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- Use your safety programs to sell your company to insurers. When insurance markets harden, insurers can be impressed by good safety programs. Be sure to emphasize yours in your renewal applications.
- Be careful when donating used equipment. The write-offs are attractive and the desire to contribute is strong. However, donating used equipment, if hazardous in any way, can lead to product liability exposures that you may not expect.
- Speak softly but carry a camera. A picture is worth a thousand words in a defense action. Consider providing disposable cameras for all company vehicles. But, also consider a little training on evidence issues for your drivers.
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| Personal risk management - guard your identity |
In a recent action movie, the heroine, a computer professional, decides to go on a vacation. She meets a handsome stranger, loses her purse, and winds up at the center of an international mystery. In the process, she finds that the world now regards her as someone else. The purse thief, working with the handsome stranger and some evil computer geniuses, has stolen her identity and substituted another persona. Now, our heroine finds that she is a wanted fugitive with a new name and a new past.
Real life identity theft is far less high-tech. Thieves raid garbage cans, steal mail and pose as landlords or employers to get copies of your credit report. Their primary target - your social security number. With it, they can apply for credit or use your existing accounts, especially if they can also get their hands on your credit cards. While your credit card liability limit may be capped, the cost of regaining your identity and credit rating can run into the tens of thousands of dollars.
Here are some ways to protect your identity:
- Protect your social security number. Don't carry the card in your wallet. When required as identification (other than financial institutions) ask if the requestor will accept something else such as the last four digits or a password.
- Get off mailing lists. Ask to be removed from telemarketer and other mailing lists (but don't respond to the "remove me from mailing list" buttons on unsolicited e-mail). Use the "Opt-out" program. Call 1-888-5OPT-OUT and request removal from the marketing lists of the three major credit bureaus. If you receive unsolicited pre-approved credit offers that you do not want, shred them.
- Check your credit rating. Online or by telephone, credit bureaus will provide you with a copy of your credit rating. The reports show all your accounts and your status with each. Fees average around $8 a report, but some services such as money management computer programs or online financial services may allow a one-time free report from one or more of the bureaus. When you get your report, contact all the accounts you are no longer using and close them.
- Clean out your wallet. Don't carry unused credit cards, social security cards, passports, birth certificates, passwords, account numbers or other sensitive financial information that you don't need to carry.
If the worst happens and you lose some of your valuable financial information, report it to the police and the credit bureaus as soon as possible. Ask the bureaus to contact you if any credit applications come through.
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| Computer viruses and worms |
A computer worm known as "Nimda" or "readme.exe" flooded the Internet with data on September 18, 2001. The incident prompted the FBI to create a task force to investigate the attack. The worm affects both servers and PCs running Microsoft software. It spreads by sending infected e-mail messages, copying itself to computers on the same network, and compromising Web servers. It can also spread by Internet Chat and by downloading files from FTP sites. Once a server is infected, the worm scans for other vulnerable computers and infects them.
Nimda, computer security experts tell us, may be the first of many virulent computer "bugs" set to attack corporate and government systems. The first version of Nimda affected nearly 160,000 systems. A new "improved" version is out and activity level is already as high or higher than the first strike.
There is no doubt that computer viruses and worms can damage your organization's systems, destroying valuable data or bring the systems down during critical business periods. Here are some things you can do to prevent such loss:
- Make sure your system has a "firewall." If you don't have an IT department and have to do this yourself, you can use a software firewall such as SyGate, Tiny, "BlackICE Defender," Norton Personal Firewall, ZoneAlarm and McAfee. Routers for small office networks usually include physical firewalls.
- Run at least one antivirus program and keep it updated, daily if possible. Some of the better-known programs include Norton, McAfee, PC-cillin, and Panda
- Instruct employees not to open suspicious e-mails and never to run executable files. Teach them how to identify such items.
- Keep your software updated. Microsoft releases patches and updates continuously to plug holes in software that could allow malicious attackers a way in.
- Stay informed of virus threats. One free e-mail newsletter, published daily, is available at www.oxygen3.com/us, operated by Panda Software, maker of one of the antivirus programs.
- Screen your employees carefully and monitor their computer usage. Regardless of how you protect your system from external threats, internal risks are often the greatest. A disgruntled employee may be your biggest threat.
For some excellent information on computer security try www.firewallguide.com. This website is full of tips, educational discussions and valuable links.
Computer security experts say that the only way to make your system 100% safe is to turn it off. With effective use of good software, hardware and common sense security procedures, you may be able to prevent 99% of intrusions. For that other 1% that even the best security can't prevent, you may decide to rely on insurance. While property insurance may cover some of the loss, more specialized policies are available to provide greater protection.
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| Toxic Mold Lawsuits Growing |
Many in the legal community consider toxic mold to be the "next asbestos" meaning that we are at the beginning of a flood of lawsuits from this hazard. Here are two recent examples.
- A Sacramento California jury found negligence by the landlords (two investors and a management company) arising from failure to clean up mold in an apartment complex. On November 8, 2001, the jury awarded $2.7 million to a family that had lived in an apartment owned by the defendants. This case is thought to be the largest personal injury verdict to date involving mold.
- A county court judge in Texas in October 2001 upheld a state court jury verdict (June 2001) of $32 million against a major insurer in a toxic mold case. The jury concluded that the insurer committed fraud in the claim handling so the damages were multiplied beyond the personal injury. The insurer disagrees with the court's finding and plans to file a further appeal.
