Beware of Parking Lot Hazards at the Holidays

parking hazard

During the busy holiday season, there are many distractions that make parking lots a fairly dangerous place to be.

The combination of early sunset, increased traffic and pedestrians, scam artists, vandals and thieves, and people in a rush, can sometimes be a deadly combination. Just a momentary distraction or lapse in judgment can lead to tragedy.

Parking lot accidents can also turn into a liability for your company or result in an employee being injured and filing a workers’ comp claim.

Fourteen percent of all collisions in the U.S. each year happen in parking lots, and can result in costly insurance claims for vehicle damage. Even worse, it one of your employees strike and injure a visitor, the costs are even higher in terms of both dollars and emotional distress.

Disseminate these basic tips to your employees to help keep everyone safe during the especially busy holiday season:

  • Check your surroundings before you get in your car
  • Backing up is dangerous. Be certain that nothing and no one is behind you before backing out of your parking space
  • Keep your foot off of the gas as you back up, and be ready to break in an instant
  • Look in every direction before pulling into a spot, or backing out of one
  • Don’t text and drive
  • Slow down and pay close attention to speed limits
  • Be careful of pedestrians who may dart in and out between parked cars
  • Park only in areas that are well-lit
  • Keep your car windows closed and your doors locked
  • Watch for cars that may cut diagonally through the parking lot

If you own a building with a parking lot you can also have some liability.

Generally, the owner of the parking lot (whether it is a person, a business, or a property management company) has a reasonable duty to take care that people don’t get hurt on their property. This means that they have to take certain precautions to make that parking lot as safe as possible.

If there are cracks or uneven areas in the pavement, the owner needs to warn people of the danger or repair any hazards that could cause a person to slip and fall. If the parking lot becomes icy, the owner has a responsibility to make it as safe as possible, perhaps by clearing the snow and putting down salt or ice melt.

The takeaway

By training your employees on parking lot and winter driving safety as well as your keeping your parking lot free of hazards you can greatly reduce the chances of an accident and injury happening.

And it goes without saying that you should have commercial general liability (CGL) insurance, which protects you and your business from claims of injury, property damage and negligence related to your business activities.

One of the most essential parts of a CGL policy is premises liability coverage. This portion of your commercial general liability policy offers bodily injury and property damage coverage related to the ownership or maintenance of business premises.

The Holidays Have Their Own Workplace Perils

office holiday party

All year long you have been reminding your employees to “work safely … don’t take short cuts … prevent accidents.”

To do this they have to keep their minds on their work, but this time of the year as the holidays near, their minds might be everywhere else but on work.

They may be thinking “what to buy for everyone for Christmas – I hate shopping!” and “how will I pay for Christmas?” Meanwhile, relatives coming to stay add yet more distracting thoughts.

For some employees, the holiday period is a wonderful time, and for others it is dreadful, but it is stressful for most anyone. Normal routines and schedules are disrupted, and there is a lot of rushing around the town to crowded and chaotic stores and malls.

Be aware that accidents may be more likely to happen at this time of the year at the workplace, on the road or at home. Employees tend to take extra physical risks ― such as when hanging lights and lugging trees around.

And when roads and freeways are jammed, auto accidents increase.

In-office safety

When planning decorations for the office, it is important to keep holiday safety in mind.

Decorating the office helps workers enjoy the spirit of the season together, but remember that proper safety precautions should be observed at all times:

  • Be mindful of potential fire hazards when selecting holiday decorations and where you place them.
  • Be careful of stapling holiday lights, do not add too many strings of lights and make sure illuminated items are turned off.
  • Verify that all fire extinguishers are in place and fully charged and accessible.
  • Do not block exits, hang decorations on fire extinguishers, fire alarms or fire hose boxes, or obstruct the view of exit signs.
  • Do not hang decorations from sprinkler heads or electrical panels.
  • Without proper planning, holiday decorations can create tripping hazards. Extension cords should not be run through traffic areas where they pose trip hazards and, if you have to use an extension cord, use the proper one.
  • Avoid placing trees, freestanding decorations and presents in traffic areas.

Holiday party

The holidays bring office parties and, if alcohol is being served, keep in mind the liability involved.

Provide plenty of alternatives to alcohol, such as soft drinks, coffee, tea, water and cocoa. Consider non-alcoholic beers and virgin drinks at the bar.

