Valuable Papers Coverage and Recovering Damaged Documents

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Unlike the rest of the restoration industry, the document recovery and reclamation segment lacks standardization. There is no universal system like Exactimate or Institute of Inspection, Cleaning and Restoration (IIRC) certification. The processes for treating damaged documents, and the rates charged for those services vary greatly. However, the best document recovery contractors do follow very specific guidelines and practices.

A standard letter/legal sized box can absorb many gallons of water, reducing the effectiveness of dehumidification. Therefore, damaged documents need to be removed quickly and blast frozen to prevent ink bleeding and microbial growth. The documents must then be dried, usually by vacuum freeze drying or desiccant drying.  Still, documents may need secondary care, such as removing debris, mold or soot from the surface.

Though a client’s Property policy may not include coverage for reproduction or imaging services, a Valuable Papers endorsement can provide the necessary protection.

Source: Rob Schimdt, Insurance Journal-National Region, April 4, 2011.

Even Intermediate Indemnity / Hold Harmless Forms May Be Unenforceable

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Hold Harmless and indemnification provisions are commonly found in contracts involving lease of premises, construction, and the sale of a product. These provisions are attempts to contractually alter the contribution or sharing of liability between two or more tortfeasors under the law of negligence.

The most common types of hold harmless / indemnification provisions are as follows:

Limited — requires each party to be responsible for its own negligence. This is the most equitable form.

Intermediate — requires the first party to be responsible for all the negligence of both parties if the first party is either solely or partially negligent (could be as little as 1%). This is the next most equitable form.

Broad — requires one party to accept responsibility for all negligence even when the other party is solely negligent. This is the least equitable form.

The most controversial issue is whether a party is entitled to be indemnified when it is negligent in whole or in part.

Despite the intentions of the drafter, these provisions may not be enforceable by the courts due to poor drafting, a statute prohibiting their use under certain situations, failure to include specific language as required by statute, or case law.

In the context of construction contracts, courts have taken the following differing positions:

* An agreement to indemnify a party for its own negligence must clearly or unequivocally evidence such intent by both parties

* A party can’t be indemnified if it was partially negligent

* A party can’t be indemnified for its sole negligence

* The entire provision may be stricken if any part of it is unenforceable

* Only the unenforceable provision in the indemnification will be stricken

In the context of commercial lease agreements, courts have taken the following differing positions:

* Explicit language may be required to show that both parties (tenant and landlord) intended for the landlord to be indemnified when the landlord was partially negligent.

* Most states allow for the landlord to be indemnified when partially negligent.

* Some states have statutes that prohibit the landlord being indemnified for its sole negligence.

* The provision “to the fullest extent permitted by law” may serve to save the enforceable parts of such provision but such a result is not guaranteed.

For the purposes of insurance coverage, the type of liability that is triggered by indemnification and hold harmless provisions is know as contractual liability which may be covered under a General Liability policy.

Source: Margaret Suuberg, Speaking The Language Of Indemnity, Risk & Insurance Magazine, April 2011

The Liquor Risk And Not For Profits Under General Liability

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I came across a fabulous blog posting by not for profit risk manager, Leslie White of Croydon Consulting, on the thought process as to whether or not the liquor and alcohol functions of not for profit organizations are covered under both the standard General Liability form and in the presence of Liquor Liability Exclusion CG 21 50.

Source:  Are We Liable? Managing The Risks Of Liquor, April 2007

Business Insurance Premiums Continue To Decrease

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“Seven years and running, the soft market shows few signs of loosening its grip on commercial insurance pricing, according to a new industry study.”

“Abundant capacity coupled with diminished demand keeps downward pressure on rates.  As things now stand, insurance buyers can anticipate another year of favorable insurance prices, although catastrophe claims always are a wild card in the pricing cycle.” 

