Most business owners understand the importance of insuring their physical property.

But too many are unaware of the need for insurance to cover losses resulting from that physical damage, such as lost revenue when mechanical equipment fails, says Craig Hassinger, president of SeibertKeck.

“In a business, people will buy property insurance to cover the building, its contents and those types of things and assume they are covered, but that coverage does not includes equipment breakdowns, electrical arcing and other things that can happen to the machines that run the business,” says Hassinger. “And if a critical piece of equipment goes down and you are not covered for those losses, you could be out of business.”

Smart Business spoke with Hassinger about how to ensure that your business survives an equipment failure.

What is equipment breakdown insurance?

The five main items that are covered under equipment breakdown insurance are electrical; equipment, air and refrigeration; equipment, boiler and pressure vessels; computers and communication equipment; and mechanical.

Where should a business owner begin when considering this insurance?

First, find an agent who is knowledgeable about this insurance and doesn’t just throw it in as an afterthought. It’s complicated, and, too often, it is overlooked, or not written properly, because agents aren’t comfortable with it. Business owners should rely on an expert to design the program.

Once you’ve identified that person, he or she will look at the overall property profile and, based on the building and content limits, look at what kind of machinery the business relies on. Is there production machinery? Are the machines redundant? What kind of protections do they have?  What kind of maintenance programs? Have you done thermal imaging studies? What are you doing to prevent a loss in the first place? Does the business have a pressure vessel — a boiler?

Everyone understands the risk of a boiler exploding, but they don’t understand that a business could have electrical arcing that could take down a call center, resulting in the loss of thousands of dollars in repair costs and lost sales. The physical damage to that equipment may be covered under property insurance, but unless you have equipment breakdown insurance, costs such as lost business income and revenue and lost production time would not be covered.

People often think if equipment breaks down it’s uncovered because it is a wear and tear issue. But while wear and tear is not a covered peril, a sudden, accidental breakdown is. And there can be really large dollar amounts involved here.

What kinds of businesses should consider equipment breakdown insurance?

Every business runs on some type of electrical apparatus, such as a computer, so every business could benefit from this coverage.

A lot of times we see property owners who don’t have coverage because they are leasing the space out. But if an electrical arc blows out the air conditioning or heating of an office building and you don’t have coverage for temporary power and to expedite the repair process, you will have angry tenants not paying the rent.

This coverage is becoming more prevalent, but we estimate that half of the companies that need it still don’t have it, or they have base form coverage that might not cover things such as lost revenue or contingent business income. Take, for example, a manufacturer that relies on another company to make half its product and uses that product to put together its own product. If that supplier has an equipment breakdown, it could break down the whole chain, and the manufacturer is no longer able to produce its product. However, there is a way to write the insurance that covers that contingency.

What would you say to business owners who say they can’t afford this type of insurance?

A business is more likely to have this type of loss than a fire, and no business would go without fire insurance. A knowledgeable agent can change deductibles and move coverages around and make it affordable. This is not an exceedingly expensive coverage, but a resulting incident could be.

If you think about a rooftop unit on a mall that is cooling the entire place, the compressor alone can cost $20,000 to $30,000. Just to repair the physical damage can be brutal, but then there is the service interruption, lost revenue and lost rent.

Another example is medical centers that either don’t have coverage or don’t have it written properly. If there is a sudden power spike that blows an MRI machine; MRIs still have to be done, only now they’re going to be done somewhere else. And without insurance, you lose the ability to get that revenue back. If it takes three months to get parts from overseas and get it rebuilt, you could be out of business. But if your policy is designed correctly, those resultant losses will be covered.

The lost income and expedited expenses of getting the equipment repaired quickly can be costly. And the extra expense of sending your customers elsewhere to get the job done is something you have to do to keep your clients happy in the interim, because if you don’t, they’ll go somewhere else permanently.

Having equipment breakdown insurance can help ensure you cover those losses to get back into business as quickly as possible.

Craig Hassinger is president of SeibertKeck. Reach him at (330) 865-6237 or chassinger@seibertkeck.com.

Published in Akron/Canton

As a business leader, you go to great extents to protect your business. But what are you doing to protect your personal assets?

Too many times, business owners can cite chapter and verse of their business insurance coverage but are at a loss when it comes to their personal liability, says Christine Kleintop, personal lines producer at SeibertKeck.

“Everything that you own, your assets, your future earnings, everything that you want to protect, could be at risk if you are sued,” says Kleintop. “Everyone wants to protect their belongings, but liability is the bigger exposure.”

Smart Business spoke with Kleintop about how high-net-worth individuals can use insurance to protect their personal assets should they be sued.

Where should you start with coverage?

Start at the most basic level, which is auto, home and any specialty item policies, such as a boat owner’s policy or motorcycle policy. Look at the basic limit of liability. And never go with the state minimum, regardless of what your assets are — purchase no less than $300,000 to $500,000 of coverage as a starting point.

What is the next step?

Move on to umbrella coverage. This coverage, which everyone should have, covers for losses above the limits of the underlying policies. If you can get sued, you should have an umbrella. It picks up where the other policies leave off.

