Clearing Up Some Common Misunderstandings About Insurance

Group of business people reviewing insurance documents

Property and casualty insurance coverages can be complex, can differ from one insurer to another, and can change from one year to the next. Your representative at Preston-Patterson is your key resource should coverage questions or issues arise. But the following is a discussion to clear up some common misunderstandings relative to insurance.

New Employee Drivers – Do We Need to “Add” Them for Coverage?

Actually, you don’t. But being attentive to who is qualified to drive your company vehicles (and as to who can drive their personal vehicles on company business) is certainly the proper thing to do. Underwriters generally evaluate the policyholder’s drivers only prior to policy renewal. At that time the underwriter will secure motor vehicle driving records (MVRs) for a sampling of drivers and will then advise Preston-Patterson should there be any “problem drivers”. But commercial auto insurance underwriters recognize that during the policy year there will be staffing changes and underwriters rely on the policyholder to act as the gatekeeper for new employee drivers. Insurers are looking for policyholders to evaluate a prospective employee’s MVR prior to hire to ascertain as to whether or not he/she is an acceptable driver (make sure that you secure a written MVR authorization from the prospective employee first). From a coverage standpoint, the general principal is that the insurance follows the vehicle – the policyholder is insured at all times for the vehicle and the driver is insured if driving with the policyholder’s permission (designated driver exclusion being excepted). Keep an updated roster of employee drivers (name, DOB and drivers license number) so that such is readily available prior to renewal.

Ransomware and Business Interruption

Business interruption coverage provided under a property/business interruption insurance policy provides coverage for impaired financial performance as result of damage to insured station property as result of a covered cause of loss. With ransomware there, generally speaking, is no actual damage to physical station property – the hacker has generally just acted to disable or impair station data/communication systems. All the tangible property is AOK. So as there is not an insured property loss…..the business interruption coverage will not respond. But business interruption coverage for such circumstances is generally available thru a network & data security & privacy insurance policy.

Tower Leases – Insurance for “Any and All Liability”

Buried in the insurance provisions of a typical tower lease is a provision stipulating that the broadcaster establish and maintain insurance that provides protection for “…any and all liability incident to (broadcaster’s) lease and use of the tower site premises…”. Sounds OK except that no insurance policy provides protection for “any and all liability”. There are various standard exclusions under a commercial general liability insurance policy including exclusions relating to pollution liability and intentional acts. And the primary focus of coverage under a CGL policy is bodily injury and property damage liability – there is no coverage for breach of contract, for example.

Is an EEOC Complaint an Employment Practices Liability Claim?

Yes, an EEOC complaint is an EPL claim and you should promptly notify your EPL insurer of such. An EEOC complaint and associated hearing is often viewed as a “low-heat” matter – the hearing is conducted in front of an administrative authority and is not in response to a heavily lawyered lawsuit full of spectacular allegations of outrageous, wrongful behavior. But by typical EPL policy definition, a claim includes a “…formal administrative or regulatory proceeding…commenced by the filing of notice of charges…including but not limited to any Equal Employment Opportunity Commission proceeding”.

Property/Business Interruption Limits of Protection and Umbrella Policies

We’ve fielded a few questions wherein clients has voiced hope that in the event that their property/business interruption limits of protection are inadequate that their “umbrella policy” will then kick in to address any shortfall. The primary function of most umbrella liability policies is to provide increased limits of protection for incurred lawsuits in excess of the limits of protection provided by the underlying CGL, commercial auto, and other primary third party liability policies. A property or business interruption loss is a first party claim – it is a claim sustained by you, the policyholder – and is not eligible for coverage under umbrella liability insurance policies which provide coverage for third party claims only.

One of Our Employees Got Hurt But He’s Alright So We’re Not going to File a Claim. OK?

Well, it’s good that he’s OK and that the medical bills are real small. But you should report the workers comp claim anyway. Injuries which initially appear to be innocuous and quickly cured can sometimes then develop into something which is more severe and long lasting. Various studies have shown that workers comp claims for which insurers are involved early on have significantly lower incurred costs (medical and lost time) than claims for which insurer involvement is delayed. You are not going to get surcharged for reporting a workers comp claim that is ultimately paid and closed for a nominal amount as might the case under a personal auto insurance policy. Workers comp underwriters have some sensitivity to claims frequency but their significant primary focus is loss ratio – claims dollars paid as a percentage of premiums. And if a workers comp claim is not well managed from the outset and then escalates it could blow up your loss ratio and that will impact your renewal pricing. Further, by paying something up front and delaying on report of the claim you might impair your insurer’s ability to rightly deny the claim if it is found to not be a legitimate, compensable claim.

This discussion is intended to be general in nature. Terms, conditions and exclusions under your insurance policies may differ. Consult your actual policy forms for details.

Contact: Stephen W. Patterson, MBA, CPCU, steve@preston-patterson.com, 800-516-5199 ext. 111