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Construction Contracting risks for Workers Comp Quotes

Are Construction Contracting Risks hard to quote or impossible?

Working with artisan contractors for commercial insurance can be an exciting struggle. The benefit of working with companies that build or fix our homes and businesses every day is a rewarding challenge. That challenge can be tough to explain. Especially to someone who is just wanting to get their business quoted and move on with their day or with some one who has never experienced a claim. Below are some key things to consider when helping business owners search for commercial insurance.

FInd out just how difficult it is to get Workers Compensation Coverage for some contractors.

Why is contracting so hard to quote?

Contracting companies or Construction firms that perform building work represent some of the highest risk industries. They represent such a high risk because of the nature of work that is being performed. This means the potential for a claim to take place is high and the potential severity of that claim is also extremely high. Meaning the possibility of the claim taking place is high and when the claim happens there is a good chance it would be a severe and expensive claim.

What are the types of things that will cause a claim?

Construction and contracting see a variety of claims causes that make it a little scary for an insurance company. They are unique in that they have the ability to see virtually all types of claims you would see. Slip and falls, lifting strains, repetitive motion claims are ones any basic shop operation could have. Contractors also perform work outside of their shop, so motor vehicle accidents become a concern. Falls form heights can be one of the biggest concerns that can make a huge difference for most contractors wanting to get out of the state fund and with a competitive market carrier.

How can I set my firm apart from the rest?

As an Insurance Agent that specializes in hard to write workers comp, my approach when tasked with quoting a difficult scenario is to focus on the primary concern and risk. As a business owner, the first thing you want to look at is the biggest risk you have to your company which in turn will be the biggest risk to your workers comp carrier. The three biggest concerns being falls from heights, motor vehicle accidents and lifting exposures. This means any way you can limit the exposure or minimize the impact of these the better chance you have of getting quoted. Below are areas that you can look at:

As for height exposures: What is the maximum height in feet you work off ground level? The lower the number the better, but if you are doing work above ground level it is important that you know what the level is. Having a hard cut off point is important. Most importantly, how much opportunity do you have for work higher off the ground. If most of your productive work is less than 10 feet off the ground, but one small job a year is 25 or 30 feet off the ground, You may need to ask the business owner if it is worth paying more for insurance just to work this one job per year? Besides limiting operations, the business owner needs to comply with OSHA tie off requirements and they need to have strict protocols regarding work performed off ground level in their written safety program.

As for Motor vehicle accidents: Are you doing most of your construction work local or long distance? If working outside your local area, do you have multiple locations or crews based in different areas? This can sometimes be a way to limit having employees travel farther and limit your exposure. Besides limiting the travel area, check Motor Vehicle Records on all employees who will drive at time of hire and at least once per year. This is standard for most companies and your Commercial Auto Carrier is likely going to do this anyway. Reviewing and removing higher risk drivers from your driver list can help you with workers comp. Of course, it will save you money on your commercial auto policy ass well if you have one.

Lifting exposures: Generally, are your employees lifting over 50lbs on their own? If so, find a different alternative to lifting like a dolly or something to assist in the lift. That can also be a mechanical hoist or a 2 wheeler to move heavy items. It could also be requiring team lifting for objects over a certain weight. All of these strategies can limit this risk for your business. Safety programs are crucial to have in place for businesses dealing with heavy lifting. Accidents are eventually going to happen and when they do, a well-documented safety program can be the difference in being dropped for your carrier or not.

Working to improve these areas can help with many things for your construction business. Employees will see that you care for their well being, which in itself can be helpful in the quoting process. The safety protocols will help reduce your employees risk of a workplace injury and in most cases this can help the business get better, more aggressive quotes for workers comp insurance. I have seen in many states this savings can be over 50% for a carrier who has to go to the state fund vs the competitive market quotes. That’s like getting a half-off coupon for your workers comp.

What is EPLI Insurance?

EPLI is an acronym for Employment Practices Liability Insurance. EPLI is a form of professional liability insurance designed to specifically address the unique risks associated with hiring, employing, and terminating employees. The number of lawsuits filed by employees against their employers is on the rise. Employment Practices Liability Insurance coverage is a safeguard for employers in today’s litigious society. It provides legal protection for the business, the owners, the officers, the directors, and the other employees.

