The Name Game

name

What is the importance of the name on an insurance policy? It turns out there is plenty of importance because the coverage is going to respond to the person or entity listed as the named insured and any others that are included by definition in the contract – and nobody else. For instance, I find that many homeowner policies list just the husband as the named insured. Yes, the spouse and any relatives are included as insureds – but only if they live in the residence premises. What happens if there is a separation and the wife moves out? If she is not listed specifically on the policy, she has no coverage because she is no longer a resident. I am also finding that LLCs are becoming popular as an ownership mechanism for property – presumably to hide the identity of the owner from others who are not exactly friends. Some think that the LLC will provide a shield from liability. Not so fast on that one. There may be protection from creditors but not necessarily for a bodily injury incident. Many landlords think that by being added as an “additional insured” on their tenant’s policy, there is no need to carry insurance for themselves. The additional insured status will provide protection if the landlord is brought in on a suit that is due to the negligence of the tenant. However, if the claim is a result of something the landlord did or didn’t do, there is no coverage and therefore a separate policy for the owner/landlord is necessary. Then there is the unfortunate situation of the life insurance policy where the beneficiary was selected years ago – and not amended. So the proceeds of the policy go to the ex-wife or the long gone partner instead of the intended person or organization. Dale Carnegie said in “How to Win Friends and Influence People” that a person’s name is to that person the sweetest and most important sound in any language. In the insurance world the accuracy of a name is equally as sweet and important.

The author of this blog, Guy Hatfield CPCU CIC, can be reached at 203.256.5660.

“You’re Fired!”

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Being fired can be a traumatic experience for an employee – and also for the employer if there are repercussions from the event. The process of letting an employee go should be well thought out and the reason for termination documented as much as possible. Wrongful termination can be a costly backlash to a Firm and it is hard to defend against because the evidence is often subjective. The reason for a termination may be justified such as incompetence, bad work habits, or the person may no longer be needed. The retaliation from the employee could be in the form of alleged discrimination or even harassment. The charge of sexual harassment is most insidious since it is difficult to defend and disprove. Often these cases are settled even if the charge is bogus. Businesses can protect themselves from the allegation of wrongful termination through the purchase of Employment Practices liability Insurance. This coverage is especially important for Firms that primarily have clerical personnel and where turnover may be frequent. However, any business is vulnerable and should consider purchasing insurance. Many employment litigation cases are settled-often for high amounts and therefore the defense cost element of the insurance program is critical. My advice would be to have a competent labor attorney as an ongoing resource to help prevent any unpleasantness resulting from a firing. Early counseling on a prospective firing would be much less expensive than defending an actual employment lawsuit. Legal advice coupled with insurance protection will help take the fear out of saying “you’re fired”.

The author of this blog, Guy Hatfield CPCU CIC, can be reached at 203.256.5660.

Unwanted Interruption

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Most business owners grasp the concept of losing tangible assets through a calamity such as a fire, explosion, windstorm, water, and other unexpected and unwelcome events. Equally important is the protection and preparation for the amount of time lost from a business disruption. Purchasing “business interruption” is just as crucial as insuring buildings and personal property. During the restoration process it is essential that one keep their business going so it will still be there when all the repairs are completed. Factories and manufacturers have to wait out the process since their operations cannot be easily moved. They should purchase a limit sufficient to pay lost profits plus ongoing expenses for the maximum expected down time- to include payroll. Other businesses such as law offices and retail would purchase insurance to provide the “extra expense” to relocate either permanently or temporarily while still operating their businesses as the claim is being settled. Business Interruption for apartment houses would be lost rents. For schools it is tuition. Insurance can handle most of the financial set back but it is also wise to do some preliminary planning as well. Businesses should have a disaster plan that includes key contacts and vendors and emergency procedures. There are enterprises that are ready to provide make shift offices to a disaster victim. An effort should be made to establish mutual agreements with friendly competitors to assist if needed. Any business that fails to plan for a business interruption is planning to fail if they have one.

The author of this blog, Guy Hatfield CPCU CIC, can be reached at 203.256.5660.

The Price is Right

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On occasion I get complaints from my clients about the cost of homeowner insurance and they ask that I shop around for a better price. I tell them I will look into their premium but I also remind them that homeowner insurance policies are not a commodity. It is not like buying a bag of potatoes where the product is homogeneous and easily discernible.

There are many homeowner insurance companies with varying degrees of premium. if you look long enough, you will find one that is a comparative bargain -but at what price?, pardon the pun. What is behind that piece of paper that seemingly is available at an attractive cost? Are there hidden exclusions and sub limits of coverage? Is the carrier experienced in homeowner claims? Do they get a good grade from consumer reporting agencies? Will they let you use a contractor of your choosing in the event of a major fire? Will the replacement materials allowed be the same as what was lost or ones of “similar” quality?

