Bank of America500 Newport Center Drive, Suite 400 Newport Beach, CA 92660-7002 (949) 759-0640 www.bankofamerica.com Kim Burdick President, Orange County About Bank of America, with its full range of banking services from investing to asset management, provides businesses with industry-leading support and top-of-the-line assistance. Serving approximately 55 million consumer and business relationships, Bank of America has more than 6,100 retail banking offices and more than 18,500 ATMs. Founded: 1904 Selected services Online payroll, invoicing and tax services, merchant card processing, check cards, lending
California Bank & Trust1900 Main St., Suite 100 Irvine, CA 92614-7320 (949) 223-7500 www.calbanktrust.com David Blackford President and CEO About For more than 50 years, California Bank & Trust has provided Californians and their businesses with prosperity through their banking services. California Bank & Trust combines the responsiveness of a local bank with the ample services provided by major financial institutions. The bank provides commercial, small business and personal banking solutions. Founded: 1998 Selected services International banking, online services, checking and savings, acquisitions financing, term loans
California National Bank1301 Dove St., Suite 101 Newport Beach, CA 92660-2458 (949) 794-3800 www.calnational.com Kristine Long Regional manager About Cal National Bank’s 68 branches represent the fastest-growing community bank network in Southern California. The Los Angeles-headquartered bank, which has $6.3 billion in assets, provides personal and business banking and commercial real estate and investments products for its customers in Los Angeles, Orange, Ventura, Riverside and San Bernardino counties. Selected services Business online banking, BusinessReward Check Card, money market accounts, loans and lines of credit, retirement and investment services
Citibank5000 Birch St., Suite 100 Newport Beach, CA 92660-2146 (800) 627-3999 www.citibank.com Ronald Jacobstein Financial center manager About With approximately 200 million customers in more than 100 countries, Citibank is one of the pre-eminent financial services companies in the world. Citibank utilizes a multifaceted online banking system to continue its outreach to customers around the globe. The bank also provides credit cards, loans and investment management to its customers. Founded: 1812 Selected services Online banking, remote check depositing, insurance and estate planning, foreign exchange and trade, escrow
Comerica Bank611 Anton Blvd., Suite 100 Costa Mesa, CA 92626-7005 (800) 888-3595 www.comerica.com David White Regional president, Southern California About Comerica Bank is strategically aligned into three major business segments: the business bank, the retail bank, and wealth and institutional management. With headquarters in Dallas, Comerica provides strong customer service and a vast range of products and services to better serve its clients, who are individuals and businesses of all sizes. Founded: 1849 Selected services Business checking, business savings, online financial management, account cards, lending
Union Bank N.A.18300 Von Karman Ave. Irvine, CA 92612-1057 (949) 553-2527 www.uboc.com Scott Connella Market president About Union Bank has utilized its vision of offering comprehensive financial solutions by serving businesses and individuals. The bank offers customized services for personal, small business and commercial banking as well as wealth management. Union Bank is the 25th largest bank in the U.S. with 335 branch offices. Founded: 1864 Selected services Online services, business loans and financing, custody, retirement and corporate trust services, foreign exchange, real estate financing
Wachovia Bank2211 Michelson Drive, Suite 200 Irvine, CA 92612-1387 (949) 475-0469 www.wachovia.com Everett Orrick Senior vice president, commercial banking director About Wachovia recently became a part of Wells Fargo & Co., expanding its services to more than 11,000 stores and 12,000 ATMs across the country. The newly formed entity is No. 1 in the U.S. in community banking presence, mortgage originations, small business lending and middle-market commercial banking. It serves businesses of all sizes. Founded: 1879 Selected services Mobile banking, business loans, lines of credit, business check card, payroll services
Wells Fargo Bank18401 Von Karman Ave. Irvine, CA 92612-1723 (949) 553-0260 www.wellsfargo.com Kim Young President, Orange County region About With its product of service, its added-value of financial advice and its competitive advantage of its employees, Wells Fargo is one of the top commercial banks in Orange County. Wells Fargo, being the largest financial institution in the western U.S., serves its customers with loans in many industries including small businesses and agriculture. Founded: 1852 Selected services Treasury management, financing, international banking, real estate, employee benefits
“Because private construction contracts are generally left to the discretion of the owner and the contractor, it is critical to ensure that the contract has key terms that will protect you and limit your liability,” says Kevin Dorse, senior attorney with Theodora Oringher Miller & Richman PC.
Smart Business spoke with Dorse about the differences between public and private works contracts, provisions that should be included in contracts, what to do if the provisions are not adhered to, and how a properly drafted contract can protect you during litigation.
How do public and private works differ?
There is greater room to negotiate in private contracting, while there are numerous limitations in public contracting. For public contracts, competitive bidding requires the agency to award the contract to the lowest responsive and responsible bidder. The general contractor is not free to change major subcontractors who were listed in the bid. There may also be requirements in public contracts for paying prevailing wages. There’s a long list of statutes and regulations that limit the flexibility in the public contracting arena.
