The same holds true for corporate education programs -- design the right program, and you and the training are a success. But what makes the right program?
For those responsible for corporate education and training, planning a meeting or an event requires the planner to be imaginative, highly motivated, organized and prepared for the unexpected. Yet in planning meetings, several crucial factors remain constant. Think of them as the who, what, where, when and how of meeting planning.
The right reason (what and when)
Make sure the meeting's objectives are important enough to merit the time and resources necessary to proceed. Take into consideration employee work schedules, the general business cycle for the company, the state of ongoing projects and other issues that have the potential to distract attendees' attention.
Also, while meetings are an excellent educational tool, they only work if designed with the organization's specific goals in mind. All too often, executives find themselves having meetings just for the sake of having meetings, with no real objective outlined.
The right location (where)
Location, location, location -- a Realtor's favorite buzzwords and a potential downfall to on-site or off-site meetings. How many times are meetings plagued with interruptions?
Many employees find that meetings conducted at their place of employment tend to be less productive than those held off-site, where interruptions are controlled. When planning your next training session or corporate event, consider holding it at an off-site location such as a local college or university that may offer affordable training facilities perfect for your needs.
Most of these training facilities offer state-of-art technology, including videoconferencing, high-speed Internet and training rooms designed specifically for a high-quality learning experience.
The right attendees (who)
Who should attend? If your focus is on meetings directed to internal participants only, the list of attendees may be based on factors such as job assignment, level of responsibility, supervisor recommendation or length of service.
For meetings involving external groups, corporate planners may find an ally in the services offered by a university's meeting and event services. Local higher education institutions pride themselves on developing partnerships within their communities.
If you select a university as your meeting site, you will find a university events coordinator or similar staff member who is more than willing to assist you with planning, facilities support and the occasional networking support to increase your invitation list.
The right presenters (how)
Presenters can make or break the most well-planned meeting or event. You need to decide what message you want to deliver to your audience, then choose who is best to deliver it.
Professional event and meeting planners can assist you with their wide knowledge of presenters, keynote speakers, professional trainers and instructors.
Once these four crucial elements are considered, you can move onto the next critical step -- evaluating your efforts. You should create a strong evaluation method, a way to measure your personal success, record where you experienced difficulty and things to do differently the next time.
Most important, evaluate the success of the meeting through your attendees. Some universities may be willing to administer the evaluations for you or, in some case's even analyze them for you. Whatever approach you take, study the results and plan. Remember Vince Lombardi's saying, "The only place success comes before work is in the dictionary."
ALICIA VINCENT is corporate programs manager for West Chester University's College of Business and Public Affairs. She has more than 12 years of meeting planning and training program development experience. For more information on corporate programs, visit training.btcwcu.org or call (610) 425-5000, ext 2440. West Chester University serves the educational and training needs of students and corporate clients from its off-campus, state-of-the-art Graduate Business Center located off the Boot Road exit of Route 202 in West Chester, Pa.
One of their biggest concerns is that business schools are slow to make modifications that reflect the realities of the business world. A current example is the concern with the lack of coverage of ethical issues as these pertain to business situations.
Criticism directed at higher education's snail-like pace in reacting to the needs of the market is often well-aimed. Many schools do react slowly to change. However, executives may not be fully aware of the reasons for the delay.
Additionally, with a little effort on their part, they can personally affect the pace and direction of change and, consequently, improve how higher education responds to the needs of corporate stakeholders.
The curriculum process
Most university curriculum changes require at least three key decision points. First, faculty within the affected discipline area must support the change since it will impact their courses. At some schools, this is a problem if faculty lack the motivation to change, a full understanding of the issues or hard data reflecting the need for a change.
Second, curriculum change is often a time-consuming process involving approvals of committees containing faculty who are outside the directly affected subject areas. Convincing these folks that modifications are required can be difficult if they do not appreciate the need for change.
Finally, school administrators must be on board with new curriculum proposals, particularly changes that affect faculty positions or increase capital expenditures, such as requiring additional or upgraded facilities. In general, this change cycle from an initial curriculum proposal to implementation of new or updated courses can take one to two years or longer.
Importance of advisory groups
This may cast a gloomy shadow on corporate expectations that higher education is at the forefront of preparing the work force with cutting-edge knowledge and skills. Yet, there is good news.