It gives you a higher dollar amount, but can also be broader than the underlying policies. For example, you could be sued for slander. Your homeowner’s policy may not cover that, but the umbrella may pick it up.

How much coverage do you need?

There is no right amount of coverage. For someone who doesn’t experience an adverse event, $1 million in coverage may be enough. But someone who is texting and hits a school bus may not have purchased enough coverage.

A good starting point is to look at your assets, your exposure and your future earnings, and consider how much risk you are comfortable with and how much risk you want to transfer. Are you very aggressive and willing to take on more risk, or are you more conservative and want to go with a safer bet by purchasing higher limits?

View the decision through the lens of how a lawsuit could affect not only you but your family. Some people may be risk-takers, but they don’t want to risk something that can affect their whole family.

Also, look for red flags that could put a target on you for a possible lawsuit. For example, if you own a pool or a dog, if you have teenagers on social websites or teenage drivers. Also at higher risk are highly visible people like coaches, business owners or politicians.

High-net-worth individuals have more to lose, but everybody has exposure, and anyone can be sued. So no matter the size of your exposure, it should be analyzed with your insurance broker.

How can having coverage with multiple agents negatively impact umbrella coverage?

We talk to business leaders all the time about their business insurance, but when you ask about their personal insurance, they are often unclear. Their spouse often takes care of that, and they are so busy protecting their business that they often can’t tell you where their personal insurance is, or what liability limits they carry.

For example, if someone has a home in Florida, that is a very tough market in which to get liability insurance, and if you can get it, the limits are sometimes very low. Now that person has different limits in two states through two agents, and if he or she has umbrella coverage, it doesn’t extend over all of those assets because the primary agent doesn’t even realize there is a policy with other agents.

The same holds true if someone buys a boat and gets coverage through the dealer but doesn’t tell the primary agent. It’s important to talk to your agent about all of your coverage to ensure that there aren’t any holes.

How often should you review your coverage?

It’s always good to regularly have that conversation and look at your policies because it might alert your agent to a gap in coverage. I always tell clients, ‘If you’re going to do anything different, call me. Don’t do anything until you call me.’ A good example is that what an insured calls a hobby may be a business by insurance definition.

That said, a lot of people are price shopping these days. That can lower your costs, but that’s not necessarily a good thing. Sometimes it’s better to pay a little more if you are with the right company with the right coverage. If you have great claims service, it may not be not worth moving to save $100.

What other areas of liability should people be aware of?

Another area is loss assessment. For example, if you are a member of a homeowner’s association and a claim occurs in a common area, each owner could be assessed for a portion of that loss. Depending on how many people there are and the size of the loss, your cost could be sizable.

In addition, if you employ an individual who is not employed through an agency, there is a good chance that you may be responsible for purchasing workers’ compensation coverage. In Ohio, if you pay someone more than $160 per quarter, say, to clean your house or mow your lawn, then you are responsible for contacting the workers’ compensation bureau and taking out workers’ compensation insurance on that person.

Although your insurance agent can’t sell you this insurance directly, consulting with that person can help you determine if this is a coverage you need to purchase.

Christine Kleintop is a personal lines producer at SeibertKeck. Reach her at ckleintop@seibertkeck.com.

Published in Akron/Canton

Many business owners think of their company as a tight-knit group and their employees as a family. That may be true in good times, but what happens when something goes wrong and an employee — or potential employee — sues you?

If you don’t have employment practices liability insurance, a lawsuit could put you out of business, says Cliff Baseler, vice president, Best Hoovler Insurance Services Inc., a SeibertKeck company.

“It is such a critical part of a commercial insurance program today that every company should have this coverage,” says Baseler. “It’s important coverage to round out property and casualty insurance. It doesn’t matter if you have one employee or 1,000 employees, it is a must, and the cost is relatively small in relation to the potential costs in the event of a lawsuit. Because it’s not a question of if you are going to have an EPLI claim, but when.”

Smart Business spoke with Baseler about what employment practices liability insurance covers and the risks of failing to have it.

What is EPLI and what does it cover?

EPLI is an insurance policy that provides employers with protection against claims of discrimination, wrongful termination, sexual harassment or other employment-related claims made by employees or potential employees.

Employers may see themselves as one big happy family, but happy families can be broken up when a company has a downturn and has to lay off employees. In an age of corporate downsizing and mergers, one of the biggest areas of employment practices claims is discrimination, be it sexual discrimination, racial discrimination or, the largest single driver today, age discrimination. The second biggest area of claims in this area is retaliatory claims, for example, when someone is a whistleblower.

When the first EPLI policies were offered, coverage was related to claims associated with the Americans with Disabilities Act and only large corporations carried these policies. Today, however, coverage is much more broad and it’s gotten to the point where even very small companies need to have it.

What steps can companies take to avoid EPLI claims?

All major insurance carriers have loss prevention consultant services. Businesses should take advantage of those services, because they can help your company be proactive in avoiding suits, providing best practices and loss prevention services. Some even offer a hotline where, if you’re in a sticky situation and don’t know how to handle it, you can call and talk to an attorney before you take action. For example, if you are going to fire someone, the attorney can advise you on what documents you need to have and what steps you need to take before doing so.

