About.com

Not So Friendly Fires

Wed, 19 Jun 2013 18:07:35 +0000

Some cities just can't get a break. After enduring the Waldo Canyon fire a year ago, Colorado Springs is battling another wildfire. This year's blaze, which has been dubbed the Black Forest fire, now appears to be under control. According to the Huffington Post, the fire has caused two deaths and destroyed at least 500 homes. The cause of the fire is unknown. Last year's Waldo Canyon fire broke out on June 23 and burned for more than two weeks. It caused two deaths and destroyed 346 homes.

Meanwhile, another wildfire is burning in California near Yosemite National Park in the foothills of the Sierra Nevada Mountains. This fire was started by an unattended campfire. Smokey the Bear, where are you? Smokey should chastise these negligent campers. They certainly could have prevented this forest fire!

I gained some insight into how destructive fire can be during the Oakland Firestorm in 1991. It was Sunday around noon when I arrived at my parents' home, located a few miles from where the fire had originated. No one was home. After phoning my parents I grabbed a garden hose and began wetting down their wood shake roof. As I stood holding the hose, balls of fire roared down the canyon nearby. Several homes were on fire. Burning telephone poles made booming sounds as their transformers exploded. Smoke blocked out the sun and the air was thick with soot. My parents were lucky. The flames came within about a quarter of a mile from their house.

In the insurance industry fires are either friendly or hostile. A friendly fire is one that is set on purpose and that remains in the place intended, such as a fireplace or stove. A fire becomes hostile when it escapes from its intended location. For example, a fire travels from a restaurant stove to the roof of the building. Property insurance is designed to cover damage caused by hostile fires. However, most policies use the word "fire" without any distinction between friendly and hostile.

Fire insurance was developed in London after the Great Fire of 1666. Yet, it didn't really catch on in the United States until stock insurance companies were formed in the 1790s. The availability of fire insurance increased throughout the nineteenth century. However, buyers couldn't be sure what they were getting because fire policies lacked consistency. A policy from one carrier could bear little resemblance to a policy offered by another. That began to change in 1880 when the state of New York adopted a standard fire policy. The policy eventually became mandatory in all states.

The New York Standard Fire Policy was last revised in 1943. The 1943 version was included in commercial property policies until the 1980s, when property forms were simplified. If you think your property policy is confusing, try reading the 165-line 1943 fire policy! Your eyes will glaze over after the first few lines.

Speaking of property policies, does your firm's policy include Building Ordinance coverage? If a building your company owns is damaged, local building ordinances can substantially increase your reconstruction costs. Learn about Building Ordinance coverage in my new article.

Image courtesy of [nokhoog_buchachon ] / FreeDigitalPhotos.net

Cyber-Attacks on Small Businesses

Fri, 14 Jun 2013 14:14:49 +0000

Do you know who's covered under your commercial auto policy? If you don't, be sure to read my article.

Most cyber-attacks are directed at large companies, right? Wrong! Small companies are generally more vulnerable than large ones since small firms tend to have fewer controls. In a survey of small businesses conducted by the Ponemon Institute, almost a third of the respondents reported they had been hit by a virus, trojan, malware or hacker attack within the last year. Only a quarter of the victims were able to recover all of their data. That means 75% suffered a permanent loss of data! Has your firm suffered a data loss? If it has, please share your experience.

A cyber-attack can wreak havoc on your computer. I learned this the hard way a few years ago. I was shopping for a watch on the Internet when suddenly X-rated pictures began dancing across my screen. Then an ominous-looking file appeared. I was unable delete it so I had to hire a computer technician the following day. He removed the malware but it had already damaged a number of files. It took me a month to fix all the problems. Don't let this happen to you!

There are simple steps you can take to protect your computer system against unwanted intrusions. A good risk management program combines loss prevention techniques with insurance. You can prevent data losses by the use of passwords, firewalls, anti-viral software and other techniques. Remember to back up your data regularly.

Commercial property policies vary in terms of the coverage they provide for computers, software and data. Some policies cover all three as "personal property." However, many policies exclude perils like electrical injury, mechanical breakdown and off-premises utility interruption, to which computers, software and data are particularly susceptible. Some policies contain these exclusions but do not apply them to computers, software or data. Check for these exclusions in your policy. If no exceptions exist for computers and data, you might want to consider purchasing electronic data processing (EDP) coverage.