Some common types of lawsuits EPLI covers include:

Employee Discrimination
Wrongful Termination
Age Discrimination
Racial or Gender Discrimination
Breach of Contract
Sexual Harrassment
Emotional Distress

Again, anyone can end up filing a lawsuit and unfortunately anyone does. These lawsuits do not have to be legitimate in order to rack up enormous costs to your business. The two main costs come in the form of defense costs and the time it takes you away from your business to fight the accusations in court. Even though lawsuits are on the rise still seven out of ten businesses do not buy EPLI coverage. Of those that do not buy Employment Practices Liability Insurance coverage six in ten businesses think they are covered for this type of claim under some other type of insurance. Many think they are co9vered under their General Liability Policy. Some important things to think about when deciding to buy EPLI coverage are that businesses are three times more likely to be sued by an employee than to experience a fire. The average out-of-court settlement for an Employment Practices Liability Insurance claim is about $40,000. If the case actually goes to trial, the average award amount is $218,000, and nearly 10% of these cases can result in an award of more than $1,000,000. Again, the average cost to defend a wrongful termination or employment case is about $45,000. Employees file over 90,000 charges per year with the U.S. Equal Employment Opportunity Commission and employees win 70% of cases that go to a jury trial.

Policy language within an EPLI contract can vary significantly between insurance companies. Some polices will include specific policy exclusions or limitations on coverage during certain events such as a merger, an acquisition, a major restructuring, or a reduction in workforce. Many insurance companies also utilize a common clause within an Employment Practices Liability Insurance policy known as a Hammer Clause. This clause gives the insurance company the right to tell the insured that it wants to settle a claim for a set amount of money. The business must either accept the advice of the insurance company and settle the claim, or it runs the risk of having to pay the claim if the court rules in favor of the employee. These issues make it crucial to have a strong relationship with your agent. Like many types of insurance, you rarely think about it until you need it. Taking a little more time to make sure you are covered correctly can save you company thousands when a lawsuit does happen.

Workers’ Compensation Insurance Limits

Workers’ Compensation Insurance comes in two parts, coverage A and coverage B. Coverage B is technically called Employers’ Liability Insurance, but the 2 types of insurance are often generically referred to as workers comp insurance in common usage. With respect to employees injured on the job, coverage A (Work Comp) provides unlimited coverage of all medical expenses, a set percentage of lost wages (which varies by state), a lump sum for disabling injuries as well as a disfigurement and death benefit. Business owners often confuse the coverage that part B limits. This effects workers comp benefits, but workers comp benefits are established by the individual state’s statutes. They generally cover all medical expenses when they are implicated. The limits on a policy only relate to employers’ liability claims.

Thus, it is important to know when employers’ liability limits could come into play. As written about in a previous blog entry, the most common types of employers’ liability claims are as follows:

(1) Third party claims: these claims are generally brought about by an injured employee against a manufacturer of the object causing the employee’s injury. The manufacturer then brings a claim against the employer for contributory negligence.

(2) Dual capacity claims: This is similar to the above, but it comes up when the employer is also a manufacturer. If an employee is injured by a defective product manufactured by his or her employer, he or she might bring a product liability claim against the employer in addition to claiming workers’ compensation benefits.

(3) Loss of consortium or other services to family members: loss of consortium and other claims such as modifications to homes or lost parental services resulting from a workplace injury can be covered.

(4) Consequential bodily injury: claims by the spouse or other family members of an injured employee arising from the injury such as a heart attack due to the stress of the news of the employee injury.

(5) Intentional acts/torts by the employer: claims covered in some jurisdictions such as knowingly allowing employees to work in unsafe workplace conditions.

