Business Protection Bulletin

Losses while loading and unloading vehicles, whether it is property of others in your care, custody and control or your own, can be a tangled web of policy language.

The business automobile policy anticipates the risk of loading and unloading vehicles by manpower. Goods delivered to a specific location, whether that location is a loading dock or a fourth floor apartment bedroom, is covered for liability under business automobile as long as the goods are delivered by non-motorized means – think forklifts.

So if your delivery professional dents a car in the parking lot or a hallway wall in the building while using a hand truck to deliver, the business automobile policy pays for the damage. Unloading is defined by the final destination, not just literally off the vehicle.

Delivery by motorized device is subject to general liability rules. Loading a truck on a loading dock using a pallet jack would be subject to business automobile; using a fork lift, general liability would cover damages.

Damage to your own property is subject to property coverage, specifically inland marine during transportation. Property belonging to other people while in your care, custody or control is treated exactly the same way. You need property coverage to pay for damages while in transport, including loading and unloading.

General liability and business automobile policies assure there is no double coverage by defining through exclusions which policy covers which event. Even if you use your employees vehicles in business, buy business automobile non-owned coverage to protect the business.

Ten years ago, the insurance industry adopted new provisions to differentiate mobile equipment and automobiles. These technical definitions exceed the complexity limits of this discussion, but if you have mobile equipment that ever enters a public roadway, talk to your agent or insurance professional.

Remember: manpower is business automobile, motorized loading and unloading is general liability. The cargo must be covered by a property form, probably inland marine.

The personal automobile policy does not anticipate primary business use of a pick-up truck. Does it allow infrequent use of pick-ups to haul business supplies or furnishings? Arguably yes for every form of personal automobile. Does it anticipate a pick-up truck wrapped in corporate logos and phone numbers? No.

As a business owner, you are better off using a commercial insurance form to cover your personal trucks if you use them in business regularly.

But what about your employees using theirs?

Typically, and this is a point of debate among insurance professionals, personal pick-up trucks have a business use exclusion built into the policy. The test is whether the truck is used primarily or incidentally for business use. So if the employee’s insurance doesn’t cover a claim, who gets sued next?

The company should buy non-owned automobile coverage for this purpose. Non-owned coverage protects the business from lawsuits brought by injured parties involved in accidents with employee, rental, or borrowed vehicles used in the course of business.

What happens if the business owner borrows and drives an employee’s pick-up for business purposes?

If neither personal policy covers business use of trucks, where is the coverage for the business owner himself?

Non-owned auto coverage is a commercial automobile policy extension for the business, not the business owner personally. The business owner should endorse the commercial policy with a “Drive other cars” endorsement. This endorsement extends the commercial policy to include personal coverage for designated drivers listed while driving other vehicles on behalf of the business.

Companies make a distinction between commuting to work or school or just pleasure. This distinction is not because they believe all you do is commute back and forth; it’s because that limited use is higher risk. Companies may list a pick-up truck for business use on a personal policy, but they anticipate limited use. The debate among risk managers is where this line is drawn.

Rather than accept that risk, place all business use trucks on a commercial policy. Add to that policy a non-owned and drive other cars endorsement to be personally protected and to properly protect your business.

Sounds like a simple question, right? It’s not. Yet, it’s fundamental to insuring your business.

Consider a software developer. If they develop an application or program that widely applies and it’s sold to the general public, it’s a product. If it’s developed for a unique user, it’s a service.

The difference from an insurance perspective is whether you need products liability or professional liability.

Professional liability implies a consultation, advice, or design like medicine or law or architecture. But how about hair styling, data management or decorating. Interior decorators earn commissions on furnishings, but isn’t it the design people are buying?

When you review your company operations, think about the amount of design that goes into your finished product, and how specific it is to one client. Every product or completed operation requires some design. The insurance professional can help determine when a professional liability exposure occurs.

Let’s look at a construction management company. They value engineer a project, review plans, manage time-lines, draw and review plan specifications and coordinate sub-contractors. All of these duties are service in nature and are covered by professional liability.

Site supervision is a service. Now the site supervisor picks up a hammer and helps finish framing a concrete form. The super just crossed into completed operations, a general liability coverage.

Professional liability suggests a more personal element – professional reputation. Products and completed operations (general liability) resolves claims by assessing damages to people or property as a result of defective products or finished processes. The insurance company acts on the company behalf to settle the claims.

Professional liability settles disputes similarly except the professional can deny the claim theirself. If they choose this path, whatever the insurance company could have closed the case for becomes the maximum limit. Obviously, this course of action is risky.

Legal and claims costs are separate and in addition to the general liability limit but cost toward the professional liability limit. If you provide a service, keep those legal costs in mind when selecting a limit of liability. Professional liability requires higher limits.

