Matt McClellan

There are more than 17,000 environmental laws and regulations worldwide. How sure are you that your business operations are in compliance?

Environmental insurance has become a hot topic the last several years, mainly because even though most companies have environmental exposures, those risks are excluded from most liability and property policies, creating a major gap in coverage.

“An experienced, specialized broker can help you recognize exposures, understand the regulatory climate and provide solutions, whether it is insurance or other risk mitigation options to satisfy coverage needs or financial assurance requirements,” says Michael R. Szot, executive vice president, global practice leader, Environmental Service Group, Aon Risk Solutions.

Smart Business spoke with Szot, Gregory E. Schilz, managing director, Environmental Service Group, Aon Risk Solutions, and Dale Cira, director, Specialty Environmental, Aon Risk Solutions, about how to protect your company from environmental risk.

Why should businesses be concerned about environmental risk?

Many companies are unaware that they do not have proper protection against environmental risk, but virtually any company that owns or leases property has exposure to environmental risk. If a company transports potentially harmful materials, it has environmental exposure. An experienced environmental broker can point where exposure exists and whether companies have coverage for it in their current program. Companies may have some limited environmental coverage built into their current policies, but a broker can identify if they have a gap.

How can businesses assess whether they have a gap in their environmental coverage?

Companies may not  understand their environmental risk. The starting point is a coverage gap analysis, in which a broker reviews current policies to determine if their insurance program provides any environmental coverage. The answer generally depends on the company and the country in which the company operates, but usually, coverage for environmental exposures is limited, at best.

Next, the broker will make a site inspection and perform a policy review highlighting  where the company has exposures and its gaps in coverage to environmental risk. Then, the company will receive solution sets showing how to fill any gaps with an environmental insurance product or other mechanism.

In many cases, they may choose not to buy insurance; they may intentionally self-insure risk. But to not know the risk level would be a mistake for any organization.

What types of problems are covered with environmental insurance?

The biggest issue is pre-existing, unknown conditions. Whenever a business considers buying a property, whether it is an undeveloped or currently developed piece of land, there is always a question about the historical use of that property. Even an undeveloped piece of land with grass growing on top of it could have been used 30 years ago as a plating facility, with lead, zinc or toxic minerals in the ground. That is the single largest driver that causes businesses to consider environmental insurance — what they don’t know about a property they are buying.

How does environmental insurance handle new issues?

Typically, this coverage focuses on insuring unknown issues that may be associated with a site. But there are also insurance policies for situations in which you have existing contamination on a site and you are trying to cap the potential cost of that risk.

You may think the risk is a $5 million problem and you don’t want it to end up being a $30 million problem. By capping that cost, businesses know if a risk becomes a larger problem than anticipated, additional insurance can protect them from that worst-case scenario. Also, most pollution policies are written on a ‘claims-made’ basis — a claim has to be reported during the policy term. However, environmental insurance policies, if crafted correctly, can have full pre-existing coverage conditions applying, with no retroactive limitation. So if the policy is placed today, it covers everything that happened in the past but that you don’t know about yet.

Why is environmental insurance growing in popularity?

It is a very advantageous market for companies considering environmental insurance for the first time or renewing their coverage. Conditions are favorable primarily due to the fact that the market has grown. Three years ago, only a few major insurance carriers offered environmental products or coverage. Today, more than 20 active markets offer some form of pollution liability coverage.

Current events — the Gulf Oil Spill and the Japanese earthquake and tsunami — cause people to think about the environment. Those are dramatic events, but smaller issues happen every day. Awareness is augmented by public and government regulators and the number of laws in place — more than 17,000 worldwide — many of which are conflicting and very complex. Companies require individuals who are staying on top of those issues to advise them on their potential liability and how best to mitigate that liability.

The market is also growing in response to major regulatory changes in the European Union. The regulatory framework of the EU’s Environmental Liability Directive creates new liability — a ‘polluter pays’ model. It also requires financial assurance, which can usually be satisfied by insurance, bonds, surety, escrow accounts, trust funds or cash.

Assurance is voluntary, but several countries have committed to moving to compulsory financial security, and there is pressure for others to do so in the name of consistency.

For affected companies, specific pollution legal liability coverage is a solution. It can be modified  to match ELD requirements and exposure for environmental liability.

Michael R. Szot, CPCU, ARM, is executive vice president and global practice leader, Environmental Service Group, Aon Risk Solutions. Reach him at michael.szot@aon.com or (213) 630-3253. Gregory E. Schilz is managing director, Environmental Service Group with Aon Risk Solutions. Reach him at gregory.schilz@aon.com or (415) 486-7652. Dale Cira is director, Specialty Environmental, Aon Risk Solutions. Reach him at (314) 854-0724 or dale.cira@aon.com.

There are more than 17,000 environmental laws and regulations worldwide. How sure are you that your business operations are in compliance?

Environmental insurance has become a hot topic the last several years, mainly because even though most companies have environmental exposures, those risks are excluded from most liability and property policies, creating a major gap in coverage.

“An experienced, specialized broker can help you recognize exposures, understand the regulatory climate and provide solutions, whether it is insurance or other risk mitigation options to satisfy coverage needs or financial assurance requirements,” says Michael R. Szot, executive vice president, global practice leader, Environmental Service Group, Aon Risk Solutions.

Smart Business spoke with Szot, Gregory E. Schilz, managing director, Environmental Service Group, Aon Risk Solutions, and Paul D. Maxwell, senior account executive, Aon Risk Solutions, about how to protect your company from environmental risk.

Why should businesses be concerned about environmental risk?