Employers’ liability claims are rare. However, they can occur and are often costly when they occur. Employers’ liability coverage can cover damages/judgments, settlements, legal defense fees and other court costs. Increased employers’ liability limits generally only increase the cost of the workers’ compensation insurance policy by around 1%. Statutory minimum limits are usually (in all but a couple states) $100,000 bodily injury by accident (each accident), $500,000 bodily injury by disease (policy limit), and $100,000 bodily injury by disease (per each employee). These limits can also be increased to $500,000/$500,000/$500,000 or $1,000,000/$1,000,000/$1,000,000 in almost all cases as well as $2,000,000/$2,000,000/$2,000,000 is sometimes available.

Now that we have created a better understanding of why increased limits could come into play, what are the most common reasons for a business owner to need increased employers’ liability limits? The most common reason to get increased limits is probably that they are required by a contract important to a business owner. This is a common request, and it is the most common reason our agency sees for increased limits. However, there are several other good reasons to use higher than statutory minimum limits. To include a workers’ comp and employers’ liability policy under most umbrella policies, the limits generally need to be at least $500,000/$500,000/$500,000 and sometimes as high $1,000,000/$1,000,000/$1,000,000 limits. Another good reason to have increased limits is for businesses which are in industries that are more likely to have an employers’ liability claim arise. Such industries are generally higher risk industries which are more likely to experience devastating claims or manufacturing industries. Devastating claims are more likely to lead to loss of consortium or other services by family members type claims. Additionally, manufacturers are most likely to risk claims from disease exposures or dual capacity products liability type claims from employees. This should provide an understanding of when it is worthwhile to consider purchasing a slightly more expensive workers comp policy.

What is Inland Marine Insurance?

Also referred to as “Equipment Coverage”, Inland Marine Coverage is coverage specifically for property that is likely to be moved or in transit. It is a highly specialized type of property that requires a unique valuation. This can include products that you are having shipped across the country, but it can also apply to a tractor. This type of coverage is essential for many business owners and the best way to determine if you need it is to have a strong trusting relationship with your insurance agent and tell them everything about your daily operations.

Now many business owners have an initial reaction to being offered inland marine coverage. That reaction frequently is that this coverage does not apply to my business. In many cases a business owner feels their insurance agent is just trying to tack on an extra coverage. A coverage that they do not really need and in some cases, they might be correct. Again, if you have an insurance agent that you trust they should be able to explain this coverage and help you determine if it is right for you. Any agent worth their weight will not be mentioning a coverage that has no benefit to you the business owner. You might have a difference of opinion about what the risk is, but an agent should never recommend something you do not need.

The best way for an insurance agent to stay in business is to keep you the customer happy. Keeping you happy occurs by saving you money on your policy up front, but also in making sure you are fully covered when incidents do occur. This is where you may differ in opinion about the risks your business faces and about the amount of risk you as a business owner are willing to take. It is the job of the insurance agent to make you aware of these risks and offer the products for you to protect your business to the fullest.

Now I speak about this relationship with your agent, because Inland Marine Coverage is a specialized product in the insurance industry. It is very important for some business owners to have, but many business owners do not carry it and many do not understand how going without it puts their business at risks. First take the example of a construction business who has just a general liability and workers compensation policy. This is typically the bare minimum to get your business up and running. If your construction business is operating away from your business residence than all of your tools are not covered under your either of the policies you have in place. If you were to severely damage a tractor or some other type of expensive equipment than you are responsible for any repairs that might occur. Say you have an expensive piece of machinery that you cannot operate without. If you do not have cash on hand to repair or replace that piece of equipment what is your business going to do? If you have an Inland Marine Policy in place than you can replace that piece of equipment through your insurance policy.

Again having a good relationship with your agent and speaking honestly with them about your daily operations can go a long way towards determining whether you need Inland Marine Coverage. Having open and honest discussions with your agent allow you to determine what risks you have and how much risk you are willing to take as a business owner. The amount of risk a business owner is willing to take is different for every business. Your agent works with all types of business owners on a daily basis. If you are the type of owner who is willing to take on more risk, you should make that known to your agent. At the same time you should partner with an agent you trust and listen to them when they recommend some type of coverage. If they are the type of agent you should be doing business with than they will not be recommending something that is not in your best interest.

What is the Assigned Risk Provider?