What are some provisions that owners should include in private works contracts?
Every project is different, but there are certain key issues that should be considered when entering into a new contract.
- Include design submittal procedures that require the contractor to provide you with specific submittals. There are going to be certain elements of work designed by the contractor as the project is built. This gives you an opportunity to see and comment on those designs before they’re put in place.
- Schedule submittals and milestones. You can require the contractor to give you regular and detailed updates so that you know the project is on schedule. If it’s not, you can identify problems and fix them.
- Establish change order and claims procedures. There should be clearly defined steps so that any problems, overruns or delays are identified immediately, notice is given, documentation is provided, and the time, delay analysis and cost impact calculations are provided. This allows you to make any necessary adjustments.
- A ‘Continuing Duty to Perform the Work’ requires the contractor to continue to work, even if there is a claim, dispute or change request. Courts can also enforce this requirement.
- Termination provisions need to be included. One option is a termination for convenience, where you can terminate or suspend the project if your circumstances change. This is happening frequently due to the new economic conditions.
- Include liquidated damage and reverse liquidated damage provisions. Liquidated damages are charged when the contractor is at fault for delaying the project. Reverse liquidated damages are paid when you are at fault for delaying the project, and you would be assessed a specific price for causing the delay.
- Include a provision that addresses the impact of early completion or concurrent delays. This precludes the contractor from asserting a delay claim if the work is completed by the project deadline. Concurrent delays occur when there are multiple reasons for the delay. If you and the contractor are both at fault, these delays offset each other and the contractor would not have a claim.
- Right to audit the contractor’s records, especially in the event of a claim or delay. Most job records for construction projects are created by the contractor, giving you little visibility to project details. Broad audit rights provide a more effective means to monitor performance and control project costs.
- Determine if you will require performance and payment bonds on the job. These bonds give protection by a bonding or surety company that would step in if the contractor defaults on the job. This is optional, and there is a cost to obtain this type of insurance that will be built into the contract price.
- Include contractor warranties. A ‘Free of Defects’ provision increases the owner’s protection and states that the contractor’s obligations are absolute. Also include a provision for remedying defective work. This provision gives the owner flexibility to require the correction of defective work at the contractor’s expense.
What happens if these provisions are not adhered to during the project?
The terms of the contract not adhered to may be deemed waived and the owner’s ability to enforce the contract may be compromised. The owner should communicate with the contractor, in writing, on a regular basis about any problems that have occurred. Good communication avoids and solves most disputes.
How does a properly drafted contract protect you during litigation?
Almost every one of the provisions mentioned above can and should provide protection if litigation arises, especially if you’re vigilant during the project and require compliance with the contract along the way. Each of these provisions can limit liability, ensure flow of information to you, be an early warning system to claims, problems, delays or change orders, and limit liability for certain types of damages.
Kevin Dorse is a senior attorney with Theodora Oringher Miller & Richman PC. Reach him at email@example.com or (714) 549-6180.
Education: B.A. in economics from Claremont McKenna College
First job: Auditor at Price Waterhouse. I learned a lot of valuable information about how businesses operate, but primarily I learned that I wasn’t cut out to be an accountant.
Whom do you admire most and why?
My parents, wife and kids. My parents, because they were the first and only of their families to attend college. They lived and instilled in me a strong ethical code, and they raised me to believe I could do anything.
What’s your definition of success?
Having my kids grow up to live a life full of integrity, joy and success in whatever they choose to do.
What’s the best business advice you’ve ever received?
Do the right thing.
If you weren’t in your current position, what might you be doing instead?
If I were good enough at any of them, I’d love to be a professional surfer, skier or triathlete. But I think I’ll stick to my day job.
On interviewing potential hires: Microsoft is famous for asking questions like, ‘Why are manhole covers round?’ I don’t have any brilliant interview questions. I try to ask questions to get to things like what’s this person’s attitude, are they energetic, are they positive?
The second thing I look for is intellect. How quick are they in terms of analyzing things? Are they curious? I’ll ask them, ‘Give me an example of a really challenging problem that you had to solve and how you solved it.’ Sometimes people will go, ‘Boy, I really can’t think of any,’ and that’s not a good sign.
Part of it is just spending time with them, listening, having lots of people [involved in the interview] and seeing how people respond to each other. You make a lot fewer mistakes when you bring other people into the decision process.
If you are toiling over what to do about training, you’re not alone.
Tuition reimbursement and continuing education look good on paper and are great recruitment and retention tools, but, as businesses are finding out, in today’s economy, those types of programs could also look more like a dispensable employee perk than a business necessity.
While academics will tell you it’s a mistake to cut training from the budget, those closest to financial reality will suggest trimming the fat and adopting a leaner training strategy that ties education to the company’s immediate needs. For most businesses, this means doing away with the nice-to-have training and focusing on the must-haves that affect the bottom line today.
