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Commercial Insurance Blog

Startups and Insurance

Posted by Val Feeney on Mon, Jul 09, 2018 @ 04:28 PM

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No matter how amazing your business idea may be, startups are inherently risky. Securing insurance for your great idea may prove to be a heavy lifting event, too. Many startups in today’s business environment don't end up making it, which is why insurance companies are much more hesitant to try and work with a business with no proven track record, and no guarantee of existing in the near future. Both carriers as well as brokers prefer to develop long term relationships with those they insure, and so the uncertainty that accompanies new businesses is often a deal breaker. Or, it results in insurance companies charging more for these newer businesses who have yet to figure out how they are going to manage and control risk costs.

So how can you make your startup business attractive to an underwriter?

It is important to show good credentials. Share information about your successes and provide detailed information about your business plan. A thorough plan outlining how you intend to address various challenges and obstacles, and ultimately find success, is an effective way to communicate to underwriters that your business has reduced risk and high potential.

Additionally, always tell the truth. Tell an accurate story and provide truthful, non-misleading information on your company website or when communicating with underwriters. A good underwriter will do their research, so honesty is the best policy if you want insurers to be willing to take on your startup. 

Lastly, to develop an insurance program for your business, work with a professional who has worked with other startups in order to get other risk management advice beyond insurance. Learning how to manage and minimize risk across the board will make your business more attractive to risk-averse underwriters, and the premium charged will then hopefully reflect your risk navigation skill set.

Prefer to hear an explanation? Watch the video below as Geoff Gordon explains the steps you can take for the best chance of getting your startup business insured! If you have a question regarding your personal situation, use the form at the left of this blog for return call or email. Want to get straight to talking? Call the Gordon Atlantic Insurance professionals toll free at 1-800-649-3252.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tags: startup, insurance program, underwriter, new business, fledgling business

Directors & Officers Risk for Non-Profit Organizations

Posted by Jeff Helm on Thu, Jun 28, 2018 @ 04:58 PM

Directors and Officers coverage (D&O) may be as important to non-profit companies as it for other (for-profit) entities. People who volunteer their time and talent often want to know that their "volunteer" efforts don't end up in court...so knowing the landscape is important.

The most common areas of exposure for directors and officers include

  • employment practices
  • conflicts of interest
  • government enforcements
  • fiduciary duty breaches

The first, employment practices, is similar to that found in the for-profit world. This includes legal action arising out of discrimination claims, unfair termination, sexual harassment claims and similar employer/employee conflicts. The problem with many non profits is focus; many are too small to have

D&O Gordon Boardroom Pichuman resources departments or even an HR risk awareness. These can be mitigated with an attention to this area; more on things to do and what to watch out for is available here.  

Conflicts of interest are more common in the non-profit area than in private business because profit for the business often passes directly to its owners. Not so here. When an officer or director puts their personal interests ahead of the organization, that's a violation of trust and when big enough, can result in financial or reputational loss.

Government enforcement includes provisions from laws, such as Sarbanes Oxley (Sarbox), which required many new obligations on both public and private companies. This law pertains to publicly held organizations, but two provisions apply everywhere:  the Whistle Blower Law which protects people who blow the whistle on bad actors; and document retention rules. Clearly deleting documents which might be found embarrassing or evidential still fall under document retention rules (you can't just shred at will). Other government enforcement includes the requirement to file tax forms. The 990N for small organizations (less than $50,000 in revenue) and the 990 for larger ones.

Fiduciary duty breaches include: duty of care (working responsibly); duty of loyalty (closely related to conflict of interest); and duty of obedience (such as filing tax forms or working within Sarbox regulations).   

There is some statutory immunity provided for directors and officers, particularly if unpaid. And many homeowners policies and personal umbrella policies provide liability protections for individual participating in these non-remunerated positions. But fraud and gross negligence will rarely get this coverage, nor legal immunity.

One solution for directors and officers is an offer of indemnification:  where the organization agrees to cover or indemnify for legal expenses including judgments.  This is usually funded by D&O insurance. 

