To manage the risk of loss to commercial property, business owners can self-insure (absorbing any losses), transfer the risk to someone else or buy insurance. But not everyone is insurance savvy, understanding exactly how property is covered and what triggers coverage.

“When it comes to business building and personal property coverage, it’s important to have an insurance broker who takes you through the what ifs,” says David Oliver, senior vice president at Momentous Insurance Brokerage, Inc. “If the broker understands exactly what assets you have, what you do, how you do it and where you do it, you should have the proper coverage, insured for the right values.”

Smart Business spoke with Oliver about insuring for the correct perils, before it’s time to make a claim.

What types of business property insurance are available?

A named peril policy covers only specified perils; a basic or broad form policy will cover a longer list of specified perils; and special form covers anything that is not specifically limited or excluded. Most businesses start with a special form policy. Then, if it excludes something you want to cover, you can buy off the exclusion or have it added for an additional premium. Other times, you’ll need to buy a separate policy, such as a difference in conditions or builders risk policy, to cover that risk.

Usually a property policy covers direct physical loss or damage to the building and/or personal property at a certain named location(s). However, if you have a business where you’re moving around, touring or traveling, you can get an inland marine floater to cover property. This can be added as an endorsement to a business property policy or bought separately, and isn’t designated to one premises. It’s essentially floating, so you have coverage no matter where it goes. It also might have broader coverage, such as earthquake and flood.

What’s typically covered on property policies?

Sometimes, when you go to court, if a policy is silent on a particular peril, it may be deemed covered. Judges tend to lean in favor of the insured, especially in California.

It is critical to understand what your policy excludes. The policies are usually definitive when they tell you what’s not covered; they want you to know what the exclusions are. Where they may tend to be vague is in the area of what is covered. Basically, the policy covers actual, unintentional physical loss to the asset, such as if there’s a fire or something gets broken, vandalized or stolen.

How can business owners make sure they have the right coverage?

Read your policy carefully to understand what’s excluded, covered and not covered. Policies are complicated, so this is where a good broker helps. Make sure that whatever you think you’re buying the insurance for is actually covered. Usually, you can get a business personal property policy endorsed to cover excluded perils like earthquake sprinkler leakage, even though you can’t get full earthquake coverage.

When it comes to triggering coverage, insurers look for the proximate cause. If what directly caused the damage is covered, then you have a claim. You may not have earthquake insurance, but if an earthquake broke a gas main, which caused a fire, you’d have coverage for fire-damaged equipment. The policy needs to insure for the cost to repair, rebuild or replace something.

Many policies have a coinsurance clause. For example, if you have $1 million worth of property with an 80 percent coinsurance, that policy requires you have at least $800,000 in insurance. If you’re not insured to that percentage, your claim is reduced proportionally.

Another mistake may be not insuring for replacement cost, but actual cash value. So, if you bought something 10 years ago with an eight-year useful life, you may get next to nothing in actual cash value. Replacement cost allows you to replace it with like kind and quality, even if that’s more than what you originally paid. For example, a five-year-old specialty lighting fixture might be replaced with a newer model, costing more than the originally damaged, obsolete and no longer manufactured fixture.

These details are why having the right broker helping you take care of your property exposures will save you money in the long run.

David Oliver is senior vice president at Momentous Insurance Brokerage, Inc. Reach him at (818) 933-2297 or

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In today’s litigious society, people are filing more lawsuits and receiving larger judgments. Everyone needs to consider buying umbrella or excess liability insurance to protect their current and future assets against catastrophic loss.

“It is a financially sound idea for everybody to consider it, regardless of personal asset holdings,” says Erin Powers, CIC, assistant vice president at Momentous Insurance Brokerage, Inc. “The worst feeling is finding out at claim time that you could have had more protection if you had spent the extra few hundred dollars on an umbrella policy.”

Smart Business spoke with Powers about how to protect yourself with a personal umbrella policy.

Who needs to buy umbrella insurance?