Also, so your staff is safe on the way home, stop serving alcohol a few hours before the party ends.

It’s essential to make transportation arrangements for employees who should not drive – whether the party is held at the office, restaurant, your home or any other location.

The takeaway

If you keep in mind that the holidays put extra pressure on everyone, it may help you to keep your workplace free of accidents.

By following a few simple safety tips, it will be easy to enjoy the holiday and the events at work without dealing with injuries or damage to property.

When planning for the holidays, incorporate safety precautions into the planning process.

Need Gift Ideas for Your Christmas Party?

Give a gift of safety that just might save a life. Here are some ideas of safety items we don’t think about until we need them and/or it’s too late:

  • A smoke detector and batteries.
  • A quality fire extinguisher.
  • A flashlight and batteries, or light sticks.
  • A first aid kit.
  • An automobile safety kit including jumper cables, flares, fix-a-flat and reflectors.
  • A carbon monoxide detector.
  • An emergency kit flashlight, energy bars, batteries and first aid kit ― packed in a small travel bag.
  • A radio that runs by cranking rather than batteries.

More Employers Get Premium Bills for ‘Misclassified’ Workers

contractor

One outgrowth of a new California law that applies more stringent criteria for what constitutes an independent contractor is that many employers are likely to see more audits and calls for additional premium from their workers’ comp insurers.

In fact, it’s already happening in some industries, according to the insurance industry trade press. More and more employers are being hit with sizeable surprise bills for additional premium by their insurers for allegedly misclassifying independent contractors as employees, according to one article in the Workers’ Comp Executive trade publication.

And this problem is only like to get worse in 2020 as the full effects of this year’s landmark independent contractor law, AB 5, take hold.

What’s happening now

The Workers’ Comp Executive reported that the California Department of Insurance’s administrative hearings bureau is receiving an increasing amount of complaints from employers that are disputing their workers’ comp insurers’ request for additional premium for workers that had originally been classified as independent contractors.

The publication cited the case of a construction company that State Compensation Insurance Fund says misclassified 42 individuals who worked for the company as independent contractors in 2017 and hence should pay an additional $114,000 in premium for that year. The dispute is currently in front of the administrative hearings bureau.

In 2018, the California Supreme Court handed down a game-changing decision in the case of Dynamex Operations West, Inc. vs. Superior Court, in which it rejected a test that’s been used for more than a decade to decide who qualifies as an employee or independent contractor.

The court instead said that California employers must answer ‘yes’ to the following three questions if they want to classify a worker as an independent contractor:

  • The worker is free from the control and direction of the hirer in relation to the performance of the work, both under the contract and in fact;
  • The worker performs work that is outside the usual course of the hirer’s business; and
  • The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hirer.

The impact of AB 5

In 2019, Assembly Bill 5, which essentially codifies the Dynamex decision into state law, was signed into law ― and it will take effect Jan. 1, 2020. But while the Dynamex decision specifically excluded the independent contractor test from use in applying workers’ comp premiums, AB 5 does not. The new law will apply to workers’ comp on or after July 1, 2020.

The law is not retroactive, however, so insurers should not be able to apply the new test for workers’ comp premium assessment purposes for policies that took effect before July 1.

Industry observers say they expect more California employers to receive additional premium calls from their workers’ comp carriers after the law takes effect. The law will have the most significant workers’ comp implications on industries including construction, real estate, professional services and fitness, which often have many workers classified as independent contractors.

Your workers’ comp insurer will not send you a demand for additional premium without conducting an audit of your payroll. If the insurance company deems any independent contractors that you use as employees, then it will calculate the amount of back premium it thinks you owe for them.

For employers who think the insurance company erred, they can usually challenge the decision with the insurer. However, if that fails, businesses have a second opportunity: to file a complaint with the Department of Insurance.

Monitoring Employees without Getting Sued

monitor record employee meeting

As a business, you have to keep employees happy but still maintain workplace discipline. And it’s important that you protect your customers and your assets without making it seem you don’t trust your employees.

Companies employ a variety of methods to make sure their workers stay on task and aren’t goofing off. But you don’t want to be overbearing or act like a taskmaster in the process.

One way to monitor workers is by using modern technology to keep an eye on them. But there is a fine line between monitoring and invading their privacy, and you have to make sure you don’t cross it.