Your carrier can also help you set up your employee handbook with sexual harassment and discrimination policies outlining unacceptable behavior. Having those policies in place can go a long way toward helping you mitigate these types of claims.

If a company is doing everything right, and has these policies in place, why does it need this insurance?

Any company can be targeted for an EPLI lawsuit. And even if the company is innocent of any wrongdoing, it still has to defend itself against the charges of illegal employment practices. If you are accused of misconduct, you will need an attorney to defend you. The average cost to defend a simple EEOC discrimination claim starts at $25,000 to $35,000, and that’s for a dismissal. If the claim ends up in court, you could be looking at six figures or more.

In addition, these types of suits are more plentiful in this economy. As companies lay off employees, the frequency of claims for wrongful termination and discrimination has increased dramatically.

How would a potential employee have a claim against a company?

For example, if you have a potential employee who is 58 and very well qualified, and one who is 35 who is equally qualified, you can’t use age in your decision to hire. It’s amazing how many employers will have the discussion about the 58-year-old only being around for a few years before retiring, while the 35-year-old will probably be around a lot longer. If that potential employee learns of those discussions, and especially if they are documented, you may have a discrimination suit on your hands. This is where your insurance company’s loss prevention program can come into play to create policies to avoid this type of situation.

Another potential area of liability is if an employee leaves your company, is interviewing with another company, and someone at your company says negative things about the former employee. If that gets back to the employee, who finds out he or she didn’t get the job because of something someone at your company said, that can also result in a lawsuit.

How does third-party coverage work?

Third-party coverage is attached to your EPLI policy and covers accused wrongdoing outside your company. For example, if you have a salesperson who makes sexual advances to a client’s receptionist, and she sues your company for sexual harassment, that’s where third-party coverage would come into play.

Do EPLI policies cover prior acts?

In most cases, yes, but the caveat is that any known prior incidents and pending litigation are specifically excluded. Prior acts could be something that happened years ago, but you weren’t aware of the problem and no supervisor had been notified. But any known prior acts that might give rise to a claim would be excluded.

Cliff Baseler is vice president, Best Hoovler Insurance Services Inc., a SeibertKeck company. Reach him at cbaseler@bhmins.com or (614) 246-7475.

Published in Columbus

Many business owners think of their company as a tight-knit group and their employees as a family. That may be true in good times, but what happens when something goes wrong and an employee — or potential employee — sues you?

If you don’t have employment practices liability insurance, a lawsuit could put you out of business, says Cliff Baseler, vice president, Best Hoovler Insurance Services Inc., a SeibertKeck company.

“It is such a critical part of a commercial insurance program today that every company should have this coverage,” Baseler says. “It’s important coverage to round out property and casualty insurance. It doesn’t matter if you have one employee or 1,000 employees, it is a must, and the cost is relatively small in relation to the potential costs in the event of a lawsuit. Because it’s not a question of if you are going to have an EPLI claim, but when.”

Smart Business spoke with Baseler about what employment practices liability insurance covers and the risks of failing to have it.

What is EPLI and what does it cover?

EPLI is an insurance policy that provides employers with protection against claims of discrimination, wrongful termination, sexual harassment or other employment-related claims made by employees or potential employees.

Employers may see themselves as one big happy family, but happy families can be broken up when a company has a downturn and has to lay off employees. In an age of corporate downsizing and mergers, one of the biggest areas of employment practices claims is discrimination, be it sexual discrimination, racial discrimination or, the largest single driver today, age discrimination. The second biggest area of claims in this area is retaliatory claims, for example, when someone is a whistleblower.

When the first EPLI policies were offered, coverage was related to claims associated with the Americans with Disabilities Act and only large corporations carried these policies. Today, however, coverage is much more broad and it’s gotten to the point where even very small companies need to have it.

What steps can companies take to avoid EPLI claims?

All major insurance carriers have loss prevention consultant services. Businesses should take advantage of those services, because they can help your company be proactive in avoiding suits, providing best practices and loss prevention services. Some even offer a hotline where, if you’re in a sticky situation and don’t know how to handle it, you can call and talk to an attorney before you take action. For example, if you are going to fire someone, the attorney can advise you on what documents you need to have and what steps you need to take before doing so.

Your carrier can also help you set up your employee handbook with sexual harassment and discrimination policies outlining unacceptable behavior. Having those policies in place can go a long way toward helping you mitigate these types of claims.

If a company is doing everything right, and has these policies in place, why does it need this insurance?

Any company can be targeted for an EPLI lawsuit. And even if the company is innocent of any wrongdoing, it still has to defend itself against the charges of illegal employment practices. If you are accused of misconduct, you will need an attorney to defend you. The average cost to defend a simple EEOC discrimination claim starts at $25,000 to $35,000, and that’s for a dismissal. If the claim ends up in court, you could be looking at six figures or more.

In addition, these types of suits are more plentiful in this economy. As companies lay off employees, the frequency of claims for wrongful termination and discrimination has increased dramatically.

How would a potential employee have a claim against a company?

