Don’t Overlook Equipment Breakdown Insurance

Imagine it’s a typical July day. You own a 30,000-square-foot office building that is 85% occupied. And the air conditioning and ventilation systems stop working. The outside temperature is in the 90’s and the humidity is high. It doesn’t take long before the tenants start to complain.

The contractor you summon determines that an electrical arc fried the circuit board that controls the systems.

The board must be replaced, but it will take up to five business days for it to arrive. In the meantime, the building is unfit for people to work in, and the leases oblige you to credit tenants’ rents for periods when the building in uninhabitable for more than a day. In short, you face thousands of dollars in repairs and much more in lost rents.

While your property insurance policy will cover the resulting property damage from fires or explosions, it will not cover the equipment or lost income from the downtime during repairs.

But equipment breakdown insurance will.

Equipment breakdown insurance

This form of insurance is not a substitute for other property coverage. It will not pay for damage caused by fire, lightning, explosions from sources other than pressure vessels, floods, earthquakes, vandalism, and other causes of loss covered elsewhere.

Equipment breakdown policies are designed to fill in the gaps left by other policies, not to replace them. Also, they do not cover mechanical breakdowns that result from normal wear and tear as a device ages.

A number of events can trigger a claim for equipment, such as:

  • Mechanical breakdown in equipment that generates, transmits or uses energy, including telephone and computer systems.
  • Electrical surges that damage appliances, devices or wiring.
  • Boiler explosions, ruptures or bursts.
  • Events inside steam boilers and pipes or hot water heaters and similar equipment that damages them.

Business owners often overlook equipment breakdown coverage. Bur, virtually all of them have some need for this insurance.

What equipment breakdown insurance covers:

  • The cost of repairing or replacing the equipment.
  • Lost business income from a covered event.
  • Extra expenses you incur due to a covered event.
  • Limited coverage for losses like food spoilage in freezers that break down.

Most businesses rely heavily on machines in their daily operations, from computers to refrigeration equipment and elevators to manufacturing equipment.

For some, the cost of repairs to this equipment and resulting downtime can have a serious impact. Such businesses should seriously consider buying equipment breakdown insurance.
Call us if you would like to discuss this crucial form of coverage.

Workers’ Comp Audit Mistakes: What to Look For

calculate

No company owner wants to undergo a workers’ compensation audit, but they are a fact of life if you run a business and have employees.

Unfortunately, many audits don’t go smoothly and sometimes your insurer may make mistakes. Missouri-based Workers’ Compensation Consultants, which helps employers through the workers’ comp audit process, recently listed the 10 most common audit mistakes that insurance companies make.

The list highlights a common problem and how you can detect the mistakes to avoid being stuck with a massive audit bill. Insurance companies allow you to review the audit with your broker. If you notice that you have received an audit bill that is obviously overstated, you should contact us.

Here are the things to look for when reviewing an audit by your insurance company:

Wrong class code – Misapplication of job classifications occurs in many workers’ comp audits. With hundreds of job classes to choose from, mistakes can happen. Talk to us and review your old policies to see if any of your class codes have changed.

X-Mod is changed – After your insurer finishes the audit, it will use the information to calculate your premium. When that happens, it has to include your X-Mod to get the right rate. But sometimes the insurer may use an incorrect X-Mod. Check carefully.

Subcontractors are counted – Sometimes insurers will include subcontractors as employees, which results in a new audit bill to account for the additional “employees.” But if they are genuine subcontractors, they should not be counted. Often, uninsured contractors will be included as employees. Make sure to use insured contractors only.

Disappearing credits – Most policies will have some sort of premium credits or other modifiers. Sometimes during audits, the insurer will remove them when recalculating the premium they think you owe. Watch out for missing credits and other modifiers if you get an audit bill, like:

  • Premium discount
  • Schedule credits
  • Deductible credits
  • State-specific credits

 

Audit worksheets missing – If the auditor fails to provide you with audit worksheets, which are used do compile your payroll and other audit information, you should ask to check their work. They will provide you with the information you need to carry out such a check.

Your rates changed – The rates you are charged at the beginning of your policy period must remain the same for the entire policy period. If your base rates have changed, the insurer may have made a mistake. 

Separation of payroll – Depending on your industry, you may or may not be able to split your employees’ payroll between job classifications (like cabinet installers and sheetrock hangers). This is a pinch point when errors can occur. If the auditor says you are not allowed to split job classifications even though you have in the past, your audit may be in error.

Unexpected large premium due – If you get a significant bill for your insurance company after your audit, the auditor may have made mistakes, particularly if you know that your employment has remained relatively stable and you’ve had no significant claims, if any. If it seems out of whack, call us.

Payroll data doesn’t match – If there is a discrepancy between your payroll data and what you see on the audit, a mistake may have been made. Try to match the payroll on the audit with that generated from your accountant. If the insurer made a mistake, you could end up paying for phantom payroll numbers.

No physical audit – There are three types of audits:

  • Mail audit
  • Phone audit, and
  • Physical audit

 

The mail and phone audits are prone to errors, since neither you nor your staff likely have any experience in premium auditing. If you have a big bill after a mail or phone audit, mistakes could have been made.

Commercial Auto Rates Face New Headwinds

Trucks, Route 66, California, USA

More accidents attributed to smartphone use while driving, coupled with much higher costs of repairs, have led to double-digit increases in commercial auto insurance rates over the past few years.

Distracted driving is just one of many factors that have converged on commercial auto insurance claims, resulting in sustained premium increases. Now there are new factors that are coming into play that will ensure that rates continue climbing, at least in the near term.

