Tony Falcone

Sunday, 24 July 2005 20:00

Liability insurance

Here it comes, every business owner’s nightmare.

You watched it happen from 20 feet away. Mike just finished mopping the floor. The kid was actually on his way back from the closet with the yellow DANGER — WET FLOOR sign. You remember thinking how the little black stick figure with his feet shooting forward and into the air was so surprisingly similar to the woman as she went down on the slick linoleum.

Well, you suppose, that image had to come from somewhere. The real difference, however, was that while the little guy with the big, black, round head was forever perched between heaven and Earth, this poor woman went down. Hard.

Your employees rushed to her aid, as did you. It was obvious that she was in pain. Your guilt kicked into overdrive as your concern for the woman was interrupted by thoughts of ambulances and lawyers.

Mistakes happen. Being in business is a risk. That’s why liability insurance exists. Liability insurance is important for a number of reasons, but the most important one is that all organizations face liability loss exposures, including yours.

This article takes a very basic look at this type of insurance — a starting point so that you can speak intelligently with an independent insurance agent about your needs.

Legal liability — the abridged version
Legal liability can be imposed by civil law, criminal law or both. Civil law provides a means to settle disputes between parties, whereas criminal law imposes penalties for wrongs against society.

Liability insurance responds to liability imposed by civil law.

Commercial general liability provides an option Fortunately, most property and casualty insurance carriers have the ability to offer you a product that will provide coverage for liability losses.

Called commercial general liability (CGL), this robust contract provides coverage primarily for liability losses arising from premises, operations, products and completed operations.

Briefly defined:

  • Premises liability — Exposure to liability for injury or damage due to the ownership, occupancy or use of premises. This is the exposure you experience when a customer slips and injures herself on your wet floor.

  • Operations liability — Exposure to liability for injury or damage due to activities in addition to those referenced under premises liability. For example, if you are a plumbing contractor and one of your employees accidentally sets a customer’s house on fire while soldering pipes, that’s operations liability.
  • Products liability — Exposure to liability for injury or damage due to products sold or distributed. For example, if you manufacture a hand tool that ultimately causes bodily injury to a consumer, that’s products liability.

  • Completed operations liability — Exposure to liability for injury or damage due to work completed. For example, if you build a pole barn for a customer that collapses after it is put to use by the customer, that’s completed operations liability.

Don’t forget to read the contract As with any insurance policy, not everything is covered. The following are a few of the more noteworthy CGL exclusions.

  • Expected or intended injury — Of course, if you intentionally injure someone, you cannot look to your insurance policy for protection.

  • Workers’ compensation/employers liability — These exclusions deal with injuries to any employee of the insured. You can purchase workers’ compensation insurance from private insurance carriers (and in some states, from the government). An employer’s liability coverage form is also available from insurance carriers in some states.

No harm, no foul
All’s well that ends well. The woman got up and walked without assistance. She seemed more embarrassed than angry.

She left with an apology and a free gift certificate — no talk of courtrooms or how she would turn your office into her sunroom. No harm, no foul. Note to self: Call agent, review liability policy.

Deep, cleansing breath and back to work.

Reach Tony Falcone, manager, underwriting practices group, at (330) 887-0133 or tonyfalcone@westfieldgrp.com. In business for more than 156 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product it offers is peace of mind and its promise of protection is supported by a commitment to service excellence. For more information, visit www.westfieldinsurance.com.

Wednesday, 29 June 2005 20:00

Influencing insurance premiums

You've worked diligently with your insurance agent to analyze your insurance needs and the best way to meet those needs. You're confident you've selected the right protection for your business and the right insurance company to partner with.

But are you getting that protection at the best value? Believe it or not, you play a big role in determining the premium you pay for your coverage.

When it comes down to it, the insurance company's underwriter (the person who makes the decision about insuring a risk) is a major factor in determining the price of your insurance policy. In the most simplistic view, the underwriter either accepts or rejects the application.

But there's more to it. The underwriter also determines the price to charge if the application is accepted. And although much of the pricing equation is decided by the company's actuaries, underwriters still wield rather large pens when it comes to determining the discretionary credits or debits that can be applied to a policy.

The amount of credit or debit varies among insurance companies and even by state. In some cases, an underwriter could apply a credit of up to 50 percent. So what influences an underwriter's pricing decision? A variety of things, including the existence and control of common property hazards.

In the insurance business, a hazard is defined as something that increases the chance of loss. There are common hazards that exist in most businesses that you should be aware of. And if they're so common, they'll probably cause the underwriter to raise your insurance premiums, right? Perhaps.