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| Intellectual property protection |
Whether you manufacture, produce, process, sell, or service, your company could be involved in an intellectual property suit. Claims might include allegations of patent, trademark or copyright infringement.
Patent infringement suits have become relatively common. Between 1996 and 1999, their growth rate averaged over 10 percent per year. Given the increase in patent applications - from 200,000 in 1996 to over 300,000 in 1999 - the lawsuit trend is likely to accelerate.
This litigation is expensive - legal fees for defense of a patent infringement lawsuit averaged $1.5 million in 1999. Damage awards have exceeded $1 billion. Damages available include lost profits, royalties, interest, attorney fees and punitive assessments.
The best way to avoid becoming a defendant is to steer clear of other's patents. A diligent patent search can certainly help. However, because the U.S. Patent Office traditionally has kept patent applications secret, a company could develop a product in good faith, do a diligent search and still violate a new patent issued during the product development phase.
Being a defendant is not the only risk. You may be counting on your proprietary process patent for significant profit, only to find that a competitor has begun using a similar process. Are you willing to undertake the expense and hassle of complex litigation to protect your property rights? Pursuing your rights in court can be as expensive as defending them.
Trademark infringement is another type of intellectual property litigation. One well-publicized case resulted in a damage award of $143 million. Major brands jealously protect any use of their trademark, slogan, jingle or other identifier. Lawsuits are fought over the use of even everyday terms, such as "real thing."
Copyright infringement is another high-growth litigation area, especially with increasing use of the Internet. Aggressive industry organizations have accused some internet site operators of illegal trading of intellectual property by allowing copying and distribution of commercially recorded music. Other cases are far subtler, including those involving alleged plagiarism. Whatever the basis of the claim, the results can be expensive to the defendant, possibly even forcing companies out of business.
In some cases, defendants who prevail can recover attorney's fees, but this is the exception rather than the rule. And, this relief could come after years of expensive litigation. It doesn't help much to win if you lose your company in the process.
Insurance can also play a role. The standard commercial general liability (CGL) insurance policy provides some coverage for certain claims arising out of "advertising activities." It may cover some claims arising out of copyright or trademark infringement. If advertising is not involved, or if the infringement could be interpreted as "intentional," the CGL won't help.
Specialized insurance coverage can better protect against intellectual property claims. Such policies may cover the costs of defense of an intellectual property infringement suit and resulting settlements or judgments. Some insurers offer so-called "pursuit" coverage, designed to aid the policyholder in pursuing infringers.
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| Rules of the road for autos used on company business |
Employees have many questions about insurance when they are required to use their personal auto on company business. Letting the employee know about a few rules may help clarify the business auto use issue for employees. Obviously, it would be best if the employee were made aware of these points prior to assuming the job duties.
Not all of these "rules" apply in all situations. Take note, too, that many of these statements are somewhat oversimplified to avoid more confusion. Extenuating circumstances, such as gross negligence on the part of one of the parties (e.g., allowing an obviously intoxicated person to drive) can negate some of these statements. To the extent that each point may apply in your company, you should consider providing the following information to employees.
- Taking the wheel of an automobile is a significant responsibility. Whether in your own auto or another's, you the driver are accountable for your actions.
- The state may have financial responsibility requirements for auto owners. Your employer requires you to have liability insurance if you drive your own auto on company business.
- If you are responsible for an accident while driving your own car on company business, your insurer will defend you and the company, if necessary.
- If you drive the company's vehicle, the company's insurance will cover you, the company and the vehicle.
- If you are injured while driving a vehicle on company business, your injuries will be covered under workers compensation. If you are on your way to or from work, you are not usually on company business.
- If a fellow employee is injured while riding with you in your auto on company business, that employee is covered under workers compensation. You may be personally liable to that fellow employee, however, if his or her injuries result from your negligence.
- If the vehicle is your property, you are responsible for obtaining property insurance for it (known as comprehensive and collision or auto physical damage coverage). Your insurance will cover damage to your auto. The company is not responsible for damage to your auto, unless caused by the company's negligence.
- You will need to furnish us with evidence of liability insurance if you are required or plan to use your vehicle on company business.
- A mileage allowance is intended to cover your cost of operating your vehicle on company business, including the cost of insurance and amounts under any deductible you have chosen.
- A moving violation or chargeable accident can affect your insurance premium no matter whose vehicle you are driving.
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| Low interest rates + premium financing = better cash flow |
Recently, the Federal Reserve has cut interest rates to help stimulate the economy, while insurance premiums have been rising. Using one to offset the other may make sense.
Premium financing is available from specialty lenders and sometimes from insurers directly. It allows the insured to spread its insurance costs over a longer period of time, rather than pay an entire year's premium up front. While there is an interest charge for this convenience, when interest rates are low an insured may be able to benefit from this option.
The cash flow advantages of premium financing can be obvious, especially when the insured company is expecting economic improvement over the long run. Premium financing may allow the insured to keep cash in the business for a longer period of time. Also, this "off balance sheet" financing will not affect your bank credit line.
Your broker or agent can help you arrange financing with the insurer. If better terms are available, they may give you a list of premium financing companies to contact, or refer you to trade journals, financial advisors or other sources.
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