Anyone with auto, homeowners or any other type of liability policy should consider umbrella insurance. We’re all exposed to claims and lawsuits that could jeopardize our current and future assets. An umbrella policy can protect against catastrophic (multi-million dollar) liability settlements.

Let’s say your dog bites a surgeon’s hand so severely he can no longer perform his job. Not only will the liability coverage pay for his medical costs, but it will also pay for his loss of wages. An umbrella policy will respond if your 16-year-old daughter crashes into a school bus, injuring or killing children, or if you injure someone with a golf ball. Another benefit of most umbrella policies is that there is coverage for legal defense costs outside of the excess liability limit.

Most auto and home carriers write no more than $500,000 or $1 million liability limits. An umbrella policy provides an additional layer of liability protection. Policy limits begin at $1 million and may be increased in increments of $1 million.

Is an umbrella the same as excess liability?

Umbrella and excess both provide additional coverage in excess of primary, but a true umbrella picks up exposures from the first dollar when no underlying insurance exists. Excess liability simply provides additional liability limits; coverage is not broadened. Many policies are called umbrella, but the contract wording says otherwise. Take time to understand what you’re buying.

What policy nuances are important to know?

The umbrella carrier will require you to maintain certain primary limits before triggering coverage. You’ll also want defense coverage to be outside of the limit of insurance, so defense costs won’t erode your limit. In addition, make sure you have worldwide coverage — some policies restrict coverage to the U.S. Family trusts or LLCs that own any tangible assets covered on the primary policies need to be included on the umbrella policy as the trust and/or LLC can be brought into the lawsuit.

Personal injury is also an important component to include. It covers things beyond bodily injuries, such as defamation of character, libel, slander, false arrest, wrongful eviction and violation of the right of privacy. With social media, everybody is putting opinions in writing. It’s an important exposure to cover, although some policies are starting to restrict Internet coverage.

What endorsements can help enhance your umbrella?

Typically, if there’s a claim, the insurance company will provide an attorney. A shadow defense provides an extra limit to bring on your own attorney to consult.

Some umbrellas include, by endorsement, employment practices liability, which protects you if a domestic employee sues for discrimination, sexual harassment or wrongful termination.

Another enhancement to consider is uninsured motorist coverage. A few companies can also include uninsured personal liability. With these coverages, you get the benefit of having your medical expenses paid, if the person who causes injury has inadequate or no liability coverage.

How do you know how much to buy?

Certain people are more at risk. Assess your lifestyle and re-evaluate with life changes. What kinds of things do you have, and what could potentially happen? Do you have parties at your house? Are you in the public eye? Do you have kids who are driving? Do you have a swimming pool?

Determining the proper limit is not an exact science. You can’t measure liability loss like a property loss. You want enough coverage to protect your assets, and maybe a little extra for peace of mind.

Erin Powers, CIC, is assistant vice president at Momentous Insurance Brokerage, Inc. Reach her at (818) 933-2791 or

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Most employers are distant from their workers’ compensation claims and thus leave money on the table when it comes to premium savings.

Good claims management starts at the beginning. As a claim progresses, there will be fewer opportunities to positively affect the outcome. It has to be an ongoing process, says Kimaili “Ken” Davis, ARM, assistant vice president at Momentous Insurance Brokerage, Inc. Employers need to be sure that the adjuster is aware of the mechanics of the injury and affected body parts. There are milestones that can change the path of a claim. Be sure that a claim goes in the right direction.

“Employers may think someone else will take care of it, whether it be the adjuster and/or insurance broker,” he says. “Yes, a good broker is going to have a knowledgeable claim professional monitoring the claims, but it’s best to take a team approach, where the adjuster, employer and broker are working together.”

Smart Business spoke with Davis about creating a culture of safety and attention to claims to give you a competitive advantage.

How does California’s workers’ compensation compare to nearby states?

California laws tend to (unfairly) favor employees when it comes to claims, so it’s important for employers to stay involved. In California, an employee can fail to follow the rules and still receive a positive outcome. In other states, the rules are enforced equally, meaning that both the employee and employer must play by the rules. I’ve seen cases before the appeals board where an employee has missed more than one hearing without good reason and has not been penalized. In other states, this conduct would negatively impact their claim.