To discuss and quantify the cost of Directors & Officers insurance further, call the Gordon Atlantic Insurance professionals toll free at 1-800-649-3252.  Prefer to type versus talk? Use the form to the left of this blog.

Legal & technical disclaimer:  Any advice provided here is not legal advice. Statements or advice are based on our experience in risk control, mitigation and transfer, and is believed to be effective and valid when provided. All legal or contractual wording, including any suggestions offered in a legal context, should be reviewed by qualified legal counsel. 

 

Tags: non-profit companies, directors and officers, directors and officers insurance, d&o, insurance for nonprofits

How Risk Programs Lower Your Insurance Costs

Posted by Val Feeney on Thu, Jun 28, 2018 @ 11:55 AM

Selling your product to a consumer is your forte. Selling the risk of your operations to underwriters is ours. Having done this for years, we know that establishing a coherent risk program before going to the insurance market can make a huge difference in your short term (insurance) and long term risk costs (labor and fleet costs, especially).  

 

manufacturing pic 

Utilizing an independent insurance broker provides the manufacturing company with an expert advocate when purchasing property and liability insurance. Presenting what you do and how you do it through a risk lens can affect what carriers say "yes," the limits and types of coverage available to you, and of course price.  Here's how we do it...

An in-person visit affords important information that is useful when negotiating with an underwriter. Walking through your plant and learning your company's history, as told from your lips, paints a narrative that can be shared. Experience gives us insight into what an underwriter will be looking for in terms of exposures, hazards, safety measures and employee training. Some areas risk professionals focus on are different from yours:  the year built, number of stories, construction material, the presence of a sprinkler system, and the roof type of and in your building; the square footage of your parking lot; your neighbors (no kidding); and the age and capacity of electrical systems will all affect an underwriter's appetite.

Loss history on paper provides only numbers, no context. Knowing the circumstances behind losses and measures taken to minimize recurrence tell another story.  We love to talk about continuous improvement with underwriters.  Does your focus on continuous improvement include safety?

Workers Compensation requires information about employee accidents. When we recommend training courses for staff, or filters for new hires, this can mean the difference between a "yes" and a "no" in terms of competitive carrier willingness to offer customized insurance.

There are other factors common to risk in the manufacturing sector:

Intellectual property including patents, formulas and designs has great value. Are these adequately protected?

If you have a retail component, payment card information may include a data breach exposure. Data theft is a real thing and steps taken to protect yourself can mean the difference between moving on from a hack attempt and having to close your doors. Educating employees on confidential data, and establishing best practices with your IT partners, can drive down the cost of this risk substantially (for more, download our Cyber Whitepaper).

Transporting your product and transporting your salespeople is another area to focus on. Running prospective employees' driving records under a "conditional offer" can help ensure fewer accidents, affecting both fleet and labor costs.

Finally, you may have exposures to other risk such as service interruption or product recalls. Talking through your daily operations with us, along with any perceived vulnerabilities, allows us to tailor the most fitting coverage while simultaneously assuring the company underwriter you are a good risk.

To discuss your business with a Gordon Atlantic Insurance professional, please call us toll free at 1-800-649-3252. Prefer to type versus talk? Use the form at the left of this blog.

 

 

Tags: insurance, property insurance, insurance cost, general liability insurance, should I use an agent, risk program, selling, buying, manufacturing, cyber insurance

Cannabis Dispensary Roll Out Will be Slow

Posted by Jeff Helm on Wed, Jun 27, 2018 @ 01:32 PM

Massachusetts is still looking for a bank to step up as a participant in the fledgling recreational marijuana industry. July 1st is the expected start date, but the roll out may be much slower than Legal Cannabis Picanticipated. According to Globe Staff writer Dan Adams, "industry executives predict that fewer than a dozen retail pot shops will open in July."

The main issue is that marijuana remains illegal under federal laws, preventing banks that operate across state lines from accepting customers involved in the cannabis business. At its core, it's still nearly impossible to get a checking account if you're in this industry. This financial constraint is holding many nascent companies up.

