Building a company without adequate insurance: it’s risky business
You never know when disaster may strike, causing severe damage and disruption to your business operations. Business insurance should be considered a regular cost of doing business; it is important to expect the unexpected and manage your risks accordingly. Generally, the best way to protect yourself and your business against the unforeseen is to prepare before it happens by taking steps to minimize the chance of an accident and by purchasing the appropriate insurance.
Types of Coverage
- Property insurance generally covers your building, contents, and equipment in the event physical property needs to be repaired or replaced.
- Business interruption insurance generally provides you with coverage for loss of revenue and continuing expenses after a business has been wholly or partially disabled by a natural or man-made disaster.
- Liability insurance helps protect you and your company from liability arising from day-to-day business operations. You should consider obtaining coverage for product/completed operations liability and premises liability to protect your business in the event someone is injured while using your products or services or visiting your facility.
- Employment practices liability insurance is designed to protect you and your company from the types of liability that may arise from employment-related lawsuits such as wrongful termination, discrimination, and harassment.
- Automobile insurance generally covers both liability and physical damage in the case of an auto accident involving one of your vehicles. You may want to also consider adding coverage for “non-owned and hired” automobiles if you or your employees use personal vehicles on company business.
- Life insurance generally provides coverage to a designated beneficiary upon your death or the death of an insured key employee.
- Disability income insurance may protect your income or that of your employees in the event of a serious accident or injury that leaves you or your employees unable to work.
Getting Started
Everything and everyone in your place of business is subject to risk, so look around and take stock of potential liabilities. In addition to your own detective work, enlist the help of your employees. Consider asking them what they believe could result in damage, injury, or loss, as they perform their duties at work.
Once you have assessed your business risks, ask yourself the following questions:
- What is and is not covered under my current insurance policies?
- Could my business survive if it is shut down? For how long?
- Does my insurance policy provide coverage to get my company back into operation? Does it cover the cost to replace my assets?
- Could I pay my creditors, vendors, and general business and administration expenses during a prolonged shutdown?
- Could my business survive the death or disability of myself or another key employee?
Who Can Help?
Many resources are available to help you determine what insurance coverage you need for your business. Start by contacting us for assistance in evaluating your business risks. Your local police and fire marshal, as well as government agencies such as the Occupational Safety and Health Administration (OSHA) and the Small Business Administration (SBA), may also provide assistance. A little time and money spent today could help prevent or minimize your financial loss for events that may occur tomorrow.
Professional liability insurance
Today, claims of “negligence” seem to arise more frequently than ever before. This is usually bad news for professionals, since the failure to provide reasonable service can be cited in many far-reaching situations and circumstances. Negligence may be claimed in conjunction with a mistake, an oversight, or a failure to deliver services in accordance with standards set by your peers. In the past, mostly doctors, lawyers, architects, and engineers had to be concerned about the implications of negligence and protect themselves from potential lawsuits. But times have changed, and now professionals ranging from software designers to public relations consultants need to consider the financial protection insurance offers in an increasingly litigious society. More and more, professional liability insurance (also called errors and omissions insurance) is being sought as a solution to liability risks.
Disgruntled customers/clients/patients can pursue a claim against you or your business whether it is legitimate or not. In such situations, it is not uncommon for plaintiffs to sue multiple parties, despite their level of involvement in the particular situation. Legal fees, not to mention lost working hours, can be costly. Professional liability insurance can help absorb these losses and expenses, as well as those incurred by judgments or settlements.
Professional liability insurance covers omissions, errors, misleading statements, breaches of duty, and other like claims arising from services rendered. The terms, rates, and conditions of this insurance vary among issuing companies, policies, professions, and locations. It’s very important to thoroughly understand the policy’s terms and conditions before purchasing insurance and long before a claim arises. Some key policy issues to address include the following:
- Are claims arising from governmental or regulatory agencies covered?
- What has to occur in order to trigger coverage? Will a written demand, an allegation, or the service of papers constitute the accepted notice of a claim?
- Is there compensation for working hours lost as a result of legal procedures?
- Is there a deductible involved, and how does it relate to legal fees?
Apart from these questions, you may need to decide between the two types of available coverage. Occurrence policies cover incidents that took place during the policy period, regardless of when they are filed. In contrast, claims-made policies cover claims meeting two conditions: the incident occurred during the policy period and the claim also was made during the policy period.
Claims-Made vs. Occurrence
Claims-made policies provide coverage for incidents that have occurred and for which claims have been made between the policy’s inception and expiration dates. Claims that occurred prior to policy issuance may be covered by “prior acts” coverage, which is included in some policies. However, even these are restricted by a retroactive date, before which incidents are not covered. Liability limits are determined according to the level of coverage at the time the incident occurs. Claims-made policy premiums are usually lower than occurrence policies, but if you cancel a claims-made policy, extended reporting periods (or tail coverage) will likely need to be purchased to extend the discovery period, during which notice of a covered claim may be filed. Extended discovery periods may be available for anywhere from six months up to seven years. The cost of tail coverage can be high, and consequently, occurrence policies, when available, may be preferable.
Occurrence policies provide coverage for incidents that occur during the policy period, regardless of when they are reported. For example, if you had an occurrence policy in effect from 2003 through 2006 and a claim for an incident occurring in 2005 wasn’t filed until 2007, coverage would be provided. The benefits of this policy are that any incidents that occurred during dates of coverage will be indefinitely covered. This policy does not require tail coverage because premium rates reflect the ability to report claims indefinitely for events that transpired during coverage dates. Effective liability limits are those that are in place at the time the incident occurs, regardless of when the claim is made.
Unfortunately, we can’t always prevent the things that happen or predict the reactions of others to our business actions, products, or services. Mistakes can be made just as easily as clients can make false accusations. Therefore, it is up to you to protect yourself and your livelihood. Doing so may just be your best business move to date. Give us a call. We would be glad to help you understand the complexities of professional liability insurance.
Did You Know? Turnover and Retirement Plans Workers may be less likely to leave an employer if they participate in the company’s retirement plan, according to an annual study by human resource consultancy Cammack LaRhette. The analysis showed that the turnover rate among voluntary retirement plan participants was just 9%, compared with 20% for non-participants. The 2006 study reported similar results: 25% of non-participants left their employers, compared with 10% among participants. Informal Employee Networks
A report on informal organizational structures by management consulting firm Katzenbach Partners, LLC revealed that nearly two-thirds of respondents (65%) rely primarily on themselves and co-workers to provide solutions and solve problems at work, while just 30% turn to managers in similar situations. In addition, 9 out of 10 employees surveyed reported having a knowledgeable and experienced co-worker they can turn to when they need to get something done.
Mothers Prefer Part-Time Work
According to a survey conducted by the Pew Research Center, more mothers would prefer part-time work to a full-time job. Of all the mothers surveyed, both employed and unemployed, 20% prefer working full-time, 50% would rather work part-time, and 29% would prefer not to work at all. While 60% of employed mothers indicated they would like a part-time job, figures from the U.S. Bureau of Labor Statistics indicate that just under one-quarter of employed mothers actually work part time.
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For Your Information Do Not Call The National Do Not Call Registry is a list of phone numbers from consumers who have indicated their preference to limit the telemarketing and sales calls they receive. Managed by the Federal Trade Commission (FTC), telemarketers and sellers are required to search the registry at least once every 31 days and drop from their call lists the phone numbers of consumers who have registered. For more information and to register a business, visit telemarketing.donotcall.gov. SCORE Business Advice SCORE is a nonprofit association dedicated to entrepreneur education and the formation, growth, and success of small businesses nationwide. A resource partner with the U.S. Small Business Administration (SBA), SCORE provides online and in-person advice to help business owners target their business plans, improve their marketing strategies, or increase their cash flow. Their website www.score.org also features free how-to articles and business tools.
Podcasts from the SBA Podcasting is a way to receive audio files over the Internet. The U.S. Small Business Administration (SBA) offers Podcast feeds on a range of small business topics, including financing, disaster preparedness, and business plans. These feeds deliver audio broadcasts to a personal computer, where they can be played or transferred to an MP3 player. For more information, visit the SBA website at www.sba.gov. New files, along with transcriptions of the audio, are being added monthly.
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Security breaches on the inform ation superhighway seem to be an increasingly serious problem for corporate America. Hackers, disgruntled employees, computer viruses, and fraud may wreak havoc that could threaten the stability and existence of any business.
Savvy Detective Work
Perhaps security crime is worsening because the workplace is increasingly dependent on information technology, such as shared networks and the Internet. To protect the workplace from these unconventional and extremely costly property risks, business owners should consider implementing their own cyberspace policing system. Here are a few actions that may help prevent computer crime:
- Establish and implement security procedures. Developing a policy at the highest levels of the company will help transform information technology concerns into a “high-profile” issue. Maintaining tight security around mainframe computers and local area network file servers will aid in the prevention of breaches and fraud.
- Equip computers with passwords and anti-virus software. Passwords help deter hackers from cracking codes, and they may be one of the easiest methods to help prevent computer break-ins. Efficient use of this technique includes choosing unusual passwords and frequently changing them to keep potential hackers guessing. Additionally, viruses lurking in cyberspace may infiltrate computer systems and render them useless. Anti-virus programs provide protection against these attacks, and businesses may want to consider updating this software periodically to combat the arrival of any new viruses.
- Install firewalls and data encryption technology. Firewalls block unwelcome cybersurfers from direct access to company computers and data. They are also used to restrict employees’ personal use of the Internet during office hours. These security devices inspect every approaching Internet connection and use a predetermined set of rules to determine whether to allow that connection. Likewise, data encryption, in which information is encoded before it is transmitted, requires a particular “key” to unscramble the data on the receiving end. An encryption device will help prevent unauthorized individuals from obtaining and misusing sensitive information.
- Provide advanced protection with detection and monitoring devices. These additional security features may raise red flags or warning signals to companies by identifying repeated attempts by unauthorized individuals and hackers to break into a system.
Plan of Attack
Along with common sense procedures, businesses should consider implementing software and other security measures. They should also assess how sensitive their information is in order to structure a system with the appropriate level of security. Businesses may also investigate Computer Fraud Insurance to protect against losses that security measures may not be able to prevent. Please give us a call. We can help you evaluate your needs and create affordable solutions to help combat potential computer breaches.
that are believed to be reliable. However, this newsletter is not intended as a substitute for legal, financial, or
professional counsel.