Business Record - Iowa Biz

Do you know how "products completed operations" can affect your business?

Do you know how "products completed operations" can affect your business?

Not surprisingly, most business owners don’t.

Often times, when I review this coverage with a client, if their business is not manufacturing, they don’t think they need it. I have even been asked if it can be removed from the policy since they do not make any products within their business.

So what I would like to do is review some simple scenarios that can show how useful and important this coverage really is.

• A self employed contractor builds a deck for a client – three months later the deck collapses and the client is injured. It is later determined that the contractor neglected to fasten the deck correctly and caused the deck to collapse.

• A customer eats a hamburger at your restaurant and later makes a claim against the business claiming that they received food poisoning from eating at your establishment.

• A heating and cooling business installs a new water heater in a client’s home. Three months later, the water heater leaks and causes property damage to the client’s home.

While some of these situations seem simple - they are common, everyday business operations that can affect many different industries.

It is important to note that to be covered, the injury or damage must occur away from your own premises, unless your business includes selling, handling or distributing your product for consumption on your premises.

Just as important to know is that this coverage only provides protection while the policy is in force.  So, if a business owner cancels the policy, closes their business or retires - and a claim arises three months later for work they performed during their policy period - they’re probably not covered.

So the next time you are reviewing your policy, make sure that your Products Completed Operations coverage is adequate for the risk you bear.

As always, I welcome any feedback that you may have and click on the above links for more information on this coverage.

A misunderstanding about equipment breakdown insurance

Boiler & machinery insurance - now known as equipment breakdown insurance - is one of the most misunderstood coverages. Why?

If you are not a manufacturing company or a company that uses large machinery or don’t need a boiler in your business …why would you need equipment breakdown coverage?

Well, here is a situation that you may be able to relate to.

Many businesses these days rely heavily on computers. Say you have an internal power surge or the motherboard of your computer crashes and causes your computers to go down. What would you do?

For those businesses that properly back up their data at an off-site location and work with a company that’s ready to handle this situation – kudos to you.

However, I come into contact with many businesses that do not have this situation planned out. In the event of such an occurrence, a business can lose substantial income should they be without computer access.

So how does equipment breakdown insurance work and what does it offer you? Equipment breakdown insurance covers the cost of repairing and replacing the damaged equipment. And it frequently (but not always) includes "business interruption" and "service interruption" coverage, which will cover you against loss of business or income due to computer-related "downtime."

If these additional coverages are not included in your policy, you may have to ask for them. Perhaps you are a Web-based business that operates via the Internet and your Web site is managed by an independent ISP provider. In this situation, you want to ensure that the ISP has both property/casualty and equipment breakdown coverage.

And make sure your own equipment breakdown policy includes "service interruption" coverage. This should pay for your loss of business caused by a mechanical or electrical breakdown to the ISP's servers or other equipment. Equipment breakdown is not just limited to the above examples; it actually covers many types of equipment and is broken down into the following categories:

• Electrical
• Air Conditioning and Refrigeration
• Boilers and Pressure Vessels
• Computers and Communications and
• Mechanical

This coverage can also apply to a personal homeowners policy as well. As with all insurance policies, there are limitations and exclusions. However, I hope you think about equipment breakdown coverage with a whole new meaning now.

Click on the links to learn more about this intriguing coverage, or feel free to contact me with any questions.

A common insurance theme

In an effort to inspire me with my blog writing, a friend sent me to a recent blog post from “The Fit Bottom Girls."

She said this blog post was “funny, refreshing and highlighted past blogs” and thought it would be a good idea for me to try something like it.

Now, what makes this so hilarious to me is that:

• These girls are talking about exercise – not insurance
• They talk about food, family and fun – again not insurance
• They are hilarious - really, there are a lot of funny things that can be said about exercise.

Now anyone who has read an insurance policy knows that it is not something you would casually pick up and get a chuckle over. Out of curiosity, aside from myself, has anyone out there ever even read their policy?