Most colleges and universities have significantly increased activities designed to build stronger relations with regional, national and international corporations. In particular, there is a strong push among business schools to include corporate personnel in the program and curriculum development process. Many schools have established advisory boards that meet with school officials on a regular basis to examine issues facing the school and individual programs.
West Chester University has done this with a business advisory council made up of executives, business owners and others from large corporations and smaller firms. Such corporate executive groups have become a vital sounding board for initiating curriculum changes. For example, in 1999, West Chester's innovative Technology and E-Commerce MBA program was created and approved in less than six months with the assistance of corporate supporters.
For executives and their senior staff, being involved in an advisory capacity with universities can yield a number of benefits, including:
- Direct input into program and curriculum changes
- Exposure to high-quality students and student groups
- Interactions with expert faculty, including partnering in research programs
- Access to university resources
- Association with school officials
- Networking opportunities with other members of the advisory board
Executives should understand that most institutions of higher education welcome their involvement, especially if the executive is a graduate of the institution or if the executive's firm offers employment opportunities for the school's graduates. Executives interested in being involved should seek out school officials to learn about such opportunities.
While initially seats on advisory boards may be filled, openings do occur on a regular basis. To prepare for a role on the board, executives should offer:
- To meet on an informal basis with school officials
- To serve as guest lecturer/speaker or part-time faculty member
- To give seminars for students and faculty covering important topics
- To do on-campus job recruiting and interviewing
- To provide student internship opportunities
- To provide funding support for school programs
The input of corporate executives into program and curriculum decisions plays a valuable role at many colleges and universities. They will find that their involvement is encouraged and does make a difference.
PAUL CHRIST, Ph.D., is an associate professor of marketing and director of MBA programs at West Chester University of Pennsylvania. For more information on the WCU MBA, visit www.wcumba.org or call (610) 425-5000. CHUCK RUMFORD is director of corporate programs for WCU's College of Business and Public Affairs. For more information on corporate programs, visit training.btcwcu.org or call (610) 425-2695. West Chester University serves the educational and training needs of students and corporate clients from its off-campus, state-of-the-art Graduate Business Center located off the Boot Road exit of Route 202 in West Chester, Pa.
Under Pizzi's leadership, the chamber grew to one of the nation's largest, boasting more than 6,000 members. Pizzi tripled revenue, expanded reserves, broadened the chamber's portfolio of programs and established a for-profit subsidiary and a Council for University Presidents that includes 33 regional institutions.
What tempted him to take his business acumen to the food industry?
"Being the head of the chamber, we grew dramatically while I was there," he says. "I had a chance to look at various businesses, and I sat on some public boards of businesses, as well."
Tasty Baking Co. satisfied Pizzi's hunger to expand, restructure and repackage a solid brand.
"This is really a learning experience," he says. "I made sure to surround myself with people who are smart and who understand the business.
"One stock analyst said, 'What does he know about this business, and why was he picked?' Another said, 'You know, this guy has an interesting background, let's wait and see.' I think we've proven that if you are open-minded and ask a lot of question and have the right people around you, that is the key to success."
Just about everyone in business has their own idea as to what networking means on some level. But what is networking, and why is it so important? Simply put, networking is the exchange of information between people and is perhaps the most powerful business-generating tool. That is of course, if you understand exactly how to use it effectively.
If you are not actively engaging in networking, chances are youre missing many opportunities to spread the word about your business. Networking provides an inexpensive way to make 20-30 personal contacts during a short period of time. Yet for many entrepreneurs, networking still remains an untapped strategic resource for doing business.
But effective networking is much, much more than just going to a party. Effective networking is really a strategic plan to make new contacts. It means being in situations where you can meet and get to know people who can potentially do business with you, or introduce you to others who represent potential business for you.
Since many small businesses are often 1 or 2 person operations, it means that the entrepreneur running the show must wear many hats like that of CEO, CFO, COO, janitor, receptionist, PR manager, marketing director and any other position that needs to be filled. And even though entrepreneurs are imbued with an independent spirit, a yearning to make a difference and a desire to do things their own way, none can really succeed without some degree of dependence on others.
