|
INDEX
|
|
 |
|
- Watch what you leave lying around. Files left on desktops, data displayed on computer screens in your office, and work papers or laptop displays used while traveling contain information. Information can be your organization's most valuable asset and the one most desired by competitors or others.
- Specify and get copies of additional insured endorsements along with certificates of insurance from your vendors and contractors. Don't rely merely on the certificate, even if it states that your company is an additional insured. If the insurer uses the wrong endorsement (or it never gets issued for some reason) collecting from the insurer after a loss may be difficult. You could be forced to try to collect from the vendor or contractor.
Return to Index
Harvard University's Center for Risk Analysis released a study that estimates 2,600 deaths per year from crashes caused by drivers using cell phones. Two years ago, the same researchers' estimate was 1,000 annual fatalities. The newest study also estimated that cell phone usage resulted in 570,000 injuries and 1,500,000 property damage losses.
The researchers attribute the rising loss tolls to increased cell phone use as the devices become less expensive to use and own. The alarming statistics have triggered studies by two major federal agencies - the National Transportation Safety Board and the National Highway Transportation Safety Administration. The NTSB is studying specific serious crashes to determine how wireless phone use may have contributed to the accidents. The NHTSA is studying how driving performance is affected by cell phone use.
Last year, 22 states considered legislation to restrict cell phone use while driving, but only New York has passed a partial prohibition so far. The lack of prohibiting legislation has not slowed the civil activity, however, as the number of lawsuits from parties injured by talking drivers continues to escalate. Increasingly, businesses are the target of these lawsuits if the company policy encourages (or fails to discourage) cell phone use while driving on business.
Return to Index
It had to happen. After several years of increasing lawsuits over mold in residential property, the new frontier for mold litigation is office buildings, hotels and shopping centers. Can factories be next?
Dr. Robert Hartwig, Chief Economist of the Insurance Information Institute has stated that commercial building mold claims increased more than 100% in the past year for many insurers. A major hotel chain is spending $20 million to clean mold from one of its resorts. That doesn't include the cost of lost business as the location remains closed for six months or more for the cleanup. A high rise condo owner in Florida is spending another $20 million for a cleanup. Mold is part of a lawsuit involving a shopping center in California.
At this point, it appears that the focus of mold claims is on residential buildings or those with open public access. That is not likely to slow the "march of mold" claims. Like asbestos, mold is a breeding ground for massive, expanding litigation. The asbestos problem has been around for many years and has touched resources once not even imaginable. Mold litigation appears to be following suit.
Return to Index
| "Miscellaneous" professional liability insurance |
Societal changes over the past several decades have caused a shift in the types of claims appearing in the tort system. Our society has moved from an agricultural to an industrial and then to a service and information economy. This transformation has increased the percentage of jobs that involve economic or technical activity as opposed to physical activity. Corporate "downsizing" and the so-called "free agent" economy have led to an increase in the number of consultants in the workforce. The Internet has led to an explosion of jobs with little or no injury or property damage exposures, but significant economic risks.
As a result of these changes, the number of claims and lawsuits for professional negligence or errors and omissions has increased in a variety of occupations, some of which did not exist fifteen years ago. These newer professions may require standards of performance, licensing and formal study. However, the rigorousness of these jobs does not rise to the level of the very high standards of care and education of the traditional professions.
These occupations often do not require the same highly specialized liability coverage that has been developed for professions such as law, medicine, engineering, architecture and accounting. However, general liability insurers do not want to cover purely economic exposures, such as is often attributable to professional negligence. As a result, a form of insurance known as "miscellaneous" professional liability insurance has been developed to cover losses arising out of a wide variety of occupations and professions. Some of the occupations covered by this type of insurance are shown in Figure 1.
Figure 1 - Some professions eligible for miscellaneous professional liability coverage
|
Actuaries |
Agricultural Consultants |
Answering Services |
|
Appraisers |
Auctioneers |
Benefit Administrators |
|
Bookkeepers |
Building Inspectors |
Business Brokers |
|
Business Managers |
Cemeteries |
Clergy |
|
Collection Agents |
Composers/Lyricists |
Computer programmers |
|
Consultants |
Contest Managers |
Courier Services |
|
Court Reporters |
Credit Bureaus |
Custom House Brokers |
|
Freight Forwarders |
Drug Testing Services |
Electronic Data Processors |
|
Employment Counselors |
Environmental Consultants |
Escrow Agents |
|
Executive Coaches |
Expert Witnesses |
Foreclosures Agents |
|
Forensic Engineers |
Foresters |
Franchisers |
|
Fund-Raising Organizations |
Funeral Directors |
Geologists |
|
Home Inspection Services |
Human Resource Consultants |
Benefit Administrators |
|
Independent Claims Adjusters |
Inspection Services |
Interior Decorators |
|
Interpreters |
Land Surveyors |
Lawn Care Contractors |
|
Referral Services |
Literary Agents |
Management Consultants |
|
Marine Surveyors |
Medical Billers |
Mortgage Bankers |
|
Mortgage Brokers |
Notaries Public |
Paralegals |
|
Patent Agents |
Personal Trainers |
Photographic Studios |
|
Political Action Committees |
Polygraph Operators |
Premium Finance Companies |
|
Printers |
Private Investigators |
Process Servers |
|
Property Managers |
Public Relations Consultants |
Real Estate Appraisers |
|
Recording Studios |
Repossessors |
Research Organizations |
|
Safety Inspectors |
Seedsmen |
Shipping/Forwarding Agents |
|
Sports Agents |
Staffing/Temp Services |
Structured settlement consultants |
|
Systems Analysts |
Talent Scouts |
Tax Preparers |
|
Technology Consultants |
Answering Services |
Testing Labs |
|
Title Abstractors/Agents |
Training Consultants |
Translators |
|
Travel Agents |
Tree Surgeons |
Trustees |
|
Realtors |
|
|
Any business in the service sector, especially those involved in information or the Internet, should seriously consider the need for some form of professional liability or errors and omissions coverage.
