipbuilding 

·         steel and foundry industries 

·         hydraulic fracturing (fracking) activities 

Disease Symptoms

Generally, silicosis develops only after years of exposure to Crystalline Silica. The levels of the disease may either be Chronic, Accelerated or Acute. Besides silicosis, silica exposure may also contribute to the development of other health problems including tuberculosis, bronchitis and lung cancer. 

Symptoms include fatigue, shortness of breath (particularly after a strenuous activity), and chest pain and weight loss. A chest X-ray may determine lung damage. In some cases, silicosis may be fatal. 

 

Please See Part Two of this article


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The Silica Problem – Part 2 


Please See Part One of this article

Silica Liability

A large number of U.S. government regulations exist with regard to employers having to provide a safe work environment, such as the use of proper equipment and training that reduces health exposures. Naturally, when employers are negligent in meeting safety requirements, workers may suffer. 

Employers may be sued and found legally liable for the costs related to treating injured workers. Lawsuits typically involve a class action basis since allegations of unsafe working conditions related to silica exposure often affect a large number of employees. 

While, in the past, the number of lawsuits spiked amid claims of fraud, it is still common to see the filings of legitimate claims for damages. 

Preventing Silicosis

Silicosis claims are often very costly, involving long-term health issues. It is important to look for ways to avoid having anyone contract silicosis. Try to apply precautions such as the following: 

·         Avoid use of compressed air cleaning 

·         If possible, substitute other materials for silica when performing abrasive blasting 

·         Use proper respirators with correct seals 

·         Do not permit eating, drinking or smoking near work areas that generate silica particles 

·         Use proper ventilation to clear work areas of particles 

·         Make showers available to workers, along with either disposable or washable work clothes 

Note:?Clothing should first be vacuumed before it is removed. 

·         Provide training to employees in how to monitor work situations and in recognizing (and reporting) silica related problems 

·         Wash hands and face before eating/drinking 

·         Use "wet" sweeping to clear dust from work areas 

There are other methods to help fight this problem. If your operations include exposure to this health hazard, be sure to discuss solutions with insurance professional. 


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A Broad View of Risk – Part 1 


It’s a dream. You’re inspecting your business just moments before a planned opening. The service counters gleam, your inventory is varied and properly displayed, your employees are experienced and service-oriented, and the location is prime and likely to consistently attract traffic. You marvel at the floor plan and even admire the beautifully painted and appointed walls, one by one and….there are no entrances or exits! Your head wants to explode from panic as you whirl around amid the impossibility of having a perfect business that is perfectly incapable of serving anyone! 

From an insurance aspect, it is a huge oversight when a business improperly manages its accompanying risks. Only in a dream could there be the possibility of a business not having doors. However, in real life, many businesses have a narrow view of the risks they face and both situations are just as ruinous to a viable business model. 

Whether a business is new or mature, its success depends upon key factors. The Small Business Administration figures indicate that seven key areas determine whether a business will survive. Poor management and lack of planning are among those factors and properly handling the risks associated with your business assists with avoiding both of these fatal stumbling blocks. 

Your business model may be solely traditional or could be combined with some level of digital presence. Regardless, you have to properly identify your risks. Often a business will “stick with the bricks,” laying out its various physical assets. The next step is often to use insurance to check off whether a given policy will respond to damage or loss to business property including buildings, stock, vehicles, machines, etc. A natural accompanying step is to secure insurance for various, basic risks of operation, such as premises liability, vehicle liability, workers compensation, etc. Most businesses will also recognize a need to protect against business interruptions and loss of income and secure insurance against those sources of loss as well. 

 

Please See Parts 2 and 3 of this article


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A Broad View of Risk – Part 2


No one will deny the critical role filled by having the right package of property and liability insurance to protect a business. However, limiting how you address risk primarily to matching various policies against different sources of loss is the way a survivalist approaches living. But what business will be able to maximize its profit and growth potential by limiting itself to merely surviving? Properly managing your business and creating long-term plans for success means having a broader vision. 

It doesn’t take much time or energy to find help with creating an exposure checklist and to make decisions on buying a standard bundle of insurance coverage. However, it does take a substantial amount of time, effort and expertise to deal with loss exposures that affect your business daily. It takes even more sophistication to create an approach toward risk that can give your business a competitive advantage. 