A 2017 study by the American Management Association and The ePolicy Institute found that:

  • 66% of employers monitor employees’ internet connections.
  • 65% use software to block employees’ access to some web sites.
  • 43% monitor workers’ e-mail.
  • 45% monitor the time employees spend on the phone and the numbers they call.
  • 16% record employees’ phone conversations.
  • 9% monitor voice mail messages.
  • 7% monitor workers’ job performance using video surveillance.

Also, in certain industries, employers search workers’ workstations and lockers, perform drug tests and physicals, investigate their backgrounds ― and even monitor their activities outside of work.

When an employer disciplines or fires a worker based on the information it learned through one of these methods, the individual may become angry enough to sue the company for invasion of privacy.

How to keep lawsuits at bay

While federal and state laws generally permit employers to monitor workers’ activities and use of employer property, some suits succeed and all of them divert financial and human resources away from the employer’s main business.

There are several things you can do to avoid this:

  • Establish a workplace policy about non-business phone and internet use, and include it in the employee manual. The policy should describe the extent to which you will monitor phone and internet use, if any, and the consequences should employees violate the policy.
    Ensure that employees are aware of the policy by discussing it at staff meetings and asking them to document that they have read it.
  • Be careful about audio recording of conversations. While state and federal laws generally permit employers to use video monitoring of employees, some restrict the ability to make audio recordings or to listen in on conversations. You should become familiar with the wiretapping laws in your state before using audio monitoring.
  • Keep employee e-mails confidential. Employers have the right to monitor their employees’ use of the business e-mail system, but making e-mails public (absent some legal or business requirement) may violate employee privacy rights.
  • Include in the employee manual a written policy regarding employer searches of desks, workstations and lockers. This should describe your right to conduct searches, the reasons you may do so, and the consequences should an employee refuse to cooperate.
    Conduct searches only when absolutely necessary for business or legal reasons, and take care to respect the employee’s dignity by doing the search out of the view of other employees.
  • Perform drug tests for legitimate business reasons and at appropriate times, such as during the hiring process and following a workplace accident. If you will administer random drug tests, you should have a written policy stating as much in the employee manual ― and you should conduct the tests with as little privacy infringement as possible.
  • Obtain a job applicant’s written consent for a background check, and investigate only those factors relevant to the position. For example, a credit check may be appropriate for a position that requires handling money.
  • Keep employee information safe from individuals outside the company. Instruct managers and staff not to discuss personnel matters with outsiders and employees who do not need to know the information.

The takeaway

Employers must run an efficient operation, maintain a safe workplace free of harassment, make employees feel comfortable in their work and make a profit. Following the above steps will reduce the chances of employee lawsuits and allow your business to focus on its core mission.

One-third of Workers Are Sleepy, Leading to Safety Issues and More

sleepy worker

More than 35% of workers in the U.S. are not getting enough sleep, a new study has found. That can lead to serious workplace safety issues, especially for occupations that use heavy machinery, people who work in factories or warehouses, construction or as drivers.

Among workers in other occupations it can lead to costly mistakes, friction among staff and poor communications, all of which can have a detrimental effect on your operations.

The study by researchers at Ball State University looked at self-reports of sleep duration among 150,000 adults working in different occupations between 2010 and 2018. Researchers found the prevalence of inadequate sleep, defined as seven hours or less, had increased from 30.9% in 2010 to 35.6% in 2018.

Lead researcher Jagdish Khubchandani, a professor of health science at Ball State University, identified these factors as being behind the increase:

  • Rising stress loads for a variety of reasons, due to pressure at work and at home, and
  • Thanks to the rise of smartphones, people are not unplugging from work and continue checking their phones for work-related messages. Because of this, many people are dealing with work issues up until they go to bed, which can make it more difficult to fall asleep.

Sleep deprivation can have a number of detrimental effects in the workplace, including:

Decreased communication — A worker who is sleepy may not communicate as well as they normally do. This can include mumbling, poor enunciation, slurring, running words together and not speaking in complete thoughts.

Decline in productivity — Workers who don’t get enough sleep are slower at performing their jobs and often make mistakes, which requires them to go back and do things over again.

Increased distraction — Sleep-deprived individuals often have trouble maintaining focus on their tasks, keeping track of events, maintaining interest in outcomes and doing work they consider non-essential.