This will dishearten consumers who have been waiting since 2016 when voters elected to legalize recreational cannabis. 

It's not only banks who are still turned off from aligning with dispensaries...most likely the first to get licensing. Town were recently given additional time to sort out zoning by-laws in a ruling by Attorney General Maura Healy. Town are taking careful, measured steps in finalizing these zoning by-laws, or are "demanding large payments from prospective operators in exchange for signing so called host community agreements." (Boston Globe, 06/17/2018)

Financial hurdles and zoning restrictions aside, research into delivery of cannabis products, including edible delivery, tinctures and oils for muscle therapy, and many other innovations are moving quickly. We are in a period similar, in many ways, to post-prohibition alcohol. Sorting out the rules will take more time, but cannabis products will be here in Massachusetts before you know it.

 

 

Tags: bank, marijuana, cannabis business insurance, cannabis license

What is a Waiver of Subrogation?

Posted by Geoffrey Gordon on Thu, Jun 07, 2018 @ 03:57 PM

In one of our previous blogs, What is an Additional Insured?, we discussed the concept of additional insureds in contracting (Haven’t read it yet? Access that blog here!) We know that when subcontractors perform work for general contractors they will typically need to show that they carry their own, in force insurance so in the event of an accident or damage the responsible party’s company will ultimately be the one paying. Additionally, we learned that often times the GC will request to be named an Additional Insured in order to protect themselves under the sub’s insurance in case the subcontractor causes damage. Occasionally things will be taken a step farther and the general contractor will request a Waiver of Subrogation clause. This waiver gives up significant rights on the part of the subcontractor and should not be granted without serious deliberation.

 

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Often required by larger contractors, the Waiver of Subrogation takes cost shifting to a whole new level. Referring back to the example from our Additional Insured blog where we had an electrical sub hired by a GC, now suppose that electrician is hurt on a job site due to negligence of the general contractor when a temporary wall collapses. Should there be a Waiver in place, the electrician's insurer is prohibited from going after the GC's insurance, even if he's at fault. So this worker's compensation claim will go on the electrician’s insurance history, and bump up his experience modification factor (not a good thing). Normally, the worker's compensation company will get reimbursed by the general contractor’s general liability insurance in a process known as subrogation. Here, when a Waiver of Subrogation is granted, the electrician’s workers compensation carrier will not get reimbursed the loss will stay on the loss history of the electrician. What’s fair about that? Plus, because your insurance company knows it can't recover against a responsible party, they need to charge you more when you grant this.

This means that acts of negligence by the general contractor are not subject to the same rules as we expect on the job site. Bigger companies can demand this because they are doing the hiring and writing the checks...even when their negligence results in claims on your loss history that weren’t your fault. It isn’t fair and it isn’t equitable, but it is part of today’s landscape. As with other jobs costs, consider what you’re giving up and whether the cost makes the job still worth it when asked to grant a Waiver of Subrogation.

Should you wish to enjoy a whiteboard video on this topic as it originally appeared on BusinessTown, click HERE!

If you have a question regarding your own personal insurance circumstances, please call the Gordon Atlantic Insurance professionals toll free at 1-800-649-3252.  Prefer to type versus talk?  Use the form to the left of this blog for a return phone call or email.

For other pertinent commercial insurance topics, check out our commercial insurance blog


Geoff Gordon

Tags: construction, commercial, insurance, Business, contractors, insurance waiver, waiver, subrogation, additional, insured, certificate

What is an Additional Insured?

Posted by Geoffrey Gordon on Thu, Jun 07, 2018 @ 01:50 PM

When subcontractors perform work for general contractors, they usually need to show the general contractor that they carry their own insurance. In addition to expecting that Certificate of Insurance, the general contractor will often ask to be named as an Additional Insured in order to be better protected in case of an accident and an ensuing claim. 

An Additional Insured is a person or entity that enjoys the benefits of being insured under an insurance policy, in addition to whomever originally purchased the policy (the Named Insured).