Many companies are unaware that they do not have proper protection against environmental risk, but virtually any company that owns or leases property has exposure to environmental risk. If a company transports potentially harmful materials, it has environmental exposure. An experienced environmental broker can point where exposure exists and whether companies have coverage for it in their current program. Companies may have some limited environmental coverage built into their current policies, but a broker can identify if they have a gap.

How can businesses assess whether they have a gap in their environmental coverage?

Companies may not  understand their environmental risk. The starting point is a coverage gap analysis, in which a broker reviews current policies to determine if their insurance program provides any environmental coverage. The answer generally depends on the company and the country in which the company operates, but usually, coverage for environmental exposures is limited, at best.

Next, the broker will make a site inspection and perform a policy review highlighting  where the company has exposures and its gaps in coverage to environmental risk. Then, the company will receive solution sets showing how to fill any gaps with an environmental insurance product or other mechanism.

In many cases, they may choose not to buy insurance; they may intentionally self-insure risk. But to not know the risk level would be a mistake for any organization.

What types of problems are covered with environmental insurance?

The biggest issue is pre-existing, unknown conditions. Whenever a business considers buying a property, whether it is an undeveloped or currently developed piece of land, there is always a question about the historical use of that property. Even an undeveloped piece of land with grass growing on top of it could have been used 30 years ago as a plating facility, with lead, zinc or toxic minerals in the ground. That is the single largest driver that causes businesses to consider environmental insurance — what they don’t know about a property they are buying.

How does environmental insurance handle new issues?

Typically, this coverage focuses on insuring unknown issues that may be associated with a site. But there are also insurance policies for situations in which you have existing contamination on a site and you are trying to cap the potential cost of that risk.

You may think the risk is a $5 million problem and you don’t want it to end up being a $30 million problem. By capping that cost, businesses know if a risk becomes a larger problem than anticipated, additional insurance can protect them from that worst-case scenario. Also, most pollution policies are written on a ‘claims-made’ basis — a claim has to be reported during the policy term. However, environmental insurance policies, if crafted correctly, can have full pre-existing coverage conditions applying, with no retroactive limitation. So if the policy is placed today, it covers everything that happened in the past but that you don’t know about yet.

Why is environmental insurance growing in popularity?

It is a very advantageous market for companies considering environmental insurance for the first time or renewing their coverage. Conditions are favorable primarily due to the fact that the market has grown. Three years ago, only a few major insurance carriers offered environmental products or coverage. Today, more than 20 active markets offer some form of pollution liability coverage.

Current events — the Gulf Oil Spill and the Japanese earthquake and tsunami — cause people to think about the environment. Those are dramatic events, but smaller issues happen every day. Awareness is augmented by public and government regulators and the number of laws in place — more than 17,000 worldwide — many of which are conflicting and very complex. Companies require individuals who are staying on top of those issues to advise them on their potential liability and how best to mitigate that liability.

The market is also growing in response to major regulatory changes in the European Union. The regulatory framework of the EU’s Environmental Liability Directive (ELD) creates new liability — a ‘polluter pays’ model. It also requires financial assurance, which can usually be satisfied by insurance, bonds, surety, escrow accounts, trust funds or cash.

Assurance is voluntary, but several countries have committed to moving to compulsory financial security, and there is pressure for others to do so in the name of consistency.

For affected companies, specific pollution legal liability coverage is a solution. It can be modified  to match ELD requirements and exposure for environmental liability.

Michael R. Szot, CPCU, ARM, is executive vice president and global practice leader, Environmental Service Group, Aon Risk Solutions. Reach him at michael.szot@aon.com or (213) 630-3253. Gregory E. Schilz is managing director, Environmental Service Group with Aon Risk Solutions. Reach him at gregory.schilz@aon.com or (415) 486-7652. Paul D. Maxwell is a senior account executive with Aon Risk Solutions. Reach him at (248) 936-5356 or paul.maxwell@aon.com.

There are more than 17,000 environmental laws and regulations worldwide. How sure are you that your business operations are in compliance?

Environmental insurance has become a hot topic the last several years, mainly because even though most companies have environmental exposures, those risks are excluded from most liability and property policies, creating a major gap in coverage.

“An experienced, specialized  broker can help you recognize exposures, understand the regulatory climate and provide solutions, whether it is insurance or other risk mitigation options to satisfy coverage needs or financial assurance requirements,” says Michael R. Szot, Executive Vice President, Global Practice Leader, Environmental Service Group, Aon Risk Solutions.

Smart Business spoke with Szot, Gregory E. Schilz, Managing Director, Environmental Service Group, Aon Risk Solutions, and Anne Sherwin, Vice President and Senior Account Executive, Aon Risk Solutions, about how to protect your company from environmental risk.

Why should businesses be concerned about environmental risk?

Many companies are unaware that they do not have proper protection against environmental risk, but virtually any company that owns or leases property has exposure to environmental risk. If a company transports potentially harmful materials, it has environmental exposure. An experienced environmental broker can point where exposure exists and whether companies have coverage for it in their current program. Companies may have some limited environmental coverage built into their current policies, but a broker can identify if they have a gap.

How can businesses assess whether they have a gap in their environmental coverage?

Companies may not  understand their environmental risk. The starting point is a coverage gap analysis, in which a broker reviews current policies to determine if their insurance program provides any environmental coverage. The answer generally depends on the company and the country in which the company operates, but usually, coverage for environmental exposures is limited, at best.

Next, the broker will make a site inspection and perform a policy review highlighting  where the company has exposures and its gaps in coverage to environmental risk. Then, the company will receive solution sets showing how to fill any gaps with an environmental insurance product or other mechanism.

In many cases, they may choose not to buy insurance; they may intentionally self-insure risk. But to not know the risk level would be a mistake for any organization.

