The Terrorism Risk Insurance Act

 

As a result of 9/11, the Terrorism Risk Insurance Act, also known as TRIA, was created for certain types of business policies. The purpose of this program is to spread the risk of catastrophic losses from certain acts of terrorism between insurance companies and the federal government. Business policies are excluded from terrorism acts. However, this act requires insurance companies to offer coverage for any loss that occurs within the United States. Coverage is available for an additional premium. Prior to 2007, TRIA coverage only covered acts a result from foreign terrorism. Since 2007, coverage now includes terrorism from domestic acts. Coverage is only for “certified acts of terrorism”.

What constitutes a certified act of terrorism?  Any terrorist act that is certified by the Secretary of the Treasury, in conjunction with the Secretary of State and the Attorney General of the United States. The act states that “It must be a violent act that is dangerous to human life, property or infrastructure. It must be committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United Sates Government by coercion”.

I am told at the time of this writing that the Boston Marathon bombings have not been declared a terrorist act. That means the building damage, for example, would be paid under the peril of explosion on one’s business policy.

When applying for business coverage, you must either accept or reject TRIA coverage and sign an acceptance or rejection form. Premiums vary between insurance companies and policy types. The additional premium usually ranges from 3-5% of the base premium, with a minimum premium of $100 for this coverage.

If you have other questions, feel free to contact us.

Condo Master Policy Insurance

 

Condominium insurance is a unique kind of insurance that integrates the interests of a condominium association with the interests of the individual unit owners. Even though each unit owner has a proportional interest in the Association, unit owners do have distinct and separate interests of their own.

The structure of the insurance policy is important, and this structure is normally defined in the Master Deed. One of the most important initial details is where association vs. unit ownership begins and ends… because insurance usually follows ownership.  Ownership is defined in the Master Deed. (When buying a condo unit, always get a copy of the Master Deed, as well as association by-laws).

All-in

The condominium structure commonly known as "All-in" includes everything right to the interior coat of paint inside the condominium units.  This “All-in” approach typically will include additions or alterations that a unit owner makes, such as adding new cabinets, alarm system, chandelier, and so forth, provided the unit owner alerts the association to these additional values. The association is then responsible for providing insurance for everything that is permanently attached within the condominium structure. A simple way of visualizing this concept is to imagine turning the building upside down and shaking it; everything that falls out, such as furniture and other personal property, is the responsibility of the unit owner. Everything else that stays attached to the structure is insured by the association policy. 

Bare walls 

The “bare walls” approach means the bare walls of the building, and leaves a greater responsibility on individual unit owners to insure their owned portion of the “structure”, building, or “real property”. In the Master Deed, the “bare walls” approach uses wording such as “on the plane of the interior studs”, or “the plane of the lower side of the roof rafters”, or ”the top surface of the sub-flooring”.  All these means is that the unit owner owns all the drywall, wallpaper, paint, flooring, etc. and is therefore responsible for insuring these items personally.   Even bathtubs, toilets, sinks, kitchen cabinets and counter-tops would not be covered.  Remember, insurance usually follows ownership.  The condominium association insures only the shell structure plus common mechanicals such as heating systems, common plumbing, and common electrical; the rest is the unit owner’s responsibility.

Biggest Possible Problems where the association policy intersects with personal policies:

The second big problem can occur if a condominium association insures its building based on a “bare walls” replacement estimate, but the deed calls for “All-in” coverage; the result is a severely under insured property.  Valuations for “bare walls” condominium buildings typically run 30 to 40% less than valuations for similar sized all in policies because of the cost of finish work and interior walls. Imagine if you were handed the keys to your newly rebuilt unit, only to find rough plywood floors, studs for walls, and only joists for a ceiling. Lesson: review your master deed for ownership specifics. (Or work with a broker like Gordon who understands these things.)
 
The management of a condominium association can directly affect the cost of insurance, as attention to general conditions and safety concerns affects potential losses.  Because every association is managed uniquely, and because attention to these details does affect losses over the long run, insurance underwriters pay close attention to loss history with condominiums.  There is also the natural tendency for unit owners to prefer to have an association assume condominium losses, rather than file their own claims.  So, even though insurance generally follows ownership, it is understandable that there is pressure to have associations assume losses where possible. However, this is a shortsighted strategy for the association.
 