The assigned risk provider is also frequently referred to as The State Fund or The Pool

Workers’ Compensation Insurance Coverage is required by law in nearly every state in the country. The basic purpose of the Workers’ Compensation Insurance is to provide wage replacement benefits and medical treatment for employees who have been injured on the job. Workers Comp prevents the employer from bearing the costs of injuries that occur during normal business operations.

Each state has their own method for how they go about determining rates on workers’ compensation class codes. Most states partner with the National Council on Compensation Insurance (NCCI) to determine rates for different class codes. Some states; like Indiana for example, have their own rating system administered by a government organization. Most use the basic guidelines of the NCCI system.

Every state also has a different way for how they go about setting up a provider of last resort for the employer’s of the state. This provider of last resort is also referred to as the assigned risk provider, the state fund or sometimes as the pool. This provider is designated as the provider of last resort for businesses who cannot find coverage through the open market. It is typically more expensive from this provider for a number of reasons.

Businesses that end up having to purchase coverage from the assigned risk provider, may not be able to find insurance coverage for a number of reasons. Lots of times it is because the business operates in a classification code that carries more risk than most carriers are willing to take. Sometimes it is because that business has had too many claims within a short period time. It also is frequently because the business just does not generate enough income for the amount of risk in their industry. States usually have a requirement that the business has to try to obtain coverage from a certain number of providers on the open market before they can apply to the assigned risk provider. Usually that number is two or three providers.

There are three main ways states go about providing employers with an assigned risk provider. Some states provide their own fund, some use NCCI and some have a partner carrier who guarantees coverage for employers who cannot find coverage on the open market. Typically states who have a strong assigned risk provider who competes with the open market enjoy the best rates on workers’ compensation insurance. There are different ways to provide this strong provider, but typically the stronger this provider is the lower the rates employers pay.

Utah is an example of a state who has its own fund. This fund is called the Workers’ Compensation Fund. This fund dominates 57 percent of the market and is the main reason Workers Compensation Utah enjoys some of the lowest rates in the country for workers comp coverage. Colorado has a partnership with a company called Pinnacol. Pinnacol was begun around the time workers’ compensation became a requirement in the state. It was designed in partnership with the state government so there would always be someone guaranteeing coverage and competing to keep the rates reasonable for the employer’s of Colorado. Both of these states enjoy some of the lowest rates on Workers’ Compensation Insurance because of their strong Assigned Risk Providers. New York is an example of the other end of the spectrum. New York has its own state fund administered as a non profit agency. New York also has very difficult regulatory compliance regulations for workers comp. These regulations force many carriers to simply not offer coverage in the state. All of these factors combine to cause New York to have some of the highest workers compensation rates in the entire country.

So administering the state fund is left up to each individual state. Again there are three main ways the states go about doing this. Some handle it themselves, others partner with an outside carrier and some contract this service out to NCCI. All three ways can be effective ways to keep costs down for the employers of that state. The strength of these pools goes a long way towards determining what employers across the state pay for workers compensation coverage.

Business Personal Property Insurance

Also referred to as ‘Contents Coverage’

For most business owners Business Personal Property Insurance is one of the most overlooked coverage options out there, in my opinion. Often times when I ask potential insureds if they want this coverage they quickly say NO I just need general liability. This may be ok for a few segments of business, but overall this is actually a really important coverage that doesn’t cost much more. What most business owners do not realize is that around 60% of companies that do not carry this coverage, do not reopen after a catastrophic loss. What exactly is Business Personal Property Insurance Coverage you ask? Business Personal Property Insurance (Contents Coverage) provides coverage for furniture, fixtures, merchandise, materials and all other personal property owned by you and used in your business. Coverage is generally at replacement cost. Now try to envision what this means to your business. If you are a contractor and have a shop that houses all of your tools, unscheduled equipment, etc. A loss wipes out your shop whether it was from fire or something else. Most of your tools and other items are now not usable. What do you think the cost of replacing those are without insurance coverage? This number will vary depending on the size of your company but when you start buying or adding up the value of everything you had this number escalates pretty quickly. If you had this coverage you probably have a $500 deductible but that will pale in comparison to the actual cost of replacing everything you need to function like the day right before your loss.