The old adage that “there’s nothing new under the sun” does not apply to today’s world of risk management. It has been decades since proper risk management meant merely identifying losses and finding ways to get reimbursed. True risk management also involves identifying opportunities for growth, being proactive in discovering and eliminating barriers to success, and aggressively leveraging opportunities. The key is to recognize that whatever expertise you possess in running your business is unlikely to include expertise in handling the wide array of risks faced by your business. Business owners with true acumen will recognize the need for expert assistance. Often such assistance should be sought from outside sources. 

 

Please See Parts 1 and 3 of this article


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A Broad View of Risk – Part 3 


Please See Parts 1 and 2 of this article

 

A major reason that businesses often hold a traditional, narrow view of handling risk is that to do otherwise means allocating too much time to do the job properly. Other reasons are that most businesses lack the ability and, what can be a tragedy, lack the awareness to seek needed help. Businesses that thrive, or wish to do so, will rid themselves of operational blinders and get a stronger grip on success by either developing or acquiring the resources to deal with the complex realm of risk. 

A wide view of risk management means the ability to assemble the right array of insurance coverage to deal with existing property and liability loss exposures. A broader view of risk management will assist in creating a safer, more efficient and more profitable operation. It will allow a business to maximize coverage and minimize costs. More importantly, it can assist with ways to eliminate loss exposures or find more alternatives to handle them. A proper risk management approach will assist with growth, creating a monitoring system for controlling existing exposures, and identifying emerging risks, particularly those due to operational changes. A true risk management approach makes certain that a business has contingencies to avoid significant interruptions. A wide view of risk management helps identify methods of reducing financial limitations to pursue additional or different business opportunities. 

A business that is too conservative and which doesn’t seek change is likely doomed to stagnation and, eventually, its demise. Growth means change. Change means new or expanded risks. Dealing with risks means having an aggressive attitude and securing risk management expertise. Take off any risk blinders you may have and increase your chances of success. 


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Insured Contracts and Commercial Umbrellas


A liability policy has to restrict its coverage to handling the type of losses for which it was created and a commercial liability umbrella (CLU) is no exception. It contains an important provision that excludes losses involving contractual liability. In other words, an umbrella ignores losses created by an agreement an insured makes with other parties. Without this exclusion a CLU’s coverage would be expanded far beyond what an insurer intended and has priced.

Example: General Cleaners Corp. (GC) is insured by a Commercial General Liability and a CLU. It signed a multi-year contract to clean and maintain all of the buildings owned by Suburban System. As part of the deal, the owner of General Cleaners agrees to be responsible for any injury or damage that occurs while any GC employee is working their premises. A month after signing the contract, a GC cleaning crew is cleaning the first floor of a Suburban System high school. Unknown to the crew, a group of kids decide to trash the computer, biology and chemistry labs on the third floor. Suburban's property insurer pays the substantial losses and then sues GC because of their agreeing to handle the loss per their cleaning contract. GC turns to its insurer to defend the claim and handle any judgment. The CLU insurer points to its contractual liability exclusion and denies coverage as the loss did not involve an insured contract.

The policy does make two exceptions with contracts. First, the CLU will still respond to losses involving contractual liability when the agreement is about situations that would be covered anyway.

Example: Playtowne Toyz specializes in play and sports equipment for children. Playtowne is contacted by the Megaland state school board. They want Playtowne to become the official toy and sports equipment supplier for the entire state's public school system. As part of the deal, Playtowne has to sign a contract. The agreement has one part that requires Playtowne to respond to any injury caused during Playtowne making deliveries to any of its schools, such as a Playtowne Truck striking a student. This is a type of loss that would normally be covered by an umbrella. However, without the exception, the situation would become a type of contractual liability and would be excluded. The exception guarantees that a technicality does not unintentionally reduce an umbrella's intended coverage.

Under the second exception, the CLU insures situations that meet its definition of an "insured contract."

While a CLU, like any other policy, is written to control the loss exposures that it covers, it is also designed to deal with the realities of the business world. The insured contract exception allows coverage for many situations that companies must regularly perform in order to run their operations such as:

  • Leasing a premises
  • Sidetrack agreement
  • Easements
  • Municipal Ordinances
  • Elevator maintenance agreements
  • Auto leases

In order to have a clearer understanding of insured contracts and to get any needed coverage, be sure to talk things over with an insurance professional.