“You only drive productivity through people,” says Harold C. Taber Jr., director, MBA Mentor Program, Crowell School of Business, Biola University. “The people are the greatest asset, and they help companies compete in the marketplace. To compete as robustly as possible, you must offer benefits. There are no laws that say companies have to provide health care coverage. It is a benefit, and the same goes for education, but education will help the company grow and evolve. There’s always a good ROI on education because the employee will come back with better ideas and ways to do things.”
Keep in mind that the usefulness of what is learned today doesn’t last as long as it once did. Technology’s rapid evolution makes knowledge obsolete when it isn’t built on. Still, the average number of formal training hours has dropped from 25 hours per learner in 2007 to 17.2 hours in 2008, according to Bersin & Associates’ 2009 Corporate Learning Factbook. The report reflects an 11 percent reduction in corporate training spending and claims a trend shift in the types of education that businesses are pursuing.
Training that educates employees on ways to increase revenue or decrease expenses or that improves relationships with customers is a business necessity and has a place in your training regimen.
Determine what your company needs to work on and what areas you need to continue to grow in as well as the basics to keep up with the competition.
“Companies should focus on continuing education activities that will help their employees to do their job or the additional responsibilities better,” says Karla Wiseman Bright, executive director, office of executive education, University of Southern California, Marshall School of Business. “For some employees, this might be technical skill training, but for other employees, this might be more soft skills, such as leading in tough times, building effective teams or communicating the tough message.”
Considering who will be receiving the training is an important step. Being wise about your budget means training those who are in a position to benefit the company most instead of offering a la carte training to whoever is willing to trade a few hours of work for classroom duty.
“During tough economic times, a lot of companies are turning to smaller or shorter programs,” Wiseman Bright says. “They should choose the most important objective they need to accomplish and develop or work with a partner college or university to develop a program that will meet that objective. Most importantly, it needs to be something that people can use immediately.”
Considering the type of education you need has equal importance to the way the education is delivered. While some companies find online courses give employers the best return on investment while saving on travel and driving time, others find in-house courses or a classroom setting to be the best delivery method for employees.
Choosing a trainer
Your company’s goals help determine what institution you’ll use to provide employee training. Look at local colleges and universities first, as these organizations have flexibility in training formats and delivery.
Universities are often willing to consult with businesses to determine what the immediate training needs are. Community colleges, business schools and specific work force training centers can also provide tailored programs as opposed to off-the-shelf training that serves as a one-size-fits-all education.
“You can pick and choose where you can get the best education for your employees,” Taber says. “Right now, you may be thinking about laying off employees and not have a lot of concern for retention, but that isn’t a best business practice. Look around at your local colleges and focus on the ones that can meet your needs in the most cost-effective way looking at the education acquired and not just a university’s name and make sure you are using an accredited program.”
Don’t think of continued education as a perk to employees, but think of it as a way to keep the business growing.
A common error employers make is accepting a program where the employee misses a significant amount of work to go to school. Options exist that allow you to dictate within reason, how, when and where your employees are educated.
“Keeping training programs is a tough issue when companies are laying off people and taking salary cuts, but cutting training altogether sends an even more dire message,” Wiseman Bright says. “Companies need to figure out how to do continuing education with smaller expenditure. Online learning is available at lower costs, internal resources are excellent for a ‘lunch and learn’ as well as some partners, like community colleges, will help a company figure out how to create a small program allowing a company to demonstrate its commitment to employee development on a smaller scale.”
After you select a program and a university, your strategy must carry over into measuring tactics. Make sure you have a way to calculate the benefits of training and the reason you have selected the specific program.
Before an employee begins training, testing the skills that will be built upon is important. Testing will help determine where the employees’ skills are today and where they need to be after training. Making sure the employee, trainer and you are on the same page with expectations will help eliminate any miscommunication about future performance expectations.
“Make sure you are selecting the most promising group of employees to educate and ones that demonstrate a desire to stay with your company,” Taber says. “You may even want to make an agreement with employees to stay with the company one year for every year of college you pay for. In a tough economy, you may even boost that agreement to two years per year of covered tuition.”
Prior to training, discuss the reason for the education and the way the training will be measured with the employee. Tell the employee how the new knowledge directly impacts his or her daily responsibilities. Managers should tie the training into performance evaluations to determine its true impact on the enhanced ability to perform.
Even after trimming the education budget, some companies say the cost is too much to handle right now. If you still believe in education, but can’t afford it, reassess it in nine months. In the meantime, use in-house training and coaching capabilities.
“Finding a way to keep education in the budget will be the solution to alleviating future budget concerns, because your business will be a place where you don’t have to eliminate beneficial business practices to stay afloat,” Taber says.
As a business owner, you have reviewed and purchased insurance policies to protect your business, and ultimately, your livelihood. You feel comfortable with your choices and feel you understand your insurance coverage and what protection is being provided. You set your policies aside until the following year. However, within those policies lurks what is known as “standard policy exclusions.” Unfortunately, most insurance buyers are unfamiliar with these exclusions and without this understanding they leave their business vulnerable to loss.