Most people will concede that their home is their most valuable asset. it should be protected by an insurance company that is prepared to restore it properly. The premium charged should be a fair one. If you are insured by an insurance carrier known for their reliability, fairness, and attention to detail in settling claims, the price that you will pay for the policy will be the “right price”.

The author of this blog, Guy Hatfield CPCU CIC, can be reached at 203.256.5660.

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“Selling vs. Solving”

riskMany in our industry refer to themselves as ”Insurance Salespeople” or “Insurance Brokers” as if the objective of their efforts is to sell an insurance policy and collect a commission. Yes, selling a policy is necessary to make a living, but the real objective for the insurance professional is to identify a problem or exposure for the client and solve it through an appropriate insurance product, risk management process, or through a non-insurance mechanism. The focus should be on design and implementation based on need and perceived risk – where the solution to a problem is the implementation of strategies and techniques which may or may not include insurance. All too often it is the peddling of an insurance policy that trumps a well thought out process of uncovering and addressing what really needs to be protected.

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Speaking of Insurance

Board of Directors Insurance

If you are a director for a profit or a not for profit venture, make sure the organization is providing Directors and Officers D & O liability insurance for your protection. If the company has general liability insurance, coverage will extend to the directors for bodily injury and property damage incidents. However, if the board of directors is sued for a mistake or wrongful act, a separate D & O policy is necessary.

There is some immunity for serving on a charitable Board as long as the mistake was made in “good faith”. Your personal Umbrella Liability policy will provide coverage for bodily injury or property damage for your service as a Board member for a charitable organization. However, coverage will not extend to mistakes or errors that result in financial harm to other parties.

Even if the alleged mistake is erroneous, defense costs could be considerable and a large part of the value of Directors & Officers liability policies is the legal reimbursement provided.

The author of this blog, Guy Hatfield CPCU CIC, can be reached at 203.256.5660.

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Commercial Lease

commercial lease

Proper insurance can take the sting out of most claims, but, if you experience a major loss, your prior agreements with other parties may hinder the recovery process or reveal gaps in insurance.

Take, for instance, that commercial lease you quickly signed but never got around to actually reading.  All leases are not standard and many contain clauses that obligate the lessee to strict and sometimes unreasonable demands from the Landlord.  You are responsible for the space you rent and your responsibilities are contained in the lease agreements. Do you have to include the Landlord as additional insured under your insurance policy? If so, for what limits? Does the agreement specify that you have to replace plate glass, doors, outside siding, etc. that are associated with your space? Does your insurance include coverage for this?

If you are the only tenant, don’t be surprised if you are instructed to insure the entire structure. The tenant usually has to insure that portion of the building occupied by the business. For example, if you rent 20% of the building and the building costs $500,000 to replace, the tenant (lessee) has to insure their space for $100,000 – just as if you owned it. This is called “fire legal liability” in the insurance world. Your liability policy will apply to the rest of the building if you are responsible for damage to it but will not pay for the space you occupy.

The only way around this is to introduce a clause in the lease referred to as a “Waiver of Subrogation”.  The waiver is an agreement between Landlord and tenant that each is responsible for their respective interests. It is a “quid pro quo” arrangement which may make fire legal coverage unnecessary (ask your attorney about this).

Of critical importance is the procedure after a loss. Who pays for the reconstruction of tenant improvements? Is the lease terminated if restoration is not accomplished by a certain date? Does the Landlord have the right to approve every thing that is done in the settlement of your loss?

Make sure you understand your obligation as lessee before you sign a lease. Have your attorney who specializes in lease negotiations look it over. Ask your insurance professional to comment on it also.

The author of this blog, Guy Hatfield CPCU CIC, can be reached at 203.256.5660.

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So What’s Your Plan?

disaster plan

Insurance is a very important ingredient in the recipe to keep a business going after a disaster strikes. Yet, insurance alone will not guarantee that your Company will retain its customer base during and after the recovery period. Therefore, it is important to develop a business disaster plan that will focus on two strategies – to get back into business as soon as possible and, secondly, to keep your clients happy during the down period.

Many services and retail businesses have the advantage of relocating quickly and returning as a functional operation in a short period of time. Proper insurance coverage will pay the “extra expense” to set up shop and promptly replenish lost inventory and equipment.

Most manufacturers, however, cannot relocate and must stay put in a nonproductive mode until the facility is repaired.