What types of problems are covered with environmental insurance?

The biggest issue is pre-existing, unknown conditions. Whenever a business considers buying a property, whether it is an undeveloped or currently developed piece of land, there is always a question about the historical use of that property. Even an undeveloped piece of land with grass growing on top of it could have been used 30 years ago as a plating facility, with lead, zinc or toxic minerals in the ground. That is the single largest driver that causes businesses to consider environmental insurance — what they don’t know about a property they are buying.

How does environmental insurance handle new issues?

Typically, this coverage focuses on insuring unknown issues that may be associated with a site. But there are also insurance policies for situations in which you have existing contamination on a site and you are trying to cap the potential cost of that risk.

You may think the risk is a $5 million problem and you don’t want it to end up being a $30 million problem. By capping that cost, businesses know if a risk becomes a larger problem than anticipated, additional insurance can protect them from that worst-case scenario. Also, most pollution policies are written on a ‘claims-made’ basis — a claim has to be reported during the policy term. However, environmental insurance policies, if crafted correctly, can have full pre-existing coverage conditions applying, with no retroactive limitation. So if the policy is placed today, it covers everything that happened in the past but that you don’t know about yet.

Why is environmental insurance growing in popularity?

It is a very advantageous market for companies considering environmental insurance for the first time or renewing their coverage. Conditions are favorable primarily due to the fact that the market has grown. Three years ago, only a few major insurance carriers offered environmental products or coverage. Today, more than 20 active markets offer some form of pollution liability coverage.

Current events — the Gulf Oil Spill and the Japanese earthquake and tsunami — cause people to think about the environment. Those are dramatic events, but smaller issues happen every day. Awareness is augmented by public and government regulators and the number of laws in place — more than 17,000 worldwide — many of which are conflicting and very complex. Companies require individuals who are staying on top of those issues to advise them on their potential liability and how best to mitigate that liability.

The market is also growing in response to major regulatory changes in the European Union. The regulatory framework of the EU’s Environmental Liability Directive creates new liability — a ‘polluter pays’ model. It also requires financial assurance, which can usually be satisfied by insurance, bonds, surety, escrow accounts, trust funds or cash.

Assurance is voluntary, but several countries have committed to moving to compulsory financial security, and there is pressure for others to do so in the name of consistency.

For affected companies, specific pollution legal liability coverage is a solution. It can be modified  to match ELD requirements and exposure for environmental liability.

Michael R. Szot, CPCU, ARM, is Executive Vice President and Global Practice Leader, Environmental Service Group, Aon Risk Solutions. Reach him at michael.szot@aon.com or (213) 630-3253. Gregory E. Schilz is Managing Director, Environmental Service Group with Aon Risk Solutions. Reach him at gregory.schilz@aon.com or (415) 486-7652. Anne Sherwin is a Vice President and Senior Account Executive for Aon Risk Solutions. Reach her at anne.sherwin@aon.com or (412) 594-7534.

The Genetic Information and Nondiscrimination Act (GINA) was signed into law on May 21, 2008.

“The primary aim of GINA is preventing discrimination on the basis of ‘genetic information,”’ says Lauren N. Diulus, an associate with Jackson Lewis LLP.

Employers need to ensure they adhere to GINA’s regulations, or they could find themselves the target of costly litigation.

Smart Business spoke with Diulus about GINA and how employers can use best practices to avoid liability.

What exactly is GINA?

GINA makes it unlawful for employers and other covered entities to request or require an individual’s genetic information, which includes their family medical history, unless it is inadvertent. GINA also prohibits the use of, access to and disclosure of genetic information based upon the idea that doing so will reduce discrimination.

What is genetic information?

Genetic information means information about an individual’s genetic tests; the genetic tests of that individual’s family members; family medical history; an individual’s request for, or receipt of, genetic services, or the participation in clinical research that includes genetic services; the genetic information of a fetus; and the genetic information of any embryo legally held by the individual or family member using an assisted reproductive technology.

What are some common situations in which an employer has the greatest potential to inadvertently obtain genetic information?

The following list is obviously not exhaustive, but the most common situations are:

When requesting documentation to support an employee’s request for a reasonable accommodation.

When legally requesting medical information from an individual, such as where an employee requests leave under the Family and Medical Leave Act (FMLA).

When reviewing an applicant’s or employee’s Internet or social media activity.

When requiring employees to submit to employment-related medical examinations such as Post-Offer or Fitness for Duty.

When obtaining information from employees as part of a wellness program.

When participating in casual conversations with their employees, i.e. ‘water-cooler’ talk, or overhearing a conversation among co-workers regarding health.

What should employers do to increase the likelihood that potential receipt of genetic information is deemed inadvertent under GINA, and otherwise avoid liability?

The Equal Employment Opportunity Commission (EEOC) sets forth a ‘safe harbor’ notice, which, if provided by the employer along with its request for medical information from the employee’s health care provider or its own third-party medical examiners, will deem the employer’s receipt of any genetic information as a result of the request to be inadvertent and, thus, not in violation of GINA.

GINA recognizes that individuals requesting leave under the FMLA, or other applicable state or local law, to care for a covered family member with a serious health condition will be required to provide family medical history. Therefore, GINA provides a separate exception permitting an employer to request family medical history to support a request for FMLA leave. Accordingly, there is no need for an employer to include the ‘safe harbor’ notice with a request for such medical information about a family member.

If it becomes apparent to the employer that its third-party medical examiners are requesting genetic information, the employer should take appropriate remedial measures to ensure that such requests cease, which includes no longer using that examiner.

