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Category: Commercial Insurance

Commercial Insurance :: Legal Action Against Your Professionalism? Here are Three Real-Life Cases

Malpractice and negligence are probably two of the most notorious words you never want to hear in the same sentence as your name, your profession and your business.
However frightening it may be, it does happen every day – even to some of the best professionals in their fields. Most never see it coming, and many are not prepared.

What will you do if it happens to you?

Here are three real-life cases that you may be able to relate to.

 

Case #1: Tax Shelter Skelter

A couple seeking a tax shelter hired an accounting firm that provided income tax and investment services. The firm enabled the husband and wife to invest in real estate limited partnerships as tax shelters between 1981 and 1985.

After some time, the couple sued the accounting firm for allegedly placing them in inappropriate tax shelters which caused them about $370,000 in investment losses. The firm, meanwhile, reportedly earned $800,000 in commissions.

The couple hired a CPA who testified that the accounting firm placed the plaintiffs below the acceptable standard of care – an accusation contested by the firm’s CPA, who said that the tax shelters provided were appropriate based on the couple’s income.

While the case has not been closed due to unresolved issues, the jury found both parties negligent, with the accounting firm bearing 60 percent of the negligence. The couple received $93,060 with reductions.

 
Case #2: Opening the Lawsuit Floodgates

Two homeowners filed suit against a school district, complaining that the expansion of a nearby high school directed water from storms toward their properties and caused flooding and erosion. They testified that they filed complaints even while the construction was still ongoing, but were told by the school district that the problem will be solved by a retention basin.

The defendant, Rose Tree Media School District, added the responsible construction company and project architect as defendants. The construction company was able to settle the plaintiffs’ $20,000 claims even before the trial, while the school district argued that it only depended on the architect’s expertise as to the design of the school expansion.

It was revealed that the third-party architect advised the school district to install an underground drainage pipe to solve the flooding problem, but the school district said that the project manager of the architect said that it was no longer needed.

The architect was found 75 percent negligent, while the jury found the school district 25 percent negligent. The first plaintiff who sought claims for damages to her home was awarded $27,366 – and both plaintiffs received $71,725 for the cost of the installation of an underground drainage pipe.

 

Case #3: The Beautician and a Beast of a Lawsuit

A 36-year-old female went into a beauty salon for a perm and went home with multiple chemical burn injuries and a bald patch.

The customer accused the beauty salon of being negligent in its application of hot and cold wave permanent solutions to her hair. She said that the cold wave solution was used on her without protective cotton banding, causing it to drip down her face. She allegedly complained up to four times during the procedure until one of the salon’s employees finally noticed that the customer was already suffering from a chemical burn.

The plaintiff reported to have continued to develop burn marks and blisters even after she went home. She later filed suit against the beauty salon for damages including pain and suffering resulting from the burn injuries, and temporary and permanent hair loss.

With the help of an expert testimony of a beauty stylist, the plaintiff was able to present that the beauty salon was negligent by failing to use a cotton band around her head and failing to use a neutralizing solution on the plaintiff’s face to prevent further burning.

The beauty salon also presented an expert physician who attested that the permanent wave solution used did not have any chemicals that could cause permanent hair loss. The jury, however, found that the case was presented in favor of the plaintiff.

 

Protecting Yourself with Personal Liability Insurance

Among the biggest mistakes businesses and professionals make is overlooking professional liability insurance – also known as errors & omissions or malpractice coverage – as their best protection against negligence and malpractice claims.

 

 

A common misconception is that
general liability coverage is an adequate defense
for individuals and companies rendering
professional advice or services.

 

 

General liability insurance may cover claims from property damage and common accidents and injuries such as slips and falls, but professional liability insurance extends the policyholder’s protection against claims for negligence, misrepresentation, inaccurate advice and violation of good faith and fair dealing.

Professional liability insurance may also cover the defense costs, but not criminal prosecution. It is required in certain areas and practices such as medicine and law, yet it is still often disregarded by other professionals – for reasons ranging from a misguided attempt at lowering their insurance costs to the delusion that they will never face any malpractice or negligence case.

 

Overlooking the necessity of
professional liability insurance means
having to shoulder all costs and responsibilities
such as hiring an attorney, and paying out
settlements and court judgments.
Without professional liability insurance,
these fees may easily amount to hundreds of thousands –
if not millions – of dollars.