EDP coverage is usually provided by an endorsement. The scope of coverage varies, but a typical endorsement covers damage to computers, software and data caused by electrical injury, mechanical breakdown, temperature and humidity changes, computer viruses and other causes. Damage caused by hacker attacks may also be covered. EDP coverage is usually subject to a sublimit such as $25,000 or $50,000. Ask your insurance agent to provide you with an EDP quote so you can determine whether this coverage makes sense for you.

Image courtesy of [chanipat] / FreeDigitalPhotos.net

What's in My Berries?

Thu, 06 Jun 2013 16:37:50 +0000

Does your company occasionally sponsor social events, like an employee Christmas party, at which alcohol is served? If so, be sure to check out my article on host liquor liability coverage.

Berries contaminated with hepatitis? When I heard about the latest incident of food-borne illness my first thought was here we go again. Cantaloupes, peanut butter, spinach. The list keeps getting longer. Are these incidents becoming more common or are they just getting more press coverage? What do you think?

In case you haven't been following the current story, here's a quick rundown. Sixty-one people have become ill with hepatitis A after eating a mixture of berries and pomegranate seeds they purchased at Costco or Harris Teeter Stores. The product is called Organic Antioxidant Blend. The hepatitis is a strain usually found in the Middle East and Africa. At least one person is planning to sue Townsend Farms, the manufacturer of the berry product.

Product contamination has to be a food manufacturer's worst nightmare. An incident like the one involving the berries can be very costly. For one thing, it can damage to the company's reputation and cause it to lose sales. There is also the cost of lawsuits. People who become sick or injured from the product may sue the manufacturer for damages. Thirdly, the company is likely to incur substantial costs for recalling contaminated products.

Product liability is covered by the standard ISO liability policy. Assuming Townsend Farms has purchased a policy, it should be covered for claims filed by the people who got sick from the berries. The policy should also cover the cost of defending the company against the lawsuits. Damages or settlements from product liability claims will reduce the products-completed operations aggregate limit. Once that limit is used up, the firm's umbrella policy (if one exists) should step in.

According to CBS News, Townsend Farms is recalling all unsold berries that may be contaminated. These costs will not be covered by Townsend's general liability policy. Both basic liability and umbrella policies exclude costs associated with a product recall. These costs can be covered by product recall coverage. This is a specialty coverage purchased by manufacturers. The scope of coverage varies. Most policies cover the cost of recalling the product. Others also include crisis management and/or extortion.

Image courtesy of [Robert Cochrane] / FreeDigitalPhotos.net

Mile High Debris

Fri, 31 May 2013 13:46:53 +0000

Residents of Moore, Oklahoma are in the process of gathering, sorting and hauling away debris created by the huge tornado that struck on May 20. If you like trivia, you might be interested in this tidbit from the Huffington Post. If the debris from the tornado was loaded into a single pile the stuff would reach over a mile into the sky. That's an awful lot of debris!

The amount of trash generated by the tornado demonstrates the importance of debris removal coverage under a commercial property policy. If your company has a commercial property policy you may not even be aware that your policy provides this coverage. Debris removal is normally included as an "additional coverage". Debris removal can usually be found following the list of "property not covered."

In years past you could chuck debris from property damaged by a windstorm or other peril into a dumpster and forget about it. Those days are gone. Federal, state and local laws now determine what you can throw away and how you can dispose of it. Getting rid of stuff can be complicated and expensive. Fortunately, your debris removal coverage will pay some or all of this expense.

The limit provided for debris removal is usually a percentage (typically 25%) of the amount of the loss. Generally, the sum of your property loss (minus your deductible) plus the amount paid for debris removal cannot exceed your limit of insurance. The limit that applies depends on the type of property that is damaged. For example, suppose a fire destroys $100,000 of personal property in an office building you rent. Your personal property limit is $500,000 and your deductible is $5,000. Your insurer pays $95,000 for the property damage ($100,000 less your $5,000 deductible) plus up to $25,000 for debris removal ($100,000 X 25%). If your actual cost to remove debris of covered property is less than $25,000, your insurer will pay the actual cost.

Image courtesy of [Chris Sharp] / FreeDigital.Photos.com

Twisters, Twisters and More Twisters

Thu, 23 May 2013 13:58:31 +0000

It's late May and tornado season is in full swing. A "super cell" thunderstorm that hit northern Texas last week generated 16 tornadoes. Can you imagine the wind power of 16 twisters? One of those tornadoes packed winds up to 200 miles per hour. Five days later an even stronger tornado hit Moore, Oklahoma. The devastation is horrendous. The one good thing about tornadoes is that they are covered by property insurance. Insured losses in Moore may exceed $3 billion.