While the employer may set forth casual expressions of concern regarding the health of an employee who has been diagnosed with a serious condition (‘How are you’ or ‘Did they catch it early enough?’), the employer must avoid questions that are more probative in nature, such as whether other family members have the condition.

While an exception to liability under GINA will apply in circumstances where an employer learns genetic information about an employee by overhearing a conversation between the employee and others, i.e., ‘water cooler talk,’ the employer must not actively listen to, or act on, that conversation.

Increasingly, employers are using social media as a way of verifying applicant/employee information and investigating potential candidates. HR professionals and managers supervising employees, specifically, should be trained about how they should be using social media, and the limitations on their use to avoid violations of GINA.

What should an employer do if it inadvertently acquires genetic information regarding one of its employees?

If an employer inadvertently obtains written genetic information, it must maintain such information separate from the personnel files and must treat the information as a confidential medical record as it would for records covered by the Americans with Disabilities Act. If an employer obtains verbal genetic information, it need not reduce the information to writing but must not disclose the information unless legally permitted to do so. Also, the employer may not discriminate or retaliate against the employee based upon such genetic information in any way.

What else should an employer do to shield itself from potential liability under GINA?

Determine if there are ways the company is getting genetic information that it should not be getting, and put a stop to it. Post the required DOL poster, which is on the DOL website. Also, broaden the EEO statement in the employee handbook to include non-discrimination based on genetic information. Finally, add GINA to agendas for EEO training for supervisors and managers.

Lauren N. Diulus is an associate with Jackson Lewis LLP. Reach her at (412) 232-0231 or diulusl@jacksonlewis.com.

Normally, people are advised to stay away from cliffs. The steep vertical drop, the hard rocks, the water below — there’s too much danger if you get too close.

However, a different kind of “cliff” is looming on the horizon and for employers it doesn’t represent danger, but rather opportunity.

“They call it the ‘patent cliff,’” says Chronis Manolis, RPh, the vice president of pharmacy for UPMC Health Plan. “It refers to the years 2012 to 2014, when many pharmaceutical companies will lose patent protection on some of their most popular products.”

Smart Business talked with Manolis about the “patent cliff” and the opportunity it presents for employers.

What exactly is the ‘patent cliff’?

The term ‘cliff’ is used because pharmaceutical companies are facing a steep revenue shortfall as their blockbuster products lose patent protection. It’s estimated that drugs representing approximately $100 billion in sales will be available as generic drugs over the next several years. That loss to the pharmaceutical industry creates a significant opportunity for employers and employees alike.

When a pharmaceutical company develops and markets a new drug, it gets patent exclusivity for a specified number of years. What that means is that for that period there can be no generic equivalents to the brand-name drugs for the public to choose from. Over the next few years, a number of the most popular and biggest-selling drugs of recent years will all have their patents expire.

These include Lipitor, the top-selling anti-cholesterol drug in the world; Plavix, the top-selling antiplatelet medicine; Viagra, the most popular erectile-dysfunction drug; Singulair, an anti-asthma medicine; Lexapro, an anti-depressant; and several others. Every year, drugs have their patents expire, but there have never been so many popular drugs all losing patent exclusivity at the same time as there will be over the next two to three years.

Why is this an opportunity for an employer?

This is a truly unique time for employers. They have the opportunity to leverage the introduction of all these generic versions of top-selling drugs to help them bring down their health care costs. Employers need to work with their health insurer to ensure their pharmacy benefit design can leverage this significant opportunity. Generic drugs are a win-win for both the employer and employee. In addition to the cost savings, there is substantial evidence to suggest that cost is a barrier to medication adherence and lower co-pays for generic drugs can remove these cost barriers.

In conjunction with innovative formulary management, co-pay designs that promote generic drugs are the easiest way to leverage the patent cliff. For example, having a material difference in co-pay amounts between brand and generic drugs is a powerful incentive for employees. Additional examples include applying deductibles to only brand drugs as well as having co-insurance only for brand drugs while having flat dollar co-pays on generic drugs.

Can employers increase awareness and acceptance of generics?

It’s important to implement promotional and educational campaigns with your benefits administrator to educate employees. This can include educational materials, work-site promotional materials and pharmacist informational sessions to build employee awareness and confidence in generics.

There continues to be a general lack of confidence in generic drugs in regards to safety and effectiveness. Generic drugs save patients money without compromising quality and safety. The patent cliff will bring many ‘first-in-class’ generics to treat conditions such as diabetes, stroke, asthma and hypertension. We will have unprecedented access to high-quality generic drugs in almost all of the major therapeutic categories.

The ultimate goal is to get plan members talking to their physicians about therapeutic alternatives. This inquiry into generic drugs will provide a shift from brand name to generic drug utilization and help reduce benefit costs. For every 1 percent increase in generic drug use, employers can save approximately 1.5 percent in drug costs.

Is there a significant difference between generics and brand-name drugs?

The Food and Drug Administration requires generic drugs have the same effectiveness as the brand-name product. Generic drugs have exactly the same dosage, intended use, safety profile and side effects as the brand drug.

Brand-name drugs develop reputations with consumers, much of which is created through extensive media campaigns that raise awareness of the product and also increase its cost. Generic drugs have the same chemical make-up but are not backed by expensive advertising. That helps to make them less expensive and is the reason that insurance companies can offer these drugs to members for a much lower co-payment.

What kind of savings can be expected by going with generics?

For generics, employees pay, on average, co-pays that range from $5 to $15 compared to $20 to $40 for the brand-name drug. The average retail price plan sponsors pay for a brand-name drug is now approximately $128 compared to the average retail generic price of $18. So the savings are material for both employers and employees alike.

Will the ‘patent cliff’ help to increase the acceptance of generics?