With professional liability insurance, you will be backed by your insurance company, which may not only have the best attorneys, but the expertise and experience to know which attorneys are best suited for a particular case. More importantly, insurance companies have the capability to settle claims at a lower cost, manage legal fees and create savings that are otherwise spent by those who do not have professional liability insurance.

The best defense you can have for unforeseen and possibly irreversible damages such as the above real-life cases is a solid insurance policy with the added protection of professional liability coverage.

 

Contact G.R. Reid Insurance to discuss what options best apply to you and your profession.

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Commercial Insurance :: What Every Employer Needs to Know About Workers’ Compensation

Employers must buy insurance to cover workers’ compensation claims. This type of insurance provides funding for injured employees, and employers also receive protection from lawsuits stemming from a worker’s injuries. State laws govern workers’ compensation, and every state has a slightly different set of rules and payment rates. To learn about a specific state’s workers’ compensation laws, it is best to contact an agent for more details. The United States Department of Labor also provides information on its official site.

What Is Covered Under Workers’ Compensation
Only work-related illnesses and injuries are covered by workers’ compensation. However, this does not mean the injury has to happen in the workplace. If an employee is injured while out driving a company car off the premises of the workplace, the injuries will be covered. Both sudden and gradual injuries are covered if they are work related. An example of a sudden injury is an employee falling off of a ladder, and a gradual injury might be a foot condition that develops from walking or standing on a concrete floor every day for several years.

What Workers’ Compensation Does Not Cover
Some problems that happen in the workplace are not covered. Some of the following situations are examples:

  • Self-inflicted injuries
  • Injuries from drug or alcohol use
  • Injuries resulting from horseplay
  • Injuries following termination or a layoff
  • Injuries sustained from fighting
  • Felony-related injuries
  • Independent contractor injuries
  • Injuries sustained while off duty but on workplace premises

When Employees Can Sue Employers
Employers are not protected from employee lawsuits in all situations. When an employee’s injuries are due to the employer’s intentional actions or there is no workers’ compensation insurance, the employee is allowed to sue the employer in court for a wide range of damages. In some cases, employees may also be able to sue third parties that are involved and have caused damages.

Workers’ Compensation Benefits
There are several provisions made possible by workers’ compensation. These include the following:

  • Replacement income when employees are off work
  • Vocational rehabilitation training or placement assistance
  • Medical expense payments for physician appointments, drugs and surgeries

If an employee is unable to work temporarily, that individual usually receives about 66 percent of his or her income as disability payments. There is a fixed ceiling amount for this percentage, and the benefits are available to people who are unable to do the same type of work that was done prior to the disability’s beginning. Some people may be able to perform other types of work, but there are people who are unable to work at all. If this is the case, such a person will usually receive permanent disability payments.

Workers’ Compensation And Employer Responsibilities
Under the workers’ compensation system, employers have several obligations. When requirements are not met, employers may face fines. In addition to this, employees may be able to sue such employers.

Carrying Workers’ Compensation Insurance
If a business does not have this type of coverage, the owner is vulnerable to lawsuits that may be filed by injured workers. In addition to carrying insurance, employers should post notices and provide employees with information about their legal rights. This should be done on a regular basis. Any posted notices should be placed in areas that employees use frequently during working hours. The literature should include the following bits of information:

  • The name of the workers’ compensation insurance carrier
  • A self-insurance statement for employers who have their own insurance
  • The name of the entity responsible for claims adjustments
  • A statement that workers have the right to change doctors
  • A statement that injured workers have the right to medical treatment
  • Details about workers’ compensation benefits

When hiring new workers, employers should notify them of all these points prior to starting work. Within 24 hours of an injury happening on the job, employers must provide workers with claim forms. They must also provide written information again about that worker’s rights under the insurance plan and state laws. To learn more about workers’ compensation insurance and how it works, contact us to schedule an appointment.

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Commercial Insurance :: What The Weather Experts Are Doing To Prepare For A Worsening Hurricane Season

HurricaneWeather experts predicted a very early and active hurricane season for 2013. The hurricane season lasts for six months and starts on the first day of June. Experts said the chance of having up to 20 storms during those months was about 70 percent. Of these storms, they predicted that up to 11 could become hurricanes, which means the wind gusts would be higher than 74 mph. They also predicted that as many as six of these storms could be major hurricanes. To be considered a major hurricane, a storm must have wind gusts higher than 111 mph. The seasonal average at the time of their prediction was three major hurricanes, six hurricanes and 12 storms.

