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The materials that a contractor brings to a job site are subject to numerous perils in a variety of locations. The contractor might take delivery of them at his main location and store them for a period of time. At some point, he will transport them to a job site where they may again sit in storage. Finally, he will cut, drill, weld, or otherwise process the materials until they become a finished part of the building. During all of these stages, the materials might suffer damage by fire, theft, flooding, or even damage in a traffic accident during transport to the job site.

Commercial Property insurance policies do not cover materials once they have been moved off of the business’s premises, and they provide little coverage for materials while in transit. To insure property that moves around, the contractor needs an Inland Marine policy, which is a policy that covers property that can easily move from one location to another. The Inland Marine policy that covers materials a contractor will install in a building is called an installation floater.

Contractors might be familiar with a similar policy known as a Builders’ Risk policy. A Builders’ Risk policy insures an entire structure during the process of its construction. The structure’s owner or the general contractor in charge of the job might purchase this policy. An Installation Floater, while similar in coverage, insures only a specific type of property during the construction, such as the plumbing or electrical systems. Subcontractors, who ordinarily have a limited scope of work on the job, purchase Installation Floaters.

An Installation Floater policy insures property used in a construction project. Although the actual policy form will vary from one insurance company to another, it will typically cover materials, equipment, machinery and supplies owned by the contractor or for which he has responsibility. The property must be used in or incidental to the fabrication, erection or construction project described in the policy. One single amount of insurance applies to the property; the limit should be the highest value for that type of property during the job. When insurance companies establish the premium for these policies, they take into account that the value of the property will start out small and increase as the job progresses. For example, if a boiler installation contractor buys an Installation Floater with a $500,000 insurance limit, the company will adjust the premium to recognize that, for most of the project, $500,000 worth of boilers and related equipment and supplies will not be there.

Installation Floaters cover all causes of loss other than those specifically listed in the policy. They cover losses caused by fire, lightning, theft, explosion, and several other perils. Typical policies do not cover losses caused by extreme events like earthquakes and floods, but some companies will consider adding these coverages for an additional premium. Most policies will also exclude damage that occurs during testing of a building component or system (for example, testing of compressors). Some companies might consider adding this coverage as well, depending on the type of property and the nature of the testing.

Beside the policy’s expiration, several other events might cause coverage to cease. Coverage ceases when the purchaser accepts the work, when the contractor’s ownership interest in the property ends, if he abandons the project, or within a stated number of days after he finishes work.

Because every Installation Floater policy is different, contractors should carefully review their policies. They should discuss any deficiencies or confusing provisions with their insurance agents. Construction contracts often require this coverage, so it is vital for a contractor to make sure he has the proper coverage.

When an individual or business buys property insurance, the primary concern is normally the replacement of the building if a fire completely destroys it. However, in many losses, a portion of the building escapes damage or machinery and equipment might be salvageable. In these situations, the policyholder and the insurance company must decide whether to repair the property or replace it altogether. The policy ordinarily states that the company will do whichever costs less. However, the answer to which costs less can become a gray area, complicated by several factors.

In some situations, the policyholder might want the property replaced, rather than repaired. For example, the business may want to replace equipment because repairing it would void the warranty. It may want to replace damaged products because buyers will be reluctant to purchase refurbished ones. The business may also fear an increased likelihood of product liability claims from these goods.

In some instances, there might be doubt as to whether repair will be less expensive than replacement. Old buildings, especially dwellings that have been converted to commercial use, might have been constructed with materials no longer in common use, such as plaster and lathe. Also, some types of machinery and equipment might be less expensive to replace because the price of a new unit has decreased, but the new unit may lack some features that the business needs.

Local laws or building codes may also affect the decision. Municipal governments often require a building to be torn down if more than a specified percentage of it needs repair, forcing the owner to replace it.

The age of the property or its components is also a factor. In the case of computer equipment, which tends to decline in price over time, replacement might well be the less expensive option. The answer may not be as clear for other types of property, such as construction equipment (assuming the policy covers such equipment for replacement cost.) A 15-year-old bulldozer that suffered damage in a rollover may be repairable, but it may also be near the end of its useful life. The same may be true of the electrical system in a 30 year-old building; perhaps only 20% of the wiring suffered damage, but it might be less expensive (and better loss prevention) to update the entire system.