Because of these issues, we usually recommend associations use high deductibles, and self-insure smaller losses to avoid these losses from affecting insurance claims experience. When associations have more skin in the game, attention to loss prevention is heightened, lowering the long term cost of risk.  With condo associations greater than four units, insurance companies usually will want to review condominium association financials to ensure the ability to pay for these smaller claims.  
 
Even when claims experience is good, insurance company initial inspection is rigorous. Talk to us about conditions honestly.  The most attractive pricing is reserved for the best-maintained (perfect) places.
 
See our other blogs and whiteboard videos for more on how individual unit owners can address their interests as they may deviate from association interests and association management’s lack of understanding of some of these nuances.

If you have any further questions, contact us by clicking the buttons below.

Insurance for Multiple Rental Properties

 

If you are an owner of several rental properties, keeping your insurance program organized is very important. If you are like many owners, as you acquired each new multi-family property you purchased an individual policy just ahead of the closing to have protection for the building and liability associated with that property. Now, you may have several different insurance policies in place all with different renewal dates, different payment dates, with different companies, and possibly different liability limits.

There is a better way. You can simplify the insurance for all of the properties by placing them all on one policy, with one payment, and with one renewal date. Equally important, the policy’s liability coverage will extend over all of the properties. This will consolidate your coverage, eliminate duplicate coverage, and simplify the management of the properties. 

Let us look at a common structure: You own several rental properties, and the current insurance program looks like:

• Building #1- $560,000 in building coverage, $500,000 in liability, rental loss coverage, with a $500 deductible. Policy renewal on June 25th.  Billed monthly.
• Building #2- $720,000 in building coverage, $1M in liability, no rental loss coverage, with a $2,500 deductible. Policy Renewal on April 11th.  Billed quarterly.
• Building #3- $330,000 in building coverage, $500,000 in liability, rental loss coverage, with a $5,000 deductible. Policy renewal on August 13th.  Paid in full. 
• Building #4- $910,000 in building coverage, $2M in liability, rental loss coverage, with a $10,000 deductible. Policy renewal on November 2nd.  Billed monthly. 

Placing these four properties, and their insurance programs, under one policy would simplify the billing, standardize the coverage for all of the properties, and eliminate the hassle of separate renewals each year. 

The new insurance policy would look like:                                                   

• Buildings #1-4 Scheduled with their total building coverage of $2,520,000. Using a “blanket limit” provides a rating discount, typically 10%. Rental loss coverage for every building. Plenty of liability coverage spanning all buildings: $1M - $20M. One set deductible for any claims on the policy.  Special form coverage for all of the buildings. One renewal date. One monthly bill. One insurance company. One claims department. One agent: Andrew G Gordon, Inc.

The insurance program you have in place for your properties is extremely important. Each building is a sizable financial asset. Each building also represents a potential liability exposure. It is essential to have the proper insurance program in place in order to sleep easy at night, knowing the buildings and your liability is efficiently well-protected.

If you want to investigate this option even further, simply contact us.

Appalachian Trail Trip Reflections

 

My son is hiking the Appalachian Trail this spring, so I decided to join him for a week while I’m old enough to appreciate it, but still young enough to keep up. While the mountains of western North Carolina and eastern Tennessee are a different world from the business environment where I spend most weekdays, there are similarities that span all these places where we spend our lives. This blog will list a few.

Preparation

When preparing for a week in the woods, great deliberation helps to minimize weight and maximize comfort. All people, and all organisms, strive to maximize return on minimal effort. When I left home, my pack, which included a sleeping bag, tent, clothes for all possible weather and other necessities weighed about 24 pounds. 2 Liters of water (daily minimum consumption), and a week of food brought my pack weight into the low 30s. 15 to 20 years ago weights for the same trip would be in the low to mid 40s; less today due to advances in clothing technology.  Similarly business tools including PowerPoint, iPads, and other technological progress make presentations more efficient today. Preparation, however, still means the difference at the margins. The success of any business presentation is always greatly affected by the level of preparation by the presenter. One day, I met a hiker who was carrying a 50 lb pack, and quickly advanced out in front of him in spite of his 30 year younger legs. Similarly, a good business presentation with deliberate and diligent preparation will outpace a poorly prepared message any day.