After several devastating hurricanes hitting the United States
during the past decade, many people become increasingly nervous
when hurricane season arrives each year.

Experts are committed to forecasting these storms as soon as possible to save more lives and minimize damages. It is important for concerned citizens to remember that tropical storms and hurricanes are not exclusive to the coastal areas. As these storms move inland, they bring heavy rainfall, flooding, strong winds and even tornadoes with them.

There are three climate factors affecting how hurricanes form in the Atlantic. These include the following:

  • Water temperatures that are warmer than average in the Caribbean Sea and the Atlantic Ocean.
  • Continual atmospheric climate patterns that are part of African monsoons. 
  • No expected development of El Niño to suppress the formation of hurricanes.

Experts say oceanic and atmospheric conditions in the basin of the Atlantic will create stronger hurricanes in larger numbers. These include wind patterns from Africa, warmer water in the Atlantic Ocean and weaker wind shear. Experts are working on ways to improve their storm tracking abilities.

It’s wise to review your insurance coverage and ascertain
that your property, equipment, personal and business operations
are properly covered against loss and failure.

One of the new developments introduced in early 2013 was an improved forecast model. The National Hurricane Center’s communicating procedures and data gathering techniques were also improved. Experts have plans to add a supercomputer that is capable of running upgraded research to depict the structures of storms and forecast their intensity more precisely.

Additional improvements include a Doppler radar that will provide real-time transmissions to aircraft. This will make it easier for forecasters to analyze storms that are moving or developing rapidly. It will help them improve their model forecasts by up to 15 percent. The National Weather Service also made some changes to keep warnings in effect or to be reissued for stronger storms that are changing. The flexibility allows them to provide a continuous stream of warning information to the public.

 

Be prepared for storm and Hurricane season. Be sure to have safety, evacuation and emergency preparedness plans in place. It’s wise to review your insurance coverage and ascertain that your property, equipment, personal and business operations are properly covered against loss and failure. Contact G.R. Reid Insurance Services to review your existing, or speak about new, insurance coverage. 

Contact G.R. Reid to discuss your Information Technology backup support needs. In the event of a major hurricane, be prepared with appropriate computer backup systems to avoid loss of critical digital files and intellectual property. Our I/T Services experts are available to assist you.

 

 

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Commercial Insurance :: How Much Business Liability Do You Need?

There is no set formula regarding how much liability a business needs. However, the more coverage you have, the more bulletproof your business becomes.

 

If you are running a very successful business, you will probably want minimal disruption if an incident occurs in which you may be seen as liable. Thus, the more coverage you have, the greater the likelihood that your business will not be affected by such an incident. Moreover, if you don’t have enough coverage, the incident may result in hundreds of thousands-if not millions-of dollars costing you out of pocket.

Hitting Your Limits
The problem with not having enough liability occurs when you are faced with a legal situation where the injured party or parties don’t want to settle for the coverage amount you have purchased. For example, if you have a $2 million liability policy-and the combined parties will not settle for anything less than $4 million-then you have a problem on your hands. You can pay the difference out of pocket or be forced to go to court. If you go to court and your insurance company agrees to pay your limit to the other parties, then you are probably going to be on your own to cover your legal costs at this point. After all, the insurance company has agreed to pay its maximum obligation under your policy. Of course, if you don’t have the funds, bankruptcy is an option. But do you really want to deal with problems and the disruptions to your business that can result from bankruptcy? Also, bankruptcy may not be an option if you don’t qualify for it under bankruptcy laws.

Multiple Plaintiffs Are Not Uncommon
Often times when a liability occurs, it affects more than one person. Take the recent explosion that occurred outside of Waco, Texas. About 15 people died and over 100 were injured, many seriously. While your business may not have the risk potential of a fertilizer plant, there are always potential dangers that can affect more than one person. Your liability limit is not in any way a per-person limit. It’s a flat limit-no matter how many people are injured. The bottom line is this: the numbers can add up when a number of people are injured. Insurance companies will then pro-rate and split up the limits between all injured parties. Once the insurance runs out, it’s up to you to hire an attorney to settle all remaining cases.