Absolutely. With the influx of new generics, we should approach generic drug use rates greater than 80 percent. With high-cost biotech drugs projected to increase significantly in the next several years, maximizing generic drug adoption will be a key strategy to contain costs in the overall pharmacy benefit. Additionally, the savings is achieved without compromising safety and quality.

Chronis Manolis, RPh, is vice president of pharmacy for UPMC Health Plan. Contact him at manolisch@upmc.edu or (412) 454-7642.

Designing programs and using best practices to keep your employees safe may feel like the right thing to do, but this decision does more than just ease your mind.

“By implementing best practices and a safety management program in the workplace, employers can not only protect their employees and prevent incidents from occurring, but they can also reduce their annual workers’ compensation costs,” says Randy Jones, the senior vice president of TPA Operations for CompManagement, Inc.

Smart Business spoke with Jones about how improving safety in the workplace benefits both employees and the bottom line, and about what employers can do to improve workplace safety.

Why should organizations focus on safety and how does doing so benefit an organization’s employees and its bottom line?

The most valuable asset that any organization has is its people. Employers should implement and use safety best practices and a safety management program in the workplace. By using those tactics, employers protect their employees and prevent incidents from occurring while also reducing their workers’ compensation costs.

Claim costs are one of the three major factors that determine an employer’s annual premium with the Ohio Bureau of Workers’ Compensation (BWC). Reducing and/or preventing workplace injuries and illnesses from happening dramatically impacts costs.

What are some steps organizations can take to improve safety?

In order for any safety program to be successful, an employer must be committed to safety. It is absolutely imperative for management to support the safety process.

There are several simple steps that an organization can implement to create an awareness of safety in their organization, such as:

  • Holding monthly safety training meetings focused on specific topics.
  • Having an emergency evacuation plan in place and practicing it regularly.
  • Ensuring that your organization always has adequate personal protective equipment and that employees know how to access and utilize properly.
  • Posting warning signs where appropriate as reminders for best safety practices, as well as marking all hazardous areas.
  • Ensuring that all equipment has appropriate safety devices installed and is checked regularly for proper working condition.
  • Appointing someone within your organization to do a monthly safety checklist review of the entire workplace.
  • Providing employee recognition for safe work habits.
  • Ensuring that first aid kits are available and easily accessible throughout the building.

Where should organizations look for safety training programs?

Many third-party administrators have in-house safety and loss control departments that offer a variety of onsite and online training programs. In addition, training is available from the BWC’s Division of Safety & Hygiene.

What types of safety grants are available and how can an organization apply for one?

The Ohio BWC has a Safety Intervention SafetyGRANTS program that is available to state-funded employers in business for at least two years. This program awards safety grants to employers for the purchase of ergonomic, safety and/or industrial equipment. Employers are eligible for a two-to-one matching grant up to a maximum of $40,000, which equates to a total of $60,000 ($20,000 from the employer and $40,000 from the BWC). The BWC requires that the employer provide ongoing documentation, case studies and access for staff to evaluate in order to determine the cost effectiveness of these interventions in reducing occupational injuries. The BWC also offers a safety grant for the implementation of a drug-free safety program and just recently announced a safety grant available for the wholesale/retail trade sector for the implementation of safety controls in their workplaces.

What are the advantages of participating in safety councils?

The BWC has more than 80 sponsored safety councils located throughout Ohio. By becoming an active member, an employer is able to receive a 2 percent rebate on its annual workers’ compensation premium. An additional rebate may be earned if your workplace reduces either the severity or frequency of injuries by 10 percent or keeps both at zero.

To qualify for the rebate, an employer must meet the following eligibility requirements: join a local safety council by July 31, 2011; attend 10 safety council meetings (at least eight through the local safety council; the additional two hours may be through attendance at BWC safety training courses or industry specific training); send a qualified senior-level manager to a safety council sponsored meeting; and submit semiannual workplace accident reports for the 2011 calendar year.

The program does not apply to self-insuring employers, state agencies and employers enrolled in the BWC group retrospective rating programs. Employers enrolled in the group rating program are eligible for the 2 percent performance rebate in addition to their group rating discount, but are not eligible for the 2 percent participation rebate.

How can an organization determine whether it is eligible for these safety improvement programs?

Your third-party administrator’s safety and loss control department should be able to review the different safety improvement programs with you and assist in identifying which ones are the best fit for your organization and management team. In addition, resources are available from the BWC’s Division of Safety & Hygiene at www.ohiobwc.com or (800) OHIOBWC.

Randy Jones is the senior vice president of TPA Operations for CompManagement, Inc. Reach him at (800) 825-6755, ext. 2466, or Randy.Jones@sedgwickcms.com.

There are more than 17,000 environmental laws and regulations worldwide. How sure are you that your business operations are in compliance?

Environmental insurance has become a hot topic the last several years, mainly because even though most companies have environmental exposures, those risks are excluded from most liability and property policies, creating a major gap in coverage.

“An experienced, specialized broker can help you recognize exposures, understand the regulatory climate and provide solutions, whether it is insurance or other risk mitigation options to satisfy coverage needs or financial assurance requirements,” says Michael R. Szot, executive vice president, global practice leader, Environmental Service Group, Aon Risk Solutions.

Smart Business spoke with Szot, Gregory E. Schilz, managing director, Environmental Service Group, Aon Risk Solutions, and Edward X. McNamara, a senior vice president at Aon Risk Solutions, about how to protect your company from environmental risk.

Why should businesses be concerned about environmental risk?

Many companies are unaware that they do not have proper protection against environmental risk, but virtually any company that owns or leases property has exposure to environmental risk. If a company transports potentially harmful materials, it has environmental exposure. An experienced environmental broker can point where exposure exists and whether companies have coverage for it in their current program. Companies may have some limited environmental coverage built into their current policies, but a broker can identify if they have a gap.

