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- When insurance markets tighten, your contractors and vendors may try to save a few premium dollars by reducing limits, raising deductibles or switching to a lower-rated insurer. If you rely on these parties to protect you from claims arising out of their activities, you may want to take a careful look at their coverages.
- Remodeling or expanding? You'll have to insure the addition, even while it is being built. One way is to buy construction insurance known as "builder's risk" which can be arranged by you or the contractor. Sometimes your property insurer will simply add the part under construction to your existing policy. This approach may save money. You should look at both options.
- Manage lots of certificates of insurance? Consider a service that handles all the paperwork and compliance chasing. Here are three such services: www.certificatesolutions.com, www.mgmttech.com/psg/default.asp, and www.certsonline.com/index.html. You may be able to find other services by running a search on the Internet. Try the words "insurance certificate tracking" as your search words.
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| Should you require "cyber" insurance from your vendors? |
Businesses with Internet activity of any kind have new loss exposures that many never have thought about. If the organization has only "traditional" insurance, it has gaps in coverage for these Internet risks. Any activity, from a simple on-line brochure to a fully interactive web site involving commercial transactions, can create cyber risk. The more activity over the Internet, the greater the risk.
Common cyber perils include:
- viruses
- unauthorized access
- insider abuse of data
- theft of proprietary information
- extortion
- denial of service attacks
- financial fraud
- copyright infringement
- intellectual property theft
- sabotage of data networks
- identity theft
There are many other risks. This list is constantly changing as new exposures are identified.
If your organization has a vendor or supplier that does business on the Internet, their cyber activities could pose a risk to your business. Here are some examples:
- A virus transmitted by a vendor damages your network or your data files
- Information published on a vendor's web site, in which your company is mentioned, causes a defamation suit in which your organization is named as a defendant
- A competitor intercepts an e-mail between your company and a vendor that provides them with critical information enabling them to gain market share (at your expense) or steal an important client
- An unauthorized hyperlink on a vendor's website takes the browser to a page containing sensitive information or bypasses a page that a site operator expects to be visited first
- Your vendor publishes copyrighted information without authorization that is linked to your company by association, trademark, etc.
Standard liability policies will not cover all of the cyber exposures. For example, liability policies exclude advertising injury claims if a policyholder is in the business of broadcasting, televising, publishing or advertising. If a vendor creates and publishes its own website, it might be considered to be in one of those businesses.
If your vendors are involved in the Internet in any way, even if just as a website owner/operator, you may need to require more than just the usual general liability, workers compensation and auto insurance from them. You should inquire about their cyber exposures and make a decision as to whether to require special insurance. Keep in mind, however, that some of the vendors may choose not to buy this coverage despite your request.
Some vendors may be willing to procure the coverage if they can pass the cost along to you. That is not fair, because many other parties will reap the benefits of the protection including other customers and, of course, the vendor.
Ultimately, the decision whether to require cyber insurance from vendors is a business decision. You must weigh potential costs (and potential reduction of the vendor pool) against other business needs. Each case needs to be evaluated individually. You may wish to consult your insurance advisor.
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A critical incident or emergency response program enables organizations to respond quickly and effectively to traumatic events in the workplace. Without a written plan that is also practiced and rehearsed, management and employees are forced to make ad hoc decisions in an emergency. Traumatic conditions usually produce great stress, further complicating things for the decision maker.
Examples of traumatic events include:
- Workplace death or severe injuries
- Major property damage such as from an explosion
- Hostage taking
- Terrorism
- Natural disaster
- Political unrest
At the very least, your organization should have a written outline explaining who does what in an emergency. You also need to spell out how you will account for employees, and how to handle the media. The focus should be on saving lives first and protecting property second. Next comes business recovery.
A plan can be as simple or complex as you want to make it. A basic planning guide is available from the Federal Emergency Management Agency (FEMA) on-line at www.fema.gov/library/bizindex.shtm. While this plan template may be too complex for some small businesses, it contains concepts and principles that everyone can use. FEMA has an abundance of additional information on emergency management and incident preparation and prevention (and many other topics) at its home page at www.fema.gov.
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| Why do I need boiler insurance? I don't have a boiler! |
As an industry that has been around for awhile, insurance has many terms that need updating to reflect the times. Because of habit and tradition, however, some terms are slow to change. One example is "boiler and machinery insurance." In today's business environment, probably most of these policies do not actually cover "boilers."
Most of the insurance industry (i.e., insurers, regulators, scholars) has adopted the title "equipment breakdown" to better express what this coverage actually does. However, you will still hear the older term "boiler and machinery" for some time to come.
This insurance covers loss resulting from accidental breakdown. All types of equipment that operate under pressure can be covered. So can equipment that controls, transmits, transforms, or uses mechanical or electrical power. Examples of the latter include electrical generating and transmitting equipment; pumps, compressors, turbines, engines; air conditioning and refrigeration systems; production machinery used in manufacturing operations. Just about any office equipment, such as copiers and computers, also can be covered.
The reason for buying equipment breakdown insurance instead of just covering the equipment under a regular property policy is simple. Equipment breakdown insurance covers things that regular property insurance doesn't. Essentially, breakdown insurance covers losses that result from internal forces (like surges); property insurance covers things that result from external forces (like fire).