Understanding the Numbers
In most cases, you will see two numbers on your liability policy. The first is your occurrence limit and the second is the annual aggregate. Occurrence refers to any single accident/incident and to subsequent related incidents. For example, in the Texas fertilizer plant incident, the blast constituted an occurrence. So any death, injury or property damage from that accident is only covered by this occurrence limit. The annual aggregate limit is if there are multiple and unrelated accidents or incidents. For this reason, the occurrence limit is extremely important and is the number you should look at as your coverage amount.

The Umbrella Solution
There are a number of ways you can purchase higher limits. Some companies will allow you to increase your liability limits on each of your policies. However, you may be capped at a certain limit, depending on the policy type, the size of the policy and the company. The best solution is to purchase an umbrella policy. An umbrella policy will extend the limits on all or most of your policies. For example, if you have a $2 million occurrence limit, the coverage amount in an umbrella policy will pick up any coverage thereafter. Umbrellas can be purchased in increments of a million dollars. It’s not unusual for a business to purchase $10 million or more of this excess coverage.

Deciding on Your Amount
There are a few good ways to determine how much coverage you need. A discussion with your insurance agent about your business, your risks and your exposure is probably a great starting point. It may also be smart to have this discussion with your attorney or an attorney who handles liability cases. You can also do research on online legal sites to review incidents that have occurred in businesses similar to your own. However, the problem here is that you will only see the cases that went to court, since out-of-court settlements are bound by a gag order.

Liability limits should be taken seriously because your business is your livelihood. Any liability incidents are not pleasant, especially when they put your business or your assets at stake. Robust insurance policies help neutralize these incidents and are crucial to the ongoing success of a business, especially when an undesirable incident occurs.

 

For more information on Commercial Insurance Coverage, contact G.R. Reid Insurance Services.

 

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Commercial Insurance News :: Small Businesses Should Protect Against Data Breaches

What Small Businesses Need to Know to Protect Themselves from Data Breaches 

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According to recent research, almost 50 percent of small businesses in the United States have experienced one or more data breaches. Slightly more than 30 percent of businesses told affected individuals that their personal information had been compromised. Data thieves often target smaller businesses. This is because these companies often do not know how to respond when client information is stolen. By not acting promptly, these companies can harm their own reputations and risk legal penalties in some cases.

A survey of small businesses in the country found that more than 50 percent of respondents had experienced at least one electronic data breach. A slightly smaller percentage experienced multiple data breaches. Although 46 states require companies to notify clients when information is compromised, slightly more than 30 percent actually notified the affected individuals. The main causes of these breaches were contractor or employee errors and procedural mistakes. In addition to this, stolen or lost smart phones, tablets, laptops and storage media were also to blame.

When data is outsourced, sensitive details are more likely to be compromised. Seventy percent of respondents agreed with this statement, but 62 percent of the surveyed companies did not have contracts that required the costs of data breaches to be covered by responsible third parties. About 70 percent of small business owners responded that they would buy insurance to pay for the costs of breaches if necessary. The study showed that more than 80 percent of these companies shared employee and customer records with third parties. Some examples include companies specializing in benefits, payroll, billing and information technology. Each company was asked which type of information would hurt business the most if it was leaked, and 70 percent said that stolen personally identifiable information of clients would be the most detrimental type of data breach. The companies felt that the personal information of customers would be even more harmful to lose in a breach than their own sensitive data.

Data breaches are serious issues, but the statistics show that most companies do not take the threat seriously enough. With cyber-crimes on the rise, it is important for all small businesses to take action. Insurance can be purchased to offset the costs of data breaches. Although preventative steps should be taken wherever possible, insurance is a smart idea. Being prepared is just as important as taking steps to prevent breaches in the first place.

To learn more about these options, contact G.R. Reid Insurance Services.

 

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Commercial Insurance :: Understanding Premium Audits and Why Compliance Is Important

InsurancePolicyimage
Many commercial insurance policies are subject to an audit since the policy premium is based upon total revenue, payroll or some other criteria that the insurer sets as a basis for pricing. Insurance companies want to collect the appropriate amount of premium for the risks, and that is why these policies are based upon quantitative measures of your business. A business that has higher numbers has a much greater risk valuation for losses, while another one with less volume in turn has a lower risk valuation.

When applying for insurance, it is very important
to review your records and disclose
the most accurate current information about your business.

It is also vital to review the premium basis on the application and quote to make sure that the correct and most up-to-date information has been reported. You should always ask what is the basis for the premium and if that amount is subject to audit. This will help you be better prepared for an audit that will be coming at the end of the term or audit period.

