Business Protection Bulletin

The difference between personal automobiles and business automobiles is the name under which it is titled. If you use your personal automobile in business, the business should have hired and non-owned automobile coverage to cover the business’ liability of your driving.

If the business owns the car, you should either have a personal automobile policy or a “drive other cars” endorsement on the business policy to cover your liability for driving a company car. The car owner and driver are often both sued.

So, what’s the difference between Commercial Automobile and Business Automobile? Commercial automobile coverage includes several policy forms. Garage, business auto, and motor carrier are each forms of commercial auto.

Business automobiles are cars, pick-ups, small trucks, large trucks, dump trucks, even ambulances can be on the fleet list. Business automobile is for standard usage owned vehicles for businesses. Garage forms are used for public repair shops, dealerships, attended parking lots, any other situation where the general public might drive the business vehicle or you have care, custody or control over other people’s vehicles. The risk is different from business auto because either the cars or drivers do not belong to the same organization. Garage liability also covers towing other vehicles. The garage form, simply stated, anticipates the owner of the vehicle and the operator will be different people on a regular basis, as part of the business.

Motor carrier forms anticipate different ownership of either the power unit or the trailer it hauls. The nature of long haul trucking is independent contractors “owner operators” hook to other business’ trailers and move them from one spot to another.

Motor carrier coverage is designed to cover the nuances of the independent operator system. Long-haul trucking has different exposures than the average salesman’s vehicle, and needs different coverage.

Of course, these commercial forms can confuse. Please call us today to assure you are covered properly. We appreciate your business.

What distinguishes products, completed operations and professional liability?

A product is a good sold to consumers. Think about “things” when you think about products. Products liability covers the business which manufactures the product against injuries, illnesses or property damage caused by the product.

Completed operations are usually contracted building services which have a beginning point and an end point, like installing a heating, ventilation and air conditioning (HVAC) system. Since it is part of a greater system of insulation, walls, floors, ceilings and lights, HVAC is not a stand alone product. The outdoor compressor is. The installation is an operation.

Professional liability insurance covers service oriented business: designers, architects, dentists, doctors, or hair stylists. The key distinction is service versus a product or an installation operation.

So, how does this distinction affect claims negotiations?

Professional liability claims imply poor professionalism which directly affects your reputation. The paid claim implies dereliction of duty or incompetence.

The insurance company’s response to any claim is a business decision – determine the long-term cost of settling and benefit of not paying the claim, pay accordingly. Your reputation does not fit into this decision matrix.

The buying public saw this decision as a conflict of interest. The insurance company did not have to live with a loss of reputation, the professional did. Now the companies offer this solution:

The professional can veto the claims payment.

If the professional chooses to do so, the insurance company is limited to the agreed upon claim amount as their new maximum limit, including legal and claims costs to that point in time.

An architect, with a $1,000,000 professional liability policy, inspects a property and determines the structure is unsafe for renovation. The contractor talks the owner into going forward anyway. The building collapses. The owner sues the architect for “allowing” the contractor to start work before the structural issues are addressed. The insurance company offers a settlement of $100,000 after spending $25,000 on legal fees.

The architect can either endorse the settlement and pay the client or he can refuse, but now his coverage limit drops to $125,000 inclusive of legal fees. It is a much more difficult reputation decision than a business decision.

In 1999, a California plumbing company hired a man who had once been convicted of domestic violence against his ex-wife. In 2003, the man made a house call that sparked a friendship with the woman living there, a relationship that eventually grew romantic. That same year, the plumbing company fired him for a variety of offenses, including drug and alcohol use and alleged physical threats against a co-worker. Two years later, the woman he was with ended the relationship and sought a restraining order against him. He responded by shooting her to death, a crime for which he was convicted.

The victim’s daughter sued the plumbing company, alleging that it was negligent in hiring the man. Although that suit was unsuccessful, the case illustrates the vulnerability businesses have to claims of injury caused by their employees. Courts may find an employer guilty of negligent hiring if all of the following factors are present in the case:

•  When the employer hired the person, it knew or reasonably should have known that he was unfit for the job and dangerous. For example, if an accounting firm knowingly hired a person who has served time in prison for embezzlement, a client who suffered a theft loss because of him could plausibly claim that the employer should have known that he was unfit for the job.

• The employer should have foreseen that the employee would harm someone. The accounting firm should have anticipated that a convicted embezzler left in charge of clients’ assets would feel tempted to pocket some of them. In the California case, the victim’s daughter argued that the plumbing company should have foreseen that its employee could injure or kill a female customer. The court rejected that argument, saying that no reasonable person could foresee that the man would turn violent two years after being fired.

