Insurance Coverage: To Consolidate or Not?

Keeping in mind that there are many types of coverage and each individual consumer will have different specific insurance needs, there may be several reasons to consider consolidating your various policies with a single carrier. For most people, the pros of consolidation usually outweigh the cons, but here are some points from both sides:

Cost

Consumers often find there’s a cost benefit in consolidating their coverage with a single carrier. While the exact number will vary from company to company, it’s very possible to save 15% or more.

Specialist companies still exist, but many generalist insurers have diversified their product lines to include an array of business and personal insurance and financial products. Since an insurance carrier is gaining customer loyalty and reducing their marketing costs when an existing customer purchases additional products, they’re usually willing to pass a portion of their savings on to their consumers.

Gaps

Depending on the types of coverage you’ve purchased and your unique situation, certain coverage gaps could be reduced when you consolidate your insurance portfolio. Take purchasing General and Professional Liability through the same carrier as an example. An accountant, for example, would have little risk of their professional services leading to property damage or bodily injury, but a travel agent, for example, routinely makes professional recommendations that could have physical consequences for their clients. The travel agent might be unaware that a lodging they recommend to a client is undergoing renovations. The client slips and falls due to unsafe conditions and sues the travel agent for not knowing the condition of the lodging before recommending it. If the travel agent has General and Professional Liability through two different carriers, then he/she may find the two carriers pointing the finger in opposite directions and disclaiming coverage. Whereas, if the travel agent has both coverages under the same carrier, then the disclaiming concern is moot since there isn’t another company to point the finger at.

Tailoring

Many carriers have learned to anticipate the common problems associated with coverage gaps, such as in the example discussed above. These carriers have created tailored packaged policies or programs with multiple different coverage options. These options interlock, but don’t unnecessarily duplicate coverage or dangerously leave gaps between coverages. Umbrella policies perform best when written by the carrier of your primary coverage(s).

Cons

As with most everything in life, there are cons to consolidation. It’s important that you look at the financial strength of the insurance carrier. If an insurance carrier is poorly rated by any of the rating services that monitor insurers, then the increased risk of going with an insurer that has questionable financial strength may outweigh any of the cost, gap, and tailoring pros.

Another con is that the insurer may quickly change their hunger for a certain product and leave you having to find replacements for multiple policies. Research the company’s track record – have they typically stuck it out during bad and good times or have they timed the market to make a quick dollar and exit?

While most generalist insurers have diversified their offerings, it’s possible to miss out on some coverage benefits still only being offered by specialists.

In closing, consider the above points and how each could or wouldn’t meet your needs. In most cases, you’ll find that coverage consolidation and the right carrier creates a winning scenario for all parties involved.

Reducing Your Employees’ Exposure to Asphalt Fumes

Roofers are a pretty common sight, especially when the weather is mild. What we may not realize, however, are the health risks that are associated with working with hot asphalt. Roofers exposed to asphalt fumes may experience headaches, eye, nose, throat, and skin irritation, nausea, fatigue and drowsiness. These risks seem to be mild and transient.

But that’s just the tip of the iceberg. According to some studies, roofers may also have an increased risk of lung cancer; although there have been no definitive conclusions as of yet. If you add the possibility of looming cancer to the other less fatal irritation effects associated with hot asphalt work, it makes sense for both employers and employees to take steps to control exposure.

Before starting work, the contractor needs to ensure that workers have been properly trained in the hazards of applying hot asphalt and acceptable work practices. The contractor should also check that employees are using the appropriate personal protective equipment to reduce exposures to asphalt fumes.

Prior planning before work begins will help reduce workers’ asphalt fume exposure. Determine if it is possible to use a tanker to supply asphalt to the kettle or to the rooftop directly. If this is not possible, and a kettle will be used, place it where workers will be least exposed to the fumes. Keep the kettle away from air intakes, doors, and windows. Try to use roofing equipment and accessories that have lids to reduce exposure to fumes.

If possible, use an insulated kettle that is the right size for the job. It should have temperature controls and the right pumping capacity for its size. Inspect it to be sure that it is in good operating condition. Insulate the pipeline that delivers the hot asphalt to the roof.