“A typical situation is finding out you don’t have coverage after an event occurs,” says Laura J. Olson, CIC, CISC, an account executive with GMGS Insurance Services. “The client is then placed in a position where they must pay for the damages themselves, which most likely was not a part of their budget.”
Smart Business spoke with Olson about typical exclusions contained in insurance policies, how to indentify those exclusions and how to determine if they will affect the business owner’s operations and bottom line profitability.
What are some typical exclusions contained in an insurance policy?
There are several common ‘misconceptions’ where business owners assume that coverage is already provided. Unfortunately, in many cases it is not. Some of the areas of concern are as follows:
Property: For business owners to cover their office contents, stock, equipment, buildings, computers and loss of income, they will typically obtain a property policy that contains Special Form or All Risk Perils. Special Form or All Risk covers everything, except for what is excluded under the policy. The standard exclusions that come to mind are earthquake and flood. However, what if a building has sprinklers and an earthquake triggers those sprinklers causing water damage to its contents? Unless the business’s policy is specifically endorsed, no coverage is available.
Automobile: Does the owner have a fleet of vehicles? Do they carry any type of chemical, solvent or other product that could be construed as a ‘contaminant’? A standard auto policy will provide coverage in respect to damage caused by fluids used in the operation of their vehicles, but will not cover materials being transported by them that may spill onto the roadway. Not counting any possible third-party bodily injury or property damage, the clean-up costs alone can add up quickly.
General liability: This policy provides coverage for your premises, operations, products and/or work. A standard general liability policy excludes property damage to your own work. I believe most business owners have not thought of the costs involved. A good example is a roofing contractor that is installing a new roof. They are using hot tar and welding and accidentally catch the roof on fire. The fire is quickly put out, but the damage is done. They will now have to tear out the entire roof, arrange for debris removal, order more materials, and once again start installing the roof. This is easily a $25,000 loss, if not more.
What are the easy fixes to these exclusions?
In each of the above examples, coverage is easily accessible at a low cost either by endorsing an existing policy with the needed coverage or purchasing a separate policy. For example, the roofer could have purchased an ‘installation floater’ to pay for his materials and labor. The pollution liability exposure associated with the transportation of hazardous materials can be provided by endorsement to the business owner’s automobile policy. As for the property, water damage from earthquake sprinkler leakage can be added to a business owner’s policy generally at a reasonable cost.
What are the benefits of being aware of these exclusions?
Business owners may or may not decide to purchase separate coverage for these exclusions, but having the knowledge that these exclusions exist gives them the tools to properly evaluate their overall operating cost and budget for ‘unexpected claims.’ This knowledge and understanding of their insurance policy, what is covered, what they have elected to self-insure, and what exposures are uninsurable are critical components of their risk management program and will certainly aid them in understanding their true net cost.
How do you become educated on these exclusions, and make sure your insurance broker is aware of them?
It is important that the business owner’s broker understand not only the business’s operations thoroughly, but understand the policy forms, terms, conditions and exclusions and how they interrelate to those operations.
Business owners also need to take responsibility and familiarize themselves with how their policy is structured and the exclusions and terms it contains. Their broker may be good at pointing out the exclusions that are attached by a separate endorsement these are in big, bold letters on the policy and you know they’re not covered. But the other exclusions, such as water damage or damage to your work, are written into the form itself and are often overlooked.
My advice for any business owner is to work with a broker that has been in the industry for a while, has knowledge of your industry, and promotes education through obtaining designations and attending various classes to improve their own knowledge. In most cases, this broker is going to know the policy forms and will be able to service your account more effectively.
Laura J. Olson, CIC, CISC, is an account executive with GMGS Insurance Services. Reach her at firstname.lastname@example.org or (949) 559-3374.
Revenue is down, the budget has been hacked away and now you’re edging toward reducing employee health care coverage — or even eliminating it outright. Before taking action, take into account the short-term benefits and long-term effects of your options.
A knee-jerk reaction may be to shift the benefit burden to employees. But those who have been down that road, say there are ways to take a strategic approach to generate value from a shrunken budget and employee pool. The most successful organizations over the long-term will be the ones that cut costs now, while improving the health of their employee populations.
Utilize existing resources to find out how you can save money, starting with your health insurance provider.
“If your insurance provider builds plans on wellness and prevention, you could save money by initiating a wellness program to complement your current employee health insurance plans,” says William B. Caswell, senior vice president of operations for Kaiser Permanente, Southern California Region. “You don’t want to be asking all of the time how you got sick but, ‘How do I get better and stay better?’”
Awareness of the claims filed by your employees will allow you to determine the best health plan move that will work for their needs and devise a health promotion program that will be most appealing to them. While moving to a lower-cost plan may be a necessity, it is a temporary fix and should be complemented with an emphasis on health that will have a more lasting impact.
A 2009 Watson Wyatt report shows that 67 percent of employer respondents to an Annual National Business Group on Health survey say the top challenge to maintaining affordable benefits coverage is employees’ poor health habits. Only by managing these habits can you truly get your costs under control.