For example, if you have a potential employee who is 58 and very well qualified, and one who is 35 who is equally qualified, you can’t use age in your decision to hire. It’s amazing how many employers will have the discussion about the 58-year-old only being around for a few years before retiring, while the 35-year-old will probably be around a lot longer. If that potential employee learns of those discussions, and especially if they are documented, you may have a discrimination suit on your hands. This is where your insurance company’s loss prevention program can come into play to create policies to avoid this type of situation.

Another potential area of liability is if an employee leaves your company, is interviewing with another company, and someone at your company says negative things about the former employee. If that gets back to the employee, who finds out he or she didn’t get the job because of something someone at your company said, that can also result in a lawsuit.

How does third-party coverage work?

Third-party coverage is attached to your EPLI policy and covers accused wrongdoing outside your company. For example, if you have a salesperson who makes sexual advances to a client’s receptionist, and she sues your company for sexual harassment, that’s where third-party coverage would come into play.

Do EPLI policies cover prior acts?

In most cases, yes, but the caveat is that any known prior incidents and pending litigation are specifically excluded. Prior acts could be something that happened years ago, but you weren’t aware of the problem and no supervisor had been notified. But any known prior acts that might give rise to a claim would be excluded.

Cliff Baseler is vice president, Best Hoovler Insurance Services Inc., a SeibertKeck company. Reach him atcbaseler@bhmins.com or (614) 246-7475.

Published in Akron/Canton

Your insurance company provides benefits that most business owners don’t utilize, many of which could save you money on your property and casualty insurance premiums. Because these services are bundled into the cost of your policy, if you’re not taking advantage of them, you may actually be costing yourself money, says Craig Hassinger, president of SeibertKeck.

“Oftentimes, business owners don’t understand that there are valuable resources available to them that are built into the cost of the premium,” Hassinger says. “Because those costs cannot be carved out of the premium dollars, if you don’t use those services, you lose them.”

Smart Business spoke with Hassinger about services you can take advantage of for no additional cost, and how those services could actually save you money on insurance.

Why are so many business owners unaware of the services available to them from their insurance company?

In some cases, the agency is not taking the time to explain it properly. In others, the customer doesn’t have enough interest in the insurance-buying process to take advantage of it. Property and casualty premiums can be significantly less than health care costs, so some business owners may only want to meet with the broker once a year and spend a limited amount of time reviewing their property and casualty insurance program. But they are walking away from some real value-added services that insurance companies offer through their independent agent.

What kinds of services are often overlooked?

The majority of companies in the insurance industry offer loss control services to their customers. Loss control engineers will visit your business, meet with you and get to know your company. As a result, they can provide you with a list of services they can offer, such as life safety seminars, employee seminars and risk management services, all of which can help control your insurance costs, or even drive those costs down.

Employers should also take advantage of the insurance company’s website, which, 24 hours a day, seven days a week, for the entire term of the policy, provides access to information on topics such as safety, HR and other important information they may be paying for through an outside consultant.

How can a five-year claims report benefit a business?

Employers should ask for a five-year claim report from their independent agent. Look at your claims and identify any trends, any problems that are driving costs or that may position you to negotiate a lower premium. If your loss experience is better than average, then your premiums should be better than average.

Though insurance companies are in business to make a profit, it is possible to negotiate with them for a discount. However, too many employers don’t know that this information is available to them and that they can use it to have an impact on their premiums.

What other steps can businesses take to save money on insurance?

One simple solution is to review your deductibles and retentions and adjust those based on your risk appetite. The higher your retention or deductible, the lower the premium you are going to pay and the more exposure you accept as a company. And the more risk you are taking on, the more you will pay out for a claim.

It’s important to know what your deductibles are and what your return on investment is by adjusting these deductibles.

How can risk transfer agreements impact your costs?

You want to make certain subcontractors and vendors have the appropriate insurance coverage. Contractors should transfer risk to these groups if they are performing work on your behalf. Certificates of insurance with additional insured coverage can allow you to transfer the exposure to risk from your organization to these subcontractors and vendors.

With risk transfer agreements, you are transferring that risk to your subcontractors and vendors, which will reduce your claims activities and, ultimately, control your insurance costs. It’s a simple process, and that’s where you independent agent can bring value by assisting you in the risk transfer process.

How else can your relationship with your independent agent provide benefits?

Your independent agent should be more than just a buying agent for purchasing the insurance product. That person should bring a value service platform. And that is an educational process to understand what services are available to you and what reports are available to you. The independent agent should also be familiar with market conditions and be able to share with you the rate expectation for future years.

Also, don’t just renew the policy each year and forget about it until next year. It’s recommended that business owners meet with their independent agent in some capacity at least twice a year. The bigger the organization, the more often those meetings should take place, because the needs are greater.

Your relationship with your independent agent should include an ongoing service plan to review your entire program on a regular basis; it should not be a once-a-year project. You should be working with your independent agent year-round to help control costs and potentially reduce them, and to manage your losses. The relationship should be that of a trusted adviser, such as that with an attorney or an accountant. The independent agent should be part of that trusted adviser group, providing solid recommendations on how to manage your risks and control insurance costs.

Craig Hassinger is president of SeibertKeck. Reach him at (330) 865-6237 or chassinger@seibertkeck.com.

