Every business has property that is critical to its operations. This can include manufacturing equipment, a family owned building housing a retail store front, inventory held in a warehouse, ingredients or parts to make products, improvements made to a property, computers and phone systems to support internet sales, and even the business income from company sales. If a covered peril such as a fire destroyed any of this property, or interrupted the business so sales were discontinued, transferring the risk of loss to an insurer may be critical to maintain the viability of the business. Business owners should consider the following when reviewing their property insurance policies:

1. Is your business income protected? Have you reported all of the physical property to be covered or scheduled on your policy? Imagine your business was “vaporized” tomorrow, what would it take to get up and running again? What would be your continuing expenses? How long would it take to duplicate your operations at another location? Have you reported all of this to your insurer?
2. Are you insuring the property for the same amount you insured it 20 years ago? When was the last time your building was appraised?
3. What perils are covered? Do you have flood coverage? How about Earthquake coverage? Some policies have restrictions on certain perils including wind and hail. Does your policy have such restrictions?
4. Will you be penalized for underreporting your property values by having a policy coinsurance penalty or a margin clause applied?
5. What ancillary coverage is provided by your policy? Do you have employee dishonesty, backup sewer and drain, or valuable papers and records coverage? What about extra expense, dependent properties, or increased cost of construction coverage?
6. Are there any warranties on your policy requiring you to maintain a sprinkler system, fire alarms or burglar alarms?

There are many endorsements that are available to improve your coverage and provide additional protections. Knowing what losses can occur and properly endorsing your policy to provide the coverage is an important risk management step every business owner should take. It is especially true to prepare for the worst but hope for the best when it comes to insuring your business.

Risk Manager’s Takeaway:

Reviewing your property insurance coverage and making sure it addresses the risks faced by your business is critical. Invest the time to review your risk management program so when a loss does affect your company you will be properly protected.

As a consultant who has reviewed thousands of insurance policies over my career, premiums can vary dramatically from policy to policy, from insured to insured. Clients always ask me the same thing: “Am I paying too much for my insurance?” Below are five factors that help determine what premium you will pay.

1. What line of business are you in?   Do you manufacture dynamite, build hundred story buildings, or do you own an accounting firm? Each type of business has its own risks but the frequency and severity for loss for each line of insurance coverage can vary dramatically by type of business. You should expect to pay premium commensurate with the risk of your operations.
2. Do you have good loss experience? I tell my clients, if you average $100,000 of losses every year for the past five years, don’t expect to pay $10,000 a year in premium.   Would you own a business that lost money every year?   Insurers are not in business to lose money.
3. Do you have a safety program in place to improve operations? Do you review losses and make improvements in your operations to prevent them from reoccurring? If you didn’t answer yes to either question, you should invest a little time and energy in developing and supporting a safety program as insurers will provide discounts even at the prospect of a business implementing safety initiatives.
4. Do you have a profitable, growing business or are you struggling to pay your bills? Insurers want to grow with a partner that will grow their operations (and the premium that can be charged). Insurers also want to know that their invoices will be paid.
5. If it is too good to be true, it probably is! I tell my clients that I can sell an insurance policy for $10, but it may not cover anything. Coverage is critical and to get the best coverage an insured should expect to pay more.

Risk Manager’s Takeaway:

Knowing the insurance marketplace and how your insurance premiums are calculated will let you develop a strategy to minimize your insurance costs while finding true insurance carrier partners offering the best of coverge.

A comprehensive and effective safety program can be the difference between a long lived and prosperous company and one that goes out of business. A focus on safety does not only make sense from an ethical standpoint, but it may even keep owners and managers out of jail. Title 29 U.S.C. § 666(e) provides criminal penalties for any employer who willfully violates a safety standard prescribed pursuant to the Occupational Safety and Health Act, where that violation causes the death of any employee. Four elements must be proved in order to establish a criminal violation. The government must prove that: (1) the defendant is an employer engaged in a business affecting commerce; (2) the employer violated a “standard, rule or order” promulgated pursuant to 29 U.S.C. § 665, or any regulation prescribed under the Act; (3) the violation was willful, and (4) the violation caused the death of an employee. 