Balance

The old expression "All work and no play makes Johnny a dull boy" is as true on the trail as it is at work. My business coach reminds me to be sure that my work, personal, and spiritual lives are in balance. Similarly, on the trail, our bodies need a break every once in a while. One afternoon, after hiking the highest mountain along our trip, we decided to continue with a night hike to double our mileage for a 21+ day. The next day we took a "Near-0", (some “take a Zero”), hiking just five and half miles out to Erwin Tennessee. We so enjoyed that brief interlude of camping, instead of hiking, that morning with time for a campfire and a hot cup of coffee after all the hikers left for the trail. And my feet healed a little.

Similarly, in business, a day of rest makes sense to recharge ourselves from time to time, especially following a difficult or especially lengthy day.

Challenges

In business we know that setting SMART goals which challenge us sets an important path to success. Challenges on the trail are equally important. Fellow hikers (substitute “workers”) may push us to accept challenges that we rise up to meet. But it is equally important to reject those challenges where you are bound to fail. Failure on the trail can be life threatening so especially when the risk of failure is severe, pay heed. On the other hand, the ability to rise up and meet those challenges that must be met fosters perseverance, fortitude and discipline. These make us better at whatever we do.

Give and Take

Stephen Covey wrote that win-win situations should be pursued in business as well as in life. On the trail the level of generosity is tempered by shared resource limitations (there's only so much food in reserve). But the happiest hikers seemed to be those willing to help others. The evening of our first day of hiking, G surprised us by breaking out a six-pack of PBR Talls. This gesture of generosity added approximately 20% to the weight she carried that day, but the satisfaction of presenting these to her friends was worth the hurt. Mentors in business find deep satisfaction in helping others. Give to receive.

One big difference – hospitality vs. generosity

As a child I was taught about self-reliance, and never been comfortable accepting charity; but am always pleased to accept hospitality. But when you are tired and cold and thirsty and weak after a difficult day’s hike, accepting Gatorade, a slot in the shelter (we routinely exceeded stated capacity), and other forms of charity are accepted without hesitation. Thus, I offer a message to those who are kind enough to donate or offer charity in their lives: the recipients of your largesse may feel better about your generosity if it is offered in the spirit of hospitality, not just out of charity. They may also be too desperate to make the distinction.

Risk: frequency and severity

When climbing on ice covered rocks in a steep incline, a misstep can be disastrous and even life threatening. Whenever I return to towns lined with sidewalks and curb cuts and warning signs saying to "watch your step," I am amazed by how safe public ways are. It’s good that we can walk around without fear of falling into a ravine. Safe walkways prevent injuries, and allow us to focus on other matters. But a sterile environment also dulls our senses. I believe that it is healthy for all of us to step away from the sterile and predictable environment we work in, to experience the high sensitivity required by unpredictable (risky) terrain, if only to feel the rush of focus and fear. Taking a measure of risk in our lives and then dealing with it appropriately keeps us alert and makes us better.

Final thoughts

This hike was one of the hardest things I've ever done, but wouldn't trade the experience for anything. Stepping out of our comfort zone into unpredictable new areas forces us to be better, to grow, and if we’re lucky, to forge new relationships. While living in great discomfort for a week is not for everyone, I urge anyone to step into an environment where sensitivities are sharpest and life explodes before us.

As you can see, business is a lot like hiking. To keep up with what's going on with the insurance of the business world, feel free to check out the rest of our commerical blog. For a free quote on your business, simply click the button below.

What is an Insurance Audit for General Liability or Workers Comp?

 

An insurance audit is when an insurance company checks on the payroll or revenues of a customer or policyholder, to ensure that the policy reflects accurate rating information. Audits are common with all Worker's Compensation policies, many general liability policies, as well as some marine policies and other kinds of insurance.

Why are Insurance Audits Important?

Here's why audits are important: insurance policies are rated based on many different metrics, many of which we just do not know at the beginning of a policy term. For example, if a rating metric for a development is the number of acres in the development, that number won't change.  If the grading metric is gross revenues or gross payrolls, we don't know the true revenue or payroll until after the policy is over. The audit helps the insurance company to rate insurance policies most accurately.

Imagine you have a business that typically generates $1 million in revenues.  If you tell your broker that your business does only a half million dollars in revenues you may get a one year break in your insurance costs. The audit, however, is the mechanism insurance companies use to keep you honest.

The rating metric that drives Worker's Compensation costs is payroll. This makes sense: the more employees working at a place, the higher the payroll; this ties to the greater the exposure for somebody to file a claim.