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Policy Insurance Limits – Part 1


If you examine the insurance policy covering your business, you’ll see an insurance limit. For instance:

Acme General Manufacturing

Coverage

Insurance Limit

Coverall Protection

$1,000,000


According to the above, it may appear that you have a million dollars in coverage. But what does that mean? Well, traditionally, such an insurance limit provides up to one million dollars of coverage for each eligible loss that takes place during the applicable (annual) policy period. This is often called an "occurrence" limit because the entire amount is available to respond to each eligible incident that occurs during the policy period. Another type of protection is provided by an "aggregate" limit, a maximum amount that applies over a given policy period.

Example: The Acme policy above has a Jan. 1, 2019 to Jan 1, 2020 policy period. During the policy period, Acme is sued five times.

Loss

Date

Amount

Stated Occurrence Limit

Available Aggregate Limit

Type A Loss

2-23-19

$200,000

$1,000,000

$1,000,000

Type B Loss

3-3-19

$450,000

$1,000,000

$800,000

Type C Loss

6-12-19

$175,000

$1,000,000

$350,000

Type A Loss

8-4-19

$300,000

$1,000,000

$175,000

Type D Loss

12-06-19

$50,000

$1,000,000

$0

Total Paid

   

$1,175,000

$1,000,000


Under the "Occurrence" limit, the total policy amount was available for each loss. Under the "aggregate" limit, each loss reduced the available limit until coverage was exhausted. In this situation, Acme would have had to handle $175,000 on its own.
Please see part two of this discussion on how an aggregate limit affects your protection.


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Policy Insurance Limits – Part 2


In this second part, we continue with an example of how insurance limits would apply on an aggregate basis. An aggregate limit is the most an insurer will pay during a policy term. Please be sure that you have read Part 1 of this discussion.

Aggregate limits are used by various insurers and/or for various instances where the company wishes to be more certain about its total possible financial exposure. Some insurers and some types of policies may use sub-limits as a method to control the amount they pay for losses. A sub-limit is a coverage amount that applies to certain types of losses or to losses involving certain types of property. Sub-limits may be used with either "occurrence" or "aggregate" limit policies. To keep things less confusing, let's use the same Acme policy situation and adding an Occurrence policy with sub-limits. In this instance, the policy provides the following:

$100,000 Sub limit for Type B Losses

$50,000 Sub limit for Type C Losses

Loss

Date

Amount

Stated Occurrence Limit

Available Aggregate Limit

Available Occurrence or Sub-Limits

Type A Loss

2-23-19

$200,000

$1,000,000

$1,000,000

$1,000,000

Type B Loss

3-3-19

$450,000

$1,000,000

$800,000

$100,000

Type C Loss

6-12-19

$175,000

$1,000,000

$350,000

$50,000

Type A Loss

8-4-19

$300,000

$1,000,000

$175,000

$1,000,000

Type D Loss

12-06-19

$50,000

$1,000,000

$0

$1,000,000

Total Paid

   

$1,175,000

$1,000,000

$700,000


Even though it has an "occurrence" limit, the sub-limits have had a drastic impact. In this instance, Acme would be left to handle $475,000 in losses that wouldn't be paid by the policy.

Because of the existence and the impact of different types of limits, you should be certain of exactly what your policies provide. An insurance professional is just the person to contact to discuss this very important issue.


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Vaping - Overview


Smoking has been a habit of humans for time immemorial and it has an impact on the property and casualty insurance world. In this article, we introduce the subject of vaping, smoking’s latest variant.

Traditionally, smoking tobacco has largely been a matter of physically drawing in smoke from a lit cigarette, pipe, cigar, hookah, etc. Regardless the form, the user inhaled a wide variety of chemicals along with the tobacco smoke, primarily nicotine. Nicotine is a powerful substance with addictive properties. Many health issues are connected with smoking, particularly the danger of various forms of cancer as well as heart disease.

Many long-term smokers eventually recognize a need for quitting smoking. However, quitting can be difficult because they have become nicotine addicts. Others are attracted to smoking but have been reluctant to adopt traditional smoking for fear of becoming hooked. Electronic cigarettes arrived on the scene in the U.S. around 2007, introduced from a Chinese manufacturer. Electronic cigarettes, later called e-cigarettes or e-cigs, were a smokeless alternative. Rather than inhaling nicotine via smoke, it was delivered electronically by heating and vaporizing a nicotine-laden liquid. The fact that e-cigarettes were smokeless created a perception that they were safer than traditional cigarettes.