Of course I am really stretching this - my friend's intent was to inspire me to perhaps be a little more creative with my writing. I just thought it was humorous to use a blog about exercise as a comparison to insurance.

Aside from other insurances and maybe financial planning (especially now) there aren’t too many other industries that aren’t fun to write about.

However, I am willing to give this a whirl and see how what happens. So, here's a highlight of what I have covered year to date. 

How many times have I asked you to keep a list or write things down?  2
(An insurance resolution list for business owners, Are you managing your workers’ compensation?)

How many times have I referred to people suing you?  4
Wow – you can tell that I have a claims background! (Businesses beware , Are you a gambler, It’s not raining so why do I need an umbrella? An office errand and your business auto insurance)

How many times have I suggested that you review your policy with your agent? 3
(Don’t be a copycat, If it ain’t broke, Have you ever had to rent equipment

So I guess my “theme” this year pretty much boils down to this:

• Write things down and keep a list because people will sue you
• Make sure that you review your policy and discuss your coverages with your agent

It’s a simple message really – making sure you have the coverage you need in place when you need it. That is what your agent is for – to help and advise you along your journey.

Well, I hope you enjoyed the recap this month – stay tuned for more exciting news - next time we will be talking about equipment breakdown: What is it? What does it cover? And, why do you need it?

Have you ever had to rent equipment?

There are many different reasons that you may need to rent equipment. Often times a construction worker needs to rent a Bobcat or a tiller. A landscaper may need to rent a mower or a chainsaw. Painters may need to rent some scaffolding or spray equipment.  Photographers or film makers may rent camera equipment or lighting. An event planner may rent signage or furniture for a booth display. 

As you can see, there are an array of companies that will need to rent equipment or property every once in a while.

Renting equipment can be cost effective compared with purchasing a piece of equipment that you may only use two or three times in a year.  However, you might want to make sure that you have the proper insurance to cover the equipment in the event of a loss.

A common error I see - particularly in the construction industry - is that this industry will often carry general liability only. While it is the business owner’s choice if they do not want to cover their own tools, here are some things they might want to think of if they are renting someone else’s equipment:

• What is the cost to insure the equipment?
• What are the chances of loss?
• Do you have enough funds to replace the equipment if the equipment is damaged?

If you answered no to No. 3 then you might want to consult with your insurance agent prior to renting any equipment to ensure that you have the proper coverage.

If you are a company that rents equipment to others – to better protect your interest, I suggest that you:

• Pre-qualify your customers – make sure that they are familiar with your equipment
• Attach safety labels, warnings and equipment instructions/manuals
• Inspect equipment before each rental and make sure that all of your equipment is properly maintained
• Use a standard rental agreement that protects your interests - a properly written and correctly used agreement will help protect your company in the event of an accident or injury during the rental period

Just because you have an insurance policy doesn’t mean that you have the right coverage for all losses. We are entering into a busy time of year for many businesses so I suggest that you review your coverages with your agent to ensure that you have what you need.

Are you a gambler?

If you are a business owner who chooses not to be insured, then I would say you are a gambler. You are rolling the dice - gambling with the risk that nothing will happen.

• No one will fall on your property and injure themselves
• The space you are renting will not get damaged or catch on fire
• No one will break into your business and steal anything.
• Flooding will not occur and shut your business down for a month or more
• And none of the work you performed will breakdown and/or cause injury.

I am sure you get the point now.

However, I continually see businesses like auto repair shops, IT consultants, construction workers, in-home caregivers and other home-based businesses that do not carry insurance. Many of these businesses run a huge risk of liability should they be sued. 

Not to mention the loss that the business owner will sustain should a loss occur. Without insurance then you are simply self-insured.

Now there is nothing wrong with being self-insured. Some companies can afford to do that. However, most start up companies or companies that have only been in business for a couple of years or so cannot.

Many business owners started their business because it was their dream.

So why risk your dream?