But you have the ability to control these hazards, and in the process make underwriters more apt to apply credits and reduce your premium.

Common hazards are easy to control

Let's look at a few common hazards and what you can do to control them.

* Management attitude. Your attitude is one of the most important common hazards. Simply put, if you invest in private fire protection, are attentive to business needs (preventive maintenance on machinery) and have an overall positive attitude about safety, the underwriter will consider this common hazard controlled.

* Heating systems. The underwriter will want to know the equipment has been properly installed and maintained (licensed HVAC professionals preferred) and that you maintain proper insulation and adequate clearance from combustible materials.

* Electrical systems. Make sure the service (wires, breakers and fuses) is sufficient for the electrical load and is updated as you add equipment and make other changes.

* Smoking. Smoking is a significant cause of accidental fires. At the very least, smoking should be restricted to designated areas, with "no smoking" signs posted in nondesignated areas. Provide self-closing, fire-resistant ashtrays in designated areas. Even better, outlaw smoking completely, a move sure to make the underwriter happy.

* Housekeeping. Something as elementary as housekeeping makes a big difference to an underwriter. Why? Underwriters are trained to equate housekeeping with management attitude. If your place is a mess, most underwriters believe your management style might be, too. Dispose of oily rags and other refuse. Sweep up at the end of the day. Empty waste cans and other trash receptacles on a regular basis. Polish the floor and clean the bathroom. Simple stuff, but it could save you money.

So, what's the moral of the story? You can control your insurance premiums. Now go buy that fire extinguisher and sweep up the shop.

Reach Tony Falcone, manager, underwriting practices group, at (330) 887-0133 or tonyfalcone@westfieldgrp.com. In business for more than 156 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product it offers is peace of mind and our promise of protection is supported by a commitment to service excellence. For more information, visit www.westfieldinsurance.com.

Sunday, 24 April 2005 20:00

Property coverage basics

It might be a building, office furniture, fixtures or equipment. It might even be business records or valuable documents.

"It" is property -- and almost all business owners protect it with insurance. But when it comes to insurance, what do we really mean when we talk about property?

* Real property. Land and whatever is affixed to the land. Not many insurance policies use the term real property; most policies cover specified types of real property, such as buildings.

* Personal property. All property other than real property. Insurance professionals commonly refer to personal property usually situated in a building as "contents."

* Tangible property. Property that can be touched (includes real and personal property). Most property insurance policies cover only tangible property.

* Intangible property. Property that cannot be touched because it has no physical existence (e.g. patents, copyrights and trademarks). Most property insurance policies do not cover intangible property.

Typically, property is covered by one section of a larger policy (often referred to as a package policy) that also covers liability and commercial automobiles. The policy's property coverage portion contains several documents, including the declarations page, coverage forms, causes-of-loss forms, conditions and applicable endorsements.

Declarations page

The declarations page serves as a checklist of sorts, providing a description of your protection at a glance. This is the starting point for any review of your policy.

* Description of the property insured

* Kinds and amounts of coverage provided, as well as the selected causes-of-loss form

* List of mortgagees, if any

* Deductible amount

* List of property coverage forms and endorsements

* Applicable coinsurance percentage

* Optional coverages

Property coverage forms -- what's covered, what's not

Property coverage forms contain an insuring agreement and include provisions and definitions that apply to only property. They also describe the property covered and not covered, and set forth additional coverages and coverage extensions.

Some types of property may be excluded because they might be illegal to insure, such as narcotics. Some property, such as building foundations, may not be subject to loss by the perils insured against. Finally, some property might be better insured under other coverage forms.

The coinsurance clause

Look for the coinsurance clause in the conditions section of the property coverage form. This clause requires you to carry insurance equal to at least a specified percentage of the actual cash value of the property insured.

If you carry an insurance amount equal to or greater than the required percentage, the insurer will pay covered losses in full (less the deductible) up to the limit of insurance. If you carry less than the required percentage, loss payments will be reduced proportionately.

You can suspend the coinsurance clause with an option called "agreed value."

Understanding the causes-of-loss form

Your causes-of-loss forms identify the perils covered in a contemporary commercial property policy. There are three types -- basic, broad and special.

The special form is the most common in the marketplace today, primarily because it protects against the most perils. However, one peril not included in any of the causes-of-loss forms is flood. Flood insurance can be purchased from private insurance companies or from the National Flood Insurance Program directly.

Tony Falcone, manager, underwriting practices group, can be reached at (330) 887-0133 or tonyfalcone@westfieldgrp.com. In business for more than 156 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product we offer is peace of mind and our promise of protection is supported by a commitment to service excellence. For more information, visit www.westfieldinsurance.com.