Shared by Employers Advisor Network (slightly modified), here are a few reasons why employers lose when taken to court by an employee. Good to be aware of and think about these things:
1. The Jury Pool- It is likely that the jurors have never held an Executive or Managerial position. As a result, the jury box generally consists of people who will judge your company from the perspective of the employee rather than the employer. Many employees tend to have an "all bosses are villains and all employees are victims" mentality.
2. Employers focus on justifying rather than taking responsibility. When we make a mistake we should admit it and try our best to render a solution.
3. Failure to document- Judges and juries expect to see proof. If you ever have any question about an employee you should document everything. Poor performance, failure to comply, attempts to work it out, etc. This will go a long ways in swinging the votes.
4. Inconsistency- Do your best to treat all employees the same. Inconsistency in how you have treated people within your company will create distrust.
5. Somebody gets caught lying- Employers will often ignore, bury, or deny conduct that they consider to be potentially damaging. If the plaintiff finds out about a lie it could be potentially devastating. It is best to get everything out in the open and work from there.
6. They never received or signed an agreement- Failure to create and retain and employee/employer agreement can lead to potential problems. An agreement should set forth rules of conduct, expectations, pay, hiring/firing procedures, disciplinary actions, etc. and should be retained on file for all employees and former employees.
7. Being overly agressive- When presenting a case it is best to present both sides of the issue fairly rather than attacking the other side from the get-go.
The fact is, there are many more ways to lose at trial. Employers are the underdog. Even if you win, you are losing a substantial amount of time and money in defense. If you lose a case, it can be real big. The best defense is to have strategies and tools in place designed to prevent the filing of claims in the first place. Purchasing Employment Practices Liability Insurance is a great way of transferring this risk. Most insurance carriers that sell this insurance will make recommendations and help implement proper strategy. A litigious society puts all businesses big or small at risk.
Tuesday, January 18, 2011
Commercial Property
I was lucky enough to be able to spend the last half of last week in a Commercial Property insurance course and just wanted to address some issues that some of you might find to be of value.
1. Now days, some Agents are looking for an easy way out and writing business on a Business Owners Policy for those types of business that can fit under this form of insurance. Basically, it was originally designed for small businesses to give property and general liability coverage with some built in features that make it easy to manage. It is usually a less expensive way to get some great coverage. Well, since the insurance market has become so competitive over the past couple years, many companies have expanded their guidelines to write this type of policy for larger businesses. Sometimes up to $20m in sales. While there is generally nothing wrong with the policy, it can be very limiting in coverage if it is not endorsed correctly for the needs of your business. In other words, if the agent doesn't take the time to find out what limits and coverages you need, then you are getting coverage limits designed for small business which might not meet your needs even though you fit into the program.
2. Do you know what types of claims are excluded from your commercial property insurance? Standard policy forms generally exclude the following:
Earthquake, Flood, Property Away From Premise, Property of Others in your Care, Custody, or Control, Ordinance or Law, Vacancy (certain exclusions along with penalties for properties vacant >60 days), Employee Dishonesty, etc.
The reason for most exclusions on the commercial property forms is because there is generally a different policy designed to cover these items which requires its own specific underwriting. There can be big differences in the insurance companies policy forms as far as what they include and what has been removed from the policy. For price shoppers, this is really something to consider because with insurance as with most anything else, you usually get what you pay for. Insurance rates are down significantly so if your premiums are down, don't assume that you are losing coverage- that is not my point here. More than anything, if your looking for a better price, BE CAREFUL. A good quote that has to do with comparing your insurance (or anything else for that matter) solely on price:
It’s Unwise to pay too much…
But it’s worse to pay too little. When you pay too much, you lose a little money – that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.