A market for e-cigs, and now vapes (devices that look like small canisters that evaporate fluids for inhaling), grew rapidly. The growth was due to a large market of persons who viewed vaping as a method to wean themselves from smoking. Another group saw vaping as a way to enjoy inhalation of nicotine (and other substances, such as THC) in a safer manner.

As time has passed, more data is available on vaping and it is troubling. While traditional smoking has been declining for decades, e-cigs and vaping use has becoming explosively popular. Traditional smokers who may have eventually quit smoking all together have switched to electronic methods. A worse situation is that vaping has become very attractive to the very young. Current vaping devices are easily concealed and allow the ability to use substances other than nicotine; also, they are available in a host of flavors.

Vaping is becoming a problem based on early findings. Such devices that use nicotine appear to be just as addictive as traditional cigarettes. Some traditional smokers have adopted vaping in combination with cigarettes, increasing their vulnerability to illness and heart and lung diseases. Vapers are facing the problem of nicotine addiction as well as other, unique problems.

Please see our companion article that discusses an emerging insurance issue.


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Vaping and Product Liability


Insurance companies are in the business of protecting you against many sources of loss. It serves them and us for them to keep track of new exposures to loss and vaping has become a significant concern. As mentioned in our companion article, Vaping – Overview, this habit is growing in popularity within a broad age-range of persons.

Vaping device data grows daily and there are a variety of ways that they are causing loss and injury. Besides health issues caused by nicotine addiction, vaping devices are at the heart of other problems.

Users have been injured due to vaping devices (and e-cigs) exploding, causing serious burns, lacerations, disfigurement and even death. Survivors often face extreme medical and rehabilitation expenses. Explosions occur for various reasons such as poor product design or flaws, poor quality of materials, improper product use/overuse, batteries that overheat, and improper charging of devices.

Lack of regulations and oversight of electronic smoking and vaping devices adds to their becoming a problem for insurers. With few standards and requirements, there are increasing incidents that may trigger product liability losses. This exposure exists for merchants or manufacturers to incur as the result of defects in a product sold or manufactured.

Other losses persist even when vaping products operate as intended. One dangerous design exists in the liquid vaporization process. Temperatures needed for this process may reach nearly 400 degrees Fahrenheit, easily hot enough to cause internal burns.

Survivors and survivors’ estates may turn to lawsuits for compensation for their injuries. Targets for such litigation is not limited to manufacturers. Entities may be held legally responsible for facilitating putting defective products in the market stream. So, companies that distribute and/or sell devices that cause injury may be sued, so need product liability coverage.

Another source to trigger product losses is in marketing. Approaches that are deceptive or misleading can create liability. Further, liability may even arise via accurate marketing when a vaping device’s legitimate use is encouraged and that use leads to harm.

If you have any involvement with electronic smoking and vaping devices, it’s critical to be aware of the loss exposures you face. It would be helpful to connect with an insurance professional for assistance in mitigating and securing protection against losses.


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Certificates Of Insurance


Business transactions frequently require the valuable protection provided by insurance. A Certificate of Insurance is a document that is often requested as proof that adequate insurance exists. A certificate is not the same as a policy and certificates do not affect the coverage provided by a particular insurance policy. Therefore, requests to "endorse the certificate of insurance" are inappropriate and misleading. A certificate is a separate document that is used to comply with a common contract requirement to verify certain types and amounts of insurance.

Certificate holders, the entity or party requiring the certificate, often demand that they appear as "additional insureds." This requires an endorsement (change) to the policy and it gives them coverage for injury or damage resulting from the contract.

Example: Tenant A leases a building from Property Owner B. Property Owner B demands that the tenant changes its insurance policy to also show the property owner as an additional insured. If a tenant’s customer is injured on the premises and sues both the property owner and the tenant, the tenant's liability policy would provide coverage for both parties.

Construction contracts require certain forms of insurance, certain insurance limits, a hold harmless agreement and the inclusion on insurance policies as additional insureds. A "hold harmless" agreement is a contract provision that states how much responsibility each party accepts for damages arising out of the agreement.

A certificate of insurance can confirm that the appropriate policies were issued and that other requirements were also met. It is important to have a system for monitoring receipt of certificates BEFORE any sub-contractors are allowed to begin work. If certificates are not obtained or kept up to date when the contractor’s Workers Compensation and General Liability policies are audited, the payroll for the sub-contractors without Certificates will be included with the contractor's resulting in an additional premium charge.