So like it or not, as a business owner, you ARE dependent on others. Youre dependent on others to refer business your way, as well as provide ancillary services that help you service your customers or clients better. Remember that old saying, Its not what you know, but who you know? Well it goes double for entrepreneurs (and those looking for jobs, too)! Now more than ever you need to develop a strong network of colleagues and associates just to survive in todays competitive business environment.
There are a lot of things they DONT teach you at Harvard (or any other) business school. How to develop a powerful network is one of them. Whether youre just starting a business, expanding into new markets or looking for a job, here are a few tips on the Art of Networking and how your can develop the skills necessary for success.
1. Be Prepared
Develop a plan. Set specific and realistic objectives. Know what you want to achieve. For example, do you want to increase visibility, strengthen existing relationships, make new contacts, explore new market segments, etc.? Who do you want to meet and what do you expect to accomplish? What types of organizations will provide the best opportunities for you (chamber of commerce, civic organizations, trade groups and shows, fund-raisers, PTA, etc.)? Whatever you choose, make sure its relevant to your business and that you stay focused on achieving your objectives.
2. Do Your Homework
If youre going to an organizational function or activity, know who will attend. Learn about the organization and the people involved. Look at the organizations newsletter and other communications. Seek out some of the members and talk to them. Read the newspaper and trade journals to be up on issues and current affairs.
3. Psyche Yourself Up
Effective networking requires a positive, open attitude. You may need to adjust yours. You should look forward to attending the various events. Keep in mind, many people are terrified of attending networking events and miss out on the opportunity to meet new contacts. Just resolve to do it - it gets easier each time you try.
4. Practice Your Self Introduction
Develop a simple-one to two line introduction. A good introduction includes your name and something about yourself. What you say depends on the event. For example, at a business function you should give your name and what you do. At a social event, just state your name and how you know the host or hostess. Heres some ideas.
Hello! Im John Smith, account manager with ABC Company. And you are? OR
Hello! Im John Smith.
Im a friend of the brides.
Though it may seem awkward at first, it gets much easier with practice.
5. Practice Your Handshake
Not too limp or too over powering. A nice, warm, firm handshake is best.
6. Check Your Business Cards
Make sure that you have an adequate supply of business cards that are clean and readily accessible, and that they include your name, company, address, phone & fax numbers, as well as what you do.
7. Work the Room
Be aware of time. Dont spend too much of it with one person. Spending 5 minutes per person will get you 12 new contacts in an hour. If you spend 3 minutes you can increase that to 20 contacts. At larger events, spend less time with those you already know. When a good contact is made, spend a little extra time, but remember - you only want to pique their interest and move on.
Its always good to follow-up with a letter, note, or phone call. Since youve spent time making contacts, now you need to cultivate the relationship. People do business with those they feel most comfortable and becoming comfortable with a new contact often takes time. Also, dont think of contacts in terms of what they can do for you, but what you can do to help them.
9. Be Patient
Recognize the fact that every contact may not lead to a sale. But dont discount anyone you meet. You never know who they know or who they could introduce you to that might result in getting new business. Adding to your support network or making connections with other people is just as important as sales.
10. Have Fun
Attending functions and meeting new people can be a lot of fun. Its important to enjoy yourself but dont forget that a networking event is still work, so be prepared to do business. If alcohol is served use in moderation or avoid it altogether.
Using these tips will get you off to a good start. But what your really need to do is to go out and start networking everywhere. Try different events - business or social mixers, little league games and PTA meetings, your church or synagogue, even the grocery store. You never know who you might meet. For more ideas and information on the art of networking, visit your local library or bookstore. There are a lot of really good books out on the subject. You might consider attending a class or seminar on networking. Check your local high school for adult evening classes or community colleges and universities offering continuing adult education classes. Check community papers for event listing that look interesting. Keep your eyes and ears open and get started right away. Happy Networking!
Robin J Hurd-Graham, is the president and owner of R. J. Graham Consulting, a training and consulting firm serving small to mid-size companies. She can be reached at (610) 407-0280. E-mail firstname.lastname@example.org.
Changes in the Americans with Disabilities Act
Summary: In March, the EEOC released new guidelines for reasonable accommodations and undue hardship under the Americans with Disabilities Act (ADA).
