Workers’ Comp Claims Can Cost You
Losses of productivity and high insurance premiums aren’t the only repercussions of a workers’ compensation claim. If your indirect costs exceed your direct costs, you could end up paying huge out-of-pocket fees. “You’ve got to understand the financial impact of one claim and how it affects the profitability of your company,” explains Bruce Eades of Insurance Office of America. In his presentation at NATE UNITE 2014, Bruce discussed an actual case study for a company where they incurred $83,000 in direct costs and $93,000 in indirect costs, which the insurance didn’t cover. Direct costs include your premiums, deductibles, medical bills, training, safety equipment, and safety director; whereas your indirect costs include things such as the increase in insurance premiums, experience modification increase, loss of production, legal feels, clean up cost, overtime, additional administration fee, training new employees, repair and replacement of damaged material or equipment, and many more. Bruce illustrated with an example what the cost was for an actual company with a workers’ compensation claim. “Mitchem has a $9,855 worker’s comp claim. This one claim drove his mod (experience modification) up 6.4%. The financial impact is this: when it hit his mod the following year, indirect costs increased $4,693. It’s like a DUI—it’s not going away. Over three years, that claim has cost him over $14,000.” But workers’ compensation claims and accidents affect your productivity levels also, which is why safety training and proper equipment are extremely important. “When a guy gets a cut on his finger—what happens? It shuts the whole job site down for the rest of the day. You have to take him to the quick care, and now you have to pay the guy time and a half to get the job going,” Bruce explains.
Why Cyber Security & Insurance is a Must-Have for Community Associations
Community associations, including condo associations and HOAs, may not realize the extent of their vulnerability when it comes to cyber crime. Just as with any other small to mid-sized business (SMB), associations can be the target of malware infections and other cyber threats. In fact, SMBs suffer 58% of malware infections, according to a recent report released from Verizon. Furthermore, not only are small businesses being hit by hackers, the attacks are costing them a lot of hard-earned cash. In 2017, average malware-related costs for small and medium-sized businesses included $1,027,053 due to damage or theft of IT assets, and $1,207,965 due to disruption to normal business operations. One of the reasons SMBs are so vulnerable is because they simply don’t have the same resources large corporations do for cyber defense, but they do possess the valuable data cyber criminals seek. Community associations particularly keep valuable data on their computer systems, including homeowners or condo owners’ bank accounts and routing numbers, credit card numbers, Social Security numbers and email addresses. Cyber criminals with this data in their hands can steal identities as well as funds. How do hackers gain access to small business networks in the first place? The number-one tactic is via email, or, more specifically, email attachments. According to the Symantec’s 2018 Internet Security Threat Report, 88% of malicious emails use malware-laden attachments to ensnare their victims. There are also other ways data gets into the wrong hands, including: A computer malfunction that inadvertently distributes a community association’s confidential information in a mass email or on printed material, or posts of sensitive data on a website. A cyber criminal who hacks the association’s computer system and gains access to the association’s bank accounts. An association employee’s or board member’s iPhone, laptop or USB flash drive containing sensitive member and board executive session information is stolen. A hacker breaks into a vendor’s software program that records the association’s payments and card transactions at the point of sale. A vendor’s employee scans the association’s credit card information and sells the information to a third party for illicit purposes. Board Members Can Be Liable Community associations and board members can land themselves in hot water and find themselves liable if a cyber attack occurs. In addition to the loss to the association if funds are stolen, there may be compensation to owners if thieves steal their funds or personal information. There is also the expense to defend a potential lawsuit and resulting reputational damage to the association. Penalties may also be assessed if the targeted association failed to comply with state data-protection statutes. These statutes vary, which is why it’s important for an association to understand its obligations under the law. The Importance of Cyber Security To help mitigate risk, it’s important for the association to have a cyber security policy in place. This includes: Review governing documents and local laws. These official documents will set up a foundation for adding a new cyber security policy. Determine which individuals will handle the data and which individuals will ultimately manage cyber security. Keep close tabs on who gets access to sensitive data and who gets administrative privileges. Outline a plan of action if security breaches or criminal hacking occur. Set up a list of rules for using association mobile devices or computers to ensure that unauthorized people will not be able to access confidential information. Establish a data breach plan. To prepare for a potential data breach, there are several resources from trusted authorities like the Federal Trade Commission (FTC). The Online Trust Alliance has an online guide about data breach preparation and the FTC offers resources that explain the process of securing association data and protecting customer data. Provide board members with a set