What’s the best way to manage individual claims to decrease costs?

Employers need to manage their employees. If you create an environment where people want to come to work, claims will be resolved quicker and for less money.

After an accident or incident, don’t just investigate what happened, look at what caused the injury and ways to prevent future injuries. Also, have human resources and/or the supervisor keep in contact with the injured employee on a regular basis. Ideally, you want an injured employee to feel like part of the team, and have a desire to get back to work and resolve the claim promptly.

An important concern is getting employees back to work as soon as possible. If employees cannot work full duties, see if they can return to modified or alternate work. It will be up to the treating doctor to release them to light duties. Communicate with employees and the treating doctor on a regular basis. The sooner employees are back to work, the less claims dollars will be paid. The result can be a lower premium over time. Further, studies have shown when injured employees return to work within 30 days of the date of injury, there’s a better chance for a full recovery.

Are there certain claims employers should monitor more closely?

Litigated cases are important to monitor, as well as those claims where medical conditions complicate recovery, such as diabetes or obesity. The California Workers’ Compensation Institute found that in claims where obesity exists, a claim averages 81.3 percent more paid losses and experienced 80 percent more lost time. The American Medical Association recently reclassified obesity as a treatable disease, which may increase claim costs.

In addition, closely watch cases where doctors prescribe prescription drugs such as opioids. If an employee becomes addicted, you will likely incur the costs of a detox program.

What’s important to know about your experience modification (ex mod) factor?

An employer’s ex mod factor is determined by a formula that compares claims dollars to audited payroll on a rolling three-year policy basis. When actual losses are less than expected losses, the employer has a lower ex mod and thus lower premiums. Ex mods are calculated based on data valued as of six months following policy expiration. The best thing you can do for your ex mod is to not have claims. Create a culture of safety.

Ultimately, workers’ compensation claims are about people. You can best manage costs by going beyond monitoring the claims process to understanding employee concerns.

Kimaili “Ken” Davis, ARM, is assistant vice president at Momentous Insurance Brokerage, Inc. Reach him at (818) 453-9645 or

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When property owners start new construction or a building addition, they should insure against certain risks, such as fire, theft, vandalism, earthquake or flood.

“Most commercial property policies exclude property under construction. That is why it is important to obtain a builder’s risk policy,” says Carla Cave, assistant vice president at Momentous Insurance Brokerage, Inc. “This coverage should be put into place before the project starts and before any material is in transit to the site.”

Smart Business spoke with Cave about what you need to know about builder’s risk policies.

How does insurance coverage during construction work?

Builder’s risk is coverage for property under construction, which can include building materials, supplies, foundations, site preparation, temporary structures (e.g. scaffolding) and soft costs. Soft costs are general contractor’s administrative costs, permit fees, insurance, state taxes and fees, loan interest, etc.

If adding to an existing building, make sure the existing structure is included in the total insured costs on the policy.

You can occasionally add a course of construction endorsement to your homeowner’s policy if the cost is nominal — approximately 10 percent of the dwelling value. It also depends on the kind of construction.  

If your company is leasing a location and intends to do improvements and betterments, a builder’s risk policy would be needed. The building owner will ask for proof of coverage if the tenant is contractually responsible for such improvements.

What if you don’t have coverage when construction starts?

Then it’s much harder to get the policy — and sometimes a little more expensive. The carrier might inspect the site to see how far you are, and may put on exclusions.

Who buys the coverage? What does it cost?

It depends. The general contractor, property owner or custom builder could buy the coverage. If the general contractor puts the policy into place, coverage should include the property owner as an additional named insured. However, the owner has no control over the policy, even though the contractor will pass along the cost to the owner.

Insurance carriers underwrite the general contractor, typically asking for three years of claims history. If you don’t have a general contractor or have one that poses an issue, carriers might surcharge the policy.