- John Ruskin
Remember, the best way for me to do my job is to know your business. A couple hours spent every six months or one year along with constant communication about changes, operations, etc. will go along way in helping me do my job as an insurance agent. Additionally, this is why a long-term business relationship with your insurance agent can be valuable to you. Let's spend more time talking about your exposures and what types of policy options we can provide you with to meet your needs. Keep in mind that not all risks are going to be worth it to you to transfer to an insurance company, but you ought to have the information so you can make those decisions as an Owner or Executive.
1. Now days, some Agents are looking for an easy way out and writing business on a Business Owners Policy for those types of business that can fit under this form of insurance. Basically, it was originally designed for small businesses to give property and general liability coverage with some built in features that make it easy to manage. It is usually a less expensive way to get some great coverage. Well, since the insurance market has become so competitive over the past couple years, many companies have expanded their guidelines to write this type of policy for larger businesses. Sometimes up to $20m in sales. While there is generally nothing wrong with the policy, it can be very limiting in coverage if it is not endorsed correctly for the needs of your business. In other words, if the agent doesn't take the time to find out what limits and coverages you need, then you are getting coverage limits designed for small business which might not meet your needs even though you fit into the program.
2. Do you know what types of claims are excluded from your commercial property insurance? Standard policy forms generally exclude the following:
Earthquake, Flood, Property Away From Premise, Property of Others in your Care, Custody, or Control, Ordinance or Law, Vacancy (certain exclusions along with penalties for properties vacant >60 days), Employee Dishonesty, etc.
The reason for most exclusions on the commercial property forms is because there is generally a different policy designed to cover these items which requires its own specific underwriting. There can be big differences in the insurance companies policy forms as far as what they include and what has been removed from the policy. For price shoppers, this is really something to consider because with insurance as with most anything else, you usually get what you pay for. Insurance rates are down significantly so if your premiums are down, don't assume that you are losing coverage- that is not my point here. More than anything, if your looking for a better price, BE CAREFUL. A good quote that has to do with comparing your insurance (or anything else for that matter) solely on price:
It’s Unwise to pay too much…
But it’s worse to pay too little. When you pay too much, you lose a little money – that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.
- John Ruskin
Remember, the best way for me to do my job is to know your business. A couple hours spent every six months or one year along with constant communication about changes, operations, etc. will go along way in helping me do my job as an insurance agent. Additionally, this is why a long-term business relationship with your insurance agent can be valuable to you. Let's spend more time talking about your exposures and what types of policy options we can provide you with to meet your needs. Keep in mind that not all risks are going to be worth it to you to transfer to an insurance company, but you ought to have the information so you can make those decisions as an Owner or Executive.
Sunday, January 16, 2011
Protect Your D's and O's
Oh yes, Directors and Officers. Why would I buy D&O Insurance?
The basic principle is that companies and their shareholders are best served by knowledgeable Directors and Officers who take strategic risks based on the information that is reasonably available to them at the time the decision is made, without the threat of personal liability. But what about the Business Judgement Rule? Won’t that protect me?
From the Utah Division of Corporations and Commercial Code, “Directors and officers must act within their authority and within the powers given to the corporation. They also have the duty to act with due care. Their duty of loyalty requires them to act in the best interests of the corporation as a whole. Most management actions are protected from judicial scrutiny by the business judgement rule: absent bad faith, fraud, or breach of a fiduciary duty.” As practical as that proposition may sound, it is still within the power of states and individual companies to deny such executives indemnification for claims that arise out of their well intended efforts. As a result, D&O insurance exists.
The most sought after D&O’s are concerned with the quality of a companies insurance program because under state law, their personal assets are at risk as well as their hard earned reputation. Therefore, companies with quality D&O coverage are most suited to attract the best directors and officers to serve the corporation. D&O insurance is usually purchased by the company itself even when it is for the sole benefit of the Directors and Officers.
In terms of basic state corporate law (at least in the U.S.A.), directors and officers of a corporation can be liable if they damage the corporation by breaching their duties and contracts to the corporation, mix personal and business assets, or fail to disclose conflicts of interest. Even innocent errors in judgement by an executive can bring D&O insurance to the forefront of the matter in defending and settling the claims.