of guidelines. These cyber security principles can help community associations better understand new policies and see how to respond to potential cyber attacks and data breaches. They are key to bringing everyone onto the same page regarding cyber security policies and procedures. Teach residents about cyber security. Educating residents about cyber security should be a priority for the association. This can be done via the community’s newsletter, emails or letters directly to residents, along with tips posted on the community website. Ensure that the association software is secure, with features that defend against malware and protect sensitive and confidential information. This includes creating strong passwords, updating software regularly, investing in an anti-virus solution, encrypting all data, and ensuring regular back-ups are being made, among other measures. Make sure the management company will not be sharing the association’s private data with third parties or storing data on servers that are shared with other businesses or clients of the data host. Secure Cyber Liability Insurance In addition to having a cyber security plan in place to help mitigate the risk of a breach, it’s also critical for an association to carry Cyber insurance. Note that General Liability insurance does not cover the impact of a data breach on the association. A Cyber policy includes first-party and third-party coverages. First-party coverage is for losses and damage to the business, while third-party coverage is for losses that an outside entity incurs due to a cyber event. A policy can be designed to pay for first-party expenses that include: Legal and forensic services to determine whether a breach occurred and assist with regulatory compliance if a breach is verified The costs involved to notify affected customers (homeowners, condo owners) and employees Customer credit monitoring Regulatory defense & penalties – coverage for defense costs and fines or penalties for violations of privacy regulations Crisis management and public relations to educate customers about the breach and rebuild a company’s reputation Business interruption expenses as a result of the breach Cyber extortion reimbursement for perils including credible threats to introduce malicious code; pharm and phish customer systems; or corrupt, damage, or destroy your computer system A Cyber policy can also be designed to pay for the following third-party expenses: Judgments, civil awards, or settlements a client is legally obligated to pay after a
7 Nonprofit Insurance Tips You Can’t Afford to Miss
For-purpose organizations are guided by mission, vision, and passion to realize a better world. They’re enthusiastic about what they can offer to individuals and communities. New nonprofits, especially, have a heightened sense of urgency and excitement for what they are setting out to do. Unfortunately, that excitement can be foiled by poor decisions or lack of consideration about accounting, technology, and insurance. Well-handled administrative tasks, however, can actually allow an organization to amplify its impact. Of those back office operational areas, insurance can be a particularly glaring blind spot for leaders of new nonprofits. Here are seven ways you can build an effective and valuable insurance program at your nonprofit. 1. Start early While insurance coverages such as general liability and directors and officers liability can represent a larger percentage of a young nonprofit’s budget, starting your insurance program early can help in two key ways: (a) Building an insurance history from the beginning qualifies you for future coverages and policy limits that growth and expansion might require of you (i.e. to satisfy municipal contracts, qualify for grants, or attract employees, board members, and donors). It also helps you qualify for the best programs, assuming your payment and claim history are healthy. (b) The earlier you have coverages in place, the easier it is for insurance to be a regular part of your annual budget. The expense will not come as a shock later in your organization’s life. 2. Budget appropriately New nonprofits often come to me without having budgeted sufficiently for the coverage they need. There is an expectation of cost that is often unrealistic. Make sure to go through the quoting process while planning initial budgets so you and your team have realistic expectations. A basic General Liability and Directors and Officers Liability package will cost a minimum of $1,200 assuming you’re a small office-based association or foundation. More than likely, if you are a startup 501c3 that provide direct or referral services, your minimum initial costs will start closer to $2,000. If your organization works with at-risk populations, you will need to consider professional liability and abuse and molestation liability. Costs depend on the type of and extent of the work you do. 3. Focus on the tangible, not the unpredictable I get this question all of the time: “What coverage do I need?” The implication is this: “Can you please predict what kind of claim we’ll have so we can buy only the policies we’d need to address that thing that will happen?” The better approach is to focus on providing coverages that address your operations, your people, and your assets (physical, digital, intangible). Construct your program to provide cover over those three items, rather than on the likelihood of a claim. A prime example in our digital world is cyberliability insurance. A client might ask to predict the likelihood of a data breach. Instead, the client should consider that the nonprofit has personal information on donors or clients spread among computers, servers, and paper files. Focus on how to cover your programs, your people, and your assets and the unpredictability of a claim event will be less of an issue. 