Business Personal Property Insurance

Examples of the need for Business Personal Property Insurance

Lets take a look at a different type of business and show the importance of Business Personal Property Insurance Coverage. Take a restaurant for example. Lets say you open a restaurant. You are new and business is slow at first. Money is tight due to all of the start up cost associated with getting a business off of the ground. With buying insurance for possibly the first time quite a few owners are caught off guard by this cost> they may want the bare minimum to get coverage in place to satisfy a lease, etc. Only give me general liability is what they will tell us. Its the only thing that is being requested from my landlord or lease. We recommend additional coverage that is vital in this type of operation and that is furniture, fixtures, kitchen equipment, etc. They decided well I will just add that later. Business owners are very busy especially at the start up phase and they continue to say lets just wait or I don’t have time to deal with it right now. That is a valid point, but imagine if they are four months in and they have a fire that wipes out their restaurant. They only have liability coverage. All of a sudden the dream they had of owning their own business is suddenly snatched away from them. When you way the cost of having to replace everything out of pocket to get back open, it can be crippling to your business.

The cost of this coverage varies with the amount you need to cover. For restaurants specifically, carriers often have a section where they can put the vast majority of the amount you value into a section called restaurant equipment. This is rated better than just blanket business personal property coverage and will make this coverage even that much more affordable.

At the end of the day at least get this coverage priced along with your general liability. That way you can make an educated decision on whether you want to further protect your business. It is after all your lifelong dream of being a business owner. Do you really feel like rolling the dice with your dreams.

6 Types of Insurance every Home Healthcare Small-Business needs.

Home Health Care is one of the fastest growing industries in the country. With the baby boomers moving up in age, the need for these services is growing larger every year. The need for proper insurance in these businesses is also becoming more important. For a business owner, most of the clients in this industry are nearing the end of their life. Most are not in good health. Many get hurt or are sick frequently. Protecting your business from mistakes or court costs is crucial in this industry. Below are 6 types of coverage every Home Health Care Business should carry.

Home Health Care

General Liability
Professional Liability
Business Personal Property
Hired and Non-Owned Auto
Workers Compensation
Commercial Crime/Employee Dishonesty

General Liability

General Liability (GL) Insurance, in most cases, is the most important insurance coverage a home health care business can obtain. In most states it is required by law and it is usually the first line of insurance purchased by a business. It protects your business from most liability exposures other than automobile and professional liability. Other coverages are usually added to this depending on the business needs, but all businesses need General Liability. Unlike Workers Compensation Insurance this coverage protects your business from liability to third parties.

Professional Liability

Professional Liability Insurance is coverage for professional businesses that give expert advice or provide technical services for a fee. It is designed to help protect a business against any claims of negligence. Therefore, professional liability insurance helps business owners defend themselves from lawsuits and helps pay the damages awarded in a civil lawsuit. Professional liability insurance is commonly referred to as errors and omissions (E&O) or medical malpractice.

Business Personal Property

Business Personal Property Insurance is usually an addition to a Commercial Property Insurance Policy. It protects your business from damages to your buildings and property of your business. The personal property of your employees and the personal property of others you might be responsible for. In most policies it also provides additional coverages including: debris removal, pollutant cleanup, preservation of property, fire department service charges, increased cost of construction, electronic data, newly acquired or constructed property, off-premises property, valuable papers and records, outdoor property, and nonowned detached trailers

Hired and Non-Owned Auto

This type of auto insurance coverage is for when employees of a home health care business use their own vehicle or a rented vehicle to do company business. This can be as simple as an employee running to the grocery store to buy snacks for a meeting, an employee using a rented vehicle while away at a conference or using a rented truck to transport your equipment.

Workers Compensation

Workers’ compensation insurance differs from most other forms of business liability insurance. That is because it is specifically designed to cover your employees and not third parties. Workers Comp covers insurance claims by employees in the event they are injured on the job. The function of workers compensation insurance is to insure a business is not liable for most accidents that occur on the job and employees have comfort knowing their doctors bills and some lost wages will be covered if they are hurt on the job.