•  The employer’s act caused the victim’s injury or harm. A client of the accounting firm could argue that, if the firm had not hired the convicted embezzler, he would still have $1 million in the bank. The California court said that the plumbing company’s act of hiring the woman’s killer did not cause her death because the relationship developed outside of his work duties and did not turn into romance until after the company fired him.

There are two ways businesses can obtain Liability insurance to protect themselves against claims like these. In cases of bodily injury or property damage, the Commercial General Liability insurance policy might provide coverage. Businesses should review their policies carefully with an insurance agent, however, because some policies might contain endorsements that remove coverage for liability resulting from employment practices. Also, the CGL policy would not cover a loss such as the embezzlement claim against the accounting firm because there is no bodily injury or property damage. Employee Dishonesty insurance might cover incidents such as this. Also, some Employment Practices Liability insurance policies might provide coverage, but they must have special endorsements adding coverage for liability to non-employees. Again, businesses should work with their insurance agents to verify that they have the proper coverage.

Insurance is no substitute for an employer doing a thorough background check on job applicants before hiring them. Taking steps to reduce the likelihood of a negligent hiring claim will save the business costs that insurance doesn’t cover, such as those arising from poor workplace morale, harm to the business’s reputation, and difficulty attracting skilled employees. A new employee is a significant investment for any business; making careful hiring decisions will save it long-term trouble and expense.

Product Liability Insurance helps protect your company from damages for losses related to manufacturing or selling products or other goods.

These claims can, and do, put businesses out of business – just ask the officers of any asbestos manufacturer.

Companies are vulnerable to three types of products claims

1. Manufacturing or production flaws that create an unsafe defect in the product. For an example, just recall the recent claims against Chinese manufacturers for using dangerous chemicals in their products.
2. Design defects that make the product inherently unsafe. (The series of lawsuits against Toyota vehicles for defective acceleration controls during the past two years comes to mind.)
3. Inadequate warnings or instructions, such as failing to label a product properly or advise consumers about potential risks. A famous example is the McDonald’s “hot coffee case.”

Damages can include medical costs, compensatory damages, economic damages, and (in some instances) attorney fees and costs, as well as any punitive damages. Some sellers and retailers choose not to buy Product Liability Insurance because they don’t actually “manufacture” anything. However, most states follow the “stream of commerce” model of liability, meaning that if your company sells a product, you can be held liable for damages to the end user. “Business Owners” and Commercial General Liability policies usually include some type of Product Liability Coverage (Sometimes known as Product/Completed Operations Insurance).

Premiums are based upon the type of product and sales volume. If you try to reduce premiums by underreporting sales or insuring only a percentage of your sales, you’ll probably face a hefty “underinsurance” penalty. Make sure to identify your products properly, too. For example; if you supply stepstools, you don’t want them categorized as ladders, which have a higher premium because of their greater risk potential.

Most business owners would agree that it’s important to maintain insurance to protect business assets. When they think about insurance, business owners generally consider protection against hazards such as fire, flood or theft at their company sites. This is obviously an important protection to have. However, there are other types of hazards that may not be quite as high on the list, but protection could be every bit as important to offset significant financial losses. Here are five examples that underscore the need for comprehensive business insurance protection:

Company vehicle contents: If you operate a business with employees on the road making service calls to customers, chances are there is valuable equipment contained in the company vehicles. But a typical auto insurance policy would probably not cover the contents of a company vehicle if that valuable equipment is lost or stolen.

Tenant property improvement insurance: Do you rent space to conduct your business? Have you built out the interior of your space or made improvements to accommodate your business needs? If so, you probably made a considerable investment in the improvements. But many property insurance policies don’t include the value of the improvements made by a tenant to the existing structure. If you’ve invested in improvements, it’s worth taking a look at securing coverage to protect it.

Home-based business equipment: More and more people are working at home at least part of the time, even if they maintain an office or site elsewhere. Most don’t have insurance on the business equipment they keep at home; many assume their homeowner’s insurance would cover it. However, homeowner’s insurance generally does not cover business equipment. If you have expensive business equipment at home, you may want to consider purchasing additional protection.

Business interruption insurance: Remember the series of hurricanes that hit Florida? The wild fires that damaged cities and towns in California? The flooding that disrupted life in the Midwest? In addition to the effect that disasters have on individuals, they can bring businesses to a standstill for weeks or even months. Business interruption insurance can provide a way to get back on your feet.

Key person insurance: In many companies, the knowledge and skills of a single person or a top few are absolutely essential to the enterprise’s success. Key person insurance can help a company recover if an essential employee dies or becomes disabled for a lengthy time. The coverage can provide needed funds that allow the company to continue operating during a search for a successor or until the key employee returns.

