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Lightning might only strike once, but that one strike is getting more expensive. A new study from the Insurance Information Institute shows that while the number of claims paid out for lightning losses over the last three years has decreased about 8 percent, the average cost per claim has gone from $2,646 to $3,446 -- a 30 percent increase.
The study attributes the increase to our increasingly electronically centered lives. And they say it's only going to get worse.
"The paid losses are likely to increase to nearly $1 billion in 2007, despite the declining number of claims, in part, because of the explosion in the number and value of consumer electronics in homes," said Loretta Worters, vice president of the III. "Wide screen TVs, home entertainment centers, multiple computer households, gaming systems and other expensive devices are having a significant impact on claims losses."
Fires caused by lightning are often covered by your fire policy, but you should check with your insurer to make sure the electronic shock that can fry computers and phones is covered, too. And there are things you can do to prevent lightning from causing losses in the first place. Here are some suggestions from the III:
* Install a lightning protection system: It's as old as Benjamin Franklin but still effective. The idea is simple, a metal rod on the roof attracts the lightning and wiring directs the energy from the bolt around the building. But while the idea is simple, installing it properly is vital. So, have a licensed electrician put in the system.
* Use surge protectors: All those computers, phones and electrical equipment you use to run your business are particularly vulnerable to lightning, and simple power strips just aren't enough to protect them. Instead, it's important to install Underwriters Laboratories-listed surge arrestors on electrical service panels. Installations typically include surge arrestors for the main electric panel, as well as incoming phone, cable, satellite and data lines. UL-listed transient voltage surge suppressors can also be installed to protect specific pieces of electronic equipment.
* Unplug: If you know a storm is coming, unplug your equipment.
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| Supremely business-friendly |
The addition of Justice Samuel Alito and Chief Justice John Roberts to the Supreme Court has been good for business. Over the last several months, the two conservative justices have helped make it more difficult to sue companies over discrimination and securities fraud, and have shielded companies from having to make large payouts when they do lose civil cases -- among other things.
Here's a look at some of the cases from this term that affect businesses:
* Ledbetter vs. Goodyear Tire & Rubber Co.: The court ruled that employees suing for pay discrimination must file a claim within 180 days of the offense, severely tightening the statute of limitations on such cases and an employee's ability to sue their employer. A woman sued Goodyear Tire saying she had been discriminated against because of her sex for many years. Because of this discrimination she earned far less than her male colleagues. A jury ruled in her favor and ordered the company to pay damages. But the Supreme Court found that none of the discrimination had occurred in the 180 days prior to the employee filing a claim, and the act of issuing a paycheck doesn't start the clock up again.
* Bell Atlantic v. Twombly: The court ruled that plaintiffs suing companies over antitrust violations must have some evidence of wrongdoing before allowing a case to proceed. The plaintiffs must show that their case is more than simply "plausible." In this case, the plaintiffs sued Bell Atlantic saying the company's actions showed there was reason to think it was engaged in illegal activity. But the court ruled that wasn't enough. The justices said the plaintiffs needed more than that to go on what amounted to a fishing expedition for evidence through the discovery process. The upshot for businesses is that it will be easier to get lawsuits dismissed before they get to the potentially expensive discovery phase.
* Leegin Creative Leather Products vs. Kay's Kloset: The court made it easier for manufacturers to set minimum prices for their products, saying the practice wasn't always anticompetitive. In the case, a retail store, Kay's Kloset, refused to stop discounting products made by Leegin Creative. In response, Leegin stopped selling to the store. Kay's sued, saying the move violated antitrust laws. The Supreme Court disagreed and allowed Leegin to continue setting minimum prices. This case is a mixed bag for business. It's a win for manufacturers, who now have more control over the price at which their goods are sold to the public. But it could hurt small discount retailers that now could be forced to stop discounting items.
* Philip Morris USA vs. Williams: The court limited what a jury could consider when deciding on punitive damages in a case. While not putting a "hard cap" on the amount money that can be awarded, the court did limit the what the defendant's lawyers termed "grossly excessive" damages.
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According to a recent study, one in six drivers would not pass their written DMV exam if taken today. GMAC Insurance gave actual Department of Motor Vehicles tests to licensed drivers in all 50 states and the District of Columbia and estimated that about 36 million licensed Americans would have failed the test.
"All Americans need a refresher course when it comes to basic driving rules," said Gary Kusumi, CEO and president, GMAC Insurance - Personal Lines. "Being a safe driver is about conduct, judgment and knowledge. We're hoping this year's results encourage people to arm themselves with the knowledge they need to stay safe."
For those who despise tailgaters, you won't be surprised to hear that one of the most commonly missed questions on the test asked the proper following distance between their car and the car in front of them. Only 19 percent knew it was two seconds. Even more test-takers didn't know what to do when approaching a solid yellow light. Eighty-four percent chose something other than "stop if it is safe to do so."
The worst-performing state was New York, which was in one of the two worst-performing regions, the South Atlantic with a 20.8 percent failure rate and New England with a 15.7 percent failure rate. The best-performing state was Idaho. The study also revealed that the older the driver the better the test score. The group that did the best on the tests was those older than 35.