Commercial Crime/Employee Dishonesty

This type of insurance coverage is mainly for employee theft of money, securities, or property. Most policies include some or all of the following types of employee crimes: forgery or alteration, computer fraud, funds transfer fraud, kidnap, ransom, extortion, and counterfeit money. It is usually written with a per loss limit, a per employee limit, or a per position limit.

Lawncare & Landscaping

Lawncare and landscaping businesses are similar yet very different.

As a business owner of a lawncare or landscape company you might have had to shop for insurance. You might have had to do this to either to meet state requirements or to make sure your business is protected just in case an injury occurs to an employee. Recently I have taken many phone calls from owners of small lawncare or landscape companies that have been asked by a client, sometimes even a home owner to provide proof of work comp coverage before they are grated the job or bid. Whether you have a small or large lawncare company chances are you have had to make a call or two to obtain a work comp insurance certificate.

When going through this process have you ever wondered how your company is classified? There are two class codes that contemplate lawncare and landscaping, 9102 and 0042. The most qualifying question to determine what class code you are in is, does your company primarily engage in maintaining already existing lawns and garden beds or is your business designing and installing landscape or flower beds. Another deciding factor is if there will be any installation of paving stones or rock beds. The class code 9102 is designated for lawncare or maintenance of existing lawns. Snow removal will also be covered under 9102 and should be discussed if there is snow removal operations in the down season of lawncare. 0042 class code is designated to design and installations of lawns and beds. Any sod laying or pavers would also fall under the 0042 class code. However both class codes do contemplate the applications of fertilizers and insecticides.

One aspect of both classes of business, that I feel I must bring up, is tree trimming. If at any time there is tree trimming the class code 0106 would need to be added to the work comp quote. Designated payroll can be added to that class or it can be added on an “if any” basis. I also must fully explain that the 0106 class code is considered high risk. It is very difficult to place with an insurance carrier.

When calling in or submitting an online quote, the first couple of questions back to you will most likely be: How many employees not counting the owner are there and what type of lawncare are you providing? If the answer to the first question is there is only the owner, which some times is the case, that would be an owner only policy. If there is one employee or more there will need to be included a total annual payroll. At that time we would figure out how to best classify you. lawncare or landscape will find the best price and insurance carrier for your company.

Attention: You’re facing a nonrenewal.

Your current insurance policy is being non-renewed due to….

You may have received a notice that starts, sounds or maybe feels something like the title above. Insurance cancellations, despite popular belief are actually more common than you would think. They are very serious and should be responded to with action swiftly, but they are not always an awful “kiss of death” from the insurance industry. Some business owners I have worked with seem to think this is so. On the other side, it is something you need to respond with action to regardless.

We will discuss today most common insurance non-renewal or cancellations we see and how you should respond to the scenarios:

…..Your reason for nonrenewal for underwriting reasons

What? Are you kidding me? Yes this is by far one of the most vague reasons, but more common than you think and as an insurance agent this tells me basically no reason why you are facing a nonrenewal. Generally this does mean one of two things. Either something about your operations (claims history, etc) or something in particular about your business makes the perceived risk for the insurance carrier less than satisfactory in their review. It could mean the company has changed their underwriting guidelines as a whole, which just happens to mean your company doesn’t fit with their strategy. Simply put insurance companies generally know what their company is good at and what they are not. Some insurance companies prefer to write roofing companies, but wont write clerical offices. many are just the opposite. Most companies fall in the middle which is why this becomes very common.

For Example: Transportation claims have been a leading cause of claims for several years, especially relating to workers’ compensation insurance. As a result in the last few years several insurance carriers who in the past would write these types of accounts have now decided they were no longer offering coverage for companies in your industry or class code. For some insured’s its no surprise when their claims have shown them good reason for this, however some trucking companies who have done well at controlling claims would see non-renewal notices for this type of reason. They were not seeing the non-renewal because of their claims or experience, but more because of the industry as a whole not performing well. This can be discouraging for these types of clients. Clients who take pride in controlling their claims and being very marketable risks to insure. These are the types of clients who need an experienced insurance agency on their side. Preferably one with several market alternatives to move to when this happens.