Once your goods have left your store, who protects the value of the product while being shipped, stored, loaded and unloaded, and delivered?

Shippers have very limited liability for the packages they deliver. Trucking lines may have limits of one dollar per pound; ships as low as five hundred dollars per container. Your property policy usually lists transportation limits as an extension of coverage of a few thousand dollars.

Obviously, inventory, machinery or products can far exceed these limits in value.

The most inclusive way to cover your property in transit is with a cargo policy which covers loading, transportation, unloading for storage or final destination, storage, loading, transport (on land or sea), unloading and delivery.

Yes, each of these steps can be an exclusion, and often are, in some policy forms.

These policies go back to when shipping by water was the only choice. Ocean Marine coverage begins and ends at the dock with some extensions possible for limited land transport. Inland Marine coverage technically ends or begins at the dock.

Loading and unloading cargo was a dangerous and damaging enterprise, so it was excluded from both forms.

Ships crossing oceans did not have the advantages of weather radar and were at the whims of the winds. When storms were encountered, the ship often lightened its load by throwing cargo overboard. Marine law limited the shippers liability because the act of jettison saved the ship and the other cargo. As a fellow customer, though, your liability to pay your share of the losses was essentially limitless.

The modern cargo policy acknowledges the passage of time and the development of containerized storage and transport. The policy is designed to cover the chain of events that is shipping, including the liability of jettison.

Review your supply chain and customer shipping options. Ask your insurance professional to help design a cargo policy that covers these possibilities.

Your maintenance schedule should include annual fire extinguisher checks and replacements. Since you check your smoke detectors monthly, you can split the building into four fire zones and service one zone per quarter if budgeting is an issue.

Contract a professional service to check and recharge fire extinguishers. Currently, the market for new units is very low and replacement can be very cost effective.

Obviously, you want to place fire extinguishers near and handy to likely ignition sources, for example cooking tops or welding areas. Here’s a few more tips to make your work space safer:

1. Think in terms of space. A fire extinguisher every 40 feet means that each extinguisher covers about one thousand two hundred square feet of space and you never need to move more than twenty feet to get one. Most codes require no more than either fifty or seventy five feet travel distance.

2. Fire extinguishers have two main uses. Either putting out small fires before they spread (trash can fires), or opening a pathway to an exit. The latter reason implies you don’t want to exhaust the supply of extinguishers.

3. Many spaces place fire extinguishers next to exit doors. Use the door instead and get out. Place the fire extinguisher on a wall within ten feet of the door to allow for use on debris blocking the door.

4. Hang arrow signs above the fire extinguishers to locate them easily. There’s no time to search when you need one.

5. Install the extinguishers at chest height for easy handling and lifting. Do not force people to bend to retrieve a fire extinguisher. Build your system for quick and easy response.

6. If you can’t fight the fire with one fire extinguisher, leave the building.

Remember, emergency equipment must be easy to find and in good working order. When you need it, it’s too late for maintenance. And, do yourself a favor, have too many fire extinguishers rather than too few.

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.

Business equipment covers a variety of assets. Word processing, production machinery, air conditioners, boilers, even bulldozers and excavators describe business equipment. So let’s answer this question by going through the different property policies.

1. Contents policy. This coverage, generally found in the property section of your package policy (general liability and property combined), protects you from losses due to covered perils (fire, lightning, smoke, hail, windstorms, civil commotion, and others). Generally, office equipment, laboratory equipment, production equipment or any other device or machinery that stays on location is best covered under contents. The policy is designed for exactly this purpose.

1. Inland Marine. This policy form covers the property value of equipment that moves. For example, construction equipment like backhoes or bulldozers travel to and remain on jobsites. Contents policies limit the value of some types of property off premises; inland marine allows transportation and off-premises usage.

1. Boiler and Machinery. This property coverage has elements of liability as well. Basically, boiler and machinery policies provide an inspection service for equipment to assure it is in good working order. Then, if a boiler breaks down or explodes, the policy covers damage caused to others and mechanical breakage of the boiler.

1. Cargo. This policy covers your property while in transit. For example, if your shipping machinery across the country or an ocean. Contents policies have exclusions and low limits on in-transit goods. The policy does not anticipate this type of risk. Cargo policies do, and they are designed around freight carrier responsibilities in the event of a loss.

Property coverage seems like it’s simple, but many subtle clauses create niche coverage issues. Call us today!

Boiler and Machinery policies provide two major services. Insurance in the form of property coverage for damage to buildings, boilers, machinery and additional liability coverage in the event of an explosion. Second, a valuable inspection service for the covered property, which enables mechanical breakdown coverage to be provided.