The cost depends on the scope of work or budget. For example, a $1.3 million home had $2.2 million of renovations, totaling $3.5 million insured value, generating a premium of $12,500.  Premiums can increase during the policy if changes are made to the original plans, the renovation uncovers problems or if the project is delayed.

What are some important items to check on your builder’s risk policy?

If increasing the square footage of an original structure, add the existing structure to the policy. Make sure the structure is valued at replacement cost value, not actual cash value. An actual cash value policy factors in depreciation, which could be detrimental if a loss occurs.

Check that your soft cost limit is sufficient, and padded enough to account for problems. If something happens to delay or set back the project, all the project fees will increase.

The transit limit on the policy needs to be adequate, especially if it’s a large project. For example, a high-end office building in Beverly Hills may have granite, copper and high-end fixtures, which all must be transported. You don’t want a $200,000 limit when $500,000 worth of materials are on the road.

Permits will be required to build or renovate per city/county requirements. This is why ordinance or law coverage needs to be included. If a one-year project is vandalized or burns down after six months of construction, the ordinance and laws may have changed.

Off-premises coverage is needed for building materials that may be stored at a warehouse or staging area. Review this limit to make sure it is adequate.

Earthquake and flood can occasionally be included in the builder’s risk policy. If not, it’s recommended that you purchase a separate policy.

Carla Cave is an assistant vice president at Momentous Insurance Brokerage, Inc. Reach her at (818) 574-0989 or

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Open enrollment is when employees review their current benefit elections and compare them to all the options offered by their employer. It can include medical, dental, vision, and ancillary products like supplemental life, long-term care and disability.

“Some employers are unenthusiastic about open enrollment since employees are pulled out for mandatory meetings, but it alleviates a lot of issues during the year for HR,” says Marifel Divinsky, an account executive in the Employee Benefits department at Momentous Insurance Brokerage, Inc. “It’s a time for both the employer and employee to work together.”

Smart Business spoke with Divinsky about best practices for open enrollment that will minimize administration headaches.

Is it helpful to have open enrollment early?

Yes. This strategy usually begins with reviewing the entire benefits plan design and premiums 90 to 120 days prior to the renewal date. The employer works with its broker to review current data from its incumbent carrier and competitive quotes from additional carriers. Carriers are trying to get renewal notices out earlier because the Affordable Care Act requires employers to give notice with a Summary of Benefits Coverage at least 60 days in advance of changes.

The employer should have open enrollment during the month prior to the renewal date. Although not mandatory, open enrollment re-educates employees about benefits and any rate changes, even if the plan structure stays the same. Also, employers need time to prepare communication pieces to notify their active eligible employees, employees who are on leave and COBRA/Cal COBRA participants about upcoming changes. Once open enrollment is complete, employee changes are communicated to the carriers, and fresh ID cards can be generated as needed.

What can employees change during open enrollment?

Employees can make changes to their current benefits elections — add or remove eligible dependents and change plans, from HMO to PPO, or vice versa. They aren’t allowed to make any changes during the policy year, unless they experience one of the following qualifying events:

  • A change in legal marital status, including marriage, death of a spouse, divorce, legal separation and annulment.
  • A change in the number of dependents, including birth, adoption, death and placement for adoption.
  • A change in employment status of the employee, or the employee’s or retiree’s spouse or dependent, including termination or commencement of employment.
  • A dependent ceasing to satisfy eligibility requirements for coverage due to attainment of age, student status or marital status.

Employees are responsible to notify employers of a qualifying event within 30 days of the event. Otherwise, they might need to wait until the next open enrollment period.

If employees understand their benefits, how does that help the company?

When employees understand their benefits, they make good decisions. This helps prevent administrative problems and manage how employees access benefits and deal with billing issues. Employee satisfaction and better use of the plan can improve productivity in the workforce. In addition, benefits education lends itself to an appreciation of the benefits offered by the employer as part of the overall compensation. Ultimately, good benefits help employers retain and attract talent.

How can employers encourage employees to participate in open enrollment? 