Sensitive machinery and equipment may need breakdown coverage, especially if it is critical to continuation of the business. Even if the breakdown is relatively inexpensive to fix, if it takes time to get a part your business income could suffer. In many businesses, including production and high technology, the loss of income from interruption of business can dwarf the direct damage expense. Make sure your machinery and equipment have the right financial protection.
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Many managers and safety professionals oppose incentive programs to motivate safety. Some are philosophically opposed to rewards for doing what should be part of everyone's job. Others have bad experiences with ill-designed or poorly executed programs. Despite the controversy over safety incentive programs, many employers believe they help achieve management's safety goals.
One thing most would agree on about safety incentives - if you are going to use them, you should couple the rewards to recognition for performance. In other words, acknowledge the specific behavior being rewarded, recognize the employee or group by name, congratulate them publicly, and then recognize them again by name.
Safety incentive programs should target specific behaviors. Such programs must highlight the activities that help prevent accidents and injuries. To target such behaviors, your organization must be aware of where it needs improvement. In other words you need specific safety information about your worksite and an overall program to improve the results your company desires. Without this targeting, incentive programs are just wasted effort.
Be careful not to put too much emphasis on avoiding lost-time injuries in designing your program. One of the reasons some programs fail is that they lead to distorted behavior in the quest for reward. Example: in some programs supervisors will fail to report claims or workers will pressure peers to work hurt to keep the numbers down.
Some successful incentive programs emphasize specific proactive safety activities. Rewards may be connected to activities such as completing safety training, participating in safety activities (e.g., serving on committees), identifying hazards before injuries occur, and similar activities.
Here are a few principles for workable safety incentive programs:
- Publicize the program. If your employees don't know about the program, they have no incentive to follow the behaviors you are trying to enforce.
- Provide meaningful rewards. A pat on the back may be appropriate, especially if accompanied by public praise. Greater achievement may justify greater rewards. But a giveaway coffee mug with the company logo that all customers get won't have much impact. Find out what rewards the employees want.
- Be consistent. When goals are met, make sure the behavior is reinforced.
- Avoid canned programs. The Internet is full of websites selling canned programs for safety incentives. Be creative. Tailor the program to your own goals, to your organization's unique culture, and to your employees' needs and desires.
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In recent years, many states have passed tougher liquor liability laws. Coupled with increased enforcement aggressiveness, these laws demand careful attention to personal and corporate liability in this area. This is especially true for those businesses that serve food and liquor. In several surveys, more than 50% of those arrested for drunk driving named a commercial establishment as the place where they had last obtained alcohol.
Many states have enacted legislation called Dram Shop Liability. These laws hold those who serve alcohol to an intoxicated or under age customer responsible for damage or injury that results. Injured parties (e.g., victims of the drunk driver) may bring suit against the alcohol server in such cases. Under some laws and circumstances, criminal charges also may apply.
Social hosts also have some exposure. For example, the California Court of Appeals has applied the Business and Professions Code section applicable to alcohol servers to the sponsor of a company party who served alcohol to an employee who was a minor. There was no charge for the liquor. But, the dram shop law applied regardless.
Social hosts usually will have coverage under their general liability policy provided that they do not sell liquor. Those selling or manufacturing alcoholic beverages need special liquor liability coverage. Some may fall in between. An example might be an organization that sponsors a fund raiser and arranges for liquor sales as an additional way of raising money for the cause.
When in doubt, it is best to have the circumstances analyzed by an insurance professional and/or legal counsel who can advise as to potential exposures. In some cases "special event" coverage may be available that will cover both liquor liability and other liability exposures specific to the event.
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| The pitfalls of "tactful" termination |
Releasing employees because of corporate cutbacks can be risky. However, firing employees for non-performance can be an even quicker route to litigation. Not only does management face possible employment liability actions, but personal injury claims for defamation, infliction of emotional distress and similar torts are likely. Employees who feel humiliated could become violent.
The way termination is handled can result in possible claims. Many organizations require conferring with legal counsel and human resources experts prior to firing a non performing employee. Sometimes this results in a warning rather than outright termination. If the employee is truly not capable of performing the work, a mere warning can make matters worse.
Where termination is selected, managers may be advised not to discuss or even acknowledge the firing. This can backfire. Employees may speculate about the termination or get distorted information from the one let go. Speculation or misinformation can result in morale and performance problems, diverting attention from the work or undermining loyalty.
When the terminated employee is an executive or has close contact with customers, speculation outside the company can cause problems. Shareholders may have misgivings. For example, the CFO of a major insurance company suddenly left the organization in the middle of an audit "to pursue other interests." The company's stock fell 15% in one day.
Managers must choose a careful path when terminating non-performing employees. Acting as if nothing happened or refusing to comment may make matters worse than if the organization revealed as much of the facts as necessary. This is especially true if the termination involves ethical factors or illegalities. Advice from counsel is important. In spite of the most careful planning, a termination may still result in legal action. A well-designed liability insurance program including coverage for employment practices liability can provide coverage for defense and settlements or judgments.
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