Underestimating Payroll or Gross Revenues

Underestimating payroll or revenues for an insurance program carries some risks. Suppose a business does $1 million in sales and the general liability is based on that rating metric. To save money the business owner tells the insurance company their sales are only $500,000. Let's say the insurance costs $5,000 under these assumptions; you'd think the business saved $5,000. But when the audit uncovers the fact that the business does $1 million in sales, last year's policy cost is adjusted retroactively by $5,000 to get up to $10,000 in this example. (The additional $5,000 is due right away, because it's for last year's policy.) Further, the insurance company has seen this tactic once or twice before.  In the interest of collecting a proper amount of premium for the new year, the insurance company will also  update the estimated sales for that policy year to $1 million resulting in an additional $5,000 charge. This is the double whammy scenario: the insurance company collects the retroactive premium, as well as adjusts the current policy to reflect the reality: in this case resulting in a total $10,000 additional charge on what was budgeted as a $5,000 insurance cost.  This isn't good for cash flow or for relationships between risk partners. Underwriters don’t have a great sense of humor when it comes to mis-reported rating metrics.

We counsel our customers to be as accurate as possible or slightly underestimate projections so that audit adjustments are minimized, and premiums are paid as revenues and payroll's are accounted for.

A new trend in workers compensation is rendering these audits nearly obsolete. Worker's Compensation charged through a payroll service company allows Worker's Compensation expenses to tie almost exactly 2 labor expenses. Visit our dedicated page on payroll deduction Worker's Compensation for more on this subject.

The Good that Comes from Audits

Not all is bad about audits. When sales come in below true expectations, most policies provide for return premiums under these circumstances. Some surplus and excess policies do not make such allowances, however, so it is important to discuss projected revenues and payroll with your professional agent or broker.

The audit exercise is typically a simple process of providing evidence of sales (income statement or tax reports) or payroll (941s and similar tax forms). However, we know it isn’t something anybody wakes up in the morning looking forward to doing. Thus, occasionsionally businesses don't get around to completing audits for their insurance company partners right away. The standard recourse is effective, but a nuisance: when an audit is not completed they generate an "assumed audit". Here the insurance company simply assumes that your payroll or revenues increased by 50% or more, generating a huge bill for the retroactive policy as well as a huge bill for the new policy. When an audit is not completed in a timely fashion the insurance companies leverage is often this giant bill. This is when the accounts payable folks get over to the bookkeeper to get that audit done. We work with our customers on expediting such events, but encourage prompt completion of any audit to avoid such unpleasantries.

In the contracting environment where a general contractor engages several types of subcontractors, the auditor will charge for costs of uninsured subcontractors much differently from insured subcontractors. When an uninsured contractor causes a loss, the general contractor's insurance may be responsible for covering a loss, therefore the attendant charge will be included for his policy.  Certificates of insurance properly organize and document insurance of subcontractors to reduce the effects of an audit on the general contractors insurance program. See our separate blog on certificates of insurance. 

Be Prepared

Don't let an audit surprise you or catch you off guard. Here at Gordon Insurance we try to advise you in a way that results in the best possible insurance program while protecting your cash flow and budget. Don't hesitate to call or contact us if we can assist with achieving these common business objectives.

What is a Certificate of Insurance and How Does It Work?

 

(If yiou prefer, see our short whiteboard video on this subject-Certificate of Liability)

A certificate of insurance is a single page usually document that lists insurance policies for a business's insurance program. Certificates of insurance are typically required when one business engages the services of another, and wants to know whether that business has liability insurance.  It is the default document to convey to an interested party what kind of insurance and what amounts of insurance another business has.

A standard certificate will list the general liability, the automobile liability, excess liability, and Worker's Compensation policies. They also provide the name of the insurance company and policy effective and expiration dates. The latter is most important particularly if the expiration of an insurance policy straddles the time that a job is being done. Thus, it lets the certificate "holder", or the company engaging another company, when the subcontractors insurance runs out. It is a great management tool for verifying insurance of others in business.

In the construction field, certificates of insurance are provided for important cost reasons.  If an uninsured subcontractor causes damage at a job site resulting in a loss, the general contractors insurance may end up paying a claim for the subcontractor's negligence. Thus, when a general contractor engages the services of a subcontractor who has no insurance, the general contractor's insurance company will usually make a premium charge for the uninsured subcontractor when they learn this at audit at the end of the year. The certificate, therefore, is an important document for preventing such a charge from landing on the general contractors insurance.