Ask your insurance agent to help determine if you should be obtaining or providing certificates of insurance in conjunction with your business. In addition, when you’re required to provide a Certificate, send your agent a copy of the contract. The contract allows the agent to assist you in determining what liabilities you are accepting and what can be done to modify your insurance program to best protect your financial well-being.


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Joint Ventures


A joint venture is an entity formed by two or more businesses in order to pursue a specific purpose for a specified period of time. While some states require joint ventures to be legally filed, other states recognize any entity that meets the definition. A partnership differs from a joint venture as the former lasts indefinitely and its purpose may change.

A joint venture (or JV) can consist of sole proprietors, corporations, partnerships or any combination of these entities. Such ventures often bring together two areas of expertise to be applied to a single objective. Therefore, JVs allow the participating entities to capitalize on that combined expertise for a specified time period. JVs may also consist of entities that are, typically, rivals in the same market that may join forces for a commercial activity that they are unable to pursue alone (typically due to size, resources or expertise).

Insurance policies generally do not cover a JV unless its name is shown on the policy. There is no automatic coverage for a business that begins a joint venture during a policy term. For instance, two contractors are interested in bidding on a major project. They decide that it may be beneficial to bid on the project as a single entity. In this case, the joint venture is recognized as a distinct legal entity formed for pursuing the project. Unfortunately, it’s equally common for businesses to fail to recognize that they have formed a JV. The oversight could result in the joint venture suffering a loss that isn’t covered by insurance.

Consider contacting an insurance agent to discuss your possible coverage needs which may include general liability, automobile liability and, if the joint venture has employees, workers compensation insurance. It is also important to determine if the joint venture will need insurance to continue after the JV ceases to exist. While JVs can be extremely beneficial to all participants, they also have the potential for legal and operating problems that are unforeseen. JVs often involve complex contracts and non-disclosure agreements. The coverage issues are unique to each joint venture and should be carefully addressed by legal counsel and the insurance agent in cooperation with the joint venture principals.


COPYRIGHT: Insurance Publishing Plus, Inc. 2020

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Disaster Recovery


No business wants to face an event that could seriously curtail or even shut down operations. Unfortunately, few businesses have plans to deal with such a disaster. It is not unusual for a business to overlook creating disaster plans. Further, companies that do have disaster or continuity plans in place often fail to update their plans on a regular basis. Besides having an update plan, it is also important to test their plans.

Business decision makers have to spend time preparing for the possibility of catastrophe. It could be a natural event, or it could have a human origin. Regardless, an owner, manager or executive has to think about the many events that could either temporarily or permanently interrupt their business. In other words, a business must consider what threats exists to their normal, profitable operations. The task may initially appear overwhelming. However, it is just a matter of considering what the business does; where it does it; how it does it; and why it does it; then, examine what could happen to stop any of these things.

Natural interruptions could be caused by wind and rainstorms, flood, snow/ice storms, earthquakes, extended or extreme temperatures, etc. Human events may include fires, break-ins, mobs, sabotage, etc. Typically, a thorough consideration of problems involves identifying the worst possible things that could occur….even when their chance of happening is remote. Remember that a single, unanticipated event could cripple or even terminate a business, so you need to have a plan that contemplates a wide variety of harmful situations.

Consideration must be given to a business' physical structures and property, machinery/equipment, management, finances, employees, products, stock, finished goods and goods in process, services, communications, transportation, contractual obligations, competition, suppliers, distribution, and so on.

Recovering from disaster depends upon many factors. Regardless the reason for a business suffering a serious interruption, the goal has to be on resuming normal operations as quickly as possible. Getting back into business often depends upon insurance, but other arrangements may be necessary and even be more important. Consider plans that include the following:

  • Arranging use of another location to run the business
  • Having duplicates of key business records (kept at another location)
  • Arranging other sources of product supplies if a key supplier's business is interrupted
  • Having access to substitute production machinery
  • Buying and maintaining generators/alternate sources of light and power

When considering how to deal with events that could threaten your business, the biggest disaster could be the failure to create a viable disaster recovery plan.


COPYRIGHT: Insurance Publishing Plus, Inc. 2020

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Construction Equipment Theft


Building and Construction work is a tough, expensive business. It is critically important to have the right type and quantity of equipment available in order to complete projects. This means that medium and larger contractors have a lot of money invested in their machinery. Unfortunately, contractors face a problem that appears to be inherent…equipment theft. The most popular theft targets are:

  • Generators/air compressors/welders
  • Skid steers
  • Loaders (backhoe, skip, wheel and track)
  • Lifts (Fork and Scissors)
  • Light Utility Work Trucks and trailers

There are numerous reasons why construction equipment theft is so prevalent.