My purpose in this post is not to go into the various claim scenarios, policies available, exclusions, etc. but to make you aware of this risk (mainly pertaining to any corporation). There are many insurance products out there for D&O coverage and some include a package of other coverages as well that would maybe include Employment Practices, Crime, Fiduciary Liability, Workplace Violence, or others.
The basic principle is that companies and their shareholders are best served by knowledgeable Directors and Officers who take strategic risks based on the information that is reasonably available to them at the time the decision is made, without the threat of personal liability. But what about the Business Judgement Rule? Won’t that protect me?
From the Utah Division of Corporations and Commercial Code, “Directors and officers must act within their authority and within the powers given to the corporation. They also have the duty to act with due care. Their duty of loyalty requires them to act in the best interests of the corporation as a whole. Most management actions are protected from judicial scrutiny by the business judgement rule: absent bad faith, fraud, or breach of a fiduciary duty.” As practical as that proposition may sound, it is still within the power of states and individual companies to deny such executives indemnification for claims that arise out of their well intended efforts. As a result, D&O insurance exists.
The most sought after D&O’s are concerned with the quality of a companies insurance program because under state law, their personal assets are at risk as well as their hard earned reputation. Therefore, companies with quality D&O coverage are most suited to attract the best directors and officers to serve the corporation. D&O insurance is usually purchased by the company itself even when it is for the sole benefit of the Directors and Officers.
In terms of basic state corporate law (at least in the U.S.A.), directors and officers of a corporation can be liable if they damage the corporation by breaching their duties and contracts to the corporation, mix personal and business assets, or fail to disclose conflicts of interest. Even innocent errors in judgement by an executive can bring D&O insurance to the forefront of the matter in defending and settling the claims.
My purpose in this post is not to go into the various claim scenarios, policies available, exclusions, etc. but to make you aware of this risk (mainly pertaining to any corporation). There are many insurance products out there for D&O coverage and some include a package of other coverages as well that would maybe include Employment Practices, Crime, Fiduciary Liability, Workplace Violence, or others.
Thursday, January 13, 2011
Umbrella Policy
Here are a couple thoughts on the Commercial Umbrella Policy. This is a policy that most businesses carry because some agent told them it was good to have and most of the businesses they communicate with have one as well. But do you know what the purpose of it is? Do you know how big it should be? Do you know how it works? Try to picture in your mind an actual umbrella that protects you from the rain and I think we might use this to paint a mental picture of how this policy functions.
First, you only use it when it rains. When the sprinkles turn to rain drops, then to hail, it's time to pull out the umbrella and protect yourself. When you find your business in the middle of a lawsuit that could settle for far more than your underlying insurance limits, this is where the umbrella policy kicks in. It provides extra limits on top of your standard liability limits (Most commonly $1 million per occurence).
Second, how much do you need to protect? Are you by yourself in the rain or do you have your family of 8 with you? A Commercial Umbrella policy can be as large as you want it to be. The good news is, the first million is always the most expensive. Beyond that, it gets cheaper for each additional million $ in coverage you choose to add. What it comes down to is: What is at stake? How much is the business worth? Beyond what point are you willing to take on the risk? Sometimes I refer to the Umbrella Policy as sleep insurance. You can sleep well at night knowing that whatever claim may be brought against you will be sufficiently covered and settled by your insurance company. Ideally, you would carry an umbrella big enough to protect the whole family.