The bottom line: From now on, if an employer has some idea that an employee with a disability will need special accommodations, then the responsibility now rests with the employer to provide those needs. The employer also can’t “require” the disabled employee to go to another “company” appointed physician for a second opinion, even if the employer has doubts about the employee’s personal physician’s diagnosis of the existence of an ADA disability and the need for reasonable accommodation.
These EEOC guidelines also have some specific changes that companies must familiarize themselves with, especially in the areas of reassignment, denial of leave of absences by employees with disabilities, job restructuring and/or reassignment, disability-related misconduct, telecommuting, and accomodation of medical side effects.
The federal courts can be expected to afford significant weight to the EEOC guidance, even though EEOC guidelines generally do not command the deference that is afforded to formal regulations. Nevertheless, these types of guidelines receive significant judicial consideration and also alert employers to the likelihood that the EEOC will challenge specific employment policies and decisions.
Summary: In October, under federal employment discrimination laws, the EEOC modified its position on remedies available to undocumented workers (those without legal authorization to work in U.S.).
The bottom line: The EEOC states now that “even if the workers are undocumented they are still entitled to the same remedies as any other worker including back pay and reinstatement.” They have also outlined different levels of remedies and addressed the issue of retaliation and the employer’s liability.
Converting Traditional Pension Plans to Cash Balance Plans
Summary: As political pressure builds against converting a traditional benefit pension plan to a cash balance pension plan, companies considering this move should do their homework and understand the positives and negatives. Agencies such as the EEOC, IRS and Congress are currently examining these plans.
The bottom line: The crux of the debate is whether older workers, who are closer to retirement, are unlawfully discriminated against when employers convert from traditional-defined benefit pensions plans to cash balance pension plans. Experts estimate that in a conversion, an employee who is five to 10 years away from retirement may lose 20% to 50% of the expected age 65 benefit. However, the ERISA Industry Committee (ERIC), a trade association representing larger employers, says cash balance plans don’t violate the ADEA just because benefits accrue more rapidly in a cash balance plan during an employee’s initial years of employment.
Several alternatives exist to alleviate the potential problems that may result from a conversion. Employers and employees should be aware of what is involved. We will be hearing more about these plans in the coming year.
Phyllis Shurn-Hannah is president of Cascade Associates, Inc., a human resource consulting and staffing/recruiting company in Blue Bell, PA.
Professional liability insurance is traditionally purchased by firms made up of architects and engineers, physicians, dentists, accountants and lawyers to protect against patients or clients alleging that negligence on the part of the professional caused physical injury or possibly economic loss to their clients.
“Over the last 20 years, the definition of professional services and the related duty of care owed by various consultants to their customers has broadened considerably,” says Philip Glick, a senior vice president with ECBM Insurance Brokers and Consultants. “As examples, real estate brokers, computer consultants and software engineers, insurance brokers, construction managers and contractors, and other miscellaneous types of consultants now are considered as professionals and face potential errors and omissions types of liability claims.”
Smart Business spoke with Glick about how professional liability insurance is changing and why you may need it.
Why doesn’t a general liability policy cover these types of claims?
General liability insurance is intended to cover claims arising out of bodily injury, or property damage arising from the client’s premises or related operations, including potential product liability losses. Similarly, a contractor’s general liability policy would cover potential claims based on completed operations such as construction of buildings or maintenance of facilities. General liability insurance does not cover economic loss suffered by a client due to an error or omission committed by a business, for example, if a client buys a new product, such as a high-speed printing press, and the press works but produces a lower hourly volume than expected.
Additionally, general liability insurance companies often exclude bodily injury claims arising from other types of professional services, such as pharmacists, health club operators, physicians and surgeons, architects and engineers and security guard companies. This exclusion mandates the need to buy separate professional liability coverage that will pick up both economic loss and bodily injury claims arising out of the designated professional’s products or services.
What is the solution to these gaps?
For firms traditionally recognized as professionals, the solution is to specifically purchase separate professional liability insurance in addition to commercial general liability insurance. For sports therapists, health clubs and sprinkler protection contractors, the simplest solution is to be sure that there is no specific professional services exclusion in their commercial general liability policies so bodily injury or property damage claims arising out of services will be covered. If there is also a potential exposure for pure economic losses to their customers, they will have to purchase a separate, stand-alone professional liability or errors and omissions policy.