Certificates also convey other important information that may be present between working parties. One of the most common is what is known as the additional insured.  The additional insured status is another step toward requiring subcontractors to assume full responsibility for their actions on a job site, and the certificate of insurance can confirm this particular status.  Another common additional insured scenario is with landlords and tenants, or service providers such as landscapers.

Another policy feature that may be required when different businesses collaborate on a project, is the waiver of subrogation agreement. The certificate likewise provides a checkbox to acknowledge whether waiver of subrogation exists between parties.

Certificates are requested in many other business relationships. A landlord should require all tenants to have liability insurance so that a lawsuit from a tenant's actions do not come back to the landlord. The certificate of insurance may be used to document compliance in this arrangement.

Another important insurance consideration disclosed on a certificate is relates to Worker's Compensation insurance. In Massachusetts, business owners may opt out from having Worker's Compensation coverage in order to eliminate the cost of including Worker's Compensation for themselves. A certificate of insurance can disclose whether the owner has opted out or not.  

When a business such as a bank wants to confirm whether there is insurance on a business's property, the certificate of liability insurance is not the correct document, but rather either an insurance binder, or the evidence of property insurance form. These look very similar to noninsurance people but there is an important distinction: These other forms typically do not address liability insurance.

Businesses that collect many certificates of insurance often organize these certificates by expiration date of their subcontractors insurance. Thus, they will know when the insurance of the subcontractor ends in order to know when to request a replacement certificate.

One important caveat: a certificate only shows insurance in place on a given day. There is no specific obligation by the insurer or by the agent or broker to notify a certificate holder if the subcontractor lets their insurance cancel. Generally speaking, when old claims make their way back to a general contractor, the subcontractors insurance often has expired.

Download a sample certificate where we have highlighted some of the more important aspects of this cryptic looking insurance form.

Some businesses enjoy the option of producing their own certificates rather than waiting to speak to their agent or broker. Here at Gordon insurance we provide online account access so that busy business owners and contractors can generate and print or email certificates whenever they want.  For contractors especially who do paperwork from home at night, this is a convenient time saver.

For more on certificates, visit our page http://www.agordon.com/certs with samples and a video on how to use certificates to your advantage.

Call or contact us for details.

Insurance for Business Owners

 

Business Owners Policy

Insurance is critical for small business owners. The purpose of insurance for the small business is to provide critical assistance in the event of a loss in order for the business to continue its daily operations with as little disruption as possible. Without the proper protection, property or liability losses to an organization can put the entire organization out of business. 

The majority of small business owners purchase a Property & Liability policy, which is more commonly known as a Business Owners Policy (BOP). It is a package policy. The reason it is a package policy is because it packages both property insurance with liability insurance under one policy for the business. 

Business Property Insurance

The policy includes coverage for any property that the business owns, leases, or rents. If the business owns a building from which the business operates, the building can be covered. Everything inside the building will be covered such as the office equipment critical to the daily operations, including computers, printers, fax machines, and others. Furniture in the building is covered. Any inventory in the building can be covered as well. Think about the significant amount of money a company invests in inventory and raw material. If this inventory is destroyed in a fire, the value of the inventory will be covered. Machinery is covered. Often times, machinery is a significant part of a company’s total assets. If the machinery is destroyed in a fire, the business will be able to purchase new machinery. 

Business Liability Insurance

The liability part of the policy covers a business when something goes wrong and the business is sued. A customer who comes to the office can slip and fall. A product the business sells can injure a customer. If property of another business or a customer is damaged due to the business’ employees or product, the business may be sued. The liability coverage will provide protection against these events. The policy will also cover the costs of defending the business in litigation. 

Cyber Liability & Employment Practices

Several important protections can be added to a Business Owners Policy. If the business holds personal information of its customers, it has the potential to mishandle that protected information, leaving the customers vulnerable to identity theft. This Cyber Liability can be added to the policy.

If the business has employees, it can add coverage to the policy that protects it from employment related lawsuits resulting from alleged acts of discrimination, harassment, wrongful termination, etc. In today’s day and age, it is common for a terminated employee to feel wronged and seek out legal counsel in order to potentially sue the company. 