Last and MOST IMPORTANT...Pay attention here...This is something that is frequently misunderstood. The insurance company that writes the Umbrella policy first looks at what the underlying protection is and requires that the full limits of that underlying protection be in place at the inception of this policy. So, as a business owner, the first thing you should do is have the same annual date on ALL of your commercial policies. This is something that is frequently misunderstood because most agents don't take the time to explain the ramifications of moving an effective date to improve your pricing on one piece of the pie. They just want the pie. I won't go into all the examples of why this could be a problem but I am happy to explain individually in more detail. The other thing is that all of your insurance policies should be with the same insurance carrier whenever possible. One example:
X Insurance Company underwrites a Commercial Umbrella Policy. They agree to write a $5 million umbrella policy over the underlying coverages already quoted by their own company. These underlying coverages might include General Liability, Auto Liability, Employer Benefit Liability, Professional Liability, etc. They have agreed to write the Umbrella policy based on the fact that they know the terms & conditions of the underlying insurance because it is also written by their company. The Umbrella policy is written under the assumption that these specific underlying coverages will be maintained throughout the policy period. Local Business enters into an agreement with X insurance company to provide all this insurance. 6 months later, here comes Stud insurance agent. Stud promises Local Business that he can save them 20% on their Commercial Auto insurance. The owner decides that sounds pretty good and allows Stud to bring them some quotes. The next day, Stud shows up with a quote for the Auto insurance and sure enough, he has lowered the price dramatically. The owner decides it is his best option to cancel his current policy with X Insurance half way through the year and move this piece of the insurance business. Stud is thrilled because he just picked up a piece of business and is walking away with his commission.
Here's what Stud never explained to the owner about moving this policy: The limits may have been slightly modified to bring premiums down, the terms and conditions with his company are different than those written by X Insurance, the financial rating is slightly different, the deductibles have changed a little bit, etc. So what happens when Local Business has a huge Auto claim 3 months later and tries to use the limits of their $5 million Umbrella Policy? Remember the conditions under which the policy was originally written? These additional limits of protection will no longer be available above the limits of the Auto policy.
Unfortunately, these are the types of things that all to often go unexplained to a business owner. The owner gets sucked in by low rates without considering the drawbacks because they don't understand insurance contracts. This is why you have an insurance agent that is a trusted advisor instead of a "Stud". This is why you should look for an agent that will openly discuss and take time to explain these things to you. This is one of the many, many examples of why you shouldn't make decisions about your business insurance solely based on price.
First, you only use it when it rains. When the sprinkles turn to rain drops, then to hail, it's time to pull out the umbrella and protect yourself. When you find your business in the middle of a lawsuit that could settle for far more than your underlying insurance limits, this is where the umbrella policy kicks in. It provides extra limits on top of your standard liability limits (Most commonly $1 million per occurence).
Second, how much do you need to protect? Are you by yourself in the rain or do you have your family of 8 with you? A Commercial Umbrella policy can be as large as you want it to be. The good news is, the first million is always the most expensive. Beyond that, it gets cheaper for each additional million $ in coverage you choose to add. What it comes down to is: What is at stake? How much is the business worth? Beyond what point are you willing to take on the risk? Sometimes I refer to the Umbrella Policy as sleep insurance. You can sleep well at night knowing that whatever claim may be brought against you will be sufficiently covered and settled by your insurance company. Ideally, you would carry an umbrella big enough to protect the whole family.
Last and MOST IMPORTANT...Pay attention here...This is something that is frequently misunderstood. The insurance company that writes the Umbrella policy first looks at what the underlying protection is and requires that the full limits of that underlying protection be in place at the inception of this policy. So, as a business owner, the first thing you should do is have the same annual date on ALL of your commercial policies. This is something that is frequently misunderstood because most agents don't take the time to explain the ramifications of moving an effective date to improve your pricing on one piece of the pie. They just want the pie. I won't go into all the examples of why this could be a problem but I am happy to explain individually in more detail. The other thing is that all of your insurance policies should be with the same insurance carrier whenever possible. One example:
X Insurance Company underwrites a Commercial Umbrella Policy. They agree to write a $5 million umbrella policy over the underlying coverages already quoted by their own company. These underlying coverages might include General Liability, Auto Liability, Employer Benefit Liability, Professional Liability, etc. They have agreed to write the Umbrella policy based on the fact that they know the terms & conditions of the underlying insurance because it is also written by their company. The Umbrella policy is written under the assumption that these specific underlying coverages will be maintained throughout the policy period. Local Business enters into an agreement with X insurance company to provide all this insurance. 6 months later, here comes Stud insurance agent. Stud promises Local Business that he can save them 20% on their Commercial Auto insurance. The owner decides that sounds pretty good and allows Stud to bring them some quotes. The next day, Stud shows up with a quote for the Auto insurance and sure enough, he has lowered the price dramatically. The owner decides it is his best option to cancel his current policy with X Insurance half way through the year and move this piece of the insurance business. Stud is thrilled because he just picked up a piece of business and is walking away with his commission.