What to do?

Discuss with your independent insurance agent what other carrier options are available. Start this process soon so you can make an informed decision on the direction you want to go without being pushed into a last minute decision. Requesting claims history reports and Experience rating worksheets from companies you have been insured with for the last 5 years is a good start as most companies will need this in order to quote.

Nonrenewal because Agent is no longer representing this insurance carrier…

Insurance companies and agencies have contracts come and go fairly often. More often for some agencies than others. This doesn’t mean your agency is not a good agency or that the carrier you are insured with is not a good carrier to do business with. It just means that one or both of those parties have decided they are not the best partnership at this time. This decision has absolutely nothing to do with you as the business owner with the exception that you are part of the pool. Agents within the industry call this the agents “book of business”. Sometimes, for one reason or another, the agency or carrier has decided that the partnership does not fit one o f their needs at this time.

What to do?

Decide who you like more. If you have not been happy with the agency, call another agency. Especially one who has access to several commercial markets. A lot of times your policy could be moved into another agency book with a just few forms signed.

If you like the agency more than you like the carrier, discuss with your agent the alternatives they have to offer so a replacement option can be found well in advance of your renewal date.

Nonrenewal due to Claims or Non-Renewal Due to payment history issues

Don’t be discouraged. We all have set backs and things come up with payments. Insurance claims are the reason we buy insurance. These statements are not to enable you to continue on your path, don’t beat yourself up, but action and change is needed in these situations. Otherwise you are going to see the same situation in the future.

What to do?

Nonrenewal due to payment issues are a sign that you want to look at things. You might have an accounting back-log or issue that’s delaying your payments (Fix the back log issue and prioritize making payments on time). You might have cash flow issues from high accounts receivables (manage this aggressively-maybe even consider outsourcing to a collections agency if need is to that extent). Your sales are just low throughout the year or part of the year (work to improve sales or drive down costs more aggressively-most importantly budget for your known operating costs like insurance). These are the most common reasons we see cancellation of insurance. The seriousness of this issue extends into all aspects of your business and is a reason why several studies point to poor accounting practices as a leading reason why many small businesses fail.

A Non-Renewal due to claims do happen often. There is really no one answer to how to handle these because the scenarios are always different. Some carriers are more aggressive than others. Some are more reactive while others are more proactive. This is really where having an agent that understands these differences in carriers is vital to helping diagnose the best game plan for your business. For instance, if you had one claim that blew up into a much bigger issue and you have made the necessary corrective actions, most of the time that is not going to be hard to overcome in finding a competitive replacement for coverage.

But when you have shown a trend of several claims, either big or small, corrective action must be taken. If these incidents have similar reasoning than from the carriers perspective it may point to poor claims management. If sufficient corrective actions have not been made than the claims are likely to create the same or worse problems for you in the future. These types of issues must be addressed or the problem with claims and obtaining insurance will get worse over time.

Overall a nonrenewal of your insurance should not be taken with a grain of salt, but are also not a reason to close your business. The issues are sometimes within your control and many times they are something no one could prevent. The key to is to manage and react promptly. Get past the problem with a well thought out game plan. The help of a good agency is crucial to deal with these problems for your business.

Seven Insurance Coverages Every Restaurant Should Carry

I am opening a restaurant, what Insurance do I really need? This is a question insurance agents get asked a lot. Not just from restaurant owners, but from all small business owners. The answer to this question is like many things in life; It depends. The answer to this question will be different if you are a Painter, a Dry Cleaner, or even an Artisan Contractor.

There are many variables that go in to running a restaurant and those variables bring on completely different risks.

First and foremost the restaurant owner needs to determine what class code their business will be in. To find this out you will need the help of an experienced insurance agent. It is very important to be open and honest with the agent about what your restaurant will and will not be doing. For example, if you are a bar that stays open until 2 AM you will be in a different class code than a diner that is open from 6 AM until 2 PM. The risks are different, so the businesses are classified different. Furthermore, if you are not honest with your agent about serving alcohol they may leave out Liquor Liability Coverage. If an incident occurs without coverage it may be a loss so large it forces you to close permanently.