4. Instill a culture of care By being mindful of risk management, you’re instilling an overall culture of care at your organization. This reaches beyond your staff and into the community you’re trying to reach. My own unscientific observations tell me that nonprofits that place a priority on risk management (including but not limited to insurance) also tend to grow and perform at a higher level over time. There is almost a directly proportional correlation between safety minded nonprofits and a culture that demonstrates deep care for both internal and external stakeholders. 5. Protect your vision As acknowledged above, nonprofits are normally driven by purpose and vision. Most nonprofits are created to fill a gap in services to a specific community. Nonprofits represent a promise to help solve problems. Proper protection helps your organization make good on the promise to fulfill your mission and vision. Insurance is a tool that protects your promise in the face of an unexpected claim event by providing funds to replace assets, defense costs in the event of a lawsuit, and guidance throughout the claims process. 6. Improve your best practices When I go through the insurance application process with a new nonprofit, I get these reactions: “Huh… I hadn’t thought of that,” or “I guess maybe I should get background checks for mentors of teenagers!” or “Should we really check driving records of people who drive elderly individuals around?” Insurance forces organizations to ask important questions that might not have been asked previously. It highlights ways for your organization to improve upon its best practices. 7. Prepare to scale as a business A nonprofit, in the end, is a business. To scale, it is vital to handle back office processes well and responsibly. Accounting, fundraising, insurance, and technology all require regular maintenance and appropriate respect. It’s amazing how often poor business practices sink an organization. Consider that local restaurant that served delicious food (for about 9 months and then shuts down). The cooking was incredible, but the accounting and staff management were horrible. Therefore, the community suffers a lack of the food it loved. The same thing can happen with a nonprofit. If you have a world-changing vision and all the enthusiasm you can muster but do not take care of the basic details of running a business, your growth will be hindered. Ultimately, insurance is a business necessity. But it can also be a vital tool if you approach it with the correct mindset. While it is important to weigh costs and prioritize which coverages you might or might not need (with the help of your insurance professional), it is more important to keep these seven principles in mind through the life of your nonprofit.
Management and Professional Liability for Real Estate Companies
Real estate companies: here’s the need-to-know about management and professional liability The real estate industry truly knows the meaning of highs and lows. When the market is strong, deals are abundant, revenue growth is prolific and competition is fierce. When the market is weak (or worse, recessed), investors are both timid and scarce, receivables are uncertain…and growth can stagnate. But regardless of the market direction, companies in the real estate sector face the constant threat of legal liability. The market direction dictates the nature of the threats that arise. For example, when conditions are good, competition brings with it tortious interference allegations. More work can also mean a higher chance of errors or omissions in your work. On the flip side, when conditions are bad, financially strained investors are more likely to file lawsuits. Tenants unable to meet their obligations can lead to torpedoed deals or risky eviction proceedings. Our intent here is to explore a few of the key risks faced by real estate companies. We’ll also look at the insurance products that can mitigate those risks and allow companies to focus on their core business and long-term goals. Let’s take a look at three broadly defined classes of business in the real estate industry: Property managers – you are the boots on the ground at a completed property. You oversee everything from rent to staffing to reporting to maintenance. Real estate developers – you oversee the process from planning to construction to sale. You’re in charge of the design and execution and your business is high risk, high reward. Property owners and investment vehicles – the buck stops with you. You oversee the financing, contracts and legal structure. Acquisitions/sales, reports to investors and partners and the supervision of your property manager are among the many jobs that land on your desk. For businesses such as these, insurance is probably already on the radar. They may have explored insurance policies mandated by state law or contract, such as workers’ compensation and general liability. While these are absolutely necessary coverages by themselves, they can leave glaring holes in a company’s risk management program. Workers’ Comp and GL provide fundamental protections from risks such as an employee injured on the job site, damage to third-party property, or a slip-and-fall at the office. However, they do little to address the many risks that exist outside of simple liability, from bodily injury or property damage. Like the following scenarios: Structural defects in an apartment complex lead to tenants suing a developer for failing to properly supervise the construction process Personally identifiable information of tenants is stolen, misused, or leaked A limited partner files a suit against the general partner for overcharging fees An allegation rises regarding a misrepresentation of the strength of the fund or the value of an investment These scenarios share two common facts: They’re all real-life scenarios that have happened in the past and will happen in the future. They are all insurable risks. Let’s look at three common insurance policies in the