How can businesses assess whether they have a gap in their environmental coverage?

Companies may not  understand their environmental risk. The starting point is a coverage gap analysis, in which a broker reviews current policies to determine if their insurance program provides any environmental coverage. The answer generally depends on the company and the country in which the company operates, but usually, coverage for environmental exposures is limited, at best.

Next, the broker will make a site inspection and perform a policy review highlighting  where the company has exposures and its gaps in coverage to environmental risk. Then, the company will receive solution sets showing how to fill any gaps with an environmental insurance product or other mechanism.

In many cases, they may choose not to buy insurance; they may intentionally self-insure risk. But to not know the risk level would be a mistake for any organization.

What types of problems are covered with environmental insurance?

The biggest issue is pre-existing, unknown conditions. Whenever a business considers buying a property, whether it is an undeveloped or currently developed piece of land, there is always a question about the historical use of that property. Even an undeveloped piece of land with grass growing on top of it could have been used 30 years ago as a plating facility, with lead, zinc or toxic minerals in the ground. That is the single largest driver that causes businesses to consider environmental insurance — what they don’t know about a property they are buying.

How does environmental insurance handle new issues?

Typically, this coverage focuses on insuring unknown issues that may be associated with a site. But there are also insurance policies for situations in which you have existing contamination on a site and you are trying to cap the potential cost of that risk.

You may think the risk is a $5 million problem and you don’t want it to end up being a $30 million problem. By capping that cost, businesses know if a risk becomes a larger problem than anticipated, additional insurance can protect them from that worst-case scenario. Also, most pollution policies are written on a ‘claims-made’ basis — a claim has to be reported during the policy term. However, environmental insurance policies, if crafted correctly, can have full pre-existing coverage conditions applying, with no retroactive limitation. So if the policy is placed today, it covers everything that happened in the past but that you don’t know about yet.

Why is environmental insurance growing in popularity?

It is a very advantageous market for companies considering environmental insurance for the first time or renewing their coverage. Conditions are favorable primarily due to the fact that the market has grown. Three years ago, only a few major insurance carriers offered environmental products or coverage. Today, more than 20 active markets offer some form of pollution liability coverage.

Current events — the Gulf Oil Spill and the Japanese earthquake and tsunami — cause people to think about the environment. Those are dramatic events, but smaller issues happen every day. Awareness is augmented by public and government regulators and the number of laws in place — more than 17,000 worldwide — many of which are conflicting and very complex. Companies require individuals who are staying on top of those issues to advise them on their potential liability and how best to mitigate that liability.

The market is also growing in response to major regulatory changes in the European Union. The regulatory framework of the EU’s Environmental Liability Directive creates new liability — a ‘polluter pays’ model. It also requires financial assurance, which can usually be satisfied by insurance, bonds, surety, escrow accounts, trust funds or cash.

Assurance is voluntary, but several countries have committed to moving to compulsory financial security, and there is pressure for others to do so in the name of consistency.

For affected companies, specific pollution legal liability coverage is a solution. It can be modified  to match ELD requirements and exposure for environmental liability.

Michael R. Szot, CPCU, ARM, is executive vice president and global practice leader, Environmental Service Group, Aon Risk Solutions. Reach him at michael.szot@aon.com or (213) 630-3253. Gregory E. Schilz is managing director, Environmental Service Group with Aon Risk Solutions. Reach him at gregory.schilz@aon.com or (415) 486-7652. EDWARD X. MCNAMARA is a senior vice president at Aon Risk Solutions. Reach him at edward.mcnamara@aon.com or (216) 623-4146.

Growing your company through mergers or acquisitions can provide a tremendous boost to business, but isn’t something to take lightly.

“You have to consider how you want the organization to grow,” says Kenneth M. Haffey, CPA, CVA, a partner with Skoda Minotti. “When you start identifying targets, consider what sort of operational challenges you will face. We call that smart growth — what should an organization look like for the short-term and the long-term.”

Smart Business spoke with Haffey about what owners should know before making the deal.

Before considering growing the business through a merger or acquisition, what should a business owner think about?

At the end of the day, you have to know what your goals for the merger or acquisition are. Will the target company be an add-on or tuck-in to an existing segment of your business? The bottom line is to understand the who, what, when, where and why of the potential acquisition or merger before you start the process.

Although often overlooked, the ‘where’ is actually just as important as the other questions. Acquiring or merging with companies in different parts of the country poses specific operational challenges, not the least of which is banking. With whom should the company bank? There are many large national banks now, but that wasn’t the case 10 years ago. If one of the involved company’s banks does not have a presence in the other company’s geographic area, then simple operational issues can become a challenge.

What should business owners keep in mind during a merger or acquisition?

Pricing is one element. Another is structuring the transaction correctly, which comes with hiring competent advisers. I can’t tell you how many times someone has their niece or nephew who just graduated from law school and took one M&A class working on these major transactions. Needless to say, that poses several challenges. You need a deal expert to make sure little things aren’t made into big things.

Years ago, when we were working on a deal with a client, three times in the first hour of our conversations, the attorney on the other side of the table came up with a ‘deal breaker.’ The third time I said, ‘If we are one hour into this and you already have three deal breakers, maybe this isn’t such a good idea.’ But this person was just trying to show his client that he was ‘in charge’ and that they would get the better of us.

After that, the individual owning the other business grabbed his attorney and said, ‘Let’s go out in the hall and talk.’ When they came back in, they had a completely different attitude. It wasn’t us versus them; it was us and them. Acquisitions and mergers only work if it is fair on both sides.

