In today’s increasingly complex and litigious business environment, your corporate officers and board of directors – the brains of the company – need protection against personal financial liability arising from their corporate activities.
These people are highly vulnerable to lawsuits by investors, employees, vendors, competitors, customers, regulators and others, alleging misconduct for a wide variety of activities, such as:
- Providing inaccurate or unlawful advice.
- Fraud and malfeasance.
- Misrepresentation of company assets.
- Failure to comply with workplace laws.
- Poor hiring decisions. (A Towers Perrin survey found that 40% of all reported D&O claims involved flawed employment practices.)
Directors & Officers Liability (D&O) Insurance will pick up the tab for legal fees, settlements, and other expenses from such litigation. This gives your officers and directors financial peace of mind in carrying out their corporate activities, and provides a valuable incentive for attracting, and keeping quality people who can help grow your business.
There’s a widespread need for this coverage. One in six company executives (17%) surveyed by Inc. Magazine believe that their business will experience a D&O-related loss within the next year.
These policies usually offer two types of coverage known as “sides.” Side A protects directors and officers from personal financial liability if the company is unable to indemnify them. (For example, during a bankruptcy or dissolution.) Side B coverage reimburses the company if it indemnifies directors and officers. (For example, when shareholders file suit against them.) A third coverage – sometimes known as Side C – comes into play when both the company and individual officers and directors face lawsuits.
To learn more about how D&O Insurance can help minimize the financial risks of litigation for your company and your top people, feel free to get in touch with us at any time.
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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
- 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.
- 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.)
- 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.
For more information, feel free to get in touch with our Business Insurance professionals.
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Business Property insurance protects your building and property against loss or damage from theft, accident, and a variety of other causes. The policy will pay for replacing or repairing covered property or providing compensation for irreplaceable items.
If you don’t own your building you’ll still need to cover its contents: fixtures, furniture, office equipment, inventory and the supplies stored at your location or off-site.
The premium will depend on whether you choose to insure the replacement cost or actual cash value (ACV) of the property. Most Business Property coverage is written on a replacement-cost basis, which will reimburse you for replacing lost or stolen goods with new items at current market prices. This feature can help your business recover from the loss or theft quickly. (If you’re leasing equipment, the leaseholder might require you to cover it at replacement value.) You’ll need to revise your coverage when you acquire or dispose of property. Be sure to update replacement values over time; a computer worth $1,000 two years ago might cost half that today – on the other hand, the price of a desk might well increase.
Actual cash value coverage, which generally costs less, provides reimbursement for the depreciated value of covered property. If your business owns its own equipment, which you could replace easily with comparable goods at depreciated market value, the lower premium of an ACV policy might make it a more cost-effective choice.
As always, our agency’s Business Insurance specialists stand ready to offer their advice on choosing the coverage that’s best for you. Just give us a call.
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Business Interruption (BI) insurance makes sense. Consider Allison Dorst, a New Jersey resident who operates three e-commerce web sites selling sportswear. Last fall, Superstorm Sandy brought a prolonged power failure that shut down Dorst’s customer-service lines, causing sales to evaporate. She’ll also see lower sales because of a month-long delay in the delivery of next season’s styles. Fortunately, her Business Interruption coverage will reimburse the profits lost because of this lost revenue.
Although most middle-market business owners and managers understand the need for BI, they don’t always have the information they need to choose the right coverage. Some companies don’t have enough insurance to remain in business after they suffer a major loss, while other businesses might be buying more coverage than they need. When it comes time to renew your BI insurance, be sure to take a close look at the insured or reported values for the policy, as well as on the various coverage extensions that apply to your business, based on its operations. It also makes sense to consider additional coverages such as:
- Contingent Business Interruption
- Claim preparation fees
- Extended period of indemnity
- Expediting expense
- Service interruption/power outage, including overhead transmission and off-premises lines
- Extra expenses
- Ordinary payroll coverage
- Selling price of finished goods inventory
- Ingress/egress
- Loss of attraction
- Civil authority
- Sue and labor
We’d be happy to offer our advice, free of charge, in selecting the amount and types of coverage that can minimize your financial risk and keep you in business after disaster strikes. Feel free to get in touch with us at any time.
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By now, employers should all realize and understand that sexual harassment is illegal. However, what employers might not be aware of is that the U.S. Supreme Court issued two rulings in June of 1998 that expanded what is termed sexual harassment; expanded the responsibility that employers have to provide a work environment that’s non-hostile; and did away with harassed employees having to prove that their company holds some responsibility or that their career suffered from lack of promotion, firing, demotion, or such. Employers are now directly responsible for employee behavior, thereby giving harassed employees more recourse in bringing about legal actions against employers. Work-related harassment and discrimination cases have been climbing steadily since the Civil Rights Act of 1991 allowed for trial by jury, compensatory damages, and punitive damages in legal cases involving discrimination. In fact, according to the Equal Employment Opportunity Commission, the amount of annual employment harassment and discrimination cases being filed grew by more than 13% between 1997 and 2009.