Impaired driving — Getting behind the wheel after not having enough sleep can be akin to driving under the influence of alcohol. But it’s not only company drivers you have to be concerned about. If you have forklifts, lawnmowers or operators of any type of machinery, there is a greater chance they’ll make a mistake when operating those vehicles or machines if they are sleep-deprived.

More mistakes — A lack of sleep results in a decline in cognitive abilities, which can result in workers making mistakes. These include errors performing tasks or failing to perform tasks. Mistakes especially are likely in subject-paced tasks in which cognitive slowing occurs, and with tasks that are time-sensitive, which cause increases in cognitive errors.

Memory can suffer — Short-term and working memory can decline due to sleep deprivation.

Poor mood — Not enough sleep can make people moody and can result in inappropriate outbursts, impatience, lack of regard for social conventions, inappropriate behavior and irritability — all of which can affect a positive work culture.

Increased risk-taking — Judgment can be affected by not sleeping enough, which can result in risky decision-making, which in turn can result in workplace accidents and injuries.

What you can do

If you suspect you have staff who are not getting enough sleep and that it may be affecting their work performance, you can:

  • Ensure they have a reasonable work schedule. That includes not working them too much and asking them not to take work home with them.
  • Offer more flexibility. You can offer staff the ability to work from home a few times a week or per month.
  • Cut down on e-mails and meetings. Set a company policy for communication and encourage brief, face-to-face meetings and phone calls instead of drawn-out e-mail discussions.
  • Provide employees time to recharge. Offering time to recharge, along with flexibility and a healthier workload, can improve employee restfulness and ease workplace pressures.
  • Don’t require staff to answer work e-mails at home.

As Cyber Threat Mounts, More Companies Take Measures

cyber attack protection

As attacks on businesses’ networks continue increasing at unprecedent levels, cyber risks have become the top concern among organizations of all sizes for the first time, according to a new survey.

The “Travelers Risk Index” found that 55% of executives surveyed said they worry “some” or “a great deal” about cyber risks. That’s more than they worry about medical cost inflation (54%), employee benefit costs (53%), the ability to attract and retain talent (46%) and legal liability (44%).

And the most common types of attacks, and which pose the biggest security threat to businesses, are phishing and fake e-mails. They are the hardest to combat because of the human factor involved, according to another survey, the “2019 Cyber Security Breaches Survey” published by the U.K. government.

In phishing e-mails, the cyber criminals will pose as colleagues or vendors to dupe an unsuspecting employee to hand over a password or click on a malicious link that will give them access to the company’s network.

In addition, ransomware has brought many businesses and government agencies to a standstill as the same technique is used to freeze an entire network and render it unusable until the company pays a ransom for a key to unlock the network.

As concerns about cyber threats have grown, more businesses say they are taking proactive measures to safeguard against cyber risks – even though a large percentage have not implemented preventive best practices.

The steps that companies are taking, according to the Travelers survey, are:

  • Purchasing a cyber insurance policy (51% of survey participants, up from 39% in the 2018 survey the insurer conducted).
  • Creating a business continuity plan in the event of a cyber attack (47%, up from 38%).
  • Taking a cyber-risk assessment for themselves (49%, up from 45%).
  • Taking a cyber-risk assessment for their vendors (41%, up from 37%).
  • Updating computer passwords (74%, up from 71%).

The fact is that a single cyber attack can put a company out of business. Taking the threat seriously and implementing a risk management program that addresses possible exposures can help a business not only avoid an attack, but also recover from one as quickly as possible.

How to lower the chances of an attack

The insurance company Chubb recommends the following steps to reduce the chances of a cyber attack on your organization:

Identify your sensitive data – Credit card and personally identifiable information is often the target of cyber attacks.

Educate your staff – Instruct your employees about cyber attacks and how to protect the network. The most important thing for them to remember is to not to open attachments from people they don’t know or in e-mails they don’t expect.
You should also post procedures for encrypting personal or sensitive information, and require them to change their passwords regularly.

Have security in place – You should have a web application firewall in place to protect your website, in addition to a firewall for your company’s network. If you accept credit card payments, you should have an e-commerce platform that is compliant with payment card industry data security standards Level 1.

Secure your hardware – Data breaches can be caused by physical property being stolen, too. If your servers, laptops, cell phones or other electronics are not secure and easy to steal, you are taking a big risk. Physically locking down computers and servers is a good idea.