Learn what a waiver of subrogation is with commercial business insurance Andrew gordon incAs an example, say an electrician, hired by a GC as a subcontractor, includes the GC as an Additional Insured on his or her General Liability policy. In the event of a claim, the electrician’s insurance will now include the general contractor in its defense coverage, as well as actual judgments if a lawsuit arises out of his work. If the electrician is the person who indeed caused the  damage, the GC keeps the loss off his or her own claims experience.

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Continuing with the above scenario, when we are the electrician’s broker we discourage granting Additional Insured status to others since you're now sharing your limits with another entity(ies). If there are two judgments for $600,000 after an incident and the electrician has a $1,000,000 policy, the electrician runs out of insurance when the claim reaches a million dollars...but the GC can still turn to his own policy. Of course, if we are the general contractor’s broker, we absolutely encourage them to get Additional Insured status from everyone who comes on a job site.  After all, each should be held responsible for their own work, and the general contractor wants to shift costs and exposure downstream whenever possible.

Enjoy a whiteboard video on this topic that originally appeared on BusinessTown by clicking HERE!

For other pertinent commercial insurance topics, check out our commercial insurance blog. If you have a specific question or concern, please call the Gordon Atlantic Insurance professionals toll free at 1-800-649-3252.  Prefer to type versus talk? Fill out the form on the left for a return phone call or email. 


Geoff Gordon

Tags: Certificate of Insurance, Additional Insured, insurance claim, general liability insurance

What is Coinsurance on a Commercial Property Policy?

Posted by Rachel Tierney on Mon, Jun 04, 2018 @ 02:19 PM

Coinsurance clauses are found in a wide range of insurance policies, but serve varying purposes depending on the area of insurance. When used in the context of property insurance, coinsurance is defined as "the percentage of the value of the property that a policyholder is required to insure." Coinsurance clauses are included in commercial property policies in order to ascertain that policyholders are purchasing a sufficient limit of insurance, and penalizes those who do not. If the policyholder fails to purchase an adequate amount of the value for their insured property, then their claim payment is reduced and they may not be fully covered in the event of a disaster. When this happens, the insurer compares the policy’s limit at the time of the loss against the amount required by the coinsurance percentage to calculate what will be paid out on the claim.
 
Let's illustrate this in an example:
 
Say a building is valued at $1,000,000 and the insurance policy contains an 80% coinsurance clause. This clause would specify the policyholder insures the building for $800,000. If the policyholder were to only purchase $600,000, they would be subject to penalty in the case of a property loss.
 
Continuing the above scenario, if only $600,000 of property limit is purchased and a fire occurs that causes $300,000 in damage repair, the claim payout would be calculated by dividing the actual insured amount ($600,000) by the required insured amount ($800,000), or 75%.  That percentage is then multiplied against the $300,000 loss, so the policyholder would only receive $225,000 minus any applicable deductible. Insuring the property at an amount less than the coinsurance clause percentage detracts from the claim payout.
 
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Coinsurance does not affect you until a loss is suffered, but it is essential to be aware of the inclusion of this clause when purchasing a policy as it will directly impact the coverage you receive in the event of a disaster.
 
To discuss this topic further call the Gordon Atlantic Insurance professionals toll free at 1-800-649-3252.  Prefer to type versus talk?  Use the form at the left of this blog.
 
Geoff Gordon has a great whiteboard video on this topic that can be viewed by clicking HERE!

 

Tags: commercial property, insurance claim, property damage, coinsurance, coinsurance percentage

MA Cannabis Retailers & Manufacturers Application Portal Opening Soon!

Posted by Jeff Helm on Fri, May 11, 2018 @ 01:46 PM

On June 1, 2018 the portal at the Cannabis Control Commission (CCC) (www.massciportal.com) will be open for businesses applying for several licenses:

  • cultivation
  • marijuana microbusiness
  • Cannabis Pic 3craft cooperatives
  • independent testing labs
  • lab agents
  • transport

Insurance requirements, as prescribed in 935 CMR 500.105 (10), are becoming an issue for many new businesses looking to the CCC for approval, and is causing some confusion amongst those needing to attest to coverage limits.
General Liability and Product Liability for your medicinal and recreational products is not an easy placement.  And it does take some time.  Underwriters in this new space work at a different pace.  Applicants don't seem to understand that many "standard" policies may not include the necessary protections to the business owners or landlords.