Any employer that’s ever been involved in a sexual harassment suit can attest that the cost to settle or defend a sexual harassment lawsuit can be jaw dropping. The average award for damages in these types of lawsuits is around $650,000, and that isn’t even including the secondary cost from workplace disruption, bad publicity, and those involved in the suit being absent from work.
What Constitutes Sexual Harassment? The first step in protection is understanding what is defined as sexual harassment. State and federal law prohibits behavior that involves an employee in authority basing professional expectations or decisions regarding a subordinate employee being willing or unwilling to exchange sexual acts. The following are examples of such behavior:
- Altering expectations of job performance when a subordinate repeatedly refuses advances for a date or sexual encounter.
- A superior demanding sexual acts in order for a subordinate to receive a raise or promotion.
- Disciplinary action, including termination, of a subordinate that refuses sexual advances or ends an existing romantic relationship.
However, sexual harassment doesn’t always involve a subordinate/authority figure relationship. An offender can be anyone from a coworker to a customer or business vendor. The offender can be male or female, as can the victim. Furthermore, the victim doesn’t even need to be the employee actually harassed. Anyone that’s affected by the harassing or offensive behavior can be termed a victim; for example, an employee that overhears two other employees discussing a taboo subject. The two employees directly involved might not be offended, but if the overhearing employee is offended, then it can constitute sexual harassment.
Verbal, visual, physical, or written behavior that causes another employee to view the work environment as hostile, are unwanted, or focus on the sexuality or gender of another person may constitute as sexual harassment. Specific examples of such would be teasing, suggestive objects or pictures being displayed, and repetitively requesting sexual acts or dates verbally or in writing.
Protection with Employment Practices Liability Insurance (EPLI). After knowing what constitutes sexual harassment, businesses can further financially protect themselves with Employment Practices Liability insurance (EPLI). This is an insurance to protect employers when an employee makes the claim that their legal rights have been violated. Although policies vary, EPLI generally doesn’t cover criminal or civil penalties and punitive damages. EPLI does generally cover settlements, judgments, and incurred legal costs arising from an array of incidences – wrongful termination, employment contract breaches, employment and promotion failures, wrongful disciplinary actions, wrongful emotional distress infliction, negligent employee evaluations, employee benefit plan mismanagement, discrimination, and sexual harassment.
Coverage is specific. So, before purchasing a policy, decide who should be covered. For example, should full and part-time employees, contracted persons, supervisors, department heads, subsidiaries, company divisions, and so forth be covered or not? One other note about EPLI is that it’s mandatory for employers to report incidents within a reasonable amount of time. Some policies might feature an ERP (extended reporting period) or prior acts. The length, cost, and availability vary by carrier.
Purchasing EPLI has been challenging for small companies in the past. However, the 2004 rate increases have somewhat plateaued. Some rates have even decreased. Keep in mind that EPLI cost is figured based on the business type, employee numbers, and past lawsuits associated with the business.
Prevention of Harassment Lawsuits. Prevention is the cornerstone in decreasing the risk of a sexual harassment lawsuit. Prevention steps include the following key elements:
- If the business has EPLI, any incident should be reported immediately.
- Create, communicate, and enforce a zero-tolerance policy for workplace sexual harassment.
- Have an effective harassment complaint process in place and take immediate, consistent, and appropriate action when a complaint is made.
- Thoroughly document all complaints and the following investigation and actions.
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The more heavily your business relies on electronic technology, the greater your vulnerability to cybercriminals.
Criminal activity conducted through the Internet impacts businesses of all sizes. One study found that companies with 100 or fewer employees accounted for 72% of data breaches worldwide.
Today’s cybercrimes put your grandmothers’ spam email list to shame. According to a nationwide study by Ponemon Institute, the median annual cost of cybercrime for a large company in 2011 came to $5.9 million.
Cybercrime covers a variety of activities, from malicious codes and hacks in which private client or company information is made public or stolen, to disruption of normal operations. Perpetrators include rogue employees, “hacktivists” seeking to make a political statement, or third parties seeking financial gain.
Businesses, such as coffee shops, that allow customers on their premises to use Wi-Fi face unique risks. In one case, a Hollywood producer sued the owner of a restaurant offering Wi-Fi access after a customer used the network to download a film for bootlegging.
To help protect your business against potential losses from cybercrime, here are some recommendations:
- Review your specific exposures. For example, if you allow people outside the company to use your WiFi, this can increase your exposure.
- Focus on the human element in data security by offering employees effective training and specific guidelines.
- Re-evaluate your guidelines frequently.
- Evaluate the potential risks of adopting new technology.
Last, but not least, make sure that you carry adequate Cyber Liability Insurance.
Our agency would be happy to tailor cost-effective coverage to your needs, and help you develop and implement a comprehensive program for managing your exposure to cybercrime.
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