Published in Akron/Canton

When you think of your insurance adviser, do you think of someone who is trying to push products on you? Or do you think of someone with whom you have an ongoing relationship and whom you view as a trusted adviser?

There are primarily four key elements in a dynamic partnership: respect, transparency, accountability and communication. If any of these characteristics are lacking, it might be time to find a new adviser, says Andrew Rowles, client adviser at SeibertKeck.

“Your insurance adviser should be a consistent partner, someone you believe is going to represent your best interests. As a CEO, their guidance, experience and capabilities are what protect your passion,” says Rowles. “This is not a unilateral relationship, a trusted insurance adviser should be intimately involved with your organization, going beyond brokering financial products. You want to feel like your adviser is on your side of the fence and that he or she is going to place you with the best possible product to meet your business needs.”

Smart Business spoke with Rowles about finding the right insurance adviser to meet your insurance needs.

How can a business leader find an insurance adviser who will work as a partner?

The key is interviewing your adviser and the agency as if they were an employee of your organization. Look for an adviser who has the right markets, can meet your business needs, works with other firms in your industry, and has the technical knowledge to place the proper program for your company. Review their strategy for placing insurance over the next three to five years. This is a long-term relationship, and this interview will help you find the right adviser.

What is the biggest mistake that businesses make when seeking insurance?

The biggest mistake is forgoing coverage for price. A competitive price is important, but having a consistent partner is more valuable. As a CEO, do you want a price-based relationship with your adviser, or an intimate relationship with someone who understands you and your business? Having a trusted advocate on your side will keep pricing low without compromising coverage. At a time when there is a loss, who do you feel most comfortable with ‘putting out the fire’?

How can this partnership help save a CEO both time and money?

As a business leader, time management is the most important aspect of your day.  Interruptions take you away from other productive activities. Ask yourself if your insurance adviser is helping you utilize your time as effectively as possible. Integrating your insurance adviser into your operation will provide peace of mind that you have the best program to protect the stability of your ‘going concern’ at a competitive price. Selecting an adviser with the experience, capabilities and vision to manage your operation will take the worry out of renewing coverages each year. If you market your insurance each year, ask yourself if the amount of time spent forming a new relationship, reviewing markets and current operation, having loss control visits, and reviewing multiple insurance presentations is justified.

Remember, your adviser represents multiple carriers, so ask for multiple quotes. The best price is not the best program; review every option.

How often should a business review its agency and carrier relationships?

It is important to continuously review the partnership you have with your insurance adviser.  Every agency will manage its clients’ expectations differently. Ask for a clear strategy for managing your complex insurance program. When presented with this strategy, keep in mind this long-term view should include flexibility for losses, business changes and variables in the insurance marketplace. Each time you market your insurance, carriers look at marketing history, losses over the last three-to-five years, competition and target premiums. Does marketing your insurance to multiple carriers every year make your company desirable to an underwriter? In a proactive relationship, your adviser should review coverage 90 days prior to renewal, which should make the renewal seamless.

What should a business expect from its insurance carrier?

There are primarily three avenues to purchase insurance: national, regional and excess and surplus insurance companies.  With the multitude of carriers competing in today’s marketplace, it can seem overwhelming to capture the best price and coverage for your firm.  As you narrow down your selection of carriers, consider financial strength, integrity, transparency, historical rates, loss control services, expertise and claims management.  Here are some questions to ask your adviser:

What has your adviser’s relationship and experience been with this company?

What is his or her experience with the claims team?

What are the historical trends of this company? Has this insurance company experienced dramatic change in rates?

How does its current and available coverages compare to its competitors?

Carriers enter and exit segments of business all the time; are these carriers interested in continuing to write our business?

Lastly, ask to meet your loss control and claims manager and underwriter. In these interactions, ask what loss control services the proposed insurance company offers. If the insurance company niche is manufacturing, ask for a loss control service platform.

Many carriers can assign claims managers to your specific account; ask to meet them as they can help minimize claim costs. Lower claim costs today reduce future insurance premiums. Loss control, claims and your adviser have substantial influence on your account with your underwriter. You should expect communication from your insurance team. If this is not happening, ask yourself ‘why not’?

Andrew Rowles is a client adviser at SeibertKeck. Reach him at (330) 865-6587 or arowles@seibertkeck.com.

Published in Akron/Canton

Hackers don’t play favorites. Whether your business is big or small, if you have people’s personal information, someone may be trying to get it.

And if someone succeeds, are you prepared to deal with the consequences?

“Hackers are not selective,” says Todd Winter, a partner at SeibertKeck. “It doesn’t matter if you’re a retailer, bank, manufacturer, health care company, educational institution, insurance agency or a government entity; they don’t discriminate against who they are hacking.”

Smart Business spoke with Winter about how privacy and security liability insurance can protect your company if personal information is stolen.

What kinds of companies should be concerned about the loss of personal information?

Any company that retains this information should be concerned. And it’s not just companies that do business electronically. Companies that have paper files containing personal information are subject to breaches, as well.

Small business owners often think that their risk of a security breach is small and don’t believe that they will be targeted, but it can be faster and simpler for a hacker to access personal information from a small business than it would be to crack the system of a corporate giant with several layers of security.