Make sure that you are protecting your business with the proper insurance policy. The benefits outweigh the cost.

Businesses beware!

With the economy struggling, we could see an increase in lawsuits. It seems that every time I pick up the newspaper or turn on the news,  I am reading or hearing about a company that is laying off. I am sure many of you can relate to this and some may even know a friend or family member that has been laid off recently.

So what do layoffs have to do with insurance? 

I know I have mentioned it in the past, but in recent light of our economic situation, I feel it is worthy to discuss again. Lawsuits are expensive to defend, so what can a business owner do?

Well, for one they can be properly insured. In order to defend you against a lawsuit from a previous employee, you must have an Employment Practices Liability Insurance policy.

EPLI is a coverage that can be added to your current policy or purchased separately.

EPLI provides protection against many kinds of employee lawsuits, including claims of:

• Sexual harassment
• Discrimination
• Wrongful termination
• Breach of employment contract
• Negligent evaluation
• Failure to employ or promote
• Wrongful discipline
• Deprivation of career opportunity
• Wrongful infliction of emotional distress
• Mismanagement of employee benefit plans

Having this type of coverage can be invaluable to a business owner since it is predicted to only get worse.

Lawsuits are increasing all over the country for an array of different reasons.  When the economy is weak, people become anxious about money and it increases their motivation to seek compensation from other sources. Of course, attorneys are right there - fueling the fire so to speak - and unfortunately businesses are attractive targets to these audiences.

So when you are reviewing your insurance, try to be more focused on coverage first rather than the price you pay for it. It could cost you a lot more if you don’t have the right insurance in place should you need it.

It’s not raining – so why do I need an umbrella?

Umbrella policies are one of the most misunderstood insurances in the market.

There are several myths surrounding them:

• They’re only for rich people
• They’re too expensive
• They’re complicated to deal with

Truly nothing can be farther from the truth. As a matter of fact an umbrella policy can prove to be invaluable to someone regardless of how much money they have or don’t have.

Just think about the following scenarios:

• You pull out from a parking lot to make a left turn - there is a van to your left with their turn signal to enter the driveway that you are exiting - you don’t see any other vehicles, so you pull out into the road. As you enter into the roadway, you run into a motorcycle. The driver of the motorcycle is ejected from his bike and pronounced dead at the scene.
• A neighbor falls on your property and hits their head on your sidewalk and suffers a severe brain injury as a result.
• A natural disaster in which another person's property is damaged by a tree on your property crashing down on their vehicle or home.  You may think this would be covered by your homeowners insurance.

Now these example are extreme – but they are also something that can happen to any one of us. With these types of situations, having an umbrella policy in place can provide that extra layer of liability protection for you.

That is what an umbrella is -  it is designed to cover you and everything you own underneath it – and will not “kick-in” until your underlying limits are exhausted.

So what other protection can it provide? It can also provide coverage for claims that may be excluded by the primary policies often including, but not limited to:

• False arrest
• Libel
• Slander
• Invasion of Privacy

So the next time you review your insurance, make sure you ask your agent about an umbrella policy. The benefit can definitely outweigh the cost – and you will be surprised at how reasonably priced an umbrella policy is.

Business auto insurance and you - part 2

(This is a follow up to my last post about business auto insurance.)

Do you think there are any differences in coverage between a business auto policy and your personal auto policy?

Have you ever wondered what other coverage is available on your business auto policy?

Here are some important things you should know about that make a business auto policy different from a personal auto policy:

• Higher Liability Limits – business owners are able to purchase higher limits of liability to better protect their assets.
• Rental Reimbursement – this coverage is typically higher than in a personal policy and covers a business owner should they need to rent a vehicle due to a covered loss.
• Drive Other Car  – this is an endorsement that can extend coverage to executive officers and their spouses while using a non-owned auto for their personal use.
• Hired and Non-Owned Coverage - this is one that seems to cause the most confusion. It is simply an extension of coverage to a rented or hired vehicle. Make sure that you check the policy language to ensure that Hired Physical damage is also included. Non-owned coverage can provide excess coverage over a borrowed vehicle, or if an employee uses their own personal vehicle, it can provide excess coverage over their policy if you have the proper endorsement – employees as insureds.
• Towing – higher towing limits are available. It costs more to tow a large truck than it does a small vehicle.