A confident and competent deal attorney and accountant or financial adviser will help make that happen. It’s important to make sure you understand the other side’s points. If every negotiating point is only going one way, why waste the other side’s time?

How should business owners prepare for an acquisition?

Have a plan in place. Set a time horizon, because, most of the time, things take longer than you think. It takes a while for both sides to perform financial and legal due diligence, and to figure out the operations. It’s not unusual that it would take four to six months from the time the letter of intent goes out until the deal is consummated. It’s more than a couple of meetings, but it also shouldn’t drag on too long or the individuals operating each entity may have their eyes off the ball of their own entities. You still need to run your own business.

What sort of tax ramifications should business owners prepare for with mergers or acquisitions?

Proper tax planning is important to make sure your corporate structure fits on an overall basis. Proper planning must be done with regard to the type of entity. Are you buying it as a subsidiary, a separate division or setting up a new company to do all this? For example, if a C corp. is buying an LLC, you have to prepare for the specific challenges for that situation.

Make sure you do your tax-related due diligence to ensure that all sales, property and payroll taxes have been paid, because the acquirer becomes liable for those taxes if they haven’t been paid, irrespective of the fact that it should have been paid by the seller. You could be on the hook for a lot of unpaid tax.

We just helped a client buy a company, and we found the company owed $300,000 in unpaid state and local taxes. That discovery drove a substantial purchase price adjustment.

Generally, when there is a problem, it is not so much federal income taxes; more often than not it is state and local taxes. Sales taxes, property taxes, payroll taxes — things like that.

How else can business owners determine what to pay when purchasing another company?

It’s important to understand the sustainability of the target company’s earnings. How does its revenue come together; what kind of clients do they have? For each client, determine if it is a special project client or if it is a client that has been around for a long time. Also, determine which clients will be continuing on with the company. That, as much as anything, drives purchase price.

Also, you must be aware of what kind of liabilities you will be assuming. Are there leases or mortgages? That is where financial diligence will uncover the liability side, and find out what is still owed to make sure there are no surprises. You don’t want to find out after an acquisition that you don’t really own your new assets — that you are leasing equipment.

Kenneth M. Haffey, CPA, CVA, is a partner with Skoda Minotti. Reach him at (440) 449-6800 or khaffey@skodaminotti.com.

Many developers struggle to deal with the cost of debt for ambitious real estate projects. But partnering with public and private entities can help reduce the loan required from the bank, allowing the developer to leverage its equity more effectively.

“The projects that require public and private partnerships, a combination of private conventional bank debt supported by quasi-public sources, are typically deals that wouldn’t happen without those subsidies,” says Michael K. Dostal, Senior Vice President and Commercial Real Estate Manager with FirstMerit Bank. “It harkens back to the 1980s, when many urban projects were required to meet the ‘but for’ test for low-interest government loans, or else the project wouldn’t happen.”

Smart Business spoke with Dostal about how large-scale development projects are made possible by public and private funding.

Why would companies want to involve public or private parties in real estate projects?

Because of the economic challenges facing some of these difficult projects, they just can’t work conventionally. The Flats East development project in Cleveland is a good example, because a public subsidy was needed to deal with the physical challenges of that site. A site may need to be heavily engineered to support development. Perhaps the roadways need to be expanded to improve physical access to the site, or utility infrastructure upgrades (water, sewer, electric) are needed.

When you deal with all those elements, you add costs you wouldn’t find in a simple greenfield development in a suburban location. The necessary upgrades increase the cost of the project, and if you tried to finance in a conventional fashion at, say, 75 percent of the total budget cost, it wouldn’t work. The cost of the debt would make the project unfeasible.

What types of projects are usually financed in this manner?

It’s not always a new site; it could be a redevelopment site. If you’re renovating an 80- to 100-year-old commercial property, you typically have to deal with out-of-date core infrastructure and mechanical systems, and inability to support modern telecommunications. Those are added costs that you wouldn’t have if you were building new. But there is a lot of energy in urban areas to revive our commercial core rather than demolish and build anew.

The cost of a 100,000-square-foot new development is not comparable to an urban redevelopment, but rent is still driving the market. You have to find a way to make the bottom line work because the rents are fixed in the marketplace. So you then have to deal with the cost of debt. That is the overriding challenge.

How do these difficult projects happen?

There is a need for multiple layers of financing. The Flats East project had 37 funding sources, led by two major banks. Another project in the University Circle area of Cleveland had 11 sources of financing. Developing these projects is not for the faint of heart. It requires a lot of cooperation with the many financing sources. The bank, as the lead lender, has to balance being in control without ignoring the issues, concerns, rights and privileges of the other subordinate financing sources.

What are typical sources of financing that can be secured for real estate projects?

Traditional public infrastructure support includes typical municipal bonds and infrastructure or general obligation bonds that go toward public improvements that support the site, like roadway access and public parking garages. Also, there are truly subordinate sources that generate equity for commercial redevelopment projects. There are two particularly prominent funding sources of this type. First, historic tax credits, offered by the U.S. government and available through the IRS, provide tax credit for the eligible amount of investment directed toward upgrading eligible properties. Second, the New Market Tax Credit, another federally designated program, was established to support job creation.

These tax credits are typically earned by the developers and syndicated to an investor, usually institutions such as banks and corporations. Developers could use the credits themselves, but usually the developer is not generating enough income to take advantage of them. So they are sold to corporations, which contribute much-needed equity to projects.

In addition to federally designated tax credits, the state of Ohio now offers historic and New Market tax credits as well. Another source of funding is local foundations, such as the Cleveland Foundation, the Greater Cleveland Partnership and the Columbus Foundation, that support historic or urban redevelopments and job creation.

