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- Consider an independent safety audit. An objective look at your company's safety program can point out weaknesses and ultimately save money. Sources include independent consultants, some insurance agencies or brokerages and some property or workers compensation insurers. Consult your insurance advisor. Another source is the National Safety Council, www.nsc.org.
- Do you give advice to any customer or other person where you are looked to as an expert? You may have a professional liability (errors and omissions) exposure. Discuss the activity with your insurance representative so that it can be properly insured.
- Do you inform your insurance representative of changes in your business - new locations, addition of expensive new equipment? A quick phone call can save you from a potentially uninsured loss.
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| Liquor liability and your holiday party |
Dram Shop liability laws exist in many states. These laws hold responsible those who serve alcohol to an intoxicated or under age customer for damage or injury. Injured parties, including accident victims, may bring suit against the party who served the alcohol. Under some circumstances, criminal charges could apply.
The laws were intended to apply to taverns and others serving alcohol commercially. However, social hosts also have some exposure. 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.
Social hosts usually have coverage under their general liability policy if 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 fundraiser and arranges liquor sales as an additional way of raising money.
If your company is planning a holiday party, give some thought to loss control and liability insurance. If you serve alcohol at a function, a professional bartender may be in order. Most are trained to recognize signs of pending intoxication and tactfully restrict consumption. Arranging transportation for those who may need help getting home is wise. Appropriate liability insurance coverage is a must.
When in doubt about the type of coverage needed, 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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Disasters seem to have become a way of life. Several years of overactive hurricane seasons, terrorist attacks, wildfires, and other calamities have conditioned many to expect catastrophic events. Perhaps one good thing that may come out of these catastrophes is raising awareness of the need to prepare and provoking thought of how you would react to a large loss. Here are some tips:
- Inventory. Maintain good inventory records. After a loss, the insurer may require an inventory of both damaged and undamaged property.
- Prompt notice. Your policy requires that you notify the insurer promptly, or as soon as practicable, when a loss occurs. Be familiar with the provisions and discuss with your insurance professional how the process should work.
- Professional help. Your insurance professional and your insurer can help when a large loss occurs, but remember that in a disaster both may be short on resources. Know whom to contact at each organization. Enlist their help in organizing your claim, finding contractors or emergency services, complying with policy conditions, and generally getting back to normal.
- Property Protection. Have at least a basic strategy for preserving the undamaged property. If a loss occurs, separate the damaged from the undamaged. Have a means to provide security as looting, vandalism and theft seem to follow calamities.
- Proof of loss. The policy likely will require a sworn "proof of loss." Read your policy provisions beforehand. When a loss occurs, submit carefully prepared documentation. Although you may be able to amend the proof of loss later, some courts have held that once the insurer accepts the proof and gets a release, its obligation is discharged. If you think you are going to run out of the time specified in the policy for submitting proof of loss, ask for an extension in writing and get a response in writing.
- Public adjuster. Only if you have done everything right and are having problems coming to an agreement, you may consider a public adjuster. A public adjuster works with the insured to establish the extent of loss. However, many insurers may view retaining a public adjuster as an adversarial move and raise defenses that might otherwise not be at issue. Consult with your insurance professional on this option if you feel your claim is not being handled to your satisfaction. Consider in your planning that in a catastrophe, public adjusters also are likely to be in high demand.
These are a few of the items to consider in your pre-loss and post-loss planning. Your insurance professional can help you with strategizing and in dealing with a disaster should that ever become necessary.
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| Ways to save on auto insurance |
In recent years, auto insurance has become increasingly expensive. Many reasons can be cited for the high cost. What a business wants to know is how to lower the premium. Here are several ideas:
- Deductibles and self-insured retentions. Deductibles for physical damage and for liability are available. Insurers often give sizeable discounts for higher deductibles. Ask for quotes at various deductible levels to determine the best price. For larger fleets, it may be possible to arrange "excess insurance" that starts only after a sizeable loss level occurs, such as $100,000.
- If State law permits, consider dropping medical payments and uninsured motorist coverages. Medical payments and uninsured motorists may duplicate workers compensation, health insurance and liability insurance. Some organizations keep these coverages for goodwill purposes, especially if vehicles transport persons who are not employees.