Return to Index
| Do you need a property valuation service? |
Your property insurer requires that you report the value of the property covered. This creates a dilemma for many insureds. Report too high and you pay more premium than needed. Report too low and you may find that the claim settlement doesn't cover the loss.
When property rates were low, the issue of over or under valuing was less critical. With the substantial increase in property rates of recent years, proper valuation is crucial.
Many insureds do not understand the differences between valuing property (including contents) for insurance purposes and all other forms of valuation. The objectives of insurance property valuation and the interaction of the insurance policy make valuation for insurance purposes unique.
Many companies use a "do it yourself" approach to valuing property. Some of the pitfalls of self-valuation include:
- Starting points for valuation can be faulty. Purchase price or market value may have no relation to replacement value
- "Yardsticks" such as indexes applied to capitalized cost, value per square foot and inflation indexes may not be accurate for all your property
- Insureds often include property elements that are not covered under the policy, such as foundations, underground wiring, finance costs, land values etc.
- Renovations or remodeling costs are added to values reported to insurers when such work actually may add little or no value
- Depreciation (in the case of actual cost coverage) is often improperly calculated, sometimes because of confusion between accounting and physical depreciation.
- Insureds often fail to keep good supporting documentation and fail to update values periodically
- Inventories of business personal property can be inaccurate
Property valuation firms specialize in determining property values for insurance purposes. Valuation companies can offer several benefits. Their services:
- Develop accurate values by using multiple indexes, modeling approaches and other techniques
- Use up-to-date data
- Calculate depreciation accurately
- Identify property excluded in the policy and avoid reporting it
- May include periodic updating at a reduced charge
- May include appraisal for property difficult to value, such as art
- Include documentation to help prove loss if that becomes necessary
If your company has significant business personal property (contents), multiple locations, any form of unique construction or sizeable total values, you may wish to consider the services of a professional property valuation firm. With rising property insurance premiums, the cost of the service may pay for itself in a short time.
Return to Index
| Review ALL advertising media for hidden messages |
Many people like to brag. Companies are no different. Sometimes such "puffery" can get one in trouble.
Statements made about the company or its products can be construed as warranties in court. Such statements could also lead to "detrimental reliance" by a party who later claims injury or economic loss. Certainly in the case of professional services, company claims about quality of work or professionalism will be highlighted on plaintiff display charts in a trial.
Good risk management requires evaluation of as many potential risk sources as possible. The person responsible for protecting the company from loss should review advertising copy, broadcast materials, speeches and other information put out to the public.
Websites are an area that requires special attention. They change frequently. They are used for advertising, for communication and to transact business, so they serve more roles than other forms of advertising. What goes on that website may come back to haunt just as overwrought claims of product qualities can. It is good risk management to carefully control web content.
Aside from the risk of claimants using your published materials against you there is another risk that should concern companies. Your potential insurers also look at these materials when deciding how (or whether) to quote on your coverages.
If the material frightens or misleads underwriters they may pass on your coverage and you would never know it. An example might be a website that uses graphic art selected more for aesthetics than for relevance. Maybe your webmaster selected the photos because they are visually effective, even if not representative. However the underwriter might not know that the picture of the bungee jumper on the website was meant to emphasize your company's courage and free spirit. To the underwriter, it might imply that bungee jumping cords are one of your products.
Return to Index
Should you accept evidence of insurance from "non-admitted"
insurers? |
Many organizations have standard insurance requirements for vendors and contractors. One common requirement is that the insurer be "admitted." Such a requirement, while well intentioned, may work against you.
"Admitted" means the insurer is licensed in the state and subject to regulation there. Typically the insurer agrees to submit to inspections by that state, maintain an office there and participate in insolvency pools. Non-admitted insurers do not submit to these requirements.
However, non-admitted does not mean unregulated. While an admitted carrier is subject to the regulatory authority of any state where it is admitted, a non-admitted carrier jurisdiction is subject to the regulatory authority of another jurisdiction. Further, many states review non-admitted insurers vital statistics and place them on an approved list if they meet certain financial and other requirements. The insurance brokers who use non-admitted insurers are regulated through special licensing procedures.
There are reasons why some insurers would not become admitted in all states. First is paperwork and expense. More importantly, the non-admitted insurance market (also called "surplus lines") fills voids that other insurers choose not to. These surplus lines insurers cover specialty risks and unique risks for which admitted carriers may not have developed policy forms nor committed the necessary resources to develop underwriting procedures. The specialty insurers can do this because of freedom from restrictions imposed on other insurers.
Often a non-admitted insurer is the only source for a particular type of coverage. If your organization's insurance specifications for contractors or vendors require such coverage but prohibit the use of non-admitted insurers, the other party has a dilemma. They may not be able to meet your specifications. Or, they may breach the contract if it includes a non-admitted prohibition.
Many fears about non-admitted insurers are exaggerated or unfounded. While non-admitted insurers do not participate in your state's insolvency fund, the potential recovery from such funds is usually quite limited and often difficult to obtain. More important is the financial strength of the insurer. Recent studies by rating firms such as A.M. Best and Standard & Poor's indicate that surplus lines insurers have continually outperformed the admitted insurance market on financial rating tests and that the solvency record of the two is equal.
The bottom line: your organization may be better off to consider the insurer's quality and financial strength more than its regulatory status when specifying insurance requirements for contractors and vendors. If you specify admitted insurers only, you may need to consider a waiver of this requirement when appropriate.
Return to Index
|