A good disaster plan that is forged before a loss occurs can help your business continue to operate even under difficult circumstances. Some techniques that should be considered are as follows:

  1. Make a deal with a friendly competitor to manufacture your product or service your customers during the recovery period. Your Company must be prepared to do the same if your colleague suffers a loss.
  2. Keep backup records and computer discs away from your headquarters so that they can be accessed easily and utilized if the originals are destroyed.
  3. Store a few months inventory of goods at another location so that your customers will continue to receive your goods even if you have no manufacturing capability.
  4. Seek out alternative suppliers beforehand so you don’t have to scramble if your major supplier suffers a loss of their own.

A copy of the disaster plan should be given to each manager so that he or she can refer to a specific emergency action plan. The manual should contain the names, addresses  (including email), phone and fax numbers of key vendors, support personnel, and customers. Some larger Firms have gone so far as to have a duplicate second office already set up in case of an emergency.

You will find that for the most part the public will be supportive and sympathetic regarding a Firm’s setback because of a loss. Nevertheless that support will wane unless it is perceived that you are determined to get back into business – fast!

The author of this blog, Guy Hatfield CPCU CIC, can be reached at 203.256.5660.

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Special Insurance Needed for Domestic Employees

Worker's Compensation

Lately, I have been finding that many households are hiring part-time and full-time employees to help manage the complexities of modern-day lifestyles. Mothers’ helpers are becoming commonplace since it is so routine to have two breadwinners in the family. It is also common to see private nurses and home health aides hired to take care of an elderly relative.

These caretakers are your employees and the latter are entitled to state statutory medical and disability benefits. If someone you hire gets hurt on the job, you will be responsible for providing these benefits~regardless of the circumstances of the accidents.

Because of this, it is imperative that as an “employer” you purchase a Worker’s Compensation insurance policy which will respond to these mandated benefits. What happens if an employee gets hurt and you don’t have a Worker’s Compensation policy?

Well, be prepared to pay out of your pocket the full medical costs, lost wages and possible disability settlement. This could cripple a family financially. It doesn’t matter if your employee falls down the stairs because they are clumsy or gets hurt in an auto accident while doing an errand. You will probably be on the hook to provide benefits.

The cost of these policies vary depending on the type of work provided and the weekly hours on the job. If you hire a couple of college kids to paint your house, the policy will be expensive because of the greater likelihood of injury. The rate for a housekeeper will be much less. Don’t be fooled by terms, “I’m fully insured” or “I’m an independent contractor.” In a court of law you may be held responsible if they are working for you. If a person performing work for you has the characteristics of an employee, he or she will most likely be declared an employee if there is a lawsuit over an injury. The homeowner policy specifically excludes bodily injury to anyone who is eligible to receive Worker’s Compensation.

Also, if you run a business, anyone working for you is entitled to benefits for on the job injury~regardless of how many hours they spend on the job.

For more information of this tricky area of insurance, please contact me, Guy Hatfield at 203.256.5660. I’d be happy to answer all your questions and clarify anything that seems confusing.

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An Umbrella for Stormy Weather

umbrella policy

All of us have the potential of experiencing “stormy weather” when it comes to insurance claims. Even careful drivers could find themselves negligent in a car accident where bodily injury claims reach staggering amounts. Although severe accidents are rare, it is advisable to “load up’ on insurance coverage for our protection against liability claims from others you may injure. A good way to do this is to purchase what is referred to as an “umbrella” policy. Many think that the term “umbrella” is some mysterious all-encompassing insurance contract that will cover everything imaginable. The umbrella is merely a policy that provides excess liability insurance. It is additional insurance beyond what is provided by other policies you may have. For instance, if you have an auto policy that has $300,000 of liability limits and you purchase an umbrella for $1,000,000, your total protection is $1,300,000. The umbrella will provide excess liability over a variety of insurable interests such as auto, home and investment (non business) properties, and boats. The cost of an umbrella is surprisingly low. The premium for a $1,000,000 contract providing excess liability over two cars and a home is approximately $180 a year. Personal insurance umbrella limits are available up to $10,000,000 usually.

Umbrellas are frequently used in business insurance as well. Limits could exceed $100,000,000 for some industries where there is a possibility of catastrophic loss. Movie theatres and other businesses where a large number of people congregate in a confined space purchase high limits.

Umbrellas normally provide the same coverage found in the underlying policy and some provide expanded coverage such as automobile liability while driving in other countries.

Ask your insurance agent to design an umbrella program that is right for you.

For further information about the personal and commercial umbrella and other insurance matters contact Guy Hatfield at 203.256.5660.

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