What are some coverage pitfalls to avoid in insuring these exposures?
It’s critical to coordinate coverage provided under a commercial general liability policy with that provided in a separate professional liability or errors and omissions policy. Any professional services exclusion in a firm’s commercial general liability policy eliminates any coverage for claims involving bodily injury or property damage liability claims arising out of their professional services.
At the same time, some professional liability policies only cover pure economic loss and exclude bodily injury liability claims, resulting in a significant gap in coverage The solution is to buy broad professional liability coverage that includes bodily injury and property damage liability-type claims, as well as pure economic loss. Although insurers sometimes will not provide this full protection, they will provide contingent bodily injury and contingent property damage coverage, which cover claims due to physical injury or damage to the property of a client if not covered in the client’s general liability policy.
Another typical exclusion involves claims due to contractual guarantees or other express warranties of price, cost or performance, or a return of fees. Unfortunately, these claims are not insurable in a professional liability policy. A solution is to amend the policy so the coverage is still provided for claims arising out of contractual guarantees or warranties if the underlying cause is due to the insured’s negligent acts or omissions.
Many professional liability policies are written on a claims-made basis, meaning that the insurance only covers claims that are filed or made during the current policy year and the related error or wrongful act occurred on or after the starting date of the policy a so-called prior acts inception date. In this case, the insurance buyer wants to negotiate a prior acts date for its professional liability policy as early as possible. Each year coverage is renewed, the insured should be certain that the same prior acts inception date is maintained.
What coverage extras should be included?
The policy should include:
- The option for the insured to choose its own defense lawyers subject to approval from the insurer.
- The broad definition of a covered claim that includes regulatory investigations or administrative actions by a government agency; coverage of legal fees incurred to defend against a demand for an injunction or other nonmonetary relief; coverage for a claim alleging a dishonest or a criminal act until found by a court upon final adjudication; and coverage of punitive damages to the extent allowable by state law.
- An absolute right to buy a ‘tail’ or ‘extended reporting period endorsement’ of one to three years in the event that the policy should not be renewed by either party. This extends the policy after it has expired to cover a claim arising from a wrongful act or error during the prior coverage period.
- A very broad listing of covered professional services under the policy.
Philip Glick is senior vice president with ECBM Insurance Brokers and Consultants. Reach him at (610) 668-7100, ext. 1310, or email@example.com.
Nearly every state charges a state sales tax, and you’ll see this charge on most purchases. However, because there is no national law for sales tax, the amount you’ll pay and the items subject to tax vary.
West Virginia became the first state to pass sales tax legislation in 1921. Today, 45 states, and many local jurisdictions, have some type of sales and use tax. However, there has been a recent political push to switch to a value-added tax, which exists in Europe, or a national sales tax based on federal income taxes and a system of rebates.
“On average, sales taxes generate $150 billion a year and account for nearly one-third of a state’s total revenue,” says Timothy A. Dudek, director, Tax Strategies, at Kreischer Miller. “With the potential to increase this amount by taxing online sales, state governments are not likely to give up on the idea of a national sales tax. And enough state pressure may be able to force the federal government to pass such legislation.”
However, a new theory called “affiliate nexus” is emerging, which may override the older concept of “physical presence nexus.”
Smart Business spoke with Dudek about the latest trends in sales tax imposition and collection.
Recently, states have expanded the sales tax to apply to affiliate nexus. What is affiliate nexus?
Many out-of-state retailers enlist independent in-state websites known as affiliates to promote sales. An affiliate places links on its website to a retailer’s site and receives a commission when someone follows the link and buys goods. This affiliate nexus will now require out-of-state vendors to collect and remit sales tax, even though the vendor does not have a physical presence in the state where the purchaser is located.
New York was the first state to adopt sales tax affiliate nexus legislation, known as the Amazon law. Under the legislation, a remote seller is presumed to be a vendor required to collect New York sales tax if:
? The seller enters into an agreement with a New York state resident, under which a commission or other compensation is paid, if the resident directly or indirectly refers potential customers to the remote seller, whether by link, an internet website, or otherwise, and
? The cumulative gross receipts from sales by the remote seller to customers in New York as a