Maintaining proper asphalt temperature is another way to reduce exposure to asphalt fumes. The equiviscous or application temperature (EVT), and the flash point of the asphalt can be found on the keg package or bill of lading. Once you have determined these guidelines, set the kettle temperature at the EVT plus 50°F. Periodically measure the asphalt temperature in the mop bucket. Make any adjustments to the kettle to maintain proper temperature. The appropriate temperature is the EVT plus or minus 25°F. The kettle temperature must also always be at least 25°F below the flash point to avoid fires and explosions. Use a hand-held or infrared thermometer to get an accurate reading.

Workers need to be trained to be continually mindful of safety when working with hot asphalt. They should place the kettle on firm, level ground to avoid spilling or tipping. They also need to be trained to put up warning tape, traffic cones, or signs around the kettle to keep others at a safe distance. They should reduce the number of times the lid is opened by filling the kettle to capacity when reloading. Workers should also check the temperature, stir, and skim when they reload. All workers must have, and know how to operate, a fully charged ABC-type fire extinguisher near the kettle.

During the actual application, workers should:

  • Keep lids closed on rooftop equipment and accessories used to transport and apply hot asphalt.
  • Stay out of the fume cloud whenever possible.
  • Use buckets with half lids.
  • Fill buckets only three-fourths full.
  • Carry buckets on the down slope of the roof.
  • Twist mops instead of pulling to unstick them from buckets.
  • Twist buckets instead of pulling to unstick them from the roof.
  • Minimize the time spent on their knees working with hot asphalt since exposures may be higher when closer to the fumes.
  • Use long-handled tools whenever possible.

Questions You Need to Ask Before Buying Distressed Commercial Properties

The economic downturn that began in late 2007 has taken a severe toll on all sectors of the U.S. economy, but it hit the real estate sector especially hard. Real estate research company Green Street Advisors reported in March 2011 that commercial property values were 17 percent below their peak in August 2007. CoStar Group reported that the values of the highest quality office buildings, relatively new retail and industrial properties, and apartment complexes were down 33 percent since June 2007. These large price decreases may attract investors in search of good buying opportunities. However, potential buyers should look beyond the low purchase price when they evaluate these properties. The properties’ physical state, legal issues, and insurance considerations also affect whether they are smart investments.

Many of these properties were only partially completed when the financial crisis hit, so buyers must assess their economic viability and physical condition. They need to ask:

* How much of the project has been completed and how much remains to be done?

* Does any of the work need to be repaired or redone because the builder, facing financial difficulty, took shortcuts in material quality or construction?

* Do the original construction plans comply with current building codes? Are there any design errors that need correction?

* Are there any significant changes the buyer would like to make to the project?

* What liabilities (debts, lawsuits, penalties, etc.) will the buyer assume with the property?

* Who will be legally liable for any defects in the design or construction of the project?

* If the original owner and builder are responsible for the problems, can the buyer recover from them?

* What insurance covered the original project? Did one program apply to the entire project, or did each individual contractor have its own coverage?

* Will the insurance apply to construction defects?

* If a single wrap-up insurance policy covered the project, did it include a deductible or self-insured retention? If so, and the insured owner or contractor has declared bankruptcy and is unable to pay it, will the insurance still apply?

* Are there special conditions that must be met before the policy will apply when the deductible or SIR cannot be paid?

* Does the original wrap-up policy extend completed operations coverage beyond the policy’s expiration date? If so, for how long?

Prospective buyers need to pay special attention to builders risk insurance on the project. If the original developer bought this coverage, the policy may have cancelled after work on the project stopped. A policy purchased by the general contractor may still be in force, but the buyer should review its terms and conditions carefully. Due to the long period of inactivity, vacancy and unoccupancy provisions may have taken effect. The buyer should also check to see if the policy covers catastrophic perils such as flood and earthquake; lost income and extra expenses resulting from delays due to covered perils such as fire or vandalism; and the extent of coverage for testing.

Regardless how low a property’s price may be, it is no bargain if it comes with a host of physical and legal problems. Arranging insurance on a property with severe problems may be very difficult or even impossible. An insurance agent or broker experienced in obtaining coverage for such properties can help sift through the issues and identify appropriate policies. There is no substitute for a careful examination of a property and all that comes with it. Buyers who do their homework will uncover the profitable opportunities.