Use education and communication, such as posters, weekly emails, or online tools and resources from the carrier. They also can work with their insurance carriers and broker to schedule a mandatory enrollment meeting to help employees understand what benefits are offered and how they work.

However, some employees don’t like discussing their benefits in a group. They need to meet with the broker one-on-one or call directly. Sometimes brokers host quarterly question-and-answer sessions, which may alleviate claim issues and save time. Brokers have great relationships with carriers and can help expedite solutions.

Marifel Divinsky is an account Executive in Employee Benefits at Momentous Insurance Brokerage, Inc. Reach her at (818) 933-2738 or

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No matter what type or size of a business, health care tends to be one of the leading employer costs. Although the Affordable Care Act (ACA) was intended to reduce costs, businesses are finding themselves on the receiving end of double-digit rate increases each year.

“Because of these hefty increases, employers are searching for more creative ways to reduce costs, while ensuring their benefits package remains competitive in the employment sector,” says Mary Policky, assistant vice president at Momentous Insurance Brokerage, Inc.

Smart Business spoke with Policky about how to reduce or restructure health benefits offerings in tough times.

When should a company consider reducing or restructuring benefits?

First, they should review their policies at the beginning of each fiscal year to determine a budget dedicated to the employee benefit package.

Then, they should do a mid-year plan review, which is also a good time to re-educate employees on important benefits available to them, such as various types of preventative care, which may be covered at no cost to the employee.

Lastly, review policies near open enrollment. Typically, the carrier releases renewal rates 60 to 90 days prior to the plan expiration date. That’s the time to shop around and research opportunities with other carriers, as well as alternate plans with the current carrier.

What’s the first step to figuring out where to make cuts or restructure?

A key factor is determining how much you want to spend. The challenge is how to significantly reduce the premium without sending employees into a tailspin from extreme changes, such as increasing deductibles and copays, which inevitably raise financial concern. Additionally, it’s a good idea to conduct employee surveys to determine their areas of concern, such as office visit copays, in-network doctors, prescription drugs, etc.

It’s also beneficial to have your broker provide benchmark information to see where you are in the industry, and where your competition is. More and more, employees are seeing that medical benefits are a vital part of their total compensation package, and will often consider a reduction in salary if the company offers comprehensive plans.

Generally, what low-hanging fruit can businesses look at first?

In addition to the deductible and copays, they should review the provider network. A company with 30 employees enrolled in an HMO plan typically spends $18,000 per month. By changing to a limited network, the premium reduces to $13,000 a month — a 28 percent savings. You can use disruption reports to gauge how many current doctors are in a new limited network.

Many employers are moving toward consumer-driven plans, such as health savings accounts (HSA) or health reimbursement arrangements (HRA). These plans allow employers to give each employee a fixed dollar amount to choose how they want to spend it on medical expenses. These tax-advantaged plans result in a lower premium and less rich benefits. However, a portion of the premium cost savings can be given back to employees to use for deductibles/copays. Also, with cost decisions in the hands of employees, the onus is on them to make better health decisions.

But it’s not always about reducing benefits. Adding wellness or disease management programs help create a healthier workforce and reduce premium increases. 

What’s the best way to communicate to employees?

Employers often underestimate the need for clear communication and making sure that employees truly understand their benefits. Make time for mid-year reviews, webinars, conference calls and/or payroll stuffers. If you must raise rates, inform employees as soon as possible. Also, inform employees how much of the increase the employer is absorbing. A great way to convey this is through benefits statements, which show the total cost of benefits, and how much the employer is contributing. 

Health care reform is just one of the many reasons to have a broker help navigate constant changes in the marketplace and tailor a plan to fit the company’s needs.

Mary Policky is an assistant vice president at Momentous Insurance Brokerage, Inc. Reach her at (818) 574-0426 or

Blog: Get more information on employee benefits and other important insurance topics at

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An additional insured endorsement is an amendment to the named insured’s policy, usually the general liability policy, that extends coverage under the terms of the policy to another entity.