If you have any other questions about your business and insurance it may need, feel free to contact us.

Cyber Liability – Does Your Business Keep Customer Information Data?

 

Do you store your customers or prospects personal identification information on a computer system controlled by your office?  Is it accessibly over the internet or from a tablet, phone or laptop? If you do you, cyber liability insurance is a valuable topic.

Cyber liability today can be broadly broken down into two categories. The first is: “How do I respond when a hacker has gained access to my customers’ personal identification information?”  The second is any liability that may arise if the theft of that information causes loss or damage to others. For example, suppose you have name and credit card information stored, which is stolen, and unauthorized charges are made against your customers credit card accounts. For insurance purposes, the first category refers to “first party coverages"; the second as third-party liability.

First Party Coverages

First party cyber liability insurance includes crisis management: “What do I do now that someone has hacked and possibly stolen some of our information?” Another expense will be forensic accounting: “How did this happen?” The next of course is notification: you have to tell your affected customers what happened. Depending upon the number of customers and the nature of the breach, you may need to engage a call-center to handle the calls that are bound to come in.  And finally, you’ll probably need to provide credit monitoring for your customers who were affected by the data breach or possible theft. Insurance policies have evolved to provide specific supplements for these categories: credit monitoring, notification, forensic accounting and other first party services. 

A separate category of first party losses include business interruption. This can be especially important coverage for businesses that conducts most business online: While under attack, a web-based business is no better off than a retail business with locked front doors: you’re out of business. Generally, this particular insurance has specific triggers such as a network attack or actual system breach; most won’t cover for other disruptions more commonly insured under other policies.

Third Party Liability

The next category is third-party liability claims. These are the claims that customers may make against you because that lost laptop or lost phone of yours resulted in their credit card having unauthorized charges made. Third-party liability claims involving personal identifiable information are generally less severe than those involving personal health information. When personal health information is stolen for the purpose of obtaining prescription medications or other treatments, attorneys can sue for invasion of privacy, tarnished reputation, mental anguish, and other subjective – and expensive - damages. 

Third party damages account for only 10%–15% of losses currently, because insured events pay first party costs, and have a crisis management partner, attended to up front. Experience for uninsured events is harder to quantify, but where first party intervention is delayed, third party damages probably rise.

The newest, and for many businesses the largest, financial exposure is regulatory. Fines imposed by new laws in various jurisdictions, state and federal, are harsh in an attempt to force businesses to secure their systems from attacks. Here in Massachusetts the law known as CMR-17 imposes severe penalties on businesses that lose private identifiable information. If you are reading this article and do not have a W.I.S.P. on file and actively updated, you should call us right away. Many insurance policies will not include coverage for government fines and penalties.  Not only is insurance a good idea, but securing your network through carefully designed procedures and protocols is necessary today.

Cyber Liability Policies

Cyber liability insurance policies have become more homogeneous over the past few years as business exposures and effective responses have been identified through insurance claims experience. Thus, while there are differences in details the basic structure of policies is beginning to form.

Some companies offer this insurance as add-ons to existing business policies, but for many a stand-alone policy makes more sense. Pricing for this insurance has become much tighter; meaning wide disparities in price from carrier to carrier are no longer as common as just a few years ago. For example, add on coverage for many small businesses can cost from as little as $500 to $2000 per year for limits of $50,000-$1 million. Business size and nature of information are important measures of cost.

To learn more about cyber liability for your business, contact us online or call us at 800-649-3252. To learn more about commerical insurance, click the link. We're always to answer any questions about insurance. To get a business quote for your business, click the button below.

Talking to the press when bad news hits a company

 

When something bad happens at your company, controlling the press’s reaction can mean the difference in an enhanced brand or a damaged one.  Bad things do happen, and a company can’t predict when it may happen to them, so it pays to know how to speak to the press. Consider these points when your company gets a load of lemons, ...and make a pitcher of sweet lemonade.

Guidelines

1.  Assign a single point person as media liaison. Generally this should be the business owner or a trained public ralations person.   The owner / CEO has access to the most information and has greatest control of the brand.   All others must defer to that person as having all the correct information.  By having a single person control the message, it will stay consistent and minimize the chance of mixed messages.

2. When talking to the media, remember

• They have a job to do:  Give them something of value without compromising your position.

• Never lie.  Ever.  Even a little. 

