Figuring out how much liability coverage to buy isn’t easy, but it’s very important.
General liability covers an entity for bodily injury, property damage, personal and advertising injury, and medical payments to a third party because of negligence of the insured. So, adequately selecting the appropriate limits provides defense costs and indemnification to that third party, which will properly indemnify that claimant.
“As an organization, ask yourself, ‘If my limits are not enough to cover the injury, what happens?’” says Cliff Baseler, vice president at SeibertKeck Insurance Agency. “You hope the insurance company will offer a settlement at your policy limits or you might look at out-of-pocket costs.”
Smart Business spoke with Baseler about setting limits of liability.
How can business owners know what limits of liability to purchase?
First, review the limits that your vendors and customers have on their insurance requirements. Many businesses purchase a $1 million occurrence policy with a $2 million aggregate limit for the general liability policy. From there, adding an umbrella or excess policy provides additional limits over your original policies.
The question becomes how much is enough. It’s a balancing act between purchasing exuberant limits that exceed industry expectations or leaving your company on the short side and potentially exhausting policies. If policies are exhausted, you could be covering claims yourself.
More exposed industries will need to buy higher limits, such as manufacturers that produce products with the potential to impact many people or those who face class action potential.
The challenge for many startup companies is having enough capital to cover the cost of purchasing adequate limits. As a well-established company, it is important to look at the cost-benefit of adding additional umbrella limits. In addition, when looking at job contracts, it is critical to make sure your limits match those of the subcontractor or contract requirements.
How can you use benchmarking to help discover the best liability limits?
A benchmarking report is a tool, not an exact science. It takes into account many different factors, such as location, industry size, revenue, employees, etc., to compare companies in the same industry segment. Benchmarking an organization against its respective industry can provide a range of insurance program premiums, limits and retentions commonly used in the industry.
Having this important tool should allow business leaders the piece of mind that they are adequately insuring their company at a competitive cost. Also, in the event of a claim, it can justify the limits purchased if the claim should exceed that limit.
An informal way to benchmark is by attending trade associations or other industry events, so you can ask peers for their limits of liability. Networking is a great way to understand how liability limits are affecting others, before you have to deal with it.
What do marketplace trends like severability tell business owners?
The severity loss trend — the change in size of an individual loss over a period of time — is staggering. According to Chubb, in 1973, a moderate brain damage injury award was $1.24 million; today, that same award is closer to $5 million.
Chubb reports that in 2010 the median compensatory award in Ohio was $13,000, while nationally 12 percent of all jury awards are $1 million or more. In addition, 57 percent of the total awarded damage for commercial/industrial product liability verdicts is for the plaintiff; the remaining amount is for additional costs. These costs include the rise in mass litigation, the high cost of defending product suits, the need for many experts in complex situations or additional awarded damages. This means $1 million of coverage is not always enough to cover the actual injury. The costs associated with a claim are far greater than what most people perceive as ‘enough insurance.’
There’s no easy answer to finding the right liability limit. It may seem ridiculous for a small company to buy $25 million in limits, but what if it has a large automobile fleet? In the end, the most important tool is to have a proactive relationship with your agent. An experienced client advocate will responsibly inform a client on how to properly balance its limit of liability and dollars. ●
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The number of absent workers regularly spikes between December and March, according to the U.S. Bureau of Labor Statistics. In fact, last January marked a five-year high for the number of U.S. full-time workers taking sick days — an estimated 1.3 million stayed home and 3.3 million worked part time.
Although some of this is related to seasonal illnesses, what can you do this winter to make your workplace safer and cut down on the number of absences and injuries?
Smart Business spoke with Cliff Baseler, a vice president at the SeibertKeck Insurance Agency, about cold weather safety.
How can you decrease wintertime injuries to employees and customers?
Encourage employees to wear snow appropriate shoes, including rubber soles and boots. Those wearing dress shoes and high heels have a notably higher chance of injury in snowy, icy and wet conditions.
Keep all walkways, sidewalks and parking lots shoveled and clear of ice and snow with regular salting and shoveling. According to the Worker’s Compensation Fund, almost 80 percent of slips and falls due to snow and ice occur in parking lots and on sidewalks, with more than 50 percent occurring between 6 a.m. and noon. Snow removal must be done properly and promptly. A local snow removal business can be contracted for the winter months to keep walkways safe.
Customer safety should continue inside. Be sure floor mats and runners are at all entrances to absorb excess snow, water and salt. This prevents puddles or a build-up of salt, which cause slips, trips and falls.
What about employees who work outside?
When the snow falls and the temperature dips, it’s important to keep warm and stay dry, especially for any workers who are outdoors for any amount of time.
Recognize that working conditions have increased danger with the extreme temperatures, wet conditions and windy locations. Any signs of uncontrolled shivering, clumsy movements, disorientation, fatigue, slurred speech and/or confused behavior require immediate medical attention. Frostbite and hypothermia are serious conditions. Teach employees the signs, so at first indication the person can be brought to safety.