“This is usually required in a contract where company A needs to provide insurance coverage to company B, so company B enjoys protection from a new risk that arises out of company A’s conduct or operations,” says Shantih M. Charlton, CIC, CISR, senior account executive at Momentous Insurance Brokerage, Inc.

Smart Business spoke with Charlton about why you need additional insured endorsements from the companies you work with, and why you may need to provide them.

What are some examples of when an additional insured endorsement is needed?

A building owner/landlord may require a tenant to name the owner/landlord as an additional insured on the tenant’s insurance policies. If there is an accident or loss on the rented premises, such as a slip, trip or fall, the tenant’s insurance coverage can respond to the claim.

Another example would be a general contractor requiring subcontractors to name it and the owner as additional insureds on the subcontractor’s policies. Then, the subcontractor’s insurance protects the general contractor and owner if someone sues based on an accident arising from the work of the subcontractor.

Also, product manufacturers may cover its sellers as additional insureds. In these cases, the retailers are better protected from claims arising from products they sell.

How is additional insured status provided?

A certificate and endorsement are both required to provide additional insured status. The carrier needs to issue the endorsement, which is part of the policy. If you receive a certificate stating that additional insured status applies but there is no endorsement attached, request a copy of the actual endorsement or policy wording.

What is the cost to add this endorsement?

It might already be included in the policy premium, or it could cost $100 to $500 extra. The cost of adding an additional insured to a liability insurance policy is generally low, as compared to the costs of the original premium.

If you get a certificate from someone with the additional insured endorsement, do you still need your own insurance?

Yes. Additional insured status doesn’t mean you don’t need insurance. It only means the company receiving the additional insured status has insurance for the other company’s negligence. So if company A is an additional insured on company B’s policy, it is covered if company B’s negligence causes a claim and company A is named in a resulting lawsuit. If that same claim was actually due to company A’s negligence, or if company B’s insurance limits were not adequate, company A would need its own policy to protect its interests.

Is an additional insured endorsement the same thing as a named insured?

No. A named insured is the person designated in the policy as the insured. Additional insured status does not give the same rights under the policy terms as a ‘named insured’ or ‘insured.’

What should you keep in mind when entering into an agreement with another business?

Whenever your business enters into an agreement with another business, follow these general principals:

•  Never assume the other business has liability coverage. Obtain a certificate of insurance or copy of their policy.

•  Review both the contract and endorsement with legal and insurance representatives. Each situation presents unique risks, and contract wording and policy forms can vary greatly.

•  Understand what your additional insured coverage status covers. Consult with your insurance adviser to better understand how this affects your business.

Shantih M. Charlton, CIC, CISR, is a senior account executive at Momentous Insurance Brokerage, Inc. Reach her at (818) 933-9860 or

Blog: Get more information on this and other important insurance topics at the Momentous Insurance blog.

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In this day and age, insurance is a very important line item for businesses. And you don’t want a broker who is unable to deliver results.

Managing Director David Toth, of Momentous Insurance Brokerage, Inc., says it’s critical for your insurance agent or broker to be familiar with your specific industry. If you make widgets, the broker should have experience with manufacturers. If you’re running a hospital, the broker needs experience in the health care industry.

“Experience and past performance of underwriting the business successfully is key,” he says. “You don’t want to be a guinea pig.”

Smart Business spoke with Toth about how to vet and ensure good service from your insurance broker.

What should you be looking for and asking about when vetting a new agent?

Use the vetting process to make sure you have a broker who understands your business, is responsive and shows flexibility. For example, in the entertainment field, you need special insurance enhancements and carefully crafted policy language to ensure the broadest coverage possible. You also need a broker who is capable of adhering to your wishes — it’s not how the broker wants it, it’s how the client wants it.

Ask for referrals, which most brokers are more than willing to share, rather than depending solely on a firm’s website. Also take time to meet the key people in the firm.

Inquire thoroughly about what insurance markets are available, because the more competition the broker can foster for your insurance, the better your program. In addition, inquire whether people from the brokerage sit on any of the governing boards of the carriers they represent, as this means they have influence on policy decisions and/or claims procedures.