Five Things You Should Know about Your Condo Association’s Insurance

A condominium unit-owner usually has her own insurance policy that covers her for loss of her personal belongings, parts of the building that the condominium agreement makes her responsible for insuring, the additional cost of living elsewhere after a fire damages her unit, and her legal liability for injuries or damages suffered by others. In turn, the condominium association has its own policy, which may cause some unit-owners to wonder why they have to buy separate insurance. Doesn’t the association’s insurance cover the same things that her policy does? Depending on the property at issue, the answer is maybe yes and maybe no. Insurance companies designed the two types of policies to complement each other in some cases and to overlap in others. Here are five things unit-owners should know about their associations’ insurance.

The association’s policy covers the building. Depending on the wording in the contract between the association and the unit-owner, the word “building” may mean several different things. If the contract requires the association to insure them, “building” can include fixtures, improvements and alterations that are part of the building and that are within a unit. For example, if a unit-owner installs new track lighting or an attached island in the kitchen, the association’s insurance would cover the cost of repairing or replacing them after a loss. Also if the contract requires, the association’s insurance will cover various appliances such as refrigerators, stoves and dishwashers.

The association’s policy covers personal property “owned indivisibly by all unit-owners.” Furniture in the building’s lobby, hand carts and other moving devices, and exercise equipment in an exercise room available to all residents are examples of the types of property that the association’s policy insures.

The association’s policy does not cover the unit-owner’s personal property. A unit-owner must buy her own insurance to cover her furniture, electronics, clothing and other belongings. Assume, for example, that the condominium contract requires the association to insure appliances. If fire damages a unit-owner’s space, the association’s insurance will cover the refrigerator but not the sofa. The unit-owner’s policy will cover the sofa. The association’s policy also does not cover an individual unit-owner’s legal liability for injuries or damages suffered by others. The unit-owner needs her own insurance to provide for her legal defense and to pay any judgments.

It is possible that both policies may apply to the same item of property. In the above example, both the association’s and unit-owner’s policies may cover the refrigerator. In that situation, the association’s policy will apply first; if it does not completely pay for the repair or replacement, the unit-owner’s policy will cover the balance. For example, if the cost of replacing the refrigerator is $5,000, and for some reason the association’s policy covers only $4,000, the unit-owner’s policy will pay the other $1,000 (the example doesn’t include deductibles that may apply.)

The association’s insurance company will not try to get its money back from a unit-owner. Suppose a unit-owner left a candle burning overnight and the unwatched candle caused a fire that damaged part of the building. Many types of insurance policies would allow the insurance company to pay its customer for the damage, then try to recover its payment from the person who caused the damage. However, a condominium association policy specifically states that the company waives its right to recover from a unit-owner. It still has the right to seek recovery from a person who is not a unit-owner and is responsible for the damage.

While comprehensive, the association’s policy is no substitute for a unit-owner’s own insurance. Unit-owners should work with professional insurance agents to ensure that they have the proper coverage.

Kidnap, Ransom, Extortion: Can It Happen to Your Business?

An Associated Press headline screams “Tape of beheading posted on web.”  It’s a sign of the times-as corporate executives, employees and contractors become pawns in terrorists’ arsenals worldwide.

Companies with international operations or employees who travel abroad face increased liability for the safety and security of their workers, not to mention the unexpected costs that ensue from a kidnapping. While some terrorists use kidnapping as a weapon in their “jihad,” or Holy War, money motivates most kidnappings. Demands for ransom and the related costs associated with managing a kidnapping crisis can run in the tens of millions of dollars.

Large global companies aren’t the only ones at risk. Small to medium-sized businesses can be victims of violence or extortion threats against property or product contamination perpetrated by disgruntled and/or former employees, as well as domestic terrorists.  The financial impact can be devastating.

Mitigating risk

A security firm can provide companies with advice and assistance in dealing with such threats. These experts can help businesses review their risks and take steps to mitigate them, such as:

·   Developing appropriate policies and procedures to deal with threats and emergencies

·   Enhancing the physical security of offices and buildings

·   Establishing a crisis management team to oversee planning and coordination

·   Providing cross-cultural, kidnap prevention, conflict-management, self-defense and survival training for workers going overseas

·   Engaging resources, such as the U.S. Embassy, to provide specific reports on safe places and areas to avoid in foreign countries

·   Purchasing Kidnap/Ransom and Extortion insurance

Insuring against the threat

Companies get a valuable combination of coverage and services with a Kidnap/Ransom and Extortion policy.  First and foremost, these policies provide broad protection from the financial loss associated with a kidnapping and/or extortion threats against the company’s merchandise, property, proprietary information, computer systems or employees.