In addition to keeping employees safe and avoiding fines, penalties and even jail time, an investment in safety can result in incredible returns for a business. Below are just a few examples of what a robust safety program can provide:

1. Insurance underwriters love safety programs! Management’s commitment to safety will often lead underwriters to provide credits to an account in return for writing the business, lowering premiums. If an underwriter believes safety is a priority, they hope to enjoy the benefits of reduced claims and associated costs and will price an account accordingly.
2. Injuries drain money from increased insurance costs over time, retained risk including deductible payments, down operation time, the need for replacement staff and overtime, equipment, benefits, and training. A safe workplace improves the operating efficiency of a company.                  
3. A true safety culture can increase morale of employees, decreasing the likelihood of employment litigation and workers’ compensation fraud.                
4. Low accident rates can lead to employees feeling safe, reducing employee turnover.

An unsafe workplace affects everyone in an organization. Employers, regardless of size or industry type, have a duty to provide for the safety of employees. By doing the right thing and investing in safety, owners will avoid possible prosecution and will also benefit financially.

Risk Manager’s Takeaway:

A comprehensive safety program requires some effort on the part of the employer but the return on investment is often substantial. Focusing on safety really is a “no brainer” for business owners.

Harassment and discrimination claims are no longer a rarity in the insurance industry. Claimants and their attorneys have learned that the mere allegation of malfeasance can result in large payouts. Attorney billing rates are astronomical, resulting in insurance companies settling claims to avoid the very large attorney fees that will inevitably be owed at the end of a legal battle. Most of this is due to Fee Shifting Laws that allow plaintiffs who prevail in their law suit to recover their attorneys’ fees in addition to any damages awarded. An award of a single dollar can result in a “win” (for the plaintiff’s attorney at least). This type of “pity” award can lead to defendant businesses paying hundreds of thousands of dollars of attorney fees consisting of both their defense attorneys’ fees and more importantly, the relatively uncontrolled plaintiff attorneys’ fees.

There are many arguments for and against Fee Shifting statutes but regardless, they are a reality in today’s society that every risk manager should understand. Proper risk control is a must to reduce the risk of a claim and to mitigate costs of a claim when filed. Below are several steps every risk management professional should take to reduce the risk of loss:

1. Ensure a comprehensive and vetted employee handbook is in place and is reviewed with every company employee.
2. Ensure regular harassment and discrimination training is provided to employees on an annual basis, tailored for both supervisors and regular employees.
3. Create a clear and unequivocal zero-tolerance culture with regards to inappropriate behavior.
4. Provide a known procedure for reporting complaints including an employee hotline and impartial and noninvolved parties to accept complaints.
5. Create an impartial and comprehensive investigative process for investigating and documenting complaints or incidents.
6. Most importantly, ensure a comprehensive insurance program is in place to provide coverage for possible claims. Limits and deductibles should be suitable for the business and risk.

Risk Manager’s Takeaway:

Remember, a lawsuit can be filed by anyone for any reason but developing a robust risk management program will reduce the frequency and severity of employment related claims, including those of harassment, discrimination, retaliation and hostile workplace. Call the experts at Star Risk Consultants and we will be happy to review your risk management program with you and create a plan that will protect your firm.