Work with your provider
Work with your health insurance provider to decide what the best options to your budget will be. Negotiating rates with insurers isn’t usually effective, as insurers aren’t offering massive discounts because of the economic downturn. The option you usually have is a different plan with reduced coverage.
One option is cost shifting to save the company money while increasing the cost to employees. But altering plans and shifting costs to employees isn’t solving the problem of high premiums. A Hewitt Associates LLC executives’ survey shows that participants found cost shifting didn’t bring out desired behavior changes in employees and that an emphasis on health at the workplace is needed.
Another money-saving health care option is risk sharing.
“You can switch to a plan that only pays when there is a medical event,” Caswell says. “But this is risky because an employee could get a costly ailment or go on maternity leave. You need to couple a doable plan with a wellness program. But when you implement these programs, don’t expect a dramatic immediate change.”
A third option is a health savings account, which takes money out of an employee’s check pretax and the employer has the option of adding money to the account, as well. If the employee switches jobs, he or she will take this health savings plan to the new position and the employer will retract its contribution from the fund.
“The economy will improve, and the way you treated your employees during this downtime will make a difference in your future business,” says Christopher DeRosa, president and general manager, CIGNA HealthCare, Southern California. “You don’t want to drop their coverage or cut them way back at the worst time.”
While health promotion — or wellness — programs aren’t usually at the top of the list when contemplating short-term health insurance savings, a program will have positive results in the short term with the best outcomes in one to three years. Companies that effectively promote health see immediate savings in premiums of 10 to 13 percent with the potential of reducing future medical costs. The investment has a $3 to $6 payback on the dollar.
Your best bet to cut costs will be a two-prong approach. Change your health plan for instant budget relief and initiate a health promotion plan.
“You will see an 8 to 10 percent trend reduction in premium and 2 to 4 percent reduction in program costs when a wellness program is initiated,” DeRosa says.
Design your health awareness plan with consideration of the number of employees that will be participating. A smaller company of 50 employees or less shouldn’t invest more than $25 per employee initially, but should focus on raising awareness by providing educational material that emphasizes preventive care, proper nutrition and health-related Web sites.
A midsized company of 300 or more employees should invest about $90 per person. Providing educational tools, focusing on the population’s main areas of concern and taking a competitive, fun approach is effective. A large company with a willingness to invest about $240 per employee can have a comprehensive program that includes education, financial incentives, the inclusion of spouses and perks like gym memberships.
Your insurance provider may have free online health risk assessment surveys. By surveying your employees you can determine ways to meet the company’s and employees’ financial needs. Ask questions about physical activity, stress management, tobacco use and general disease risk factors.
“People move and take action only when they feel they need to,” says Jim Elliott, vice president, mid/large sector sales, Southern California, Blue Shield of California. “Discuss the economic reason to alter health insurance plans and tell them what benefits a wellness plan can have on not only their health but their finances.”
Discussing what your insurance company provides to you at no cost or at reduced rates is a great first step. Many employers are unaware of fringe benefits included in their plans. If the insurance provider doesn’t offer what you need for free, it should be able to direct you to an organization or local hospital program that does.
After you’ve determined a health awareness focus for your employee population, you can create a plan of action.
“Create a tool kit of ideas to help promote a culture of wellness,” says Cynthia Anderson, wellness coordinator, UC Irvine Medical Center. “Have staff get involved with ideas like healthy vending options, healthy messages to promote wellness, etc.”
You also need to make an assessment of your workplace wellness environment. Identify strengths and areas that need improvement. Enforce no smoking on the campus; provide healthy choices in vending machines and the cafeteria.
“See if you can get a discount for your employees through your local YMCA and do things that can boost morale,” Anderson says. “Help employees see their maximum potential when they focus more on wellness.”
Provide health tips, programs, discounts to gyms and other information through multiple delivery sources. Some employees are more receptive to e-mails or newsletters — or they just need to hear the same message multiple times to get motivated into action.
“If you have 60 to 80 percent participation in a wellness program, you will see serious changes not only in employees’ day-to-day health but in health care costs,” Elliott says. “It will be worth all of your effort, and you’ll wonder why you didn’t start a wellness program sooner.”
Today’s standard insurance programs often include property, general liability, auto and umbrella insurance policies due to legal or contractual business requirements. While such policies might offer broad coverage, there are many inconspicuous exposures that are often overlooked by today’s insurance brokers. While these gaps in coverage may be subtle, they can often create significant financial risk for your company.
“Just because a coverage is not specifically required by contract does not mean it is not important, especially if the exposure can lead to large financial claims,” says Michael Finn, an account executive with GMGS Insurance Services.
Smart Business spoke with Finn about the problems you face by not including these coverages in an insurance program, and how to identify and close these gaps in coverage.
What problems can arise if you do not include these coverages in your insurance program?