So once a business is classified correctly there are seven main coverages every restaurant should carry. Some restaurants will need all of these coverages and more. Some restaurants will need only a few coverages. Again, that is where the help of an experienced commercial insurance agent is important. This list is a great starting point for protecting any restaurant.

General Liability
Liquor Liability
Commercial Property
Hired and Non-owned Auto
Commercial Crime
Workers’ Compensation
Umbrella Policy

General Liability

General Liability (GL) is often referred to as the first line of defense in any good business insurance policy. A GL policy protects a business against liability claims for bodily injury and property damage as a result of normal business operations. It also covers some types of advertising liability. This can be as simple as someone slipping and falling on the way to the bathroom to another business claiming you stole their advertising slogan. There are exclusions in every policy and not every carrier has the same exclusions. Reading your policy and consulting with your agent are important.

Liquor Liability

Liquor Liability is designed for businesses that sell or serve alcohol. If you do not plan on selling alcohol this is not necessary for your business. In many states, business are required by law to carry this coverage. Liquor liability covers liquor related instances including bodily injury, mental anguish, psychological damage, assault, intoxicated employees and property damage.

Commercial Property

Regardless of whether you own or rent the facility your restaurant is located, property insurance is an essential part of protecting your restaurant from disaster. Commercial Property Insurance covers losses and damages to a companies property including buildings and permanent fixtures, inventory, furniture, equipment, personal property, signage, fences, and even landscaping.

Hired and Non-Owned Auto

One risk that many restaurant owners forget about is when their employees are using their personal cars for business purposes. This is where Hired and Non-owned Auto Coverage is necessary. Many restaurant owners think if they do not offer delivery services they do not need Commercial Auto Coverage. That is not always the case. Hired and Non-owned Auto Coverage kicks in when your employees use their own vehicle or a rented vehicle not owned by the the company. The employee could be using their vehicle for something as simple as going to get change at the bank. Regardless of how small the activity may seem, when the employee is using any vehicle to do business activity you are liable.

Commercial Crime

In today’s day and age the risk for credit and debit card fraud is very high at a Restaurant. You and your customers are putting a lot of faith in the people you hire to not steal their personal credit card numbers. For this reason it is necessary to carry Commercial Crime Insurance. This coverage provides coverage for criminal acts committed by you or your employees. These can include employee dishonesty, forgery, computer fraud , funds transfer fraud, kidnap, ransom, extortion and money laundering. Depending upon the policy it will pay to defend you at trial and some fines or judgments awarded by a court of law.

Workers’ Compensation

Workers’ Compensation Insurance offers coverage similar to General Liability. Workers Comp is designed for your employees instead of third parties. Work Comp Coverage is frequently referred to as the “exclusive remedy”. This means employees give up some rights to sue for injuries occurring on the job in exchange for guaranteed benefits like lost wages and coverage of medical costs. Employers gain the piece of mind that they will not be sued for most accidents occurring on the job unless the business is intentionally negligent.

Umbrella Policy

An Umbrella Insurance Policy is a great way to provide an added layer of protection to your business. The coverage is a policy that goes over the top of other insurance policies for a rainy day. Basically, the Umbrella Policy will provided higher limits of coverage when a large claim occurs. Think about the size of a potential claim if your restaurant caught on fire while people were inside. This could easily lead to you reaching the limits for General Liability and Commercial Property Coverage. This type of situation could easily exceed a typical $1,000,000 occurrence limit for those underlying policies. This is when the Umbrella policy would kick to provide additional coverage over and beyond those limits.

In most cases these policies can be bundled together under a Business Owner’s Policy (BOP). Most insurance carriers like to offer policies in a bundle because it brings them more business and allows them to get better prices for the business owner. It also ensures business owner’s are completely covered with no gaps in their coverage. So when you go out looking for your restaurant’s insurance policy these are seven insurance policies to consider when protecting your restaurant.