This coverage is not available under other insurance policies. In many insurance companies, boiler and machinery has been re-titled equipment breakdown to reflect the more modern application.

Mechanical breakdown insurance provides loss of refrigeration coverage for food spoilage, loss of revenue due to emergency generator malfunction, and extra expenses to keep the operation temperature controlled during machinery outages. Good loss control in these matters begins with avoidance – well running machines.

The inspection service meets requirements of local and state authorities. More importantly, the inspector gives solid loss control advice to avoid the breakdown of machines and boilers at inconvenient times. The inspectors review the system as a redundant check on the owner’s own maintenance program. Losing power, heat, cooling, or ventilation creates production problems for any business.

Boiler and Machinery coverage applies to almost any business. The image of huge steam boilers may come to mind, but refrigeration, modern HVAC systems, or emergency power generators should instead. Think turbines, engines, fans, all the gears and shafts which make them work, and any other mission critical machinery. Think about heat pumps, air conditioners, even elevator equipment.

Ask your professional agent to help compile a list of equipment that may be exposed to mechanical breakdown to the detriment of your operations. It is likely that your company has an exposure that is not being properly addressed. With this coverage, the loss to the equipment is secondary to the consequential loss of income or the extra expense brought on by the mechanical breakdown. Your professional agent can help you design the correct coverage.

Since new legislation is passed affecting employment practices liability yearly, we can only broadly describe areas of concern:

1. Discrimination Claims come in three forms: overt discrimination, disparate treatment, and disparate impact. Overt discrimination is purposeful and observable behavior, like firing all employees of one sex, age limit, or race. Disparate treatment concerns disciplinary actions for the same behavior. Perhaps women are written up if they’re late to work but men are not. The treatment is unequal and prevents moving upwards in the organization. Disparate impacts involves creating rules or conditions that affect one group more than others. For example, the men’s locker room is located within the confines of the plant while the women’s is a quarter mile away; then allowing only five minutes for bathroom breaks, or not allowing people in to change until fifteen minutes before the shift. The more subtle forms of disparate impacts include height and weight limits. For example only hiring people above six-feet tall or below five feet five inches. Certainly the pool of candidates would show sexual preference. Unless there is an excellent reason why height is a factor, this is discrimination. What’s the cost? About $500,000 per settlement.
2. Wrongful Terminations. For cause terminations and strategic layoffs aside, firing employees has become a difficult process for employers. Even in at will states, employers cannot be arbitrary or capricious in firing individuals. Courts have upheld the doctrine that an implied contract of employment exists and must have cause for termination. Document and write-up employee behavior.
3. Sexual Harassment. Unwelcome sexual advances, explicit or implicit, is unlawful discrimination. Disparate treatment and impact cover this form of discrimination too. Interesting in these cases, discomfort, not dismissal is all that is required for sexual harassment to occur. And, neither party involved directly needs to bring the action, just a bystander who objects to the behavior can make a claim. Keep sex out of the workplace.
4. Retaliation Claims. Legitimate actions by an employee are punished with dismissal, wage freeze, or some other retaliatory act.

Other disagreements over such things as overtime wages, improper distribution of email content (if you wouldn’t want to see it on the evening news, don’t send it), or even mass layoffs can start discrimination suits.

Employment Practices Liability is fast becoming a leading cause of claims. Get the right coverage. Contact us today!

Historically, the insurance industry wanted to design a policy for small, typical Main Street businesses. These businesses had some property, maybe their building and stock, and low risk of liability claims. Insurance companies designed the BOP for these businesses whereby the insured bought a package which included property, liability, some crime coverage, and other incidental coverage at one low cost.

From a risk perspective, these Main Street businesses were very similar.

In the modern era of BOPs, many businesses now qualify for specialty industry coverage. Restaurants, small manufacturers, small contractors, and artisans can all qualify for this type of policy.

BOPs cover property similarly to conventional policies. Typical options are extended as part of the package. For example, crime coverage is included in BOPs rather than having to add this coverage on. Investigate the limits of these add-on coverage to be sure they are adequate. We would be happy to discuss the details with you to design a program to meet the specific needs of your business.

Liability coverage follows the general liability format, except again, some extensions of coverage are included. These extensions may have lower liability limits, so again, reveiw these with your insurance professional.

If your business does not own cars or trucks, but you occasionally use your personal auto in your business, consider adding non-owned and hired automobile coverage to your BOP. This coverage pays for your company’s liability while you use your car for your company’s benefit.

Business owners policies began as a one size fits all retail risks insurance form. It has evolved into an important small business, and now not so small business, policy to cover industry typical businesses.

Your business does need to qualify for this coverage. Please call us for a review and suggestions regarding the best fit policy for your business needs.