As you can see, there are many hazards businesses face that aren’t covered under a typical insurance policy. However, you can get extra protection with the types of coverage outlined here. Since you invest so much time, money and effort into your business, it pays to make sure you have the protection you need.

By the beginning of 2011, the social networking Website Facebook had more than 600 million users. An estimated 200 million people use micro-blogging service Twitter. The business networking site LinkedIn has reported that it has more than 100 million members. In addition, the Internet hosts millions of blogs and tens of thousands of podcasts. These sites and media, popularly known as “social media,” have opened up new ways for people and businesses to communicate with each other. As the numbers show, they have become extremely popular. Consequently, businesses are increasingly using social media to reach current and potential customers.

However, use of these services presents risks together with the potential benefits. For example:

• Employees making posts on these sites might make inaccurate statements, particularly when not all the relevant facts of a developing situation are known.
• They might inadvertently release confidential information.
• They might make statements that embarrass the company, such as negative remarks about racial or ethnic groups.
• They might make statements that violate a person’s privacy.
• Disparaging statements might provoke others to sue the company for libel. For example, if an employee of a restaurant posts on Twitter that a competitor’s stew looks and tastes like cheap dog food, the competitor might sue.
• Blog posts that offer advice might expose the employer to lawsuits if others take the advice and get undesirable results.
• Disgruntled customers, employees or competitors might post disparaging comments about the company.
• Any of these situations can harm the company’s reputation.

The company’s General Liability insurance policy might not pay for the costs of defending against these claims or paying settlements. For example, the insurance will not cover losses resulting from:

• An injury caused by or at the direction of an employee when he knew that the action would violate a person’s right to privacy.
• An injury caused by or at the direction of an employee when he knew that a statement was false.
• Claims that the business’s products or services do not live up to statements about their quality.
• Injury arising out of statements made on Internet chat rooms or bulletin boards the business owns or over which it has control.
• Unauthorized use of someone’s name or product in a manner that misleads that company’s potential customers.

In addition, the insurance only covers liability for certain types of injuries that are not bodily injuries. It will not cover a lawsuit filed by someone who suffered financially after relying on advice on the company’s blog. To reduce the chance that an uninsured loss will result from the use of social media, businesses should consider:

• Written procedures for employee use of social media, including:
  • Who may post on the company’s behalf.
  • Definitions of acceptable and unacceptable behavior.
  • Employees’ personal sites should make clear that that the employees are not speaking on behalf of the company.
  • When a discussion should move offline and into the company’s regular workflow (for example, when a customer has a specific complaint that should be handled out of public view).
  • The consequences of non-compliance.
• Company policies regarding employees’ ability to link to the company’s Website on their personal social media pages. The policy should also address employees’ use of the company name, logo, or other advertising on their sites.
• Company policies on the content that employees may post on blogs, both those of the company and others blogs where the employees post on the company’s behalf.
• Purchasing special insurance to fill in gaps left by the General Liability coverage.

Social media offers exciting new opportunities for businesses to build relationships with customers. However, they need to approach it with care and proper planning if they want to reduce the risks.

Remember when you were in school and they’d run fire drills? Everyone would walk out of the classroom single-file, alarms blaring over the intercom, and then you’d all just stand out in the soccer field for ten, twenty minutes while the teachers counted heads.

Were these drills really of any use? Did they ever save any lives? Or were they just a way to break up the monotony of schoolwork and let the teachers step outside for a smoke?

Well, hiding under your desk like a Cold War kid isn’t going to shield you from an atomic blast, but believe it or not, safety drilling really can help, when you’re practicing a reasonable response to a realistic threat. Here’s what you need to know about safety drills.

• It’s more of a troubleshoot than a practice run. The truth is that a drill isn’t really about learning how to get out of the building safely. Most of us already know how to get up and walk out of a door. It’s more of a dry-run evacuation to find out where you might find a jammed escape door or a faulty smoke alarm on your way out the building. Run enough drills and you may be able to bring those issues down to zero, as these numbers from Stanford Law show.
• What you learn during a safety drill might help other people run safer workplaces. The concept of the fire drill started with a tragic fire at Chicago’s Our Lady of the Angels School in 1958. The fire department was called, but given the wrong address. People were trapped inside, unable to find a nearby exit. The lessons learned through this tragedy were used to completely reinvent fire safety across the country, and the tradition has continued, using safety drills to trouble shoot and change regulation across the board.
• We’re still learning. The fear of school shootings has led many to wonder if it’s a good idea to sound an alarm and get everyone in one place where a shooter might have easier access. So far, nobody has a perfect answer to this question.

It has been said that the wheels of bureaucracy turn slowly in order to prevent overzealous government officials from passing any crazy law they want. It can be frustrating, but our government has those checks and balances in place to ensure that lawmakers have time for extensive deliberation before putting any plan into action.