Commercial auto rates are increasing for companies with large fleets as well as for businesses with just a few vehicles and drivers. Here’s what’s at play and what you need to be aware of in the future.

Continuing factors

Distracted driving – This is the biggie. Starting a few years after the advent of smartphones in 2009, the steady decline in vehicle accidents and claims costs started to reverse when vehicular deaths started increasing for the first time in decades. The culprit, say many transportation safety experts, is distracted driving.

Repair costs – The cost of repairing vehicles has skyrocketed as cars have become more technologically advanced. A 2018 research paper by AAA found that vehicles equipped with advanced driver-assistance systems (ADAS) can cost twice as much to repair following a collision, due to expensive sensors and calibration requirements.

AAA cited the cost of repairing a car with windshield damage if it has an ADAS. The system uses cameras that are installed behind the windshield. These cameras need to be recalibrated after a windshield is replaced. This has increased the cost replacing such windshields to about $1,500, compared to $500 for a standard windshield.

Medical costs – Health insurance premiums and medical costs have been rising at a steady clip. Those increases carry over into the costs auto insurance companies incur when drivers and passengers are injured in an accident.

More miles driven – According to AAA, Americans are spending more time on the road. Driving more miles increases motorists’ likelihood of having an accident.

New and future risks

Weather-related property claims – A recent report in the insurance publication National Underwriter noted that commercial auto insurers say that the increasing frequency of large hurricanes, floods, hailstorms and wildfires are leading to higher auto physical damage claims. The number of property claims has been steadily increasing in the past decade as both the frequency and severity of major weather events grow.

Lack of experienced drivers< – As the economy expands, it’s become more difficult to find experienced drivers. Many experienced commercial drivers are retiring, and there are not enough job candidates with the skills and expertise needed to drive commercial vehicles.
The American Trucking Associations estimates that the industry is understaffed by more than 50,000 drivers, and this could increase more than threefold within eight years if current trends continue.

Security with onboard systems – As more vehicle functions become automated, new risks could surface from system failures that may result in accidents. There are number of technologies that come into play in new vehicles and a highly automated vehicle will rely on array of devices, including radar, light detection and ranging, cameras, graphics-processing units and central processing units.

As Cyber Attacks Rise, Is Your Business Protected?

Complex Circuit Board With Security Message

Cyber attacks on companies’ information systems and data have reached unprecedented proportions, and are growing with each passing year.

The biggest threat to an organization is if there’s been a breach of personally identifiable data or credit card information that it stores. That results in a number of costs, including notification costs, providing those whose data was compromised with credit monitoring, potential fines, legal costs if sued – and even reputational costs. If data is stolen, there are also restoration costs.

The threat is largest for smaller organizations. Because larger companies can afford to hire teams of technicians to thwart attacks, cyber criminals are increasingly targeting small and mid-sized organizations as they may not have the same resources to defend their data. The “2019 Internet Security Threat Report” by Symantec found that:

  • 48% of cyber attacks target small business.
  • Just 14% of small businesses rate their ability to mitigate cyber risks, vulnerabilities and attacks as highly effective.
  • 60% of small companies go out of business within six months of a cyber attack.

Ransomware

According to the Symantec report, in 2018, enterprises accounted for 81% of all ransomware infections. While overall ransomware infections were down, enterprise infections were up by 12% from the 2017 level.

With ransomware, hackers gain access to your IT system, lock it down and demand a ransom to release it. The ransom usually has to be paid in bitcoin or other cryptocurrency so that the criminals can avoid detection.

Phishing and malware

One of the most common ways for criminals to compromise an organization’s data is through phishing, a process through which employees are sent e-mails with links, which if they are clicked, gives the hackers entry into the company’s computer systems. Malware is usually the code that is inserted into the computer system to either slow systems down or to access the information.

What you can do

  • Install anti-malware software – This can weed out the latest malware before it does damage.
  • Keep your software up to date – Using up-to-date versions of operating systems, applications, firmware and browser plug-ins helps protect against the latest threats by patching security vulnerabilities.
  • Use strong passwords – Use a password manager tool to generate unique passwords and securely store your log-ins.
  • Lock down your devices – If your staff uses company-owned devices, or you allow them to use their own, require that the devices are locked with a password, fingerprint or other method.
  • Think twice before downloading – Remind staff to be cautious about downloading new software or browser plug-ins.
  • Click carefully – Teach your staff to look for telltale signs of phishing e-mails that prompt them to click on malicious links.

The ultimate protection

Cyber-liability insurance covers losses that result from data breaches and other cyber events.

While cyber-liability policies vary among insurers, there are some common threads:

Loss or damage to data – Many policies cover the costs to restore or recover lost, stolen or corrupted data, and may also cover the cost of outside experts or consultants you hire to preserve or reconstruct your data.

Loss of income or extra expenses – Many policies cover income you lose and extra expenses you incur to avoid or minimize a shutdown of your business after your computer system fails due a covered peril. The perils covered may be the same as those covered under damage to electronic data.

Cyberextortion losses – Cyber-extortion coverage applies when a hacker or a cyber thief breaks into your computer system and demands a ransom to unlock it, or to not damage the data. Extortion coverage typically applies to expenses you incur (with the insurer’s consent) to respond to an extortion demand, as well as the money you pay the extortionist.

Notification costs – Policies may cover the cost of notifying parties affected by the data breach by government statutes or regulations. They may also include the cost of hiring an attorney to assess your firm’s obligations under applicable laws and regulations.

Network security liability – This covers lawsuits that individuals or companies file against your organization alleging negligence on your part for failing to adequately protect data belonging to customers, clients, employees or other parties.