Typically the final piece in these communities is the urban governments themselves — the cities of Akron, Cleveland and Columbus all offer either redevelopment or economic development grants and low-interest financing sources.

Why are these partnerships becoming more prevalent?

Their increased prevalence is a reflection of the economic times. The last time that significant public/private partnerships were required was the late ’80s and early ’90s, when a lot of our urban cores were redeveloped. Projects like the Short North area in Columbus and Tower City in Cleveland received significant tax credits for historic renovation.

Help was required because economic times were such that market rents wouldn’t support private capital doing it alone, and there was a scarcity of capital. We’re going through that again, as many large-scale projects were stopped when the financial markets crashed in 2008. Slowly, developers have dusted themselves off and government and foundation sources have stepped up in creative ways to support development. In turn, the banking industry has been nudged back to the table.

When times are tough and capital is scarce, everyone needs to come to the table to get these deals done, or else nothing happens in the marketplace.

Michael K. Dostal is a Senior Vice President and Commercial Real Estate Manager with FirstMerit Bank. Reach him at (216) 694-5654 or Mike.Dostal@firstmerit.com.

Many developers struggle to deal with the cost of debt for ambitious real estate projects. But partnering with public and private entities can help reduce the loan required from the bank, allowing the developer to leverage its equity more effectively.

“The projects that require public and private partnerships, a combination of private conventional bank debt supported by quasi-public sources, are typically deals that wouldn’t happen without those subsidies,” says Andy Dale, the Vice President of Commercial Real Estate for FirstMerit Bank. “It harkens back to the 1980s, when many urban projects were required to meet the ‘but for’ test for low-interest government loans, or else the project wouldn’t happen.”

Smart Business spoke with Dale about how large-scale development projects are made possible by public and private funding.

Why would companies want to involve public or private parties in real estate projects?

Because of the economic challenges facing some of these difficult projects, they just can’t work conventionally. The Flats East development project in Cleveland is a good example, because a public subsidy was needed to deal with the physical challenges of that site. A site may need to be heavily engineered to support development. Perhaps the roadways need to be expanded to improve physical access to the site, or utility infrastructure upgrades (water, sewer, electric) are needed.

When you deal with all those elements, you add costs you wouldn’t find in a simple greenfield development in a suburban location. The necessary upgrades increase the cost of the project, and if you tried to finance in a conventional fashion at, say, 75 percent of the total budget cost, it wouldn’t work. The cost of the debt would make the project unfeasible.

What types of projects are usually financed in this manner?

It’s not always a new site; it could be a redevelopment site. If you’re renovating an 80- to 100-year-old commercial property, you typically have to deal with out-of-date core infrastructure and mechanical systems, and inability to support modern telecommunications. Those are added costs that you wouldn’t have if you were building new. But there is a lot of energy in urban areas to revive our commercial core rather than demolish and build anew.

The cost of a 100,000-square-foot new development is not comparable to an urban redevelopment, but rent is still driving the market. You have to find a way to make the bottom line work because the rents are fixed in the marketplace. So you then have to deal with the cost of debt. That is the overriding challenge.

How do these difficult projects happen?

There is a need for multiple layers of financing. The Flats East project had 37 funding sources, led by two major banks. Another project in the University Circle area of Cleveland had 11 sources of financing. Developing these projects is not for the faint of heart. It requires a lot of cooperation with the many financing sources. The bank, as the lead lender, has to balance being in control without ignoring the issues, concerns, rights and privileges of the other subordinate financing sources.

What are typical sources of financing that can be secured for real estate projects?

Traditional public infrastructure support includes typical municipal bonds and infrastructure or general obligation bonds that go toward public improvements that support the site, like roadway access and public parking garages. Also, there are truly subordinate sources that generate equity for commercial redevelopment projects. There are two particularly prominent funding sources of this type. First, historic tax credits, offered by the U.S. government and available through the IRS, provide tax credit for the eligible amount of investment directed toward upgrading eligible properties. Second, the New Market Tax Credit, another federally designated program, was established to support job creation.

These tax credits are typically earned by the developers and syndicated to an investor, usually institutions such as banks and corporations. Developers could use the credits themselves, but usually the developer is not generating enough income to take advantage of them. So they are sold to corporations, which contribute much-needed equity to projects.

In addition to federally designated tax credits, the state of Ohio now offers historic and New Market tax credits as well. Another source of funding is local foundations, such as the Cleveland Foundation, the Greater Cleveland Partnership and the Columbus Foundation, that support historic or urban redevelopments and job creation.

Typically the final piece in these communities is the urban governments themselves — the cities of Akron, Cleveland and Columbus all offer either redevelopment or economic development grants and low-interest financing sources.

Why are these partnerships becoming more prevalent?

Their increased prevalence is a reflection of the economic times. The last time that significant public/private partnerships were required was the late ’80s and early ’90s, when a lot of our urban cores were redeveloped. Projects like the Short North area in Columbus and Tower City in Cleveland received significant tax credits for historic renovation.

Help was required because economic times were such that market rents wouldn’t support private capital doing it alone, and there was a scarcity of capital. We’re going through that again, as many large-scale projects were stopped when the financial markets crashed in 2008. Slowly, developers have dusted themselves off and government and foundation sources have stepped up in creative ways to support development. In turn, the banking industry has been nudged back to the table.

When times are tough and capital is scarce, everyone needs to come to the table to get these deals done, or else nothing happens in the marketplace.

Andy Dale is the Vice President of Commercial Real Estate for FirstMerit Bank. Reach him at andy.dale@firstmerit.com or (614) 545-2798.