Source:  Insurance Journal, May 3, 2010

Rental Car Insurance Full Of Loopholes

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Insurance agents often advise their commercial clients that it is safest to purchase the collision damage waiver from rental car companies instead of relying on agent provided Hired Auto Physical Damage. The reason is that Hired Auto Physical Damage (which typically costs $250 per year) will only pay the cost to repair the car or the actual cash value in the event that the car is totaled. However, the rental car contracts also make the lessee responsible for the difference between replacement cost and actual cash value in the event the car is totaled, diminution of value in the event the car is repaired, and loss of profits while the damaged vehicle is out of the fleet. None of these additional charges are covered by Hired Auto Physical Damage. Thus, the common recommendation it is safest to buy the collision damage waiver from the rental company at a cost ranging from $12 to $28 per day.

 However, this may not always be the best advice upon closer examination of the terms of the collision damage waiver coverage. To follow are common loopholes in these contracts:

 * Authorized Drivers — Coverage is only extended to the authorized driver who signed the rental agreement. Other drivers must be added for an additional charge per day that can significantly drive up the cost of the coverage. If an unauthorized driver is involved in an accident, the collision damage waiver typically will be voided.

 * Under The Influence — Coverage can be voided if he driver was “under the influence of intoxicants, drugs or any other substance known to impair driving ability”. This wording is much more severe than being above the legal blood alcohol levels for DUI. “Under the influence” could mean one beer or drink or the use of certain sinus headache medicines.

 * Violation Of Any Traffic Law — Coverage could be voided if any traffic law was violated during the accident.

 * Driving On Unpaved Roads

* Leaving Keys In The Car And Resulting Theft

 Based on these potential problems, it would seem that the safest course of action would be to purchase Non Owned And Hired Auto Liability and Hired Auto Physical Damage from your own insurance agent plus the collision damage waiver from the rental car company.

Source: CIC Resources, Winter 2009; Car Rental Contracts And Conundrums; Bernie Neff

Mythology, Legends, and Lies In Insurance (Part Two)

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Follow the link below for another great article that addresses many of the common and dangerous myths that policyholders believe.  Listed below are some more myths:

 “It’s better to pay small liability claims out-of-pocket rather than report them to the insurance carrier.”

 “Statute does not require me to have workers’ compensation, thus you (a higher tier contractor) can’t require it either.”

 “I pay him with a 1099.  He’s an independent contractor, not an employee.”

 “If a workers’ compensation injury is less than a certain amount, I do not have to report it to the insurance company.”

 “Flood insurance is only for those in ‘flood zones.’”

  More Insurance Lies Clients Believe 

 Source: Chris Boggs, Insurance Journal, August 2009

Mythology, Legends, and Lies In Insurance (Part One)

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Follow the link below for a great article that addresses many of the common and dangerous myths that are believed and passed on by policyholders, “experts” and even insurance professionals.  Here are a few of those myths:

 “If I don’t have anything, they can’t get blood out of a turnip.”

 “There is no need to purchase liability limits higher than my net worth.”

 “That’s why I buy insurance (no need to implement risk management or loss controls).”

 “Corporate status will protect me from liability, I’ll just declare bankruptcy and shut down.”

 “Insurance is all the same.”

Insurance Lies Clients Believe And Pass On To Others

Source: Chris Boggs, Insurance Journal, August 2009

Fraud Opportunities Rise

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“Does a bad economy increase crime?  Analysts have debated that question for years, according to Mike McKee, senior special agent for the National Insurance Crime Bureau.  While it’s too soon for statistics to confirm whether recent events like the mortgage meltdown and an increase in unemployment truly lead consumers to commit more crimes, McKee said at least anecdotally the economic recession is affecting insurance fraud.”

 

Different types of fraud and the opportunity to commit fraud has taken a toll on all lines of the insurance business according to fraud bureaus. 

 

Commercial insurance is being hit with the rise in theft of cargo as electronics and other equipment are taken right off the trucks.  Circuit breakers are being ripped out and copper wiring is increasingly stolen from commercial buildings.  

 

An increase in vehicle giveups has been reported when owners dispose of a vehicle and then claim that their vehicle has been stolen.  Then the owner collects the insurance money and often makes a profit.  Employees of car dealerships are sometimes involved in the theft and/or burning of the vehicle.  And in turn, the owner may purchase a new vehicle as payoff for the help of the dealership employee. 