Other tips are:
- Proper attire for cold weather is a hat, gloves, scarf, several layers and a warm coat.
- Schedule work for the warmest part of the day.
- Work in pairs so one worker can recognize danger signs his or her partner displays.
- Drink warm beverages and avoid highly caffeinated and alcoholic drinks.
How can employers winterize vehicles?
When severe weather hits, it’s important to only drive when necessary. More than 50 percent of winter storm deaths are auto-related. If you or your employees must drive, do so when it is lightest out and always inform someone of the schedule, route and destination. Have all employees program emergency numbers and contact information into their phones.
Maintain full levels of fluids in vehicles at all times. Stock vehicles with a cold-weather kit containing a blanket, extra gloves, hat, sweatshirt, bottled water, first-aid kit, flashlight, snack and phone charger, as well as a folding shovel and a bag of salt or sand.
In the event of an accident, remind employees to stay calm, stop safely, turn on emergency lights and watch for oncoming traffic. Then, notify police and call an ambulance if required; be sure to always cooperate with authorities and police. Employees should take photos if it is safe to do so, exchange information with the other driver, and write a complete description of the accident while it is fresh in their mind.
You or your employees shouldn’t discuss accident details with anyone other than the police and your insurance company. Never agree to a phone recording or to give a signed statement to another driver’s insurance company without consulting your agent first. Never allow vehicles to be towed to an unfamiliar repair shop or authorize repairs by signing a tow release unless you’ve decided to have the vehicle repaired by the shop to which it is being towed.
Taking precautions early, and knowing the signs of danger can help prevent injury and loss. ●
Cliff Baseler is vice president at SeibertKeck Insurance Agency. Reach him at (614) 246-7475 or email@example.com.
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If your company has 500 employees or less, you want to be in a group rating program to get better workers’ compensation rates. Some court rulings have decreased the amount of group credits and increased rates for group rated employers.
“It’s still the best thing going for the small to medium-size employer,” says Cliff Baseler, vice president at Best Hoovler McTeague Insurance Services Inc., a SeibertKeck company. “The group is a fantastic idea, and an employer can receive much lower workers’ compensation premiums.”
Smart Business spoke with Baseler about the advantages of a group rating program and how the landscape has changed.
How does group rating save money?
The Ohio Bureau of Workers’ Compensation (BWC) allows employers with better than average claim histories to join together through a sponsoring organization for the purpose of being rated as a large group. As a standalone business with no losses, you might only develop an experience modification of a 5 to 7 percent credit off your rates. However, when combined with thousands of other companies in a group, your company can earn up to a 53 percent credit to your base rates. The credits can vary for individual businesses, depending on your type of business, whom you are grouped with, final loss figures, total enrollment and reported payroll.
What are other benefits of enrolling?
A third-party administrator (TPA) will manage your claims cost-effectively and aggressively, as well as representing you at Industrial Commission hearings for contested claims. You also have real-time access to claims information rather than trying to obtain it directly from the BWC.
The TPA physically reviews your rates and classifications assigned to your company. Many times the company classifications are wrong because of a change in operations or they were incorrect from the beginning. All of this can result in higher premiums.
The TPA also provides training, education, bulletins, seminars, newsletters, etc. It will help you receive various other credits for safety or a drug-free environment too.
What happens if you have a large loss?
With a group rating, if you have a shock loss, a death claim or a large medical claim, you can be asked to leave at the end of the policy year. Typically that precludes you from any group for two or three years, as all groups look at your current year and the previous three years of claim history. After you’ve been relatively loss free for two or three years, many groups allow you to re-enroll.
The problem is you might have been enjoying 45 percent credit, but now have a 35 percent debit — an 80-percentage point rate swing. For a lot of small businesses, that creates a financial strain since premiums can double the next year. Extra dollars in premiums could result in a workforce reduction.
If asked to leave, you still can sign a contract with the TPA to help you limit and possibly prevent other losses with the goal of returning to a group plan.
How are recent court rulings impacting workers’ compensation?
Some recent rulings in favor of plaintiffs in Cuyahoga County have hurt the rating structure of group plans. The argument was that if Company A has a bad claims history and pays a $20 rate per hundred, but Company B is in a group rating paying $5 per hundred, that creates an unfair advantage in a public bid situation.
As a result, the BWC decreased the maximum group credit to 53 percent and raised classification rates as much as 21 percentage points versus nongroup rates. This action seeks to equalize the playing field, in the court’s opinion.
Also, the governor authorized the release of $1 billion of ‘overpaid premiums’ to private employers and public taxing groups for the 2011 rating year as a result of another court ruling. Employers are receiving rebate checks for 56 percent of premiums paid.
With the increase in rates for groups and the decrease in the credits, many companies have to decide whether to stay in the group. While it may no longer be as cost-effective, you get extra services — aggressive claims management, hearing representation, rate analysis, etc. — and service means everything to your experience and rates.
Cliff Baseler is vice president at Best Hoovler McTeague Insurance Services Inc., a SeibertKeck company. Reach him at (614) 246-7475 or firstname.lastname@example.org.
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