Finally, buildings constructed decades ago may have architectural features, such as gables, atriums, or balconies, which are not important to the owners. Replacing the building with one lacking these features may cost less than repair.

If the policy provides Business Income or Extra Expense coverage, the company must weigh the impact of the repair/replace decision on them. For example, assume that fire has destroyed 60% of a building, forcing the business to shut down. Replacing the building with a similar one in a location ten miles away will cost 50% more than repairs would, but the business could resume operations there in three months, as opposed to a six-month shutdown if the building is repaired. When the company considers all of the applicable coverages, it may well find that replacement is the less expensive option.

Ultimately, the policyholder must negotiate the repair/replace issue with the insurance company. A business owner who is unhappy with the company’s proposed settlement should follow the steps listed in the policy for contesting it. The firm’s insurance agent can be a valuable ally at claim time, as she is familiar with the process and may be able to intervene on the firm’s behalf. Working together, all parties should be able to decide on an approach that quickly gets the business back to normal.

Employees being supervised in their work activities is an inherent element in most all employer-employee relationships. Effective supervision is a vital component in ensuring employees is completing the right work, the right way, and at the right time to make a business’s operations as efficient and profitable as possible.

Employee supervision is also necessary to discourage employees from saying things that could harm the reputation of a business, result in legal liability for a business, or reveal a business’s trade secrets. Of course, such threats are more present and concerning than ever in today’s world of advanced communication technology. It’s no longer just a question of whether or not an employee will say something inappropriate over the office phone, but rather how they use an array of work-related communication technologies such as cell phones, email accounts, and Internet browsers. As a result, many employers have turned to technology as a new means to monitor the activities of their employees.

Many employers have started to monitor the phone conversations conducted by their employees, which is usually allowed by state and federal laws for the purpose of quality control in regards to conversations between an employee and a client. Keep in mind that some states require businesses to give advanced notice to all parties involved in a call that’s being monitored. Federal law, on the other hand, allows business calls to be monitored without such advanced notice, but does require an employer to quit listening if and when they realize it’s a personal call. If a phone is designated and labeled specifically for business use only, then an employer can generally monitor calls of any nature. Additionally, employers can legally obtain a listing of every phone number dialed from a particular phone/extension and the length of the calls. Even when advanced notification isn’t required legally, employers might find doing so helpful in thwarting inappropriate communications proactively.

According to the Electronic Communications Privacy Act of 1986, employers are allowed to monitor employee e-mails when an employee provides consent, the e-mail is related to the normal course of business, and/or the e-mails are stored within an in-house network computer. The keystrokes made on an employee’s computer can even be monitored to determine how much and what type of text an employee produces.

The courts routinely have upheld an employer’s right to monitor their computer systems. For example, the court ruled against a CIA employee who downloaded pornographic material and violated the CIA’s Internet use policy. Another court ruled that there wasn’t a reasonable expectation of e-mail message privacy in a case where an employee described his management using derogatory and profane language in an e-mail.

Legal experts recommend that employers planning to monitor e-mail and Internet activity create a comprehensive, clear employee Internet and email use policy with the assistance of their legal counsel. Be sure to take the following steps:

• The policy should clearly state Internet use rules, such as the types of files that can/can’t be downloaded and the types of Internet sites that should/shouldn’t be visited, and the disciplinary actions for offenses.
• The policy should clearly state that employee communications on the employer’s computer system aren’t private and are subject to being monitored.
• Use the policy to inform employees how long computer files will be stored and deleted.
• Require employees to sign a copy of the policy before providing them with access to the system.
• Post the key points of the policy on each computer’s login screen.

Employers should keep in mind that, despite the above precautions and legal monitoring rights, an invasion of privacy lawsuit by an employee is still a possibility. Many employers purchase employment practices liability insurance to protect their financial well-being and cover the costs of litigation and unfavorable judgments.

Employers need to keep a vigilant eye on their employees, but that doesn’t mean violating an employee’s rights during the process. Avoid a lot of undue risk by using technology to your advantage, having a clear Internet and e-mail use policy, and an employment practices liability policy.