I experienced a minor tornado many years ago and it was scary. I was in my apartment around nine P.M. one evening during a thunderstorm. Ironically, I was just about to move from the East Coast to Oklahoma. I heard a roar, like a train was in my back yard. I looked out the window (not a smart thing to do during a tornado!) and the wind was blowing so hard the trees were almost horizontal. The noise stopped and the power went out. The next day I could see the path of the tornado from the destruction it left behind.

The recent tornadoes serve as a reminder of the importance of maintaining adequate property insurance. Your business need not be in Tornado Alley to be hit by a natural disaster. If a catastrophe occurs will your firm's property policy provide adequate restitution? Will you be able to rebuild or replace key property?

Floods and earthquakes require specialized coverage. Flood insurance is available through the National Flood Insurance Program. Sources of earthquake coverage vary by state. Ask your agent for help getting a quote.

A disaster can do more than damage your physical property. It can cause your business to shut down temporarily, generating a loss of income. You can protect your firm against income losses by purchasing business income coverage.

Most of the school kids in Moore survived the tornado thanks to the disaster plan the schools had in place. When the tornado hit, everyone knew just what to do. An emergency plan can save your business and your employees. Both OSHA and FEMA provide useful tips on how to draft a disaster plan.

Image Courtesy of [Dan] / FreeDigitalPhotos.net

Risky Business

Thu, 16 May 2013 12:07:46 +0000

Like most small businesses, yours is probably covered by a general liability policy. But have you actually read your policy? Plowing through a bunch of legalese isn't fun, but you do need to know what your policy covers. Take the first step by reading my introduction to the standard liability policy. If your company offers health insurance or other employee benefits you'll also want to read my article on employee benefits liability insurance. You'll be glad you have this coverage if your firm is hit with a lawsuit because of an administrative error.

Speaking of liability, you've probably read about the explosion that occurred at a fertilizer plant in Texas last month. The plant caught fire and blew up, killing 14 people and injuring over 200.

The explosion decimated the plant, and damaged or destroyed numerous homes and a few commercial buildings. The factory contained two fertilizers, ammonium nitrate (which is also an explosive) and anhydrous ammonium.

Clearly, fertilizer manufacturing is a risky business. While the factory owners couldn't predict the explosion, should they have considered the possibility that a disaster might occur? They don't seem to have done that. Many news outlets, including the Los Angeles Times, have reported that the factory had only a $1 million general liability policy. Liability insurance is supposed to compensate members of the public who have been harmed due to a company's negligence. The $1 million in liability limits won't go very far considering the number of people that were injured.

It is really sad that so many homes and businesses were built near the plant. I don't think the plant will be rebuilt but if it is, I hope it will be located a good distance away from homes and other businesses.

The incident has many people asking whether companies in hazardous occupations have an obligation to the public to buy adequate liability insurance. Granted, the factory owners in West could have purchased ten or twenty times the existing limit, and they still wouldn't have had enough insurance to cover potential claims. But ten or twenty million would be better than one million.

Government officials in Texas say that they limit regulation in order to support business. Is freedom from regulation more important than compensating people who have been injured by a business? A lawyer for one of the victims has called the plant owners irresponsible because they bought so little liability insurance. Is he right? What do you think?

Image courtesy of iStockphoto.com

Distracted Drivers, A Modern Menace

Thu, 16 May 2013 12:07:45 +0000

If you have ever been confused about the difference between an auto and mobile equipment (terms used in commercial auto and general liability policies), my article on mobile equipment should clear things up. Does your company rent autos? If so, check out my piece on "Questions to Ask Before Your Business Rents an Auto". This article can help you avoid costly mistakes when using rental vehicles.

If you regularly read online insurance publications such as Insurance Journal then you know that distracted driving is a hot topic these days. Much of the attention has focused on texting by teenaged drivers. However, in a survey conducted by the Pew Research Center in 2011 over 90 percent of the survey respondents between the ages of 18 and 49 admitted that they had engaged in texting while driving. This should give you pause if your firm employs workers that drive on the job. How do you think your auto insurer will respond if an employee of yours is texting and causes an accident?

I first became aware of inattentive drivers as a passenger in a carpool many years ago. When I looked out my window on our long morning commute I was amazed to see what other people were doing in the driver's seat. One guy brushed his teeth as he drove over a bridge in heavy traffic. Other people flossed, shaved or put on eye makeup as they drove.