A July article in the Wall Street Journal cites examples of small business owners who never thought they would be targeted but were crippled by cyber attacks. In one example, a Chicago area magazine shop owner found software on his cash registers that was sending credit card information to Russia. In another case, a Kansas car dealership found that a hacker had added nine employees to its payroll through its bank account and transferred $63,000 to them.

As a result of the risks, businesses of all sizes need to financially protect themselves against a claim. Lawsuits resulting from breaches can come from vendors, employees, business associates and other third parties. And it’s not just the company that is at risk; directors and officers have a duty to make sure that systems are in place to make sure a breach doesn’t happen, and, if it does, they could be held responsible as well.

How can privacy and security liability insurance help protect a company if a breach occurs?

Privacy and security liability insurance provides coverage for the theft or loss of personal information and for the alteration, corruption, destruction, deletion or damage of data assets. It also provides protection for security-related events and gives a company a layer of protection above and beyond its IT systems and internal management control.

Not having coverage can prove costly in the event of a breach, if a laptop containing personal information is stolen, or a company’s electronic backup of paper records is hacked.

The average cost of a data breach is $210 per lost customer record; if your company stores 20,000 customer records, that could mean a possible loss of $4.2 million. Business leaders need to consider whether that is a hit that their business can afford to take.

What should a business owner look for in privacy and security liability coverage?

If you buy privacy and security coverage, make sure you have protection within your policy for regulatory defense and penalties that could be imposed as a result of a breach at your company.

Also consider including crisis management and public relations coverage. If your company experiences a breach and personal information is accessed, that can create a big hit to your reputation. Once customers are aware of the breach, they may no longer feel comfortable turning over personal information to your business. Public relations coverage can help you repair your reputation and create a campaign to let the public know that you are still a good company to have as a business partner.

Some carriers may not provide certain types of coverages, so with the help of an outside adviser, identify those that have broader protections for your business. That would include crisis management, network business interruption insurance, cyber extortion and event management, all coming together under one policy.

What is the cost of privacy and security liability insurance?

It can be expensive because the coverage is still fairly new and carriers aren’t yet sure how much risk is out there. And when they don’t know what the potential risk could be, they typically charge more until they get more experience in writing the coverage. However, the coverage is well worth the premium, as the potential costs of a breach not covered could prove catastrophic for an organization.

What is a business’s responsibility if a breach occurs?

Because breaches previously sometimes went unreported, states have enacted laws requiring that if personal information has been breached that a business must promptly notify those who are potentially affected. That is where notification coverage comes into play, covering the cost of notifying those affected by the breach. This privacy breach response service can offer protection for as many as two million affected individuals.

What would you say to business owners who believe that they have strong IT departments and don’t need to worry about coverage?

Often businesses feel that their IT department has done an excellent job of providing protection, that because they’ve installed firewalls and done everything possible to protect the information, they are fully protected. Larger companies, especially, may feel like they don’t need the protection of an insurance policy because they have proper controls.

But no company is ever really fully protected, and if you don’t take steps to make sure you are covered, the results for your company could be catastrophic.

Todd Winter is a partner at SeibertKeck. Reach him at (330) 865-6572 or twinter@seibertkeck.com.

Published in Akron/Canton

If your medical practice accepts payments from Medicare or Medicaid, you could find yourself dealing with the time and expense of an audit, even if you are doing everything right.

With the current debt crisis, the government is working to ferret out fraud, and the Center for Medicare Services (CMS) is blanketing practices with audits of what they are billing for services, says Joe Pannitto, a client adviser at SeibertKeck Insurance Agency.

“You need to be prepared,” says Pannitto. “Even a practice that is squeaky clean, if audited, has to deal with the expenses of defending themselves.”

Smart Business spoke with Pannitto about how the right insurance can protect you in the event of an audit.

How are practices identified for audit?

The government, through Recovery Audit Contracts (RAC), separated the U.S. into four regions. Independent companies are assigned to these regions to find fraud and abuse in Medicare and Medicaid.

Computer programs look for billing patterns, and things outside the norm get kicked out of the system. Those practices are then identified as potentially having questionable billing. But sometimes the audit may be random. After a practice is identified, the company will then serve notice on the practice that it wants to audit its billing.

Since it began two years ago, CMS has identified $684 million in payment corrections, whether those are overpayments, or, sometimes underpayments.

What can a medical practice do to ensure it isn’t crippled by an audit?

It’s really a matter of awareness. There are coverages available to protect you, both as part of your medical malpractice insurance, or, more recently, as a standalone policy. With the economics of medicine, any time you have to discuss additional coverages and added expenses, it hurts the bottom line.

But you have to weigh that cost with the risk you face with these audits. There’s the expense of defending yourself with legal counsel, the expense of providing and defending an independent audit of yourself to justify your billing, as well as any fines or penalties that may be levied.

How can insurance protect a practice that is being audited?

It’s huge. No insurance product will insure true overpayment; if you were overpaid by $X, no insurance is going to pick that up. What will be covered, however, is when an audit says that you have overbilled. There is an appeals process. You have to get legal counsel and pay for your own audit to run a comparison to what they’re saying you were overpaid, both of which are covered by the insurance. There are fines and penalties that could be levied through the Department of Justice if it is found you were overpaid, and certain fines and penalties would be covered, as well.