One more point of qualification to ask a new broker is: What limit of errors and omissions insurance do you carry? If the brokerage only carries $1 million, is this enough if a broker’s mistake results in a loss to your business? Keep in mind this is the limit they carry for all clients in the firm.

Are there ways to tell if an agent provides good service?

It depends on whom you ask. Some clients might place responsiveness at the top of the list, while others need to be kept abreast of changes in the industry, including trends with insurance prices. So, for example, is the agent sharing the upcoming changes with the Patient Protection and Affordable Care Act? Has the brokerage advised you that if you’re in California your workers’ compensation rates might increase because of changes with the insurance code? Do you already know that with insurance carriers exiting the California management liability market, those lines could increase dramatically?

Other service concerns are:

•  How does the agent keep you up to date on the claims process? Does he or she regularly follow up?

•  What does the broker do in terms of your premium rates? Is he or she doing all he or she can to obtain the best rates for you?

•  Is the agent delivering the renewal two weeks prior to renewal, or waiting until the last minute? Do you feel as if you are part of the process and have control?

• How available is the agent? If it’s important to you on a Saturday, it should be important to the broker on a Saturday.

How do you know whether to stay with your current broker or to move on?

Loyalty is a great thing, but it doesn’t hurt to have another set of eyes. Ask an independent insurance broker to review your insurance program — usually at no cost — and make sure you don’t have duplicate coverage or coverage gaps, while double-checking for extra benefits and/or cost savings. And if someone else can’t improve upon your insurance policies significantly, it confirms that your current broker is doing a good job.

David Toth is managing director at Momentous Insurance Brokerage, Inc. Reach him at (818) 933-2721 or

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All employers face a potential loss because of the hiring, employment and potential firing of employees. Therefore, employers should purchase employment practices liability (EPL) insurance to protect themselves against damages from workplace events and allegations of wrongdoing by employees.

Today, claims are increasing, the market is hardening and premiums are going up for this type of coverage, says Stephen Stromsborg, assistant vice president at Momentous Insurance Brokerage, Inc.

“It’s important for businesses and homeowners with domestic staff to partner with a broker who can represent them well to insurance companies and get them as many options as possible,” he says.

Smart Business spoke with Stromsborg about how EPL policies work and the market trends that make this type of coverage advantageous.

What claims does EPL insurance cover?

It covers such things as wrongful termination, harassment, discrimination, defamation, unfair hiring and firing practices, failure to promote, emotional distress, retaliation and invasion of privacy.

Who should consider EPL coverage?

Both businesses and households that employ domestic staff should strongly consider purchasing the coverage.

Businesses’ general liability policies either specifically exclude employment-related claims or are very restrictive and not adequate enough to respond to EPL matters. In particular, companies with large employee headcounts and high turnover are more susceptible.

As for households employing domestic staff, a homeowner’s policy won’t protect against allegations of wrongful termination or sexual harassment by domestic employees like nannies, gardeners and estate managers.

Any employee can allege he or she was wrongly terminated or harassed while employed, and an employer has a legal duty to respond, regardless of the claim’s merit. Even if it’s dismissed, not litigated or doesn’t go to trial, the high-cost of defense and/or settlement can have a significant impact on a company’s or family’s financial stability and reputation, especially without insurance.

What is impacting this coverage today?

Employment-related charges in 2012 were 20 percent higher than in 2007, according to the Equal Employment Opportunity Commission (EEOC). Many employment practices claims go straight to lawsuits and are not reported to the EEOC, so this number could be even higher. Unemployment rates are one contributing factor; California is tied now for the highest unemployment rate at 9.8 percent. With rising unemployment comes the decision to layoff employees or risk being put out of business. Unfortunately, workforce cuts can lead to disgruntled former employees suing for allegations of wrongful termination.

With the increased claim volume, insurance companies have been paying out more for both defense and settlements in the EPL arena. This results in most insurance companies transferring additional renewal and new business premium costs to employers. Companies are also increasing EPL policyholders’ retentions and deductibles. Several EPL coverages have been restricted, so it’s important to have an open dialog. The broker needs to articulate what is and is not covered in these policies for clear understanding on both ends.