Bottom line — gaps in coverage will create uncovered losses. Many business owners find out about these gaps in coverage because they incorrectly believe standard insurance policies cover all loss scenarios. A company that experiences one of these uncovered claims learns a valuable and often expensive lesson. The question is, can your business really afford to learn one of these lessons?
By reviewing and understanding these non-standard coverages, a company can better identify its true exposures and develop potential solutions to address such exposures. The following coverages can often be added to your present insurance program for a nominal premium or potentially for no cost at all.
? Wage & hour defense coverage can be added to most employment practices liability (EPLI) policies. Wage & hour covers the defense costs for employee lawsuits related to the Fair Labor Standards Act (FLSA). Common claims include employee lawsuits alleging the lack of mandatory breaks/lunches or improper payment of overtime benefits. There should be no extra cost to add this coverage to your present EPLI policy.
? Employee benefits liability covers an employer when errors or omissions have been made in the administration of the company’s employee benefits program. Coverage can be included for little to no cost. Common claims include failing to properly advise employees of the company’s benefits program or improperly excluding an employee or dependent from the health coverage.
? Cyber liability fills the gap in coverage created by general liability policies excluding all Internet related business activity. Cyber liability provides coverage for a company’s Web site, Internet media/ads, and other Web-related content. Common claims include libel or trademark and copyright violation for improper display of pictures, logos or products on a company’s Web site. Coverage is generally added to an existing general liability policy via endorsement for no charge.
? Privacy liability coverage is needed for companies that receive or store customers’ personal information. The most common claim scenario is when credit card or social security information is received by a business and then inadvertently stolen or publicized. Companies are expected to properly protect this private information.
? Crime/employee dishonesty insurance provides coverage for employee theft of money, securities and business property. Smaller limits of $25,000 to $50,000 can be added to property insurance policies for no additional premium. A separate policy should be placed for businesses requiring higher limits and broader coverage.
? Fiduciary liability covers those responsible parties, including company owners, for administering 401(k)s and other employee benefit plans. Fiduciaries can be held personally liable for 401(k) plan losses incurred as a result of their alleged mismanagement, error, omission, or breach of fiduciary duties. Such coverage can be added to a D&O/EPLI policy for a minimal premium.
? Employed lawyers professional liability covers a company’s exposure when an attorney works as in-house general counsel and is not part of an outside law firm. Both general liability and directors & officers liability policies exclude any professional liability arising from an attorney employed at a company. A separate policy should be placed to correctly cover this exposure.
? Hired & non-owned auto liability protects a company for its liability arising from employees driving personal or rented vehicles for work purposes. Common claims occur when an employee uses his or her personal car to run a work errand and is involved in a serious auto accident. This coverage can be endorsed on to the commercial auto policy for little or no additional premium.
How can you make sure these inconspicuous exposures are properly covered in your policy?
The key to protecting a company’s assets is working closely with a knowledgeable and technical insurance broker. A professional insurance broker should function more as a risk manager than as a salesperson. It is your broker’s responsibility to have regular meetings with you and determine which of these exposures exist in your business. If these exposures are not properly insured, your company may unknowingly be ‘self-insuring’ these risks.
Do you need to include all these overlooked exposures in your policy?
The need for any insurance coverage depends on a company’s individual operations and exposures. Every business is unique and certainly not all of the above exposures pertain to every company. In this turbulent economy, it is important to properly protect your company’s assets by having the appropriate coverages in place, not just the standard contractually required coverages.
Michael Finn is an account executive with GMGS Insurance Services. Reach him at (949) 559-3376 or email@example.com.
To be a good communicator, Joe Wells says that you need to start with a firm belief in the words that come out of your mouth.
“You have to have a message that you believe and that you are passionate about,” says Wells, founder, chairman and CEO of Max Muscle. “That helps you communicate that message a little better. You have to really know the person you are talking to and understand how to communicate with that person.”
Wells, a former linebacker for the Oakland Raiders, has translated his engaging personality and way with words into a successful chain of sports nutrition franchises. With more than 150 stores employing about 500 people, Max Muscle posted 2008 revenue of approximately $18 million. And Wells is confident that the value he places on social networking is one of the reasons his business has succeeded.
“I have hundreds of friends in the industry,” Wells says. “It is all reciprocation. You help people, and they help you.”
Smart Business spoke with Wells about the keys to developing an effective network of peers and being a good communicator.
Take advantage of industry events. You are going to develop a lot of friends when you go to trade shows. I have hundreds of friends in the industry, not necessarily people that I hang out with on the weekends, but at the same time, people I know I can call on if I am looking for somebody.
It comes with mutual respect.
Make an effort. I have limited time to spend networking and have social lunches and social dinners. But in the course of the day, an old friend calls me, I walk in and see a current vendor that I use and like, and I put the two together. That happens two or three times a week. It’s something that helps you be successful. You need to learn that right away.
Get to know a lot of people and reciprocate. If you are the type that just calls somebody when you need something, after awhile, they’re going to stop helping you. If you are the guy that knows when to call up and say, ‘So-and-so has Lakers tickets and cannot go. Do you want to go?’