Depending on the policy, coverage can include ransom payments, hostage-negotiating fees, consulting fees, loss of income, interest on bank loans taken out to pay a ransom, informant rewards, medical/psychiatric care for the employee kidnapped, as well as rest and rehabilitation costs, and accidental death or dismemberment payments. Corporate policies can even pay for interpreters, travel expenses and the cost of hiring a replacement.

Kidnap/Ransom and Extortion policies also offer policyholders access to a range of consulting services-from incident prevention to response resources.  Even those businesses that can afford to pay the ransom can benefit from the kind of services provided. Security consultants are available to assist with independent investigations, arrangement and delivery of ransom funds, mobilization of international resources, forensic analysis and family counseling.

Policies vary greatly. They come in a wide range of limits-from the $5 million to $10 million limit to $50 million. The premium rate is higher for coverage in risky geographic areas, such as those on the State Department’s travel restriction list, like Nigeria, Iraq and Indonesia, and may exclude some countries. High-risk areas include the Middle East, Latin America, Eastern Europe and Asia. 

Some policies are available with no deductibles, while others have large deductibles. In addition, policies may require that the policyholder not reveal the coverage’s existence. This is to prevent knowledge of the policy from encouraging a kidnapping or extortion plot.

With the threat of terrorist activities growing, companies large and small, particularly those that send employees overseas on business, should talk to an insurance agent about their risk and how to protect their human and corporate assets.

The Importance of an Annual Insurance Review

Most people know the importance of insurance protection. You don’t want to be without it when problems strike. What many don’t realize, however, is that protecting themselves with insurance isn’t a once and done event. You don’t wear the same pants you did when you were five years old because, besides no longer being in style, they simply don’t fit. A homeowner’s policy purchased when your house was furnished with bean bag chairs and bar stools is no longer going to “fit” once you’re lounging on Italian leather sofas while watching television on your wall mounted plasma screen. Life is constantly changing, and your insurance policies should reflect that.

Does this mean that I have to immediately call my insurance agent every time I buy a new piece of furniture or my cousin Gwen moves in for 6 months? Not necessarily. While more significant changes should be reported immediately (such as getting married or getting a new car), items such as improving your home entertainment system or upgrading your car’s tape deck to an mp3 player, can be reported at your annual insurance review. Agents reach out to their clients because they want to make sure to check up on these changes and make help avoid any gaps in their clients insurances, however it’s equally important to for a policyholder to reach out to their agent to make sure they are covered. Schedule your own annual review, and call your agent as you get your annual renewal. If one agent handles all of your coverage, this task is relatively easy. Jot down any changes that have occurred over the last year, even if you’re not sure whether they are significant enough to mention. Doing so will ensure that all of your insurance policies are best suited to your current life situation.

Some examples of changes that should be mentioned to your agent immediately are listed below. Ask yourself these questions every year:

*Have I gotten married or divorced?

*Have I had a new baby, or adopted a child?

*Is anyone in my house a new driver?

*Is anyone living with me who wasn’t before? Will they ever be driving any of my vehicles?

*Do I have a personal umbrella policy? Do I need one?

*Have I purchased any new properties?

*Have I started a home business?

*Have I purchased new furniture, electronics, or fine jewelry?

These are just a few examples of life changes that are often picked up during an annual review. However, they are far from the only changes that can affect your coverage, so be thorough when documenting and reporting items to your agent.