Top five finishing states:
1. Idaho
2. Alaska
3. Minnesota
4. Wisconsin
5. Kansas
Bottom five finishers
47. Rhode Island
48. Massachusetts
48. District of Columbia
48. New Jersey
51. New York
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| Responsibilities come with promising "satisfaction" |
So, what does "satisfaction guaranteed" mean anyway? That question was at the heart of a recent notorious lawsuit involving the owners of a Washington D.C. drycleaner who were sued for $54 million because a customer said they lost his pants. The owners won the case, but the judge's ruling provided an interesting look into what exactly businesses are responsible for when they promise satisfaction for their customers.
The drycleaners had a sign in their store that promised "satisfaction guaranteed," and the plaintiff in the case said because of that he could demand almost anything from the drycleaners until he was satisfied. But the D.C. Superior Court judge ruled that his demands were unreasonable and that "satisfaction guaranteed" doesn't give the customer a blank check to demand anything they want. But that doesn't mean the promise is meaningless.
The judge used local law and Federal Trade Commission rules to craft a decision that, while not precedent setting, is instructive for businesses across the country. She held that if a reasonable person would agree that the business tried to satisfy the customer in good faith then they have met their pledge. And the FTC has held that a satisfaction guarantee "should be used only if the advertiser is willing to provide full refunds to customers when, for any reason, they return the merchandise."
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| Finding the right policy before disaster strikes |
A massive fire swept through South Lake Tahoe, Calif., a month ago destroying hundreds of buildings and leaving hundreds homeless. But a new tragedy is beginning to emerge as some homeowners are finding out too late that they didn't have enough insurance to cover the cost of rebuilding their homes.
Rebuilding a home or business after a major disaster is almost always more expensive than most policyholders would guess. This can be especially true for businesses that fail to anticipate the cost of being closed for an extended period of time. Also in the case of a large disaster, such as a wildfire, earthquake or hurricane, the cost of rebuilding could increase as the demand for construction workers and materials grows. Many business owners are tempted to buy a policy with lower premiums that might not cover a truly devastating loss. It is important to talk with your insurance representative to find out if you have a policy that fits your business.
Some things to keep in mind:
* Do you need business interruption insurance? This insurance protects a business from losses incurred while it is closed during and after a disaster.
* Do I have enough insurance? It is important to have a realistic estimate of what it would cost to rebuild your business. Skimping here could cost you later.
* Do I have the right kind of insurance? Talk to your insurance representative to make sure there are no holes in your coverage. You don't want to find out too late that you thought you were covered for something that you weren't.
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| A new call for rethinking terror insurance |
With a bill languishing in Congress that would provide federal protection for insurers in the event of another major terrorist attack, a new study shows the terrorism insurance system in the United States is inadequate and in need of major reform.
The RAND Corp., a nonpartisan think tank, says there are major holes in most policies and that too few businesses are buying the coverage. "America's economy does not have adequate financial protection from terrorist attacks," said Peter Chalk, a RAND terrorism expert and lead author of the report. "Protecting businesses against the economic impact of a terrorist attack should be part of a robust homeland security effort."
The report made several suggestions to improve the system, including:
* Expanding and improving the protections offered by the Terrorism Risk Insurance Act, instead of allowing the law to expire as scheduled in December.
* Requiring that terrorism insurance cover acts by domestic groups and attacks involving chemical, biological and nuclear weapons, something that few policies now cover.
* Creating a national board of governors that can assess the performance of TRIA or its successor.
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| Business briefs: Drugs and accidents |
Just because an employee has been drinking or doing drugs before he is injured in a workplace accident doesn't necessarily mean they are not entitled to workers' compensation benefits or disability payments. The Tennessee Supreme Court found that a man who had his hand crushed in a piece of equipment and later tested positive for marijuana was entitled to workers compensation and was awarded partial permanent disability. The court ruled that state law forced the employer to show that the drugs or alcohol caused the accident; just testing positive wasn't enough. Though this case hinged on Tennessee state law, many other states have similar laws.
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| Business briefs: Stock option danger |
It turns out compensating chief executive officers with stock options could be a recipe for disaster. A study that appeared recently in Organization Science showed that a high level of stock option compensation for CEOs significantly increased the likelihood of financial misrepresentation. Stock options offer a strong incentive to raise the stock price above the strike price; indeed, the stock price must rise above the strike price for executives to profit from their options. This incentive motivates some executives to misrepresent financial outcomes to raise the stock price, according to the study.
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| Business briefs: A hurricane center mutiny |
There has been something of a mutiny at the U.S. National Hurricane Center, the agency responsible for tracking and forecasting storms. Last month, the center's director, Bill Proenza, told several news outlets that an important satellite used by the center to monitor hurricanes was in danger of failing, something he said could hurt the center's ability to track and forecast hurricanes. But just days later, 23 of the center's employees, including seven hurricane forecasters, signed a letter urging the U.S. Department of Commerce to fire Proenza. They said he was dragging the center into the "political arena" and said he had exaggerated the threat of losing the satellite. Not long afterward, Proenza was replaced by his deputy.
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