At the conclusion of the audit term, the insurance company will either ask you for your actual figures, send out an auditor or both. It is extremely important to provide the actual numbers and not an estimate as insurance companies take this process very seriously.  They will take things a step further if they feel they are not getting the correct numbers.  Once you have provided the updated figures and they have been verified, you will get a statement showing either a premium balance due or a credit. A balance due is actually a positive thing as it means that your business did better than expected. However if your business did not perform so well, you will get a refund. This adjustment cycle repeats itself for each audit period, so if your business keeps growing, you may get an additional bill once each audit has been completed.

Workers Compensation Insurance
Workers comp policies are always subject to a payroll audit as these policies are strictly based on payroll numbers. This audit can be easily performed by accessing information in your payroll reports. It can be done on a monthly, quarterly or annual basis, depending on the size of your payroll. The insurance company will work with you to make sure this process goes as smoothly as possible.  Many companies have automated this process and reporting is then easier than ever.

Commercial Liability Coverage
Many commercial liability policies are subject to an audit.  Premiums are usually based on sales levels; however, some can be based on other criteria such as payroll or square footage.  In the cases of sales and payroll, these audits are usually performed at the end of the policy period. In the case of square footage, they are usually done within the first few months of the policy period, but may also be verified in future years.  This is especially true if additional or adjacent locations have been added.

Other Types of Policy Audits
Cargo policies are an example of another type that can be audited. The premium is usually based on shipping a certain volume or valuation of goods.  However, if greater or lesser amounts have been shipped, this will be audited at the end of the policy term. There are also other types of policy that may be audited. That is why it’s so important to understand the premium basis when securing a policy.

While a policy audit may be similar to a tax audit in some ways, their purposes are very different. The policy audit is done strictly to measure the business risk factors as determined by actuaries. A tax audit is done to make sure income taxes rules have been followed and tax levels are set by politics, not by actuaries. Insurance premiums also tend to increase at a regressive rate as the quantity numbers increase, meaning the burden decreases with higher numbers. Taxes, on the other hand, are progressive in most cases, meaning the burden increases with higher numbers.

If you disagree with the audit, it’s best to contact your agent to discuss your concerns. Your agent can work on your behalf to help you provide supporting documentation that will go back to the auditor for further review. That is why it’s so important that you are absolutely certain of any errors before sending these documents. If insurance companies did not have the ability to audit, rates would probably be higher since they would have to make gross assumptions about your business that may not be correct. Then businesses of all sizes would have the same or similar premiums and in turn, smaller businesses would often be subsidizing bigger businesses. That is why the premium audit process is critical.

 

G.R. Reid Insurance Services offers a wide range of commercial insurance, personal insurance, employee benefit, and risk management services. Our highly trained professional staff will afford you a unique level of personal service and the expertise to identify, evaluate and solve risk and insurance problems. Contact us for more information.

 

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Commercial Insurance :: Can Your Business Survive an Interruption?

Every year, after nearly every natural disaster, thousands of small businesses face a true acid test: Can their business survive an interruption?

Hurricanes Andrew, Katrina and Sandy and the tornados that struck Joplin, Missouri in 2010 didn’t just affect structures: They knocked thousands of small and medium-sized businesses out of commission for days, weeks and sometimes months.

These business owners were caught in a double whammy: First, they lost out on the revenues from sales and operations at affected locations.  Second, they still had ongoing expenses to pay. If your business were to be hit by a disaster, do you have the cash on hand to continue making the following payments:

  • Your own salary as an owner-employee
  • Salaries of key people whom you can’t afford to lose
  • Salaries and hourly wages of workers helping with clean-up and recovery
  • Insurance premiums on company vehicles
  • Payroll taxes
  • Fringe benefits
  • Health insurance premiums
  • Lease payments on critical equipment
  • Marketing and advertising expenses – many of which are done on a forward contract?
  • Temporary office and warehouse space
  • Utilities
  • Deductibles from other insurance coverage

If revenues from operations came to a halt, and you had to add up all these expenses and keep things going, how long could your business run?
Would you be faced with the loss of key salespeople and staff?
Would valuable institutional memory be forced to go to other employers because you can’t pay them for an extended period of time?