 

Workers’ Compensation and health insurance carriers have noticed that people are staying out of work longer and claiming more injuries.  Instead of a hurt arm, now it is an arm and a leg, or back and a shoulder.  The most attention-grabbing trend is employees extending their claim.   In one case, for example, an employee injured his toe, which led to not being able to sleep, then led to sexual dysfunction.   As a result, he had to have sleep and sex therapy along with treatment for the injured toe. 

 

The loss or disappearance of classic cars and jewelry has risen.  Arson of both homes and vehicles has also increased.  Consumers are burning their homes hoping for an insurance bailout.  Others are claiming smoke and ash cleanup from wildfires to get insurance payoffs. 

 

Another major inclination is in medical identity theft and provider fraud.  In this situation, a person’s identity along with their medical and insurance information is stolen and fraudulent bills are sent to the insurance company.  Then the insurance company pays the bills to a fraudulent company, while the true insured and his insurance company are unaware that they are victims of a scam.

 

And unfortunately, there is a rise in insurance agents who are committing premium theft and diversion.  They divert premium checks that are intended for the insurance companies and embezzle them to use for personal use while assuring the insured they are covered. 

 

Source:    Insurance Journal, April 2009, Patricia-Anne Tom http://www.insurancejournal.com/news/national/2009/04/14/99585.htm

McDonalds Workers’ Compensation Claim Denial Justified

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According to a Workers’ Compensation expert, the recent denial of a claim by McDonald’s insurance carrier is justified upon analysis of the law despite public outcry.

 

A McDonald’s employee was shot in Little Rock, AR in 2008 after expelling a man from the store who was battering a customer. The man who was expelled returned with a gun and shot the employee who attempted to prevent his re entry into the store.

 

The “Course And Scope” rule requires the following three elements before a claim can be compensable:

 

1) The injury must “arise out of” employment.

 

2) The injury must be in “the course of employment”.

 

3) The injury must arise out of the “scope of employment”.

 

In the case at hand, 3) was not met according to the insurance carrier and the claim was denied. This case will likely go to trial.

 

Upon first glance, the outcome does not seem fair. However, an insurance policy such as Worker’ Compensation is a contract and the contract dictates the terms of coverage based on the language and case law.

 

See Full Story: Chris Boggs, Market Scout, http://www.mynewmarkets.com/article_view.php?id=99219

Health Care Reform To Impact Profitability Of Small Business

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According to a recent NFIB article, likely health care reform will take one of five different directions and the impact to small business employers will be impacted differently by each.

 

The five most common ways discussed to structure health care reform are as follows:

 

1) Employer Mandate – Requires employers to a) provide a fixed percentage of employee health care costs, b) a fixed percentage of payroll to go towards the purchase of health insurance, or c) “pay or play” option where employers who don’t contribute must pay a special tax.

 

2) Single Payer System – A single payer such as the federal government would tax both employers and individuals in return for providing health care. This is the type of system in Canada.

 

3) Exchange / Connector – A public / private partnership where subsidies are offered for low income individuals to purchase discounted benefits through a forced consolidation of individual and small group markets.

 

4) Individual Mandate – An individual requirement to obtain health insurance either through their employer or on their own through government run plans.

 

5) Tax Equality – Inequalities would be ironed out of the tax system which currently favors employer provided insurance where the employer gets to deduct 100% of costs and the employees pay their portion with before tax dollars. However, individuals currently purchasing insurance on their own gain no tax advantages. In addition, the self employed are penalized by paying for their insurance with after tax dollars as they can’t deduct and pay a 15.3% payroll tax on their premiums.

 

The debate on this crucial issue will need to be watched closely as the consequences would be severe in terms of tax burdens and loss of jobs due to many small businesses becoming uncompetitive.

 

Source: NFIB, My Business, April/May 2009,

http://www.mybusinessmag.com/fullstory.php3?sid=1964