Cyber insurance

As the cyber threat becomes more sophisticated and changes, cyber-insurance policies have evolved to meet businesses’ needs. There are many types of policies in the marketplace that are tailored for specific types of businesses. The key is getting a policy that best fits your organization and covers any eventualities that you may encounter.

Some coverages you may want to consider for inclusion in your cyber insurance are:

  • Business interruption – Covers the loss of business income due a cyber attack.
  • Computer fraud – Covers theft of money, securities and other forms of tangible property through computer fraud and social engineering schemes.
  • Data breach – Covers claims of failure to protect personally identifiable information and protected health information of clients.
  • Property damage – Covers replacement cost of computers damaged by a cyber attack.
  • Identity theft expenses – These are related to the business owner or their employees after identity theft.
  • Advertising and personal injury – Covers damage caused by defamation on website or social media.
  • Transmission of virus or malicious content – Covers failure to stop the transmission of a computer virus or malicious content.
  • Errors and omissions – Covers loss caused by failure to provide proper network security.

Some policies are stand-alone products, while others are endorsements to existing polices like a business owner’s policy.

The Importance of Employment Practices Liability Coverage

law lawyer file

Every employer, no matter how small, faces the specter of being sued by a past, present or prospective employee at some time.

In fact, such employment practices claims are widespread – so much so that most businesses are much more likely to have an employment practices liability claim than a general liability or property loss claim.

Nearly three-quarters of all litigation against corporations today involves employment disputes, which can be extremely costly. The cost associated with an employment practices claim can be significant.

In 2018, the Equal Employment Opportunity Commission resolved 90,558 charges of discrimination and recovered about $505 million in remedies for discrimination plaintiffs.

In addition, the EEOC recovered nearly $70 million for victims of sexual harassment through litigation and administrative enforcement that year, up roughly 50% from $47.5 million in 2017.

The massive jump in sexual harassment claims and recoveries is a direct result of a surge in lawsuits since the start of the #MeToo movement, which has emboldened many victims to come forward and file complaints.

Keep in mind, the above are just penalties and do not include defense costs, which can exceed $100,000 per claim for employers.

For these reasons and more, employment practices liability insurance is crucial for any employer. The risks of being sued by an employee for discrimination or harassment have increased substantially, particularly now in the #MeToo era.

Employers need EPLI coverage because comprehensive general liability policies and workers’ comp policies exclude employment-related claims.

EPLI coverage

Policies cover:

  • Defense costs (court fees, attorney fees and related costs).
  • Payment of settlements and/or judgments up to the policy’s limits.
  • Any fines or penalties levied by government agencies.

EPLI policies cover business owners as well as directors, officers and managers. Some policies also cover employees. Additionally, you can buy third-party policies to cover claims brought by non-employees, such as clients.

Types of action covered include:

  • Discrimination based on gender, race, national origin, religion, disability or sexual orientation
  • Sexual harassment or other unlawful harassment in the workplace
  • Wrongful termination
  • Failure to employ or promote
  • Retaliation
  • Employment-related misrepresentation
  • Failure to adopt adequate workplace or employment policies and procedures
  • Employment-related defamation or invasion of privacy
  • Negligent evaluation of an employee
  • Wrongful discipline of an employee
  • Employment-related infliction of emotional distress

NOTE: Wage and hour claims, or disputes regarding overtime pay for non-exempt employees, have become more expensive in recent years, so most EPLI policies exclude this coverage. Business owners may be able to find endorsements to add wage and hour coverage.

Costs

EPLI claims can be extremely expensive. The average cost of a discrimination claim is $125,000, and 25% of judgments exceed $500,000.

Most businesses are wise to have at least $1 million in coverage. However, higher coverage limits increase your premium cost, so you want to balance your coverage needs and your budgetary concerns.

Call us if you want further information or need help in gauging your EPLI coverage needs.

New Experience Rating and Physical Audit Levels Set

workers' compensation, X mod, physical audit,

Starting in 2020, the threshold for California employers to be eligible for experience rating (X-Mod) has been reduced by order of the state insurance commissioner.

Commissioner Ricardo Lara in September approved the recommendations by the Workers’ Compensation Insurance Rating Bureau to lower thresholds for determining eligibility for experience rating and when a carrier needs to perform a physical audit of an employer’s payroll records.

