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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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