real estate industry and review why they are so important for managing risk and ensuring the survival of your business. Types of insurance policies Directors & officers insurance High Level: This policy covers executives and the company if they are named in a lawsuit or regulatory action. Claims include allegations of breach of fiduciary duty from investors, investigations from regulatory bodies such as the SEC, unfair trade practice suits from competitors and claims of misrepresentation or fraud (as long as it is unfounded) from vendors. These policies are frequently offered with additional coverages such as employment practices liability and fiduciary liability insurance. Employment practices liability insurance covers suits from employees (and sometimes third-parties) alleging harassment, discrimination, wrongful termination and other employment disputes. Fiduciary liability insurance protects the company from its exposure as the sponsor of an employee benefit plan. Professional liability insurance High Level: this policy covers the company in the event of lawsuits that allege it was negligent in its duties as part of an ongoing professional relationships. These can be suits from clients alleging breach of contract, suits from tenants claiming discrimination or suits from limited partners who feel there were errors made during a fund’s distribution process. For property owners and investment vehicles, the best practice is to purchase a directors & officers policy that blends in coverage for professional liability claims. The right policies are specifically designed to account for the unique aspects of these businesses, such as the possibility of an investor claiming an error or omission in the provision of their investment management service. They also include features that allow for automatic coverage of the many limited partnerships and LLC’s created during any given year (something that may not be available in an off-the-shelf D&O policy). Cyber liability insurance High Level: This policy protects the company from litigation and other expenses associated with a cyber attack or data breach. Any company that collects individuals’ personally identifiable information (PII) has a responsibility to protect that info. PII includes obvious high-risk data such as social security numbers and credit card, but it doesn’t end there. Names, phone numbers, email addresses — even IP addresses — can all be considered PII. If an unauthorized party gets access to this information via a company’s systems, that company may have to bear the cost of civil suits and regulatory fines and penalties. It’s important to remember that a company’s liability begins much earlier than the moment a criminal steals someone’s identity. An event as simple as a the loss of a thumb drive has been enough for companies to be on the hook for millions in legal costs and fines. A cyber liability policy is designed to cover these costs. This includes coverage for suits from affected individuals and costs associated with a regulatory investigation. Some policies also include “first party” coverages which include the costs of: notifying your customers and providing credit monitoring for them business interruption after a cyber-attack locks up your systems forensic investigation into the source of the breach Possible claim scenarios Let’s look at some practical examples: Example 1: A prospective tenant of a unit in an apartment building is working with a property manager to secure
SCHOOL TRANSPORTATION: TAKE THE SAFE ROAD
One of the greatest and more devastating risks that organizations face today is the operation of vehicles for business and events. Your school can be held liable for damages whether you own, lease or borrow a vehicle, or if your volunteers and staff members use their own personal vehicles for transportation. On a regular basis, we read reports and handle transportation-related claims that involve serious injury and death. More often than not, these accidents involve unsafe vehicles and practices. Vans and cars in disrepair, not wearing seatbelts, driver fatigue and distracted drivers are all cited as causes of accidents. The following information from the GuideOne Center for Risk Management can help you reduce vehicle risks and determine whether or not you have the right coverage in place. Safe Transportation Strategies Form a transportation committee consisting of staff, drivers, maintenance workers and parents. Adopt a written transportation policy that outlines who can drive, how vehicles will be selected and maintained, and what safety measures you will employ. Check driving records of all current and potential staff and volunteer drivers. Have drivers complete a release allowing you to review their driving record. Remember that more accidents occur with drivers under age 25 and over age 70. Train drivers on safe vehicle operation . Assign responsibility for vehicle maintenance. Ensure consistent pre- and post-trip inspections by drivers, and semiannual inspections with a qualified mechanic. Only use non-owned vehicles that pass a strict safety inspection. Are You Covered if an Accident Happens? A large number of liability claims against organizations often result from vehicle accidents. Claims can be devastating if an accident involves a bus or van. Protection is needed against negligent driving, operation and entrustment. (Example: The driver has no license or a history of substance abuse.) A business automobile insurance policy can cover any vehicle your organization owns. It will cover damage to the vehicle, injuries and damage to other property. Non-owned vehicle coverage is also needed for situations where the organization controls the list of pickups (of children or youth) by volunteers’ personal vehicles for organizational activities. In addition to general liability coverage, a commercial umbrella policy with $1 million of coverage or more is recommended.