• Never say “No Comment”.  It sounds like there’s way more to this juicy story and reporters are trained to get the full story, one way or another.

• They can ask any questions, and you can say anything you want in reply. Learn from politicians: control the agenda.  Use questions as a prompt for what you need to say, not always by answering the question.

• Everything you say, on or off the record, is fair game for the media.  See the first point again.

3. Answers / Announcements: Here’s the order and structure of what to say when a microphone appears in front of your face:

1. We’ve had an incident involving  ____________.
2. The incident is under investigation, and we are working with authorities / outside experts to learn more.
3. We don’t have all the facts and details yet.  (let the story fade)
4. Our customers (or our employees) are our primary concern. (show social responsibility)
5. We will cooperate with the authorities in every way possible. (We are good people dealing with a bad turn of events)

The reason these sound so familiar is because they work. This format signals to the press that you know the game.  It signals to consumers of the press that you're responsible, well intentioned, and hard working.  You have the platform: use it to the best of your advantage.

4. Generally- Don’t admit fault. Let your lawyers deal with that later.  Attend to the work at hand.  If applicable and true, re-direct fault to others, without overtly throwing them ‘under the bus’.   example: our software vendor noticed a breach on one of their servers, and are working hard to determine the extent of the breach. 

Our job here at Andrew G. Gordon, Inc. is to provide you and your business with the best knowledge possible to deal with adverse situations in an organized and controlled way.  In general, a plan is better than no plan.   Check out our other commercial insurance blogs for more information about how to protect you and your company.  For a business quote request, click the button below.

What is Waiver of Subrogation? Should I grant Waiver of Subrogation?

 

When subcontractors perform work for general contractors, they usually need to show the general contractor that they have insurance. Often, the general contractor asks to be named as an Additional Insured, and occasionally include a Waiver of Subrogation clause as well. We’ll take a look at each of these here. In general, proof of insurance is expected, Additional Insured may be a negotiated item, and waiver of subrogation gives up significant rights and should not be given without serious deliberation. 

Showing that you have insurance has been common for years. If a sub-contractor does work for a general contractor and something bad happens, the general wants to know the sub has insurance. A simple example would be if the electrician performs faulty wiring that results in a fire. If the sub-contractor doesn’t have insurance, then not only does the claim go on the history of the general contractor, but the entire payroll (including both materials and labor) is charged to the general contractor on audit. So even when there is no claim, the absence of insurance through the sub will still cost the general money on his own insurance, since all actions of the sub will be picked up under his insurance. The simplest and most common way to show proof is on a certificate of insurance. If a fire results from work by the sub-contrator electrician, the general’s insurance company may get involved in a claim, but the general's insurance company will know the sub-electrician's insurance company name, coverage amounts, and policy number; ultimately the responsible party’s company will be the company to pay damages.

Additional Insured

The general contractor may ask to be named as “additional insured” as well. If granted by the sub to the general, the electrician’s insurance will include the general contractor in its defense coverage and actual judgments if a lawsuit arises out of his work. So, if the electrician causes damage, the general contractor gets insurance protection from the sub’s insurance company, keeping losses off its own claims experience. (See our broader discussion on Additional Insured here).

When we are the electrician’s broker, we discourage granting ‘additional insured’ status to others, since they’re sharing their insurance with another entity. If there are two judgments for $600,000 after the fire, and the electrician has a $1,000,000 policy, the electrician ran out of insurance when it reached a million dollars, but the general contractor can still go to his own insurance. Of course, if we are the general contactor’s broker, we encourage them to get additional insured status from everyone who comes on a job site.  After all, everyone needs to be held responsible for their own work, and the general contractor wants to shift costs and exposure downstream whenever possible.

Waiver of Subrogation

Larger contractors now require another step in cost shifting: Waiver of Subrogation.  This takes cost shifting to a whole new level. Suppose the electrician is hurt on a job site due to negligence of the general contractor when a temporary wall collapses on the electrician. Unlike the previous two steps which assign whose insurance company pays the responsible party, waiver of subrogation prevents the electrician’s insurer from going after the general contractor’s insurance, even if the general was at fault as in this example! So the worker's compensation claim will go on the electrician’s insurance history, and boost his experience midification factor. 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 losses will stay on the loss history of the electrician. What’s fair about that? Plus, becuase 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. But even their negligence may result 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 Waiver of Subrogation.

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