Some of the above examples might seem pretty obvious. Most people know that if their teen-ager gets his license, they need to notify their auto insurance carrier. However, not everything is as obvious. For example, take a couple who just had their first child. They decide that it’s time to purchase life insurance to provide for the child if something ever happens to them. This couple is doing the responsible thing. They understand the importance of buying life insurance when starting a family. That significant step in planning for the future is taught to the general public quite effectively, in the form of commercials, television shows, radio spots, and the like. But what about five years later when little Ellie is born? Having child number 2 doesn’t necessarily flip on the proverbial switch like the first time, shining that bright light on the right decision. Television shows don’t show “made for t.v.” couples updating their life insurance policies for child number 2. Advertisements don’t highlight the importance of adding new children as beneficiaries. All anyone ever hears about through popular culture is the importance of getting life insurance if you don’t have it, especially if you are starting a family. If the Henderson family gets a life insurance policy when their first little one is born, and 4 children later, mom and dad are hit by a logging truck on a trip to Alaska, only #1 gets the money. Unfortunately, #1 also happens to be 18 by that time, and decides to run to Vegas with his new fortune. This particular tale might seem slightly “tall,” but beneficiary issues create havoc, legal battles, and misdirected money on a daily basis. Sometimes it’s to the tune of thousands, other times it’s to the tune of millions. Protect yourself, your family, and your personal belongings by making sure that each of your insurance policies gets an annual check-up. You’ll rest much better once you do. 

Umbrella Coverage: Protect Your Exposed Assets

There’s no doubt that we live in a litigious society.  Jury awards continue to bankrupt individuals and many small companies.  Some trial lawyers constantly search for deep pockets, and reach far and wide for defendants.  Underwriters continue to be amazed to find seemingly unconnected insureds “invited to the dance.”

The most common protection for a business, or for an individual of means, to use against a crippling judgment, is an umbrella policy.  Umbrellas provide high limits of liability, usually with a small ($10,000 is typical-and this is sometimes waived) self-insured retention, above those offered by primary Commercial General Liability and Auto Liability policies.  Umbrellas may also provide coverage for certain losses not covered by primary policies.  Professional exposures such as Directors and Officers Liability or Errors and Omissions coverage, are excluded from “conventional” umbrella policies.  High limits for those risks are available from specialty markets.

How do you know how much umbrella coverage is enough?  While the question is best answered by information you’ll collect from your accountant, attorney and insurance agent, many company underwriters recommend buying limits of two to two-and-a-half times the value of your exposed assets.  Exposed assets are those that would not be exempt from liens or judgments, and a list of specific items may well be different for every insured.  For example, the deed to a wealthy individual’s primary residence might be in a foundation, blind trust or some other instrument that’s out of reach, but the vacation home, boat, stock portfolio, etc., might be exposed.

If that individual’s liquid net worth is $2,000,000, a $4M to $5M umbrella might be adequate.  There is some science, and some art, to making a decision on limits.  If you or your client is “luminous,” you might consider the exaggeration that will likely occur should you or that client be found at the defendant’s table.  A few years ago, a very successful professional tennis player, at the zenith of a stellar career, carried $50M in umbrella limits.  The player, unmarried and with no dependants to support, had five homes, nine cars, and significant other assets.  That player attracted a lot of notoriety off the court as well, and while celebrities are often the targets of frivolous lawsuits, our tort system can find that the same injury to an innocent party is worth more if it was caused by an individual of means.

A business, especially one with stockholders, has to answer the “adequate” question from an entirely different perspective.  Not only do physical properties, product inventories, valuable research, good will, cash, bonds, etc., have to be fully protected, the company’s value to stockholders must also be covered by adequate liability limits.  A stock certificate is owners’ equity, and a successful class action suit or an uninsured product recall campaign, could prove catastrophic to its value.  Imagine the aggregate costs if, say, a bug in a Microsoft product fried the motherboard in all those millions of computers that run its software.  Imagine the cost if, say, a hole in the AOL gateway gave someone with malicious intent a free ride through all the data on the PCs of their some 30,000,000 subscribers.  And high tech isn’t the only vulnerable industry-what if Dial soap suddenly made all our hair fall out?  Or what if Minute Maid (owned by Coca Cola) Orange Juice made us break out in hives?  The immediate and consequential dollar losses stagger the imagination.

Finally, the right number for an umbrella or excess limit is one you, your accountant, attorney and insurance agent and carrier(s) are comfortable with.  Remember that in some cases, plaintiff’s counsel has the right to know how much insurance coverage there is to pay a given claim.  Don’t buy so much that you make yourself a target.  Get the best advice you can, and buy limits that make sense and that you can afford.