Without coverage, you’re exposed to all of that out of your own pocket, and you are without the expert knowledge of an attorney versed in this type of case to defend you.

When you look at what the premium is for the coverage versus the actual cost out-of-pocket expenses if you don’t have coverage in an audit, there really is no comparison.

The insurance industry has started to address this issue, and malpractice carriers are providing at least a small level of coverage on their policies. It is typically about $25,000 worth of coverage, but that is strictly for defense costs, and it doesn’t go very far.

Standalone policies, created to address regulatory and auditing issues, will provide up to $1 million of coverage, or, depending on the practice, even higher limits. That covers auditing expenses, attorneys, and certain fines and penalties.

Looking at the potential of what you could be exposed to, the cost of this coverage is pretty minimal.

Once a practice has been notified of an audit, how should it proceed with its insurance carrier?

Once you get that letter, you need to respond ASAP. Contact your carrier. With a standalone policy, you will be able to select from a pool of attorneys.

After you’ve been notified of the audit, you have 45 days to respond to the contractors and CMS. If you don’t respond within 45 days, that is basically an admission of guilt by default.

That’s not a lot of response time when you have a very busy practice. Things can fall through the cracks, and if they do and you go beyond 45 days, you may be found guilty.

What would you say to practice leaders who say they are doing everything right and that they don’t need the added expense of this type of insurance?

Some practices are really stretched thin, and adding another layer of insurance is not something they want to do or think they can afford. But as difficult as medicine is right now, there is tremendous pressure to squeeze the system to remove fraud and abuse.

There will be many practices exposed to these audits that haven’t done anything wrong, but still have to defend themselves. And the RAC audits are just one that they may be exposed to, as there are several concerning Medicare and Medicaid billing.

Contracting auditing companies are paid based on what they find, so if you are audited, you have to ask yourself whether they are going to give you a clean bill of health or whether they are going to find something.

If Medicare and Medicaid payments are part of your practice, this is not something you can afford to overlook.

Joe Pannitto is a client adviser at SeibertKeck Insurance Agency. Reach him at (330) 867-3140 or jpannitto@seibertkeck.com.

Published in Akron/Canton

Hundreds of businesses were recently destroyed or severely damaged in the Joplin, Mo., tornado, and if statistics hold true, fewer than 20 percent of those will be up and running again within three years.

If that happened to your business, would you be in the 20 percent or the 80 percent?

“Too many business owners fail to obtain business interruption coverage, or, if they do have it, are surprised in a disaster to find it is not written to properly cover their needs,” says Parker Berry, an executive vice president with SeibertKeck Insurance Agency. “If your plan is not properly designed, you may find you don’t have the coverage you assumed you did.”

Smart Business spoke with Berry about how having the right business insurance coverage can mean the difference between rebuilding and going out of business.

What is business interruption insurance?

A business interruption occurs when you have a physical loss to your location. For instance, if there is a fire at your manufacturing plant, there will be a loss of income because you are no longer able make a product.

The insurance will pay for loss of business income, expenses such as moving to another location while the building is being rebuilt or repaired, and continuing to pay your employees until they are able to work again.

Business owners should look at it as disability insurance for the business itself.

What types of businesses need this insurance?

Most should at least have the extra expense piece of it. For example, contractors make most of their money in the field, but if they have office operations, and something happens to that physical location, they will still have those extra expenses, and some lost income.

With a manufacturer, restaurant or retail location, all revenue comes from the physical location. So there are certainly some classes of businesses that need it more than others.

How does a business determine how much coverage it needs?

There are formulas your agent can use to give you a good idea of the amount of coverage you need. Other businesses will use monthly multiples of sales.

For example, if you are a manufacturer that uses certain machines and they are destroyed, you’ll need to replace them. But there may be a six-month build-out time. You are never going to start loss adjustment from day one because you have to clean up and take inventory. Then you have to order new equipment and it’s a minimum of six months before it arrives.

Do you have a contingency plan? Is there disaster planning? How quickly can you replicate what you’re doing somewhere else? Those are all items for discussion when determining the amount of coverage.

Each business is different, and it’s an art to figure out the right number. This is why an experienced agent is critical when working through the process.

What questions should business owners ask their agent to make sure they’re getting the right coverage?

Are there coinsurance limits? Are there time limits? Is the coverage paying for a regular work force? Is it covering ordinary payroll — because if it’s not, your employees are not going to wait for you to start paying them again. Is it paying fixed bills like utilities and rent? For what length of time is the coverage?

The agent should be asking questions of the business, as well. While most businesses have some form of business income coverage, it may be poorly written because the coverage isn’t designed specifically for them, or the agent isn’t asking enough questions.

Without a true understanding of your business, the agent won’t be able to design the best coverage for your needs.

What other areas should a business consider when buying business interruption coverage?

You can have ordinance or law issues, or power interruptions. For example, an ice storm could cause a manufacturer to be out of business for weeks without power. Or if a restaurant loses water service, it’s out of business until that is restored. The building itself may not be physically damaged, but the business has sustained a business interruption loss.