The threshold for physical audits that takes effect for policies incepting on or after Jan. 1, 2020 will be $10,500 in annual premium, a drop from $13,000. This means that any employer with an annual workers’ comp premium of $10,500 or more will be subject to a physical audit at least once a year.

“Physical audit” is defined as an “audit of payroll, whether conducted at the policyholder’s location or at a remote site, that is based upon an auditor’s examination of the policyholder’s books of accounts and original payroll records (in either electronic or hard copy form), as necessary to determine and verify the exposure amounts by classification.”

Additionally, the threshold for experience rating or to have an X-Mod, has been reduced to $9,700 in annual premium from $10,000.

The eligibility rating threshold is the amount of payroll developed during the experience period in each classification multiplied by the expected loss rates for each class. If the total for all assigned classes is at or above the threshold, then the employer is eligible for an X-Mod.

Changes to dual-wage class codes

The insurance commissioner in September also approved the Rating Bureau’s recommendations for changes to a number of construction dual-wage class codes.

While most workers’ comp classes have one rate, in some classes the difference in claims costs between high- and lower-wage workers is so great that a dual-wage classification is needed. In those cases, the workers above the threshold rate are assigned one rate, while those below that threshold are assigned a higher rate.

This is usually because the higher-wage workers are generally more experienced and tend to suffer fewer workplace injuries compared to those below the threshold.

The new thresholds are for 14 construction classifications, and any workers above the threshold will have a lower rate applied.

CLASSIFICATIONS AFFECTED         

Masonry – 2020 threshold: $28 per hour (+$1 from 2019)
Heating/Plumbing/Refrigeration – 2020 threshold: $28 (+$2)
Automatic sprinkler installation – 2020 threshold: $29 (+$2)
Concrete/Cement work – 2020 threshold: $28 (+$3)
Carpentry – 2020 threshold: $35 (+$3)
Wallboard application – 2020 threshold: $36 (+$2)
Glaziers – 2020 threshold: $33 (+$1)
Painting/Waterproofing – 2020 threshold: $28 (+$2)
Plastering/Stucco work – 2020 threshold: $32 (+$3)
Roofing – 2020 threshold: $27 (+$2)
Steel framing – 2020 threshold: $35 (+$3)
Excavation/Grading/Land leveling – 2020 threshold: $34 (+$3)
Sewer construction – 2020 threshold: $34 (+$3)
Water/Gas main construction – 2020 threshold: $34 (+$3)

As Wildfire Risks Increase, Insuring Businesses More Difficult

home wildfire

Business property coverage is getting more difficult to come by for operations located in areas that are susceptible to wildfires.

The devastating wildfires of the last few years, along with the thousands of homes and businesses that have been burned or damaged due to these events, has resulted in insurers becoming more selective about the properties they are willing to cover. This intense period of yearly wildfires has led to a record $12.8 billion in insurance claims.

As a result, some insurers have started non-renewing commercial property coverage in these high-risk areas – and others have just stopped writing new policies altogether. We are seeing renewals in wildfire-prone areas on a scale we’ve never seen before.

Companies that receive a notification that their insurer plans to non-renew their policies are faced with shopping in a market that is more selective and with insurers requiring that they take certain steps to better safeguard their properties.

What’s going on

More and more homes and businesses in areas susceptible to wildfires are at risk than ever before. The fires are becoming more frequent, hotter and more widespread. Insurers have had to pay out record amounts in fire claims during the last few years, which has taken its toll on many of them.

Some insurers are non-renewing property policies of all sizes in high-risk areas, and the practice has become widespread.

Typically, insurance companies are applying three metrics in evaluating exposure to fire:

  1. Brush mapping – This is a map of the tinder and brush, nearby trees and other natural items that could contribute to your building(s) catching fire. The insurer will use the mapping to see if you are keeping up your property by removing combustible materials from the perimeter and limiting the amount of shrubbery and trees.
  2. The nearby wildland-urban interface – The closer that a building is to wildlands (open spaces with combustible materials), the more likely it is that insurers will balk at writing the policy. A wildland-urban interface is defined by the Forest Services as a place where “humans and their development meet or intermix with wildland fuel.” Communities that are within a half a mile of the zone are included.
  3. Concentration of other properties an insurer covers in your area – If your insurance company already writes policies for many other businesses and homes in your area and they feel they have too much risk concentrated in that zone, they may opt to non-renew policies in order to reduce their exposure.