You do something for them, and they do something for you. You are not going to get a lot of reciprocation if you do not do something first. Go to trade shows and make a lot of friends. Make sure you give before you are getting.
You figure it out pretty quick when somebody is getting more than they are giving.
Take a cue from others. Some of our vendors, they come in once or twice a week, and pretty soon, you get to know them.
A good example of networking is I have a guy that does printing. He wants to get work from us, but there is nothing new on the horizon. He comes in once a week, and he thinks of different ways he can get our attention.
He finds us a company that sells a chocolate flavor. We really like this chocolate flavor. It does not have anything to do with printing labels, but he knew somebody that he was printing labels for that makes the chocolate bar. He puts them in contact with us.
Now he’s worked his way into our network. When I know somebody is looking for chocolate or a particular kind of printed wrap, I’ll send him to vendor X or vendor Y.
He did not just stop with the chocolate bar. He brought in beef jerky, anything he could think of that would help our business or a product we would be interested in. That got us to feel like we kind of owe this guy something. We need to do some printing with this guy.
Think before you speak. If you are speaking to the guys in your warehouse, you might talk a different way than you do to your sales reps or your customer service reps or your accounting people. You have to understand the message, who it’s going to and what you’re trying to deliver to get the most impact.
I need to say, ‘OK, this person.’ In my brain, I kind of click on what type of person this is. As you are speaking to that person, you can get where they are coming from and you can read people.
It comes down to the consistency of the message and trying to be a little bit creative in how you say the message. Know the person you are talking to and understand how to communicate with that person. If you want to be an effective manager, you have to learn to make people hear you and understand you.
Good leaders help their message to be heard. It has to be very clear and concise, but at the same time, it helps to come up with a creative and fun way of how you are going to deliver the message.
Be a good listener. It opens the lines of communication. When you let an employee make a decision that comes up with a better idea or an alternative way to handle it, you empower them. You make them a better employee. That was their decision, and now they have to make it work.
How to reach: Max Muscle, (714) 456-0700 or www.maxmuscle.com
Business owners should be sitting down with their accountants to discuss The American Recovery and Reinvestment Act of 2009 in order to get the most out of the new law.
“It’s a matter of getting to know what benefits are out there and then taking advantage of them,” says Corey Higa, a senior manager at Haskell & White LLP. “Sometimes cash can be left on the table. To avoid that, work closely with your CPAs. Be sure they are on top of the news and that they are up to speed on all the new rules and regulations.”
Smart Business spoke with Higa about the changes and how business owners can derive tax advantages in light of the new law.
How have bonus depreciation and Section 179 changed?
The act has extended the 2008 increase in Section 179 deduction limits for depreciable property through 2009. The limit will remain at $250,000 ($285,000 if the business is in a qualified enterprise zone or renewable community). The eligible Section 179 deduction is decreased dollar for dollar for the amount by which the cost of property acquired during the taxable year exceeds $800,000.
In addition, the act extends the 2008 bonus depreciation allowance for certain qualified property placed in service during 2008 and 2009 (2010 for certain property having longer production periods and aircraft). The taxpayer may deduct an additional 50 percent of the adjusted basis of qualified property, after reduction for any Section 179 deduction but before regular depreciation.
Qualified property is tangible property with a recovery period of 20 years or less, water utility property, off-the-shelf computer software and qualified leasehold improvement property. The depreciation limits on autos, trucks and vans have also been increased for the year.
The extension of the Section 179 deduction amounts and the bonus depreciation provisions are two of the significant business provisions in the act. Businesses should plan their asset purchases to maximize these deductions. It may be necessary to accelerate or defer asset purchases depending on the business circumstances.
Note that an election exists for corporations, which allows them to treat unused pre-2006 Alternative Minimum Tax (AMT) or Research credits as refundable credits. The cost of this benefit is the corporation must agree to forego bonus depreciation and must use straight-line depreciation method on those assets. The availability of this election has been extended through 2009 along with the bonus depreciation provision. This may be beneficial to loss corporations or those frequently in AMT.
What do business owners need to know about the net operating loss carryback provision in the act?
This provision allows a net operating loss to be carried back up to five years rather than two years for qualifying businesses. This can help business owners by infusing cash into their operations this year. If a business had profits in prior years and paid taxes on those profits, it has the ability to take a deduction for this year’s losses and claim a refund up to five years.
For example, if a company had profits in 2006 and paid taxes on them, it could carry that loss back to 2000 and get a refund of the taxes it paid previously.
For 2008, the new law extends the maximum NOL carryback period from two years up to five years for small businesses with gross receipts of $15 million or less.
How does the new law affect businesses in debt?