There is also a form of contingent business income. Say you have a large vendor or client that is damaged by a fire. That can have an impact on your ability to do business.

Or you may have a retail business anchored by another large business that pulls in a lot of traffic. If that business is damaged and no longer operating, causing a loss of traffic and, as a result, income, you can recover that through dependent property coverage.

How can an agent work with a business to minimize the chances of a disaster and increase its odds of recovering if one does occur?

An agent can do a risk management audit, trying to find the weaknesses in coverage and where the company is weak in loss control. Risk management can help prevent bad things from happening, but if they do occur, it can help ensure you have the right coverage in place.

Business owners can do a lot to make sure that if a claim does happen, it will move quickly and in the way they want. If data are backed up offsite, they will be easier to recover than if everything is inside those four walls.

You will recover much more quickly if you truly spread your risk and have a disaster plan. If you lose your physical plant and don’t have a plan, it’s going to be a long road back.

Parker Berry is an executive vice president with SeibertKeck Insurance Agency. Reach him at pberry@seibertkeck.com or (330) 867-3140.

Published in Akron/Canton

Hundreds of businesses were recently destroyed or severely damaged in the Joplin, Mo., tornado, and if statistics hold true, fewer than 20 percent of those will be up and running again within three years.

If that happened to your business, would you be in the 20 percent or the 80 percent?

“Too many business owners fail to obtain business interruption coverage, or, if they do have it, are surprised in a disaster to find it is not written to properly cover their needs,” says Marc McTeague, president of Best Hoovler McTeague Insurance Services, a member of the SeibertKeck Group. “If your plan is not properly designed, you may find you don’t have the coverage you assumed you did.”

Smart Business spoke with McTeague about how having the right business insurance coverage can mean the difference between rebuilding and going out of business.

What is business interruption insurance?

A business interruption occurs when you have a physical loss to your location. For instance, if there is a fire at your manufacturing plant, there will be a loss of income because you are no longer able make a product.

The insurance will pay for loss of business income, expenses such as moving to another location while the building is being rebuilt or repaired, and continuing to pay your employees until they are able to work again.

Business owners should look at it as disability insurance for the business itself.

What types of businesses need this insurance?

Most should at least have the extra expense piece of it. For example, contractors make most of their money in the field, but if they have office operations, and something happens to that physical location, they will still have those extra expenses, and some lost income.

With a manufacturer, restaurant or retail location, all revenue comes from the physical location. So there are certainly some classes of businesses that need it more than others.

How does a business determine how much coverage it needs?

There are formulas your agent can use to give you a good idea of the amount of coverage you need. Other businesses will use monthly multiples of sales.

For example, if you are a manufacturer that uses certain machines and they are destroyed, you’ll need to replace them. But there may be a six-month build-out time. You are never going to start loss adjustment from day one because you have to clean up and take inventory. Then you have to order new equipment and it’s a minimum of six months before it arrives.

Do you have a contingency plan? Is there disaster planning? How quickly can you replicate what you’re doing somewhere else? Those are all items for discussion when determining the amount of coverage.

Each business is different, and it’s an art to figure out the right number. This is why an experienced agent is critical when working through the process.

What questions should business owners ask their agent to make sure they’re getting the right coverage?

Are there coinsurance limits? Are there time limits? Is the coverage paying for a regular work force? Is it covering ordinary payroll — because if it’s not, your employees are not going to wait for you to start paying them again. Is it paying fixed bills like utilities and rent? For what length of time is the coverage?

The agent should be asking questions of the business, as well. While most businesses have some form of business income coverage, it may be poorly written because the coverage isn’t designed specifically for them, or the agent isn’t asking enough questions.

Without a true understanding of your business, the agent won’t be able to design the best coverage for your needs.

What other areas should a business consider when buying business interruption coverage?

You can have ordinance or law issues, or power interruptions. For example, an ice storm could cause a manufacturer to be out of business for weeks without power. Or if a restaurant loses water service, it’s out of business until that is restored. The building itself may not be physically damaged, but the business has sustained a business interruption loss.

There is also a form of contingent business income. Say you have a large vendor or client that is damaged by a fire. That can have an impact on your ability to do business.

Or you may have a retail business anchored by another large business that pulls in a lot of traffic. If that business is damaged and no longer operating, causing a loss of traffic and, as a result, income, you can recover that through dependent property coverage.

How can an agent work with a business to minimize the chances of a disaster and increase its odds of recovering if one does occur?

An agent can do a risk management audit, trying to find the weaknesses in coverage and where the company is weak in loss control. Risk management can help prevent bad things from happening, but if they do occur, it can help ensure you have the right coverage in place.

Business owners can do a lot to make sure that if a claim does happen, it will move quickly and in the way they want. If data are backed up offsite, they will be easier to recover than if everything is inside those four walls.

You will recover much more quickly if you truly spread your risk and have a disaster plan. If you lose your physical plant and don’t have a plan, it’s going to be a long road back.

Marc McTeague is president of Best Hoovler McTeague Insurance Services, a member of the SeibertKeck Group. Reach him at (614) 246-RISK or mmcteague@bhmins.com.

Published in Columbus
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