What can be done to mitigate EPL losses?

Important preventative measures are:

• Maintaining adequate compliance with employment laws in the workplace.

• Establishing formal harassment training with employees.

Employers also can reduce turnover, which has a direct impact on claims.

Implementing compliance and harassment training will convey a proactive risk management work environment to underwriters, and working with a broker who can articulate those measures can lead to insurance companies being more comfortable in providing coverage.

Who can help with coverage decisions?

EPL is a very tough market. With premium increases on the rise, employers should partner with a broker who has the expertise and marketplace relationships to place the appropriate coverage.

Stephen Stromsborg is assistant vice president at Momentous Insurance Brokerage, Inc. Reach him at (818) 933-2722 or

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General liability policies specifically exclude claims arising from professional services, so any business engaged in such services should consider a professional liability policy to properly protect their business. However, business owners may not realize that not all errors and omissions (E&O) policy forms are created equal and there is no such thing as a “standard” policy. The coverage is highly specialized and it is important to work with a broker who understands your industry and how to tailor such policies to suit your needs.

Smart Business spoke with Steve Rivera, an assistant vice president at Momentous Insurance Brokerage, Inc., who shared some insider tips to help businesses evaluate whether their E&O coverage is protecting them correctly.

What is E&O insurance?

E&O insurance, more commonly referred to as professional liability or malpractice insurance, covers your company, or you individually, in the event that a client holds you responsible for an error or omission in the service you provided, or failed to provide. In addition, E&O insurance can also protect your business from allegations of libel and slander.

Who needs this protection?

Anyone providing a professional service, for example doctors, lawyers, real estate and insurance agents, accountants, software designers, educators, architects, engineers, contractors and consultants.

What is important to look out for?

Making sure that the services you render are covered by the policy. If you are like most businesses, you are constantly evolving and finding new ways to service your existing client base or attract new clients. Have you recently rolled out a new service offering? If so, have you contacted your insurance broker to notify them and asked how it may impact your E&O policy? If not, you are running the risk of operating with a gap in coverage on your E&O policy and could experience unforeseen expenses because of an uncovered claim, which can severely hinder your business or even worse, put you out of business.

How are E&O policies responding to website and social media activities?

If your company has a website or a social media presence, it is important to speak with your broker about adding coverage on your E&O policy for these exposures. Many policies exclude Web-related activities, leaving you unprotected against claims. If your company transacts sales over your company website, you are liable for client information, such as credit card numbers, in the event your website is hacked and personal information is accessed.

Why is it important to know if your defense costs are inside your limit of coverage?

Most E&O policies include coverage for defense costs, which pays for legal and administrative expenses associated with defending a claim, regardless if the suits are baseless or contain merit. The defense costs can be staggering and can erode your policy limit, which may mean that if limits aren’t sufficient, you pay out of pocket. Let’s say, for example, that the total losses to be paid as a result of a covered claim are $1 million in damages and $300,000 defense costs, for a total claim of $1.3 million. If you have a $1 million dollar policy limit, and defense is inside that limit, then $1 million is the most the insurer will pay and anything above that limit is your responsibility. It is advantageous to the policyholder to seek defense costs coverage outside the policy limit, whenever available.

How can you tell if E&O limits are adequate for a business operation?

There are a few ways to do so, including evaluating the company’s revenues and benchmarking against peer institutions. Unfortunately, there is no magic formula and there is no way to predict just how big an E&O claim can be, so the best thing a business owner can do is to work with a broker that specializes in this type of coverage.

Does E&O cover international operations?

More and more businesses are able to service clients all over the world, and it is imperative that their policy’s coverage territory is defined as worldwide. Not all policies will come standard with worldwide coverage.

Steve Rivera, CLCS, is assistant vice president at Momentous Insurance Brokerage, Inc. Reach him at (818) 574-0894 or

Insights Business Insurance is brought to you by Momentous Insurance Brokerage, Inc.



Published in Los Angeles