My carpool days are long gone but there are still plenty of distracted drivers on the road. Nowadays, the main distraction is the cell phone. Many people find this gizmo irresistible. They know that driving and cell phones are a bad combination but they just can't put the thing down. Cell phone addicts have become such a danger on the highway that many states have passed distracted driving laws. Most of these laws ban texting and driving or the use of hand-held cell phones.

Distracted employees can be a menace to your business. They can cause auto accidents that result in damage to your firm's vehicles or that generate lawsuits against your company. Injuries sustained by distracted drivers can cause your workers compensation premium to go up. What can you do? Training employees about the risks of distracted driving is essential. You should also draft a written policy regarding cell phone use in vehicles. Useful tips about how to perform these tasks are available from the National Highway Traffic Safety Administration and the National Safety Council.

Distracted driving laws focus on cell phones but many other electronic devices can divert drivers' attention. I was shopping for a new car recently and was amazed at the number and variety of gadgets that are available. You can get a Bluetooth-enabled stereo, and power outlets for your laptop, iPod or cell phone. Other options include a satellite television and headrest monitor with a built-in game system. If cell phones have made us a danger on the highway, how will these gadgets affect our driving? Will we need laws for these things too? What do you think?

Today is National Healthcare Decisions Day

Mon, 16 Apr 2012 15:07:23 +0000

April 16, 2012 is the Fifth Annual National Healthcare Decisions Day. A day created by a coalition of health providers and insurers to remind the public about the critical importance of having advance healthcare planning.

If you do not have any form of advance directive telling your friends and loved ones how to make medical care decisions, you risk losing control of those decisions. "42% of Americans have had a friend or relative suffer from a terminal illness or coma in the last five years and for a majority of these people and 23% of the general public, the issue of withholding life sustaining treatment came up." We do not like to think about disaster, but planning can ease the burden on us and our family.

Advanced planning is important for business continuity as well. If you are a key person in the business and suddenly taken away, have you provided direction as to how to run the business or make decisions.

Good estate planning attorneys are not going to charge you extra for an advanced directive and/or living will as a part of the estate planning process. This is because the legally acceptable forms are free in order to encourage the public to plan ahead. The forms are free and encourage a frank and open discussion with your medical professionals and family about how you want to be cared for in the event of a serious illness or injury.

There is no excuse, download your state appropriate form, talk to your family and plan ahead.

Practical Workers' Compensation Manual

Mon, 26 Mar 2012 13:35:19 +0000

The Risk and Insurance Management Society (RIMS) is a great source of information for companies looking to control risk and control business insurance premium costs. The RIMS professional library is a terific way to learn risk and insurance management.

The Society frequently sends me e-mails about product offerings and I do not receive any compensation from RIMS. I mention their publications because I know they are well written and practical.

Workers' compensation is complicated. It is also mandatory. It is also one area of business insurance where proper preparation and implementation of good company policies can significantly reduce premiums. Often very simple bookkeeping or hiring changes can save 15-20% of premium dollars.

RIMS is offering a 2012 publication entitled Workers Compensation Management Program - Reduce Costs 20% to 50% at its store. "The book guides the user through each aspect of a workers' compensation program, to learn, step-by-step about a variety of techniques that show organizations exactly how to reduce workers compensation costs." If your company has a large workers' compensation premium and doesn't have a good handle on controling costs, this might be a resource for you.

The Butcher With the $1.5 Million Taste Buds

Thu, 22 Mar 2012 10:16:50 +0000

There is this agricultural board in the U.K. called BPEX(British Pig Executive) and it "represents pig levy payers in England. BPEX is focused on enhancing the competitiveness, efficiency and profitability for English pig levy payers and driving demand for English pork and pig meat products in Britain and globally."

Yeah, I'm not sure I understand all that either.

I probably would have little interaction with BPEX as I live in Ohio and my "bangers" come from Ohio. Our state is typically in the top ten in pork production (Iowa beats us every year). But, there are a number of news reports talking about the butcher with the Board whose taste buds are so valuable to them that they have taken out a $1.5 million insurance policy on his taste buds. Yes, when it comes to business insurance you can insure anything of value.

According to the BPEX "who's who," Mr. Keith Fisher is the Butchery Development Manager. He is a master butcher with a lifetime of honed taste buds. In a newspaper interview, Tina Mulholland of BPEX stated, "As a grandmaster butcher and the resident baconologist and head judge for Bacon Connoisseurs' Week, Keith's vast experience makes him the ideal person to lead the judging panel of tasters. As part of his role as head judge he and the rest of the panellists had to taste over 200 different cuts and cures of premium bacon for this year's award. As such, it was imperative that we protect his prize assets for the campaign."