Here's what Stud never explained to the owner about moving this policy: The limits may have been slightly modified to bring premiums down, the terms and conditions with his company are different than those written by X Insurance, the financial rating is slightly different, the deductibles have changed a little bit, etc. So what happens when Local Business has a huge Auto claim 3 months later and tries to use the limits of their $5 million Umbrella Policy? Remember the conditions under which the policy was originally written? These additional limits of protection will no longer be available above the limits of the Auto policy.
Unfortunately, these are the types of things that all to often go unexplained to a business owner. The owner gets sucked in by low rates without considering the drawbacks because they don't understand insurance contracts. This is why you have an insurance agent that is a trusted advisor instead of a "Stud". This is why you should look for an agent that will openly discuss and take time to explain these things to you. This is one of the many, many examples of why you shouldn't make decisions about your business insurance solely based on price.
Wednesday, January 5, 2011
A NEW YEAR
AS FAR AS WORK GOES, THIS IS MY FAVORITE TIME OF YEAR- THE FIRST OF JANUARY. IT MEANS NEW OPPORTUNITIES, NEW GOALS, AND A FRESH MARKET. EVERY BUSINESS WILL DEAL WITH THEIR INSURANCE SOMETIME IN 2011 AND HOPEFULLY THIS MEANS MORE OPPORTUNITIES FOR ME TO DO MY JOB AND PROVIDE ASSISTANCE IN THIS PROCESS. I AM REALLY LOOKING FORWARD TO THIS YEAR AS I AM ENTERING MY FOURTH YEAR IN THE INSURANCE INDUSTRY AND THIRD AS AN AGENT.
I ALSO LOOK FORWARD TO MEETINGS WITH MY CLIENTS AND MORE OPPORTUNITIES TO HELP THEM THROUGHOUT THIS YEAR AS THEY DEAL WITH CHALLENGES AND CHANGES IN THEIR BUSINESSES. I HOPE THAT THOSE OF YOU WHO READ MY BLOG WILL CONTINUE TO DO SO AS I STRIVE TO USE IT AS AN AVENUE OF FEEDING INFORMATION TO YOU AT YOUR CONVENIENCE. I WILL THEN BE ABLE TO BETTER SERVE YOU AS WE DISCUSS ANY QUESTIONS OR TOPICS IN FURTHER DETAIL AT OUR MEETINGS.
I WISH YOU ALL A VERY HAPPY AND SUCCESSFUL NEW YEAR!!
I ALSO LOOK FORWARD TO MEETINGS WITH MY CLIENTS AND MORE OPPORTUNITIES TO HELP THEM THROUGHOUT THIS YEAR AS THEY DEAL WITH CHALLENGES AND CHANGES IN THEIR BUSINESSES. I HOPE THAT THOSE OF YOU WHO READ MY BLOG WILL CONTINUE TO DO SO AS I STRIVE TO USE IT AS AN AVENUE OF FEEDING INFORMATION TO YOU AT YOUR CONVENIENCE. I WILL THEN BE ABLE TO BETTER SERVE YOU AS WE DISCUSS ANY QUESTIONS OR TOPICS IN FURTHER DETAIL AT OUR MEETINGS.
I WISH YOU ALL A VERY HAPPY AND SUCCESSFUL NEW YEAR!!
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