You may be at an elevated risk of severe economic harm from business interruption if the following conditions apply:

  • You have substantial business overhead in general
  • You rely on leased equipment or vehicles to operate, or if you have financed equipment subject to repossession if you don’t apply.
  • You rely on vendor financing.
  • You have key employees that are not easily replaceable
  • You have one location, or if you have multiple locations within the same geographic area
  • You cannot operate without electric power and generator power is not realistic or cost-effective for you.
  • You rely on being able to purchase gasoline or diesel locally.
  • You rely on your income from the business to get through each month.
  • You will have to rent computers, vehicles or capital equipment on a temporary basis to continue to function.
  • You are locked into forward purchasing contracts for materials, inventory or advertising
  • You rely on income from e-commerce operations that would vanish in the event of a sustained power outage.

An insurance professional with experience in business interruption insurance and business overhead insurance can help you tailor your coverage to account for considerations specific to your industry.

For example, some industries are seasonal: Damages from an unexpected shutdown in operations during tourist season or at some other critical time would be much more damaging than shutdowns at other times during the year. Your coverage should take this into account.

What About Non-Disaster-Related Shutdowns?

Not every business shutdown is due to a natural disaster. Sometimes you may have a shutdown due to the illness or disability of a key employee. Depending on the circumstances, you may need to wait things out until a partner/owner or key employee is able to return to work. In other circumstances, you will need to recruit and train up a replacement. In some instances, business could come to a near halt until this is accomplished.

Ordinary key-person coverage should provide some point-blank protection, for example, to pay the costs of recruiting and training a new key salesperson, executive or other vital individual. But you may need additional coverage, called business overhead insurance, to keep your business’s key functions running while you deal with your personnel changes, or buy time for your key individual to recover from the illness or injury that took him or her out of action.

Contact G.R. Reid Insurance to discuss your commercial insurance needs.

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How Much Commercial Property Insurance Do I Need?

 

The whole idea behind insurance is protection. When you buy property insurance for a building, the goal is to have enough coverage so that your insurance claim will put you in roughly the same economic position you were – or as close to it as possible – before disaster struck.

The Three Property Valuation Methods
From an insurance perspective, there are three basic methods for valuing and assigning coverage limits to a commercial property: fair market value (FMV), actual cash value (ACV) and replacement cost. It’s important to understand that these numbers can be very different from each other – and sometimes radically so. The three approaches are not interchangeable at all. It’s very important to understand the type of insurance coverage you own and how claim settlement figures are arrived at.

Fair Market Value
The concept of fair market value is familiar to most of us. A property’s FMV is the price a property would sell for if placed on the market today, and purchased by an informed, knowledgeable counterparty in an arms-length transaction. That is, there are no outside influences or competing loyalties affecting the property’s market price.

To calculate fair market value, appraisers will rely a good deal on “comps,” or recent sales of nearby comparative properties. But valuation for commercial properties can be tricky, since there may be relatively few truly comparable sales of similar properties nearby.

Also, FMV can be subject to wide swings in investor sentiment – as property owners across the country learned in the last decade.

Actual Cash Value
This approach to underwriting attempts to calculate what it would take to replace a property and its fixtures – and then subtract an amount from that value for depreciation. For example, if a property includes a seven-year-old refrigerator that is depreciable over ten years, the insurance company may only value the refrigerator at about 30 percent of its replacement value. If you are insuring a 13 year-old rental house that is depreciable over 27.5 years, the insurance company may only be willing to pay half of the home’s replacement value.

This amount is grossly inadequate, in practice, for most of small business owners, who don’t maintain the kind of sinking funds this kind of coverage requires. After all, if your business relies on a working refrigerator and you lost it in a disaster, you lost a whole refrigerator – not just 30 percent of one.

Replacement Cost
Replacement cost underwriting attempts to estimate what it would cost to reconstruct the property on site, using comparable or equivalent construction methods and materials, where possible. This can be a very different figure from market value because buyers will also deduct for age and depreciation. Some industry experts also believe that replacement cost provides a useful cap on figuring reimbursements and insulates the risk pool from the distorting effects of appraisal fraud: Commercial property buyers won’t pay more for a property than it would cost to build the same thing next door!

Location is particularly important for commercial properties. Most experts recommend using replacement cost as a basis for calculating needed insurance coverage on commercial properties.

Most insurance agents have access to programs that help streamline estimating the cost of rebuilding common, basic structures.

Flood Insurance is Separate
Remember, standard commercial insurance policies don’t cover flood damage. To protect yourself against the financially devastating effects of flooding, you will need to secure separate flood insurance, both on the building itself and any contents in it you may own.