An often overlooked component of risk management programs is the handling of certificates of insurance. Contractual risk transfer is a critical part of any comprehensive risk management program and it starts in the contracts you enter in to with other parties. Certificates of Insurance evidence the coverage you agree upon in a contract, allowing you to confirm the required coverage is indeed in place. Below is a list of items you should review when receiving a certificate of insurance from another party providing services or products to your firm:

1. The insured name and address of the other party matches the contract in place.
2. The certificate holder name should correctly list your firm and address.
3. The certificate should be recently issued. The date of certificate issuance is critical to verify the coverage is current and in force.
4. Insurers, along with their proper NAIC #, should be listed to allow you to verify they are adequate in terms of size and strength and meet your requirements.
5. Policy expiration dates and policy numbers should show current coverage.
6. Lines of Coverage should be appropriate for the services or products provided as outlined in your contract. For instance, if automobiles will be used on your premises, Auto Liability coverage should be evidenced along with workers’ compensation coverage in case an accident occurs.
7. Limits of insurance should be sufficient and commensurate with the potential risk for loss. A firm demolishing a building will require much higher insurance limits then a vendor hanging curtains.
8. Special coverage requested in the contract should be referenced on the certificate, including additional insured status, waiver of subrogation, limits per location or project, occurrence based coverage, and primary, non-contributory status. Language should be added in the “Description of Operations section and the appropriate boxes on the certificate should also be checked as appropriate.
9. Cancellation provisions should match the contract requirements and be agreed upon by insurers.
10. The issuing broker’s name and address should be shown under the Producer section, along with a signature of an authorized representative.

Risk Manager’s Takeaway:

After examining thousands of certificates over 20 years for clients, I am amazed at how many certificates are incorrectly issued and not properly reviewed by brokers, issuing parties or most importantly, the receiving parties. A little due diligence up front can save a lot of sleepless nights if and when a large or catastrophic loss eventually occurs (knock on wood).

There are numerous ways to control the costs related to workers’ compensation. This article focuses on the actual premium paid instead of the other components associated with workers’ compensation costs such as labor used to investigate, report, and follow up on workers’ compensation claims, lost productivity directly related to an accident, temporary labor to replace an injured employee, and other administrative, claims and loss control related expenses.

The workers’ compensation premium alone can be a significant cost to any business but by taking the appropriate administrative steps you can ensure that you are not overpaying for your insurance. Trust me, your insurance company is not going to help you save money, and neither will your agent as he earns more commission when you pay more in premium. Below are 10 questions to ask when reviewing your workers’ compensation policy and risk management program:

1. Did I reduce reported payroll to account for the extra compensation related to overtime pay?
2. Did I cap or exclude executive payroll from the reported payroll?  
3. Are my employees properly classified and can some be classified at a much lower rated class code, such as clerical or sales?
4. Does my policy have a credit applied which can reduce premium by 5% to 30% or more?
5. Does my insurer have competitive rates filed with the State for the governing class codes of my business?
6. Is my company experience modification factor correct and applied?
7. Did I make sure that losses used to calculate the experience modification factor are correct and do not include excessive reserves?
8. Am I properly reviewing and controlling my claims to ensure insurers are not paying excessive claims and passing those costs on to me?
9. Is safety a priority at my company as frequency of claims drives premiums?
10. Can I retain or transfer risk to lower my premiums and ultimately save money?

Risk Manager’s Takeaway:

Taking the time to answer some basic questions can help you focus your efforts to reduce risk and develop a sound risk management plan. This can save you substantial money over the long run. Call the experts at Star Risk Consultants and we will be happy to review your program with you to create a plan that will save you money.

An effective fleet program can save your company money, protect your company assets, and prevent employee injuries and even death.  Sometimes an accident can occur when it is no fault of a driver while at other times the driver involved in an accident had no right being behind the wheel. Your drivers can pose a significant risk to your organization and you have an obligation to ensure they are safe and do not pose a threat to other drivers on the road or the property of others. Below are several things to consider when creating a fleet loss control program:

1. DOT Compliance: First comply with federal law and make sure your employees maintain Commercial Drivers Licenses (CDL) issued through your State if required by your operations and vehicles being used. Contact your State DMV for additional information.
2. Inspection of Vehicles: If your company owns vehicles you must ensure that they are safe and regularly inspected. You should have a pre-trip inspection checklist completed by drivers to identify any issues or damage to the vehicle to be used.
3. Maintenance of Vehicles: Your vehicles must be maintained on a regular basis to ensure they are safe to operate. Regular maintenance should include oil and fluid checks/changes, tire rotations and replacements, alignment of tires, checking brake pads and rotors, replacing filters, and wiper changes to name a few. As additional miles are driven, major components of the vehicle must be inspected including the engine, transmission, belts, etc. Numerous apps, GPS and telematics, are available to track mileage and to remind management when vehicles are due for servicing.
4. Driver Selection: Motor Vehicle Reports (MVR) should be checked for every employee upon hire and at least annually thereafter. The reports should be inspected for major violations including driving while intoxicated or careless driving, accidents, moving violations including speeding or failure to use turn signals, and non-moving violations. Criteria should be established and uniformly applied to all drivers, outlining what is an acceptable MVR and what is not. Unsafe drivers SHOULD NOT be permitted to drive on any company business.
5. Personal Vehicles: A Personal Vehicle Use for Company Business policy should be enforced. If an employee is to drive their personal vehicle on company business, that person must be a safe driver as supported by regularly inspected MVR’s and must maintain insurance on the vehicle from an acceptable carrier with limits as specified by the policy.
6. General Safety: Safe practices including seat belt use, no eating or drinking, no cell phone use, limiting distractions while driving, no driving while intoxicated or on any medications, obeying all traffic laws, no picking up hitch-hikers or driving other non-employees, and similar best practices should be specified.
7. Accident Reporting/Investigation: An employee accident reporting, manager and company review and investigation process should be specified in the program. An Accident Review Board should be put in place to evaluate any and all incidents involving a vehicle.
8. Training: Driver training is critical and in-person and on-line training should be provided on a regular basis. Training and employee sign off on the fleet policies should take place.
9. Insurance: Proper insurance must be maintained with coverage endorsements added to properly address the risk of the business. An insurance professional should review your fleet program and place the correct policies to protect your business.

Risk Manager’s Takeaway:

Star Risk Consultants will audit your current fleet program and your operations. A Certified Safety Professional will provide expert advice on how to improve your program and make it world class. A comprehensive fleet program can reduce your company risk, protect employees and ultimately save you insurance premium dollars and the enormous costs associated with accidents.

Creating written job descriptions is often considered an inconvenient chore.  Arguments follow that writing a descriptive outline of an employee’s normal job tasks is not worth the effort.   A good risk manager knows, however, that written job descriptions can help an organization in several critical areas:

• Job descriptions are essential for reducing workers’ compensation costs and returning employees back to modified or full duty work in a timely manner after a workplace injury.  Before a treating physician agrees to release an employee back to work, most will require a description of the job and the physical demands necessary for performing the job tasks.  Supplying the physician with job descriptions for modified and full duty positions at the start of treatment will help bring injured employees back to work in a timely fashion. 
• Employers covered by the Americans with Disabilities Act (ADA) or similar state laws should prepare written job descriptions in advance of an issue.   This will provide an initial starting point for reviewing obligations and liabilities the employer may be subject to under the corresponding act. The ADA makes it critical for employers to maintain accurate job descriptions that include the essential functions of the job. Reasonable accommodations can be determined only when reviewing against accurate job descriptions.
• Proper employee classification depends largely upon accurate job descriptions.  Proper documentation can prevent Fair Labor Standards Act (FLSA) claims and other issues.
• A written job description can be a useful tool in a job interview. The job applicants can be asked if they can perform the essential functions of the job by reviewing the position’s job description. This will help support hiring decisions and also provide defenses for ADA, discrimination or other claims that may arise.
• Written job descriptions can be used in performance evaluations, disciplinary actions and terminations.  This will again provide a defense against employment related litigation including retaliation claims.
• Written job descriptions can assist your organization in reviewing Equal Pay Act requirements.

Risk Manager’s Takeaway:

Make the effort to create accurate written job descriptions and they will likely save you time and money over the long haul.