While we can sometimes work with an insurer to have the property owner clear brush and take measures that would reduce the chances of their property catching fire to satisfy the brush-mapping metric, it’s more difficult to negotiate about numbers two and three.

The options

If you have a business in a wildfire area and your insurer plans not to renew your coverage, and if other companies are not willing to underwrite your policy, we can help you find new coverage. If no admitted insurers (those that are licensed and regulated in California) are willing to cover your building, we have two options:

The non-admitted market – These insurers are not licensed to do business in California, but we can still use them to write policies for businesses. These insurers, which includes Lloyd’s of London, are usually willing to write buildings in higher-risk areas, but they too have increased their underwriting criteria.

The California FAIR Plan – If we are unable to find an insurer in the admitted or non-admitted market, the last choice is FAIR Plan, which is the state-run market of last resort for homeowners and commercial property owners that cannot get coverage in the regular market. Commercial policies are available for:

  • Buildings with five or more habitational units (e.g. apartment buildings, hotels, motels, or home-sharing services such as Airbnb)
  • Retail mercantile
  • Manufacturing risks
  • Office buildings
  • Residential or commercial buildings under course of construction.

Policies cover losses from fire, lightning, and explosion only. Also, policies are limited in what they will pay out, so if you have millions of dollars tied up in equipment and/or inventory, the policy may not be enough to cover all the damage you incur from a wildfire.

The maximum limit for commercial properties is $3 million for structures and $1.5 million for all other coverages, for a combined $4.5 million limit for all commercial properties at one location. But there are some exceptions.

What we can do if you go to the FAIR Plan

If the FAIR Plan coverage is not enough coverage or falls short, we can find another insurer that provides excess coverage that would kick in at a certain dollar amount of damage.

And for the aforementioned risks that are not covered, we would have to also find you a “differences in conditions” policy. Combined with FAIR Plan coverage, adding such a policy can nearly mimic the coverage of a commercial or homeowner’s policy.

A Lesson in Timely Claims Reporting

file claims

A recent appeals decision denied coverage to a company on its directors and officers (D&O) liability insurance policies for taking too long to file the claim.

In this case, the 5th U.S. Circuit Court of Appeals in New Orleans sided with an insurer that had denied a claim a company had made after being sued for failing to pay overtime wages to nonexempt employees.

The insurance company had denied the claim because the first employees’ claim was made in August 2014, but the company failed to inform the insurer of that and subsequent claims until September 2015.

This case illustrates the importance of filing claims in a timely manner.

When the employer actually got around to filing the claim it had an in-force D&O policy with the insurer, although there was an earlier policy in force when it had received the first claim of failing to pay overtime.

Under the policy in force at the time of the first claim, the insurer would have been obligated to pay all claims made against the company under the policy.

“That earlier policy would have provided coverage except that the insured failed to comply in 2014 with a notice provision. We conclude the district court was correct to rely on this difference,” the three-judge panel in the appellate court wrote in an opinion that upheld a lower court’s ruling.

Timeliness

One of the critical obligations of an insured is the duty to timely report claims or circumstances that may give rise to a claim. Failure to report a claim in accordance with the policy requirements can result in a claim being denied, or worse, having the entire policy voided.

D&O policies are “claims made” policies, meaning that coverage exists only for claims made during the time period the policy is in effect. Claims made while no policy or extended reporting period are in effect are not covered.

Claims-made policies also have retroactive dates. Ideally, the retroactive date is the day the insured started business, but it can also be the day that it first purchased professional liability coverage.

Assuming the retroactive date has not been advanced, the policy in force when a claim is made is the policy that will respond, regardless of when the negligent act, error or omission took place.

However, there is one important qualifier. This insurance applies to claims that took place after the retroactive date, but prior to the end of the policy period, provided that the insured had no knowledge of the claims prior to the effective date shown in the declarations.

In other words, if you knew of a claim prior to the time you renewed your claims-made policy but did not report it, and if a claim is subsequently made, the insurance company can deny coverage. It doesn’t matter whether or not it’s been continuously renewed by one insurance company, the policy excludes it.

This underscores the importance of timely reporting of all claims prior to renewal each year.