- Narrower scope of physical damage coverage. Auto policies contain a form of coverage called "comprehensive" that truly is that. It covers almost anything that might damage the vehicle, such as paint damage caused by a leaking container on a truck your vehicle is following. The coverage is also expensive. An alternative is so-called "specified cause of loss" coverage, also known as "named perils coverage" which covers most of the losses a vehicle is likely to suffer such as:
- Fire
- Windstorm
- Hail
- Theft
- Earthquake
- Lightning
- Explosion
- Flood
- Vandalism
- Sinking, burning, collision or derailment of a conveyance transporting the covered auto
There are perils that may be important to you such as damage to windshields that specified perils will not cover. Compare the difference in coverage and price and choose based on your needs.
- Self-insuring physical damage. Some organizations self-insure all or part of the physical damage exposure. If you own newer, more expensive vehicles and some older vehicles, you may be able to limit physical damage coverage to scheduled vehicles past a certain model year or replacement value. Another option is to purchase comprehensive coverage only and forego collision coverage.
One problem with self-insuring physical damage is that while loss of a single vehicle may not be material to the company's finances, parking the vehicles in a single location could create a potential catastrophe if a single event could damage the fleet. You can purchase coverage that applies only at the location where the vehicles are parked. This approach covers the catastrophic exposure.
There are many ways to save on auto costs, especially if your company can afford to take a little risk. Consult your insurance professional for guidance.
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The Sarbanes-Oxley ("SOX") act of 2002 has changed the landscape for whistleblower retaliation claims, according to data provided by the U.S. Labor Department. These are claims in which an employee alleges retaliation because of "whistleblowing" activity. Section 806 of the act provides legal protection for employees who report suspected fraud or activity against shareholder interests. In 2002, only one such complaint was filed. In 2003 there were 81 claims. In 2004, 180 claims were filed, and in the first nine and half months of 2005, 229 claims have been filed.
Of the total number of claims from passage of the act through September 12 of this year, approximately 85% have either been withdrawn or dismissed. Apparently relatively few have merit. However, defending the cases is costly. In addition to the fact that employment-related cases tend to be expensive to defend because of the extensive discovery and investigation required, an employer may be required to reinstate the employee, pay back wages with interest and pay special damages. Since the cases that get to litigation can be heard in federal court, litigation costs can be extremely high.
Another problem for the defense is that SOX requires a higher standard of evidence, called "clear and convincing" than required by other federal anti-discrimination laws. If the employer fails to produce such evidence, it may be required to reinstate the employee even before resolution of the case.
Experts expect the rate of whistleblower claims and lawsuits to continue to accelerate as the outcomes become better known. Even those organizations that are not publicly traded and therefore not subject to SOX have experienced side effects of the legislation. The same may be true when it comes to whistleblower claims, which are possible under other state laws in addition to SOX.
Good risk management practices to control this exposure include:
- Setting up formal complaint procedures for employees to report alleged fraud
- Establishing policies prohibiting retaliation against employees
- Employee training programs to explain procedures
- Documentation of employee performance (to show "clear and convincing" evidence that a termination is justified and not "retaliation")
Insurance protection may be available to cover such claims under either the corporate directors and officers liability policy or a separate employment practices liability policy. Consult with your insurance professional if you have questions about this coverage.
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Insurers use different classifications for different types of businesses so that companies in less risky fields will pay less premium and vice versa. A little known (outside of the insurance industry) classification for an insured under a general liability policy is the so-called "lessor's risk only," or "LRO." The rate for this classification is far less than the standard rate for similar occupancy, such as office or mercantile.
The LRO rate is usually applicable, however, only if the insured occupies less than a certain portion of the building, such as 75%. Whatever portion of the building that the owner (lessor) occupies is classified at the usual rate for that occupancy. The portion occupied by tenants is rated at the LRO rate. That rate can be as low as 20% of the cost of the regular rate. Not all insurers offer this rate at all times.
Insurers may be willing to provide such significant rate reductions because they understand that much of the liability risk in the leased portion of the property is picked up by the tenant's insurers. As a standard practice, a lessor should require a hold harmless or indemnity agreement from the tenant, evidence of liability insurance, and inclusion on the tenant's general liability policy as an additional insured. Some insurers may require these things as a condition of granting the lower LRO rate.
There are different ways this rating structure might apply depending on how your business is structured, type of business, number of locations, etc. If the lessor's risk only rate can apply to your business, the savings could be substantial.
One word of caution is in order, however. Some insurers have attempted to limit the scope of coverage of a liability insurance policy by claiming that a classification used to set premium limits coverage to the activities that are described in the classification. In one such case the classification used was LRO. The lawsuit came from former business partners and others. The insurer contended that the claim arose out of activities not related to lessors risk, which was true, but somehow that meant no coverage. The trial court agreed, but was reversed on appeal.
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