If you are thinking now that you don’t need a business auto policy because you don’t need this type of coverage, think again.

Most personal auto policies will exclude coverage if you are using your vehicle regularly for business use.
Now, keep in mind it does depend on which type of business you are using your vehicle for.

Another issue that is most troubling to business owners is how their vehicles are titled. If the vehicle is titled to the business and you are using it regularly for the business then it should be insured by a business auto policy.

Don’t wait until a loss occurs and find out that you don’t have any coverage because you did not have your vehicle insured under the correct policy. The benefits of proper coverage can far exceed the costs.

An office errand and your business auto insurance

Do any of your employees run errands for you? Sometimes a business owner can be faced with a liability exposure and not even know it.

Consider these scenarios:

• Your office manager stops by Office Depot to pick up some supplies for work on her way back from lunch.
• On the way home, your salesperson stops by a client’s office to get some paperwork signed.
• Your receptionist stops at the bank during lunch to make a business deposit.

What if they were involved in an automobile accident along the way?

Whose policy do you think would cover the loss?

Whose policy would cover the defense costs?

Who would pay for the damages to the employee’s vehicle?

Well, in Iowa, insurance follows the vehicle. Therefore, typically the employee’s vehicle would cover the loss first and then they may turn to the business.

Now I did say typically. What I mean by this is that it does depend upon what type of policy the business owner has and what their policy language states. Business auto policies are determined by how you have designated your insurance.

In general, you have three options for which vehicles you choose to cover.

• Autos your business owns
• All autos your business owns, hires or leases
• All autos used for the business, including those that your business does not own, hire or lease

It also depends on if you have employees listed as insureds and if you have Non-Owned Liability. Non-owned liability can act as excess over your employees personal policy.

For example, if your employee’s personal policy is not enough to cover the damages in the loss, then your business policy can pick of the difference up to your policy limits.

These are key factors that should be addressed prior to taking out a business auto policy or when you are completing your annual review. There are many other aspects to a business auto policy as well so stay tuned…

If it ain’t broke …

Do you know someone who has gone on vacation and come home to find two inches of water in the basement because a pipe broke or their sump pump stopped working?

Intermittent changes in our weather can wreak havoc on plumbing systems. As a matter of fact, frozen and broken water pipes are the second largest catastrophe next to hurricanes, in terms of the cost of damage. This may surprise some of you, however, water damage often goes undetected for several days before it is found ... and by then the damage is already done.

The good news is that water damage can be prevented.

Here are some tips and steps you can take to make insurance losses less likely during extended severe weather.

• Watch for ice dams near gutter downspouts. Keep gutters free of leaves and debris so melting snow and ice can flow freely. Ice dams can cause water to build up and seep into your house or business. 
• Keep your building heated to a minimum of 65 degrees. The temperature inside the walls where the pipes are located is substantially colder than the walls themselves. A temperature lower than 65 degrees will not keep the inside walls from freezing.
• Identify the location for the main water shutoff in your home or business. Find out how it works in case you have to use it.
• Disconnect hoses from outside spigots.
• If you are leaving your home to go on a trip or closing the business for a period of time, ask a neighbor to check your home or business regularly. Or simply have the water system drained by a professional to keep pipes from freezing or bursting.
• Install an alarm system that can detect water or low temperatures.

Most insurance policies will cover the resulting damage from broken or freezing pipes, however many policies will not cover backups in sewers and drains or flood unless you have the appropriate endorsement or flood policy in place.

And, of course, make sure to check with your agent to ensure that you have the proper coverage in place. If something is going to break, be prepared.