Did you know that many insurance carriers, upon learning that there is "marijuana in house," will seek to cancel coverage for the increase in hazard or misrepresentation?

Don't get stuck having to escrow $250,000 when we can get you coverage.  We have the knowledge, the tools and the markets to help you through these requirements and design the right program for your piece of the growing marijuana business. 

To discuss further with a Gordon Atlantic Insurance professional, please call us toll free at 1-800-649-3252.  Prefer to type versus talk?  Use the form at the top left of this blog for a return phone call or email from a cannabis insurance expert.

 

Jeff Helm Web Card A 2018-5

  

 

Tags: marijuana, marijuana business, cannabis business insurance, marijuana business insurance, cannabis licenses, cannabis license

Workers Compensation Audit Compliance

Posted by Geoffrey Gordon on Fri, May 11, 2018 @ 12:19 PM

Your Workers Compensation insurance renews and you receive the letter informing you it's time for the prior term's audit.  

Initial premium is based on estimated payroll.  At the end of the year the company needs to determine actual payroll, including casual labor, and uninsured subcontractors.  If the actual is less than the estimate you get a refund.  If the actual is greater than the estimate, you owe the difference. 
 
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An insurance policy is a contract: when you purchase Workers Compensation insurance they require you to comply with the audit.  It may be a phone audit, a self-audit, or a physical on-site audit, (physical is required in Massachusetts at least every three years).

Should you refuse, it's rough: the carrier issues a high "estimate" with premium due.   If you do not pay the estimated additional, your policy gets be cancelled; and the Department of Industrial Accidents may issue a Stop Work Order.  You are also have an uninsured loss and then have to pay for medical expenses and lost wages out of pocket; plus be subject to a fine.  

To prepare for the audit try to have:

  • Payroll records
  • Federal 941 Tax Returns (most recent four quarters)
  • 1099 Tax Forms 
  • Federal Tax Return including Profit & Loss section (1040 Schedule C, etc.)
  • General ledger or checkbook
  • Certificates of Insurance from subcontractors
You will receive a Final Audit Report from the carrier.  If money is owed and you disagree you can file a dispute.  The payment due date will be suspended until the dispute is settled.  

To discuss your Workers Compensation coverage with a Gordon Atlantic Insurance professional, call us toll free at 1-800-649-3252.  Prefer to type versus talk?  Use the form at the top left of this blog for a return phone call or email.

Geoff Gordon

Tags: commercial, workers compensation, insurance, Business, insurance audit, audit

Status Update on MA Cannabis Licenses

Posted by Jeff Helm on Thu, Apr 26, 2018 @ 10:59 AM

Applications are underway for Massachusetts Cannabis licenses! US Cannabis Leaf Pic

The Cannabis Control Commission (CCC) began accepting priority applications in April of this year for Registered Marijuana Dispensaries (RMD) and Economic Empowerment licenses through its portal www.massciportal.com

Starting May 1st, the CCC will begin accepting applications for Cultivation Marijuana Microbusinesses, Craft Cooperatives, Independent Testing Labs, Lab Agents, and Transport.

On June 1st, non-priority applications will be accepting for retail and marijuana product manufacturers.

Retail operations will be permitted to open under state law effective July 1st, subject to local municipal regulations.

Retail operations will have to deal with increasingly difficult operational challenges caused by financial institutions not willing to run afoul of current federal laws requiring businesses to handle all transactions in cash, including payroll, taxes and even insurance. 

For help on how to handle these, and other challenges, in this evolving market, including your business insurance needs, please call me toll free at 800-649-3252.  Prefer to type versus talk?  Click below! 

 

HAVE A QUESTION?

 

Jeff Helm Web Card A 2018-5

Tags: marijuana, marijuana business, cannabis business insurance, marijuana business insurance, cannabis license

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