You’re an advertising/marketing professional, not an insurance wiz. Here are some suggestions to make sure that you have the appropriate property and casualty coverages in place.
For property and general liability insurance coverage, go with a Businessowners Insurance Policy (BOP). BOPs are inexpensive, include a wide array of “bells & whistle” coverages (employee dishonesty, fine arts, valuable papers & records, etc.), and are payable over installments.
Be attentive to the following relative to your property insurance:
- Deductibles. The cost savings generated by elevated deductibles typically are not significant. For example, increasing the deductible from $1,000 to $5,000 might generate a savings of only 10%. One claim in excess of $1,000 can blow-up the premium savings generated by the higher deductible. Underwriters will look for larger companies to accept larger deductibles but do what you can to try to hold down your deductible.
- Increased Limits. The “bells & whistles” coverages touched on above are subject to low limits of protection, typically in the magnitude of $25,000. Depending on the needs for your agency you might want to bump the limits for:
- Employee dishonesty/depositors forgery
- Valueable records/work product (“valuable papers & records”)
- Fine arts
- Computer Hardware & Software. Broadened coverage is typically provided for computer hardware and software (includes coverage for claims arising out of power surges and electrical arcing). But such coverage is often capped at a sublimit ($25,000 or $50,000). On the other hand, some insurers just lump computer equipment in with the standard coverage for business personal property unless requested otherwise. Make sure that you are in agreement with the scope of coverage and the limits of protection provided for your computer equipment.
Also, often times the principals in an agency will thru a separate partnership own the building wherein the agency is a tenant. You can insure the building and the agency under the same BOP thereby saving money on the general liability coverage (eliminates the need for a separate general liability policy or BOP for the building/partnership). Just make sure to add the partnership as a Named Insured on the agency’s BOP.
General Liability Enhancements
Optional coverages which can be added for an additional charge often include:
- Employment Practices Liability Insurance: Coverage for wrongful termination, harassment, discrimination and the like. The limit of protection is often set low ($25,000-$50,000) but this is an easy and inexpensive way to secure some such coverage (broader coverage with higher limits is available thru and Employment Practices Liability Insurance policy).
- Employee Benefit Liability Insurance: Coverage for your negligence in your management of your employee benefit plans (mistakes in enrolling employees for major medical coverage, errors in description of benefits, etc.)
- Hired & Non-Owned Auto Liability Insurance: Coverage for liability arising out of hired vehicles (AVIS car you rent at LAX when visiting a client) and non-owned vehicles (AE getting into accident in personal car en route to client meeting).
Employee Locations In New States
Coverage is automatically provided under your current workers comp policy for employee locations you establish in new states but such coverage is included in the subsequent policy renewal only if the new state, address, activity and payroll has first been reported to the insurance company. The renewals of most smaller workers comp policies are pre-issued as per expiring with the exception of a small automatic increases in declared payroll values so new employment states established in the prior year are then not covered under the pre-issued renewal. To be safe, provide your insurance agent with an updated schedule of employee location addresses, activities and estimated annual payroll values prior to each workers comp policy renewal.
Coverage for Volunteers/Interns
Who is covered under a workers comp policy? A workers comp policy, basically, provides coverage for people providing services for remuneration unless insured elsewhere. Volunteers (spouses of employees helping out at an event) and interns provide services but they are not paid so they are not covered. That is unless your agent attaches a voluntary compensation endorsement to your policy the effect of which is to then include coverage for volunteers, interns, and other non-compensated individuals. And, the great thing about this endorsement — it’s free!
EMPLOYMENT PRACTICES LIABILITY
The following are some key general considerations that you should be aware of in regards to EPLI policies.
Reporting of Claims
EPLI policies stipulate that the policyholder has a duty to notify the insurer “as soon as practicable” of any EPLI claim. And, certainly most all policyholders will immediately deliver to their agent any EPLI lawsuit as soon as received. But, EPLI policies also stipulate that they policyholder should notify the insurer “as soon as practicable” of any circumstances which could give rise to an EPLI claim. One such key circumstance, which is often overlooked by policyholders, is that of a complaint being filed with the Equal Opportunity Commission (EEOC). You should immediately notify your agent upon you first becoming aware of any complaint being filed with EEOC. Although findings/determinations made by the EEOC are not admissible in any subsequent EPLI claim, a finding in favor of a prior employee by the EEOC can then embolden the prior employee to proceed with the filing of a formal EPLI lawsuit.
Third Party Coverage
The primary intent of an EPL policy is to provide protection for the policyholder for its liability arising out of inappropriate behavior — sexual harassment, discrimination, wrongful termination, and the like — by one employee towards another. However, an employee can also exhibit certain inappropriate behavior — discrimination and sexual harassment — towards non-employees such as clients, vendors or service provider. Third party EPL coverage protects the policyholder for claims arising out of such inappropriate behavior by employees towards such qualified third parties. And, this coverage can often be added in for nominal or no charge.
Additional Limit Dedicated for Defense
EPL limits of protection are provided on an occurrence/aggregate basis and are inclusive of defense costs. So with a $1,000,000 occ/agg limit, the insurer will pay a total of $1,000,000 for all damages awarded and all defense costs incurred arising out of all covered claims incurred in any one policy year. For nominal charge, insurers will provide an additional limit of protection (for example, $500,000) for defense costs only.
“Hammer Clause” for Claim Settlement
The defense and resolution of an EPL claim can result in a lengthy, and often unpleasant, process the conclusion of which can be that the insurance company and plaintiff move towards a settlement. Before formally agreeing to a settlement, the insurance company will contact the policyholder to affirm that the policyholder is agreeable with the settlement. Some insurers, such as Chubb, have policy forms that stipulate that the policyholder has sole authority to approve or disapprove any such settlement. Others have a settlement clause, also known as a “hammer clause”. The effect of a settlement clause is that if the policyholder disapproves the settlement, the insurance company will then proceed with further defense of the claim but the policyholder then shares in the subsequent defense costs and in the portion of any final settlement in excess of the original contemplated settlement. For example, under and 70/30 settlement clause, if the policyholder disapproves a claim settlement of, say, $100,000, the policyholder is then responsible for 30% of subsequent defense costs and 30% the portion of any final settlement in excess of $100,000.