1. Since equipment theft is very profitable, professional theft rings are common. Naturally, a large number of thieves with a high level of proficiency increase the volume of thefts.

2. Unlike autos, trucks, SUVs and vans, there is no comparable level of registration or title documentation for construction equipment.

3. There is no standard for placing unique identification numbers on such equipment. The poor ability to track ownership makes the stolen equipment easy to sell. This is the major reason that stolen equipment is not usually recovered.

4. In order to make equipment easy to use, different equipment manufacturers use a similar key entry system, so a master key can be acquired and used by thieves.

5. Most large construction projects are outdoors and at various sites; equipment is often stored without special security or locks.

6. Construction sites are usually unoccupied and unsupervised on weekends, so thefts may go unreported for long periods of time.

7. Equipment components are highly standardized, so equipment is vulnerable for theft for purposes of chopping and re-selling the parts

There are ways to help minimize thefts losses. One method is the registration of construction equipment. Registered equipment should be conspicuously marked with the registration information. Engine, serial and transmission numbers are all suitable for use with an equipment registry. Other theft deterrents are mechanical security devices (for instance, tire clamps or boots), electric lockdown devices, and/or use methods (such as LoJack or GPS systems) to track equipment deployed at remote job sites and after they are stolen. Other methods are the use of more lighting and cameras around equipment storage areas, use of fencing and making it more difficult to get access to smaller equipment.  It is also helpful to weld company name and other information onto otherwise unmarked equipment (such as buckets, skids, booms, frames, cranes, etc.) and report theft losses quickly.

As an incentive to promote anti-theft efforts, some insurers award companies that use various security measures by applying premium discounts, reimbursing vehicle registration fees or waiving deductibles for stolen equipment. An insurance professional would be just the person to contact to discuss this very important issue.


COPYRIGHT: Insurance Publishing Plus, Inc. 2020

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

General Contractors


General contractors (GCs) are the playmakers for any significant construction project, taking responsibility for all key operations such as construction assignments, job site supervision, and activity coordination. Typically, GCs have their own construction specialty (example: malls, restaurants, office buildings, stadiums, arenas, parks, etc.). GCs are often larger concerns with a tremendous amount of expertise in their area of specialty. The level of experience is critical since it permits a construction project to be led efficiently and more successfully.

GCs may assign/award work in a variety of ways, such as:

  • supplying all of the specialty contractors for an entire project, such as the excavator, electrician, heating contractor, cement contractor, plasterer, and so forth
  • using their own, permanent employees for certain jobs, and
  • subcontracting the remaining tasks to other, smaller construction specialists

 

After land has been purchased and the design/architectural work has been done, the general contractor proceeds, usually beginning with site preparation, through excavation, foundation-laying, framing, and finishing until the building or project is completed. The general contractor provides the materials and equipment according to the applicable design specifications (usually provided by the architect). The GC must comply with all local and state ordinances, codes and zoning requirements. This includes purchasing the necessary permits and obtaining the necessary surety bonds.

GCs may either be hands-on operators, who actively take part in construction, or they may be "paper" operators, overseeing the actual work of other contractors. The general contractor may rent, lease or borrow equipment (including equipment operators) for use by subcontractors. Since the general contractor is responsible for the job site, he/she should be aware of the proper use of the equipment during construction. Is the equipment being used as it was designed to be used? Is the equipment's load capacity routinely exceeded? Finally, GCs have many contractual and administrative obligations such as making sure that critical project deadlines are met, that payroll is handled, materials and equipment are obtained and that the project's budget is followed (avoiding cost overruns).

GCs face a myriad of loss exposures that vary substantially according to the type of construction project. Their insurance needs may range from a simple, low limit package of coverage to a huge wrap-up program, involving multiple lines of business, different insurers and reinsurers with various layers of coverage. Firms involved as general contractors must work with insurance professionals who are equally adept at handling large tasks.


COPYRIGHT: Insurance Publishing Plus, Inc. 2020

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Recall Insurance


A company that is run responsibly is likely to act when it finds out that there is something wrong with their product. That action is often a recall….sending out a public notice that a problem has been discovered and that customers are urged to return the product. It should be obvi