Under prior law, taxpayers generally recognize income where the taxpayer is released from a debt obligation or if the taxpayer repurchases its debt at a discount. There are exceptions for bankruptcy, insolvency and certain qualified real property business indebtedness. Certain businesses will now be allowed to elect to defer cancellation of debt (COD) income generated from the repurchase of its debt by itself or a related party for five years (for acquisitions in 2009, four years for acquisitions in 2010), and then recognize the COD into income ratably over the following five years. These same rules will apply also to a complete forgiveness of debt by the creditor, as well. The important consideration here is that any taxpayer making the election under this provision will not be allowed to utilize any of the other exclusion provisions for the year of the election or any subsequent years. This is significant because the exclusion provisions in some instances provide for either a permanent exclusion from income or a long-term deferral into basis of property, which the taxpayer may decide to continue to own and thus not trigger the income.
Have there been any changes to the work opportunity credit?
The new act adds two new groups for which employers may receive work opportunity tax credits of up to $2,400 per individual hired from a qualifying group. The new groups are unemployed veterans and disconnected youths. Qualified veterans are those discharged or released from active duty during the five years prior to hire. A ‘disconnected youth’ is an individual between 16 and 25 who hasn’t been regularly employed or attended school in the past six months. It is intended to motivate and provide financial assistance to businesses for hiring from these targeted groups.
Corey Higa is a senior manager at Haskell & White LLP. Reach him at (949) 450-6389 or firstname.lastname@example.org.
Companies need to be able to depend ontheir professional service partners toprovide them with the necessary protection to survive and thrive during challenges. A key member of every risk management team is the property/casualty insurancebroker.
“The broker is not only responsible for providing the right combination of insuranceprotection for company, customers, assetsand employees but is accountable for protecting the net worth of the company and itsowners,” says Griff Griffith, CPA, CIC, principal with Garrett/Mosier/Griffith/SistrunkInsurance Services.
Smart Business spoke with Griffith aboutwhat to look for in a superior broker and thetools to ensure accountability.
What should you look for in a broker?
A great insurance broker functions beyondthe traditional role of a broker and providesrisk management service. They should betechnically proficient someone who actually reads and understands the policy forms.Many brokers today function on their entertainment skills and don’t rely on technicalskills to get the job done.
The adept broker needs to understand yourbusiness and industry. The broker must alsoanalyze your particular exposures and evaluate how to control, transfer or assume thecorresponding risk.
There are many brokers who will promiseservice but never deliver. Brokers are alsocutting services today because they’re costly.The difference between a good broker and agreat one is someone who does not cut services but rather puts their service commitments in writing and into action.
How can a broker put those commitmentsinto writing and what should that include?
Service commitments need to be incorporated into every proposal and service meeting. They are not just pretty adornment for abrochure but a pledge to provide services:
- Exposure identification and analysis
- Insurance coverage design. You’re not just taking the prior year’s policy and replicating it but analyzing the present exposures and finding the best way to cover them.
- Strategic marketing of coverage. Instead of making the clients part of the marketing process and presenting them with various quotes, a lot of brokers come to their clients and say, ‘Here’s the best quote available, should we go ahead and bind coverage?’
- In-house claims management service that reduces insurance costs
- In-house loss control and safety management. Many companies do not have the need or resources for a safety director, but a full-service broker can provide some of these services for no additional fees. The result is a safer work environment and potential premium savings.
- Employee training and education. If brokers assist in educating employees on safety and insurance, the employees are more likely to buy in to your safety program and become partners in this process.
What documents, proposals and servicesshould a broker provide?
- In-person presentation of proposals. Too often, brokers take the lazy way out and fax over an insurance quote. Protecting your net worth merits an in-person discussion, not a last-minute telephone call or quick fax.
- Exposure synopsis and a full scope of coverage options
- Summary of all marketing efforts and insurance quotes
- Cost benefit comparisons of presented coverage options
- Historical exposure, premium and rate comparisons
- Summary of service and broker-facilitated cost reductions
Each year, approximately 90 days beforeyour renewal date, your broker needs topresent a plan for marketing your insuranceprogram. Beware of brokers who insist onkeeping the same coverage and carrier yearafter year without first surveying the marketto ensure that your company is receiving thebest combination of coverage and premiumfor your needs. If you choose to stay with thesame insurance company, you need to makesure it’s the best option for your company.
What is a broker service calendar?
A service calendar is potentially the mosteffective tool for ensuring broker accountability. It includes the list of broker servicespromised during the policy year. These services are prioritized with scheduled deadlinesand assigned personnel to ensure completion. This is a perpetual tool and is updatedregularly to ensure ongoing accountability.The calendar also serves as a broker reportcard at the end of each policy period.
Why should accountability be the focus ofbusiness-broker relationships today?
Accountability ensures that the brokerservices you are promised are the servicesyou are delivered. The result is the highestvalue of service attainable for your dollar. Asa broker becomes truly accountable, he orshe becomes an active member of your management team, without being on your payroll.An accountable insurance broker alsoenables your people to focus their time andresources on other business matters, whilehaving the confidence that your insuranceprogram is being professionally managed.
GRIFF GRIFFITH, CPA, CIC, is a principal with Garrett/Mosier/Griffith/Sistrunk Insurance Services. Reach him at (949) 559-3370 orGriffG@garrett-mosier.com.