How mobility data is driving the future of transportation
Mobile devices are now on the cusp of disrupting what might arguably be their most impressive feat yet — the notoriously staid, and unfailingly constant insurance industry — right from the palm of our hands. Mobile devices also are at the center of the distraction that is wreaking havoc on the transportation system, as well as our systems and ways of thinking. Yet, these devices can help solve this very issue, serving as the link to understanding driver behavior through mobility data — not as a model but in real life, in real time. To move at the speed of the consumer, insurers must move beyond traditional data used for years and tap into the power of mobility data to create more relevant experiences, as well as a deeper, more accurate understanding of risk. Mobility data vs. device data Telematics data from on-board diagnostics (OBDs) proved the concept of usage-based insurance, but cost held it back from mass adoption. Now, mobile data can deliver in accuracy and insights. OBD data does a good job verifying mileage as well as speeding, hard braking, aggressive turns and time of day that a vehicle is driven, and all of this information is useful. But what it can’t do is tell you who is driving the car during different trips or if the driver is distracted, whether it be sending texts at 65 mph or checking a navigation app at a red light. Mobile data captures meaningful driving behavior for individual drivers, including distracted driving phone handling, which is a more predictive metric than verified mileage or credit history. Telematics models have shown us that not all distracted driving behaviors are equally risky, naturally resulting in varying levels of loss for insurers. For example, mobile data distinguishes between phone usage at a red light vs texting while driving. It can also apply more contextual data such as real-time traffic. All these actions will help to define a more accurate risk profile Many insurers are scrambling to accumulate the driver data needed in order to build more accurate pricing models that reflect distracted driving behaviors. And the fact of the matter is, most insurers simply don’t have the data — or the data science and technological means — to accrue mobility data down to the distracted driver level or at a scale that would create accurate models. If you’re serious about pricing risk more accurately today, as well as into the future, consider a third-party data partner that has already build a platform, partnerships and data model (a.k.a. driver score) that is based upon real claims data and accounts for both distracted driving and loss. Adoption vs. extinction The automotive insurance industry is ripe for an overhaul to its business model. Not only can customers be targeted by companies with more advanced pricing, but by the change of car ownership moving towards shared mobility use cases. By strategically leveraging the right data, insurers can go on the offensive, instead of becoming victims of the evolving transportation ecosystem. Insurers must become increasingly responsive to the changing needs of their customers by harnessing the power of mobile data. Then create insurance products and solutions that take the changing landscape into account, while empowering customers to experience a whole new world of options. Overall, the insurance industry must evolve to remain relevant and profitable as the nature of mobility changes at a breakneck pace. Understanding how to mobilize mobility data is at the center of the industry’s survival, and we must act now. Gary Hallgren is the president of Arity, a technology company focused on making transportation smarter, safer and more useful by transforming data into actionable insights to help partners better predict risk. Hallgren has more than 20 years of industry experience in connected cars, telematics and usage-based insurance. These opinions are the author’s own.
Why EPLI Is Important
Why EPLI Is Important Each day, business owners face dozens of potential employment liability risks. Small businesses may be especially vulnerable to potentially costly employment claims. It’s been found that the percentage of employees who reported being harassed at work was 32% at both large and small businesses. Small companies may have fewer resources available for these claims, meaning they may suffer more harm in the event of a lawsuit. The average cost of a discrimination claim for an employer is $125,000. Without insurance, this is an amount that could cause substantial harm to a small business. When businesses employ people, they take on risks. You may face employment liability risks that you never thought about when you started your business. Getting the right types of insurance policies might help to protect your company if one of your employees decides to file a discrimination or another employment-related claim against your business. What does EPLI cover? EPLI offers coverage to pay for legal expenses, judgments, and settlements that might arise from the following types of claims: • Discrimination based on a protected status • Sexual harassment • termination, including constructive discharge • Retaliation for engaging in a protected activity • Failure to hire or promote because of a protected status • Breach of employment contracts • Mismanagement of employee benefits • Mental anguish or infliction of emotional distress • Defamation • Violations of privacy rights • Family and Medical Leave Act violations Apply for EPLI coverage today In today’s business environment, having the right types of coverage is vital for the success of your business. An increasing number of employee lawsuits are being filed against companies of all sizes. It makes sense for you to protect your company and everything that you have worked to build by getting EPLI coverage. To learn more and to request an EPLI application please send us and email and we will send you the application to fill out.