Special Situations
Some situations call for a more specific approach. If you own an historic or antique building, for example, you probably have some unique concerns that a typical warehouse owner around the corner may not have. For example:

  • Rebuilding with prefab or other low-cost building techniques may not be warranted – especially if your business derives significant value from the unique character of an older building.
  • Rebuilding may require materials and artisan workmanship no longer readily available.
  • Your old structure may have been built before construction and wiring standards were modernized. This is particularly true if you are in earthquake-prone areas. Rebuilding may require additional expenses to bring the structure up to code.
  • You may have greater business interruption costs than other comparable businesses because it takes that much longer to rebuild.

These cases call for a much more detailed and specific approach than simply calculating costs per-square-foot and adding some coverage for contents. A good insurance agent can help walk you through the issues involved in appraising these kinds of structures and estimating rebuilding costs. You may need to hire an outside appraiser with experience in certain specific construction techniques. At the end of the day, insuring antique, historic or specially-built or designed buildings is a team effort between yourself, your insurance agent and the insurance carrier.

Replacement Cost is available in most cases and unless you don’t intend to rebuild, this is the best option, since it will pay for the entire cost replacement your building without consideration for depreciation. When insuring for replacement cost, most policies require that you insure to 100% of what it would cost to replace your building. Insuring for 90% of actual building replacement cost would result in a co-insurance penalty of 10%. This means that if you had a partial loss, you would only get 90% coverage due to the co-insurance penalty found in policies with this clause. This is why it is so important to work with your agent and the insurance company appraiser, if an appraiser has been assigned to value your building. You building is your investment, and protecting your investment is a wise financial decision.

For more information, contact G.R. Reid Insurance for an evaluation.

 

 

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Commercial Insurance Services News :: Disaster Recovery Checklist for Business Owners and Executives

Everyone is responsible for the disaster preparedness of their own households. Business owners and executives, however, have additional responsibilities. Not only do they have to get their house in order, but they are also responsible for hardening their own businesses to continue to operate despite a local disaster – and to facilitate the recovery of the business, for the sake of investors, customers, employees and vendors.

Here are some basic tips those in executive positions can take to ensure the survival of a small business in the event of a disaster.

• Create a written disaster preparation and recovery plan. This document should be in hard copy in your office, and emailed to new workers, so that they can access the plan even if your offices don’t exist.
• Inventory on-site first-aid kits and other emergency supplies.
• Secure data offsite. What will happen if your servers are destroyed in a flood or fire at your office? If your business would be damaged, it’s time to arrange to back up your files at a remote location, or on the Internet.
• Designate an alternate meeting site. What happens if your office is suddenly destroyed or inaccessible? Your employees should know where to report for work. Managers should have a roster of phone numbers.
• Arrange for alternate facilities. You may need to arrange new office space or warehouse space in a hurry. Have an alternate location already scoped out.
• Get a generator. Don’t count on waiting until disaster strikes to get one. There will be a run on supplies. Ensure the generator has enough output to power your key equipment, whatever it is – be it computers, printers, and refrigerators (The cost of one generator big enough to power your refrigerator or freezer can pay for itself many times over in preventing food spoilage for those in food service businesses).
• Name responsibilities. Who will come to the office prior to a hurricane to put up storm shutters? Who will be available to come fill and place sandbags? Who can clean up if there is severe damage, and when? Remember that your employees will have conflicting loyalties. Some may be having difficulties preparing their own homes and families. Others may be members of the National Guard, and may be mobilized for disaster response. Take this possibility into account.
• Audit your insurance coverage. Lay out all your policies and make sure they cover the possible hazards, and that the amount of insurance reflects your needs. Double check flood coverage. Most regular insurance coverage doesn’t cover floods.
• Double check key person life insurance and disability insurance coverage. The same disaster that disrupts your business could disable or kill key people, and cause severe disruption to the rest of the business as well.
• Consider business interruption insurance. These policies help companies by providing a cash benefit to keep them going in case of a temporary closure. Can you make your payroll for a month or two while you get your business back on its feet after a disaster? If not, you may need business interruption insurance to avoid going bankrupt, or to retain valued employees while your business has shut down.
• Have a public relations plan. Designate a spokesperson for the company. Reach out to the local media with your recovery story. Don’t let people get the impression your business closed – particularly if you have to relocate. This could be a fatal blow, even if you do everything else right.
• Diversify your telephone systems. Hurricanes and other disasters may knock out Verizon phones but not AT&T service, and vice versa. It can take time before workers can repair towers or reroute signals. By ensuring your workers have different cell providers, you can spread the risk out, so that your ability to communicate by cell is not wiped out by the loss of any one cell tower.
• Make a note of this phone number: 1-800-659-2955. It’s the phone number to the federal Small Business Administration. The SBA provides low-interest loans to qualified small businesses affected by disasters to help them keep running through a disaster and its aftermath.
• Copy your tax returns and other key documents. Keep them online somewhere. Keep hard copies in a fireproof safe or deposit box offsite – preferably 100 miles away or more. If you live on the coast, keep it inland. If you live in a flood plain, keep it up hill. Identify your hazards, and don’t expose your valuable assets and papers to the same hazard in two different locations.

Above all, though, use your judgment, critical thinking skills, and work through the different contingencies that may affect your business. All businesses are different, and one business may have different needs than other business next door. For example, when Hurricane Katrina was menacing New Orleans in 2005, many nursing homes and other health care providers had difficulty evacuating their patients and residents. In some cases, low-paid staff didn’t show up for work – they were busy evacuating themselves or their families. If you rely on low-paid staff that takes the bus to work, don’t expect them to be available immediately prior to a hurricane, for example, unless you make and communicate arrangements in advance.

For more information, visit Ready.org/business, which has a variety of tools and planning tips for business owners and executives.

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Commercial Insurance Services :: Consider Business Income from Dependent Properties to Insure Against Supplier Shut Down

A business that suffers a major accident such as a fire or hurricane may have to shut down for days, weeks or longer for repairs. Often, the income lost during the shut down will exceed the cost of repairing or replacing the damaged property. Businesses can protect themselves against this severe financial loss by purchasing business income insurance. However, sometimes a business can suffer a significant income loss, not because of damage to its own property, but because of damage to someone else’s.

Consider the following business situations:

• A metal parts manufacturer derives 80 percent of its income from sales to four customers.

• A restaurant located within a five-minute drive from a factory that employs 1,200 people.

• An electronic components distributor that buys its products from three manufacturers.

• A supermarket chain that sells milk under its own brand name but that outsources production of the milk to a dairy products supplier.

In all of these examples, the businesses depend on third parties for supplies, purchases, or attraction of customers. If any of these third parties were to shut down, the resulting loss of income would devastate the business.

 

A business that depends on a few third parties for a large share of its income may want to consider buying Business Income From Dependent Properties insurance. This coverage pays for income lost as a result of damage to the property of another business on which the policyholder depends financially. The form classifies these properties, called “dependent properties,” into four groups:

• Contributing locations, which deliver materials or services to the business or to other businesses on the policyholder’s account. The three manufacturers that provide product to the electronic components manufacturer are examples of contributing locations. The form does not consider a supplier of utilities (water, power or communications) to be a contributing location. A separate coverage form exists to insurer these types of suppliers.

• Recipient locations, which accept the business’s products or services. The four customers who provide 80 percent of the metal parts manufacturer’s income are recipient locations.

• Manufacturing locations, which manufacture products for delivery to the business’s customers under a contract of sale. The dairy products supplier producing the milk for sale under the supermarket’s label is a manufacturing location.

• Leader locations, which attract customers to the policyholder’s business. The factory near the restaurant is a leader location.

Coverage applies if the dependent property suffers damage from a cause of loss that the policy would cover if it damaged the business’s own property. For example, a typical property insurance policy covers damage caused by fire or explosion, so this insurance will pay if the dependent property burns or explodes. However, since most policies do not cover flood damage, the insurance will not pay if a dependent property floods.

The insured business has a choice of how to arrange the insurance. One option is to make the amount of insurance covering the business’s own property also apply to the dependent properties. The other option is to buy separate amounts of insurance that apply to each dependent property. Under either option, coverage begins 72 hours after the time the damage occurs.

Virtually every business depends to some degree on other firms for parts of its operation. Dependent property income losses do happen; many businesses in lower Manhattan suffered these losses in the months following September 11. Discussion of the exposure to loss from dependent locations should be a regular part of a business’s review with its insurance agent. Standard coverage protects against loss to a business’s property, but the worst loss may come from damage to someone else’s.

 

For more information on our Commercial Insurance Services, contact us.

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