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May 04
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Audit Your Management Decisions to Avoid D&O Claims

By Business Protection Bulletin
Directors and Officers Liability insurance protects the company from claims pertaining to management decisions and their effect on company policy, financial reporting and, of course, performance. More and more, Boards of Directors and C-suite officers are targeted for literal or figurative payback when problems arise.
What is the best risk management for these types of losses? Other than finding the skill to predict the future or purchasing adequate limits of D&O insurance, auditing decisions for compliance and efficacy is the best.
Just as a Certified Public Accounting audit uncovers potential problem areas and relieves some of the burden and responsibility from the Board, operations and procedures audits point to compliance and process issues.
Your options include internal and external audits.
External audits have the advantage of bringing in people unfamiliar with your company, with no pre-existing thoughts, to rethink procedures and compliance. Typically, businesses grow and do not change management styles or procedures until problems arise. Sometimes a total re-engineering is required; sometimes a few tweaks do the job. A fresh perspective helps.
Internal audits have the advantage of cost, but familiarity can blind people to the issues at hand. The process investigation should begin with raw materials and end with shipping. Why? That is the pertinent question.
Why this supplier? Are others available either to supply or back-up the first supplier? This situation is a potential D&O claim: no contingency suppliers lined up. Why not? Tradition most likely.
Corporate memory and tradition are valuable, but modernization is too.
One more audit method is worth mentioning. Ask the first person in the process line how they would improve the system. Go to the next and so on. Many employees have good ideas but are hesitant to rock the boat. Find those employees and mine those thoughts. You might be surprised.
Engaging the employees has an additional benefit: happy, engaged employees who feel some sense of ownership are less likely to sue for employment practices claims, a rising cause of D&O losses.

 

May 04
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Look Through Receivables to Find Potential Liability Claims

By Business Protection Bulletin
There’s an old adage in risk management: anything pending is a potential liability.
Just like football coaches forgive hitting mistakes over inaction, top-notch business risk managers design processes which complete tasks; and when awaiting customer input, they mandate a date certain response time with follow-up. They do not want inaction to lead to uncertainty.
One form of the pending dilemma disguises itself as accounts receivable. Business owners cringe at the mention of this toxic reality – not everyone pays on time.
Use receivables as a valuable risk management tool. One of two basic truths drive accounts receivable:
1. The company made a poor credit choice and extended terms on which the customer could not
pay.
2. The customer, in hindsight, does not value the product or service as much as they expected.
Okay, before you argue that some customers are just dishonest (credit criminals) or the economy went south for the decade, see observation 1 above.
Legitimate liability issues dwell in the second house. Investigate the reason for non-pay.
Was the customer over-promised results? The area a coat of paint will cover is puffery and not a liability issue. The promise that paint is lead-free when it is not is a liability issue. If all you do is steam over not getting paid, this issue will not be rectified in a time-prudent manner.
Was your product or service defective in some way? In construction, perhaps the concrete mix was specified to be rated high strength and early tests show it is not going to meet the standard. The contractor may only find out ten days after the pour. If they move the business to a different concrete pre-mix company, you may never find out without proper investigation.
Not only is proper after-sale follow-up good salesmanship, it provides a pathway to lowering past-due receivables and detecting quality issues.
If your company is not a high priority on your customers payables list, there is a disconnect between perceived value and observed value. This situation germinates pending liability claims.

 

May 04
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Five Steps to Better Risk Management

By Business Protection Bulletin
Risk management improves with keen observations. Try these five techniques over the next few months:
Financial Statements
When reviewing your financial statements for your risk management audit, take a hard look at receivables aging. How are collections compared to last period and industry standards? Increased issues with receivables are a good indicator of future risk management problems.
Customers pay their priority vendors first. Are you slipping on their list? Is this a credit or production problem? Investigate thoroughly when slippage in receivables occurs.
Include Middle Management
Do not rely on communications rolling up hill. Interview middle managers and get thoughts on hazards, perils and general safety and risk management. Sometimes good ideas do not get passed along for a variety of reasons.
Safety Committee
If your company does not have a safety committee, organize one. The CEO should be a member, but not the head or chair. All levels of employees and sectors of the company should be represented.
Interview a few committee members about what the nature of discussions are with non-member employees. Is the information received well? Are changes implemented on a timely basis? Is the feedback from non-members of the nature of wondering why something is not being done or fixed?
Disaster Plan – Contingency planning
If you don’t have a plan, create one. Within this exercise, rethink the operation and how you would rebuild it. There is always room for improvement and your contingency plan might be a solid blueprint.
Some examples:

1. Does it make sense to move closer to your suppliers?
2. Does it make sense to move closer to end product users?
3. What is the next generation of equipment?
4. What feature should the next generation of equipment possess?
Ask the people involved with the process, they will have good ideas.
Listen
Listening is almost a lost skill. Interviewers and investigators have two ears and one mouth use them in that ratio. As a risk manager, improve your service by listening to everyone taking time to speak with you.
They do not get heard often and will pay you dividends for hearing.

 

May 04
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Employee Benefits That Improve Worker Production

By Business Protection Bulletin
Offer health services in conjunction with insurance and gym memberships to enhance employee health, which in turn, benefits production. It’s a cost effective benefit.
Most companies offer health insurance and some gym memberships as employee benefits. Those perquisites amount to access, not usage. In order to assure usage, and therefore a healthier employee, guidance is required.
1. Nutritionist – design specific diets for employee conditions such as diabetes or weight
loss. Teach employees proper health habits for themselves and their families.
2. Exercise coach – design and encourage exercise routines specific to employee conditions,
such as water aerobics for joint rehabilitation.
3. Prevention – flu shots and vaccines at work.
Although these services sound expensive, most companies do not need in-house staff; and many able professional service providers will accommodate corporate clients.
Company functions can practice healthier habits. Rather than cookies and donuts at meetings, fruit, bagels, or vegetable trays can be offered. Water is a worthy substitute for sodas.
Corporate officers and managers can embrace healthier choices to lead by example. Lifestyle balance, such as vacations and family leave, can be managed so the employee can take real time off without reporting in.
A common error in benefits management is buying a pro forma suite of benefits without communicating their value to employees. Paid vacation, health insurance, holidays with pay, company physicals and preventative medicine are great for employees, but costly to the employer. Why not detail the cost and demonstrate how the employee can best profit from the benefit?
Further, why not spend a few extra bucks to assure employees use the benefits correctly and wisely? Trainers prevent gym accidents. Nutritionists teach employees how to live healthier.
Don’t just allow employees access to facilities, be sure advisers are present to help them maximize their efforts. This benefit is easily and inexpensively outsourced.

 

May 04
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Rehabilitation for Injured Workers: what’s available?

By Construction Insurance Bulletin
Obviously, nobody wants to suffer an occupational injury where they lose time from work, incapable of returning quickly. The employer loses a valuable employee, and the employee loses part of their life, or worse.
Rehabilitation is a loose term which conjures up visions of learning to walk using parallel bars or weight training to regain muscle mass. Mere tools.
Quality rehabilitation begins with quality occupational therapy, a three step process:
  • The individual is evaluated mentally, emotionally and physically to help determine
realistic personal goals
  • An intervention designed to improve performance towards the long-term goals proposed
  • Evaluation of progress to assure success or indicate revising the plan.
The family or close associates are consulted along the way.
Evaluation
Does the employee want to return? Like the formula one racer who can’t emotionally get back in the car or the rodeo rider who loses his nerve, probably wisely, some employees just cannot bring themselves to return to a hazardous job.
In the evaluation process, the injured decides what their future is: return or retrain.
Intervention
Physical therapy, weights, walking, learning to speak again, or any of a myriad of rehabilitation techniques can bring the employee back closer to their former selves.
The intervention requires commitment by family, friends, the employer, and the therapist along with the injured. The employee must stick to the game plan to recover the best possible way.
Evaluation
Choosing the best technique to follow is not always an exact science. Perhaps the original evaluation is optimistic, maybe too pessimistic, or just unknown factors are discovered later.
The secret is to stay in the present tense. The injured isn’t three weeks into therapy; they are at a condition today which mandates a specific direction. Maybe not a significant change, or perhaps an entirely different rehabilitation pathway. Optimum outcome relies on the ability to change therapies as needed.
Try not to think in terms of returning your employee to their former self, get the help needed to meet their new goals in life.

 

May 04
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How to Embrace the OSHA Mission

By Construction Insurance Bulletin
The Occupational Safety and Health Administration (OSHA) mission concerns the reduction and elimination of workplace conditions which lead to accidents and illness.
Rumored to be feared by many contractors for surprise inspections and handing out steep fines.
OSHA, however, administers safety and health more than policing it. If you embrace their mission, OSHA becomes a great partner.
Use OSHA Research
OSHA has libraries of manuals and fliers regarding on the job hazards and alerts for newly discovered perils. The publications, available on their website, bring awareness and solutions to potentially dangerous job conditions.
The literal A to Z coverage of dangerous chemicals and occupational risks can be found at https://www.osha.gov/pls/publications/publication.html in English or Spanish.
Use OSHA Paper work and Forms
Some are mandatory anyway, so adapt the forms to your reporting purposes and cut back on data entry. Their injury log organizes essential data for injury occurrences on the job. Add to these data by keeping records of near misses, prevention responses, or any in house data or follow up within your own safety culture.
Read and review OSHA forms to mine ideas regarding your own programs. OSHA responds to general safety and health needs; but you can tailor ideas to fit your specific conditions.
Use OSHA Spanish Language Signs and Instructions
OSHA serves as a built-in interpreter for essential safety communications which require a specialty lexicon. Non-English speaking labor does not automatically know the United States standards of or tolerance for safety. OSHA helps with the teaching.
Some signs remind of important employee rights and procedures. OSHA has these signs available in Spanish to assure your compliance.
Use OSHA Training Classes
HAZMAT response may be a specialty occupation, but most laborers should have basic knowledge of how to spot a potential toxic chemical spill. OSHA certified training is quite good in this area.
If you’ve been cited unfairly or just don’t like the idea of OSHA site inspections, don’t deprive yourself of OSHA research, posters, language help or ideas. Embrace the health and safety aspects for your employees. You have that in common.

 

May 04
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What contracts are included in contractual liability?

By Construction Insurance Bulletin

Contractual liability concerns accepting grey-area responsibility through agreements with other business stakeholders.

Standard liability policies exclude damages as a result of the insured’s agreement to accept liabilities through certain contracts, such as hold harmless or indemnity agreements.

In order to be covered, the insured must pay a premium to remove the exclusions so that those obligations are paid as general liability claims.

Keeping the exclusion in the insurance policy does not relieve the insurance company from liability if a court would find the insured responsible in the absence of the contract.
Removing the contractual exclusions does not remove the exclusions to the general liability coverage, for example, a claim from a contract which anticipates bodily injury will not be paid.

It is complicated. Certain contracts fit the definition of insured contracts under standard CGL language:

1. Real estate leases except indemnification clauses for fire damage, which must be insured

through property coverage.
2. Railroad sidetrack agreements.
3. Easement or license agreements (except construction or demolition within fifty feet of a

railroad track).
4. Contracts with municipalities.
5. Elevator maintenance agreements
6. Blanket tort liability, as opposed to warranties or guarantees.

Some companies remove the blanket terminology to limit contractual liability.

Legal fees and costs become part of the limit of liability under the contractual liability unless the insured would be held responsible in the absence of the contract. In that case, legal fees and costs are covered in addition to the limit of liability.

As business became more complex and contract oriented, this clause has been added to and modified to meet the contemporary demand. Now, it’s like Dr. Frankenstein’s clause. It’s alive, but not as simple as it could be.

Seek advise from your attorney and insurance agent when contemplating agreements with transfers of liability. These scenarios are very complex under general liability policies.

May 04
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What is a completed operation?

By Construction Insurance Bulletin

Operations concerns work in progress such as constructing the steel for a bridge. Completed operations is the finished process or scope of work put into its intended use by someone other than another contractor.

The steel skeleton is an operation when the concrete subcontractor pours the decks. It’s a completed operation when traffic begins to flow whether or not the guardrails are functional.

Completed operations liability covers the consequences of faulty work, not damage to the faulty work, but bodily injury and property damage as a result of the faulty work. The steel isn’t covered but the car it lands on is.

Three tests must be met to secure completed operations coverage for a specific claim:

1. The bodily injury or property damage must arise from your work product or completed

operation.
2. The claim occurs away from insured premises – owned or rented.
3. The work must be completed or abandoned when the injury occurs.

The subcontractor exception can be difficult to understand:

1. The exclusion does not apply to work done by subcontractors.
2. The exclusion does not apply if the damage arises out of work by a subcontractor.

If your general contracting company installs an HVAC system incorrectly that burns the building down; your work will not be reimbursed by your insurance carrier, but the work of your subcontractors will.

If a subcontractor installed the faulty system, all the work will be reimbursed by your insurance company. Of course, your company will likely subrogate, that is sue, the subcontractor.

The best risk management technique for this exposure is only perform work within your expertise and subcontract the balance of the contract, and perform quality control inspections on your work and that of your subcontractors. Document specific work completed by your subcontractor. Test your materials and fix defects as you work on the project.

Make sure your work is completed correctly to your satisfaction before releasing the project for its final use.

 

May 04
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Does Workers Comp Cover Injuries Caused by Employee Negligence?

By Employment Resources
Workers Compensation provides financial payments if you’re injured, disabled or contract an illness at work. Employers are typically required to carry this coverage, and it pays for medical care, replaces lost income and covers necessary retraining. Sometimes, though, the injury or illness might result from employee negligence. Maybe a heavy barrel fell on you because you were daydreaming while driving the forklift or you didn’t wear protective gear, breathed in toxic fumes and now suffer from asthma. In those instances, you need to know whether you can claim workers comp benefits.
What Injuries are Covered by Workers Comp?
Incidental injuries are usually covered by workers comp. That means if you lift a heavy box without your safety belt and pull a muscle, your medical care is covered. You can also receive workers comp if you suffer from a long-term or recurring illness like carpal tunnel that develops when you don’t sit properly at your desk.
What Injuries are not Covered by Workers Comp? 
While almost all workplace injuries, including those that occur because of negligence, are covered by workers comp, several aren’t. They include:
*Self-inflicted injuries – If you try to hurt yourself on purpose, don’t count on workers comp to cover your medical treatments.
*Injuries suffered while committing a crime – Don’t expect workers comp to cover medical treatment if you’re injured as you break into the cash drawer or commit another crime at work.
*Injuries suffered when violating company policy – If your company doesn’t allow employees to drink on the job, workers comp won’t cover injuries that occur because you’re drunk at work. Read your employee manual to understand all your company’s specific policies.
Accidents happen at work, and your negligence might be the cause of an injury, illness or disability. Those incidents are typically covered by workers comp. It’s a smart move, though, to verify the specifics of your claim when you talk to your human resources manager or worker comp insurance rep and try your best to stay safe on the job.

 

May 04
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Seven Retirement Savings Tips for People With a Low Income

By Employment Resources
Do you struggle to stretch your low income and make ends meet? Whether you’re living on unemployment, just entering the workforce or received a recent pay cut, saving for retirement might be the last thing on your mind. However, seven tips can boost your retirement savings as you plan for the future.
1. Save Automatically
Instead of feeling discouraged that you don’t have enough cash every month to put toward your retirement, save automatically. Open a 401(k) through your employer and set up automatic deductions each month or set up a recurring monthly transfer from your bank account into your retirement account.
2. Invest Your Tax Refund
Because your tax refund is probably the biggest lump sum check you receive all year, designate a percentage for retirement. Use IRS Form 8888 to deposit part of your refund directly into your retirement account.
3. Increase Your Savings Rate
Every time you receive a raise, increase the percentage of money you save. You won’t miss the few extra dollars each month that help your retirement account grow.
4. Open an IRA
Maybe your employer doesn’t offer a 401(k) or you’re a seasonal or part-time employee. Open an IRA and make regular deposits as you save cash for your future.
5. Don’t Touch Your Retirement Money 
No matter what expenses arise, resist the temptation to withdrawal money from your retirement accounts. You’ll end up paying a penalty, and you lose valuable retirement savings.
6. Avoid Get Rich Quick Scams
On every corner, you’ll find an attractive scheme that promises to double your money in one week or pay a huge dividend for a small investment. Resist these scams and invest your money into a retirement account where it’s guaranteed to grow.
7. Start Saving Today
You’re never too old or too young to start saving for retirement. Right now is the best time to get your retirement savings momentum going.
Even with a low income, you can prepare for your retirement thanks to these seven tips. Your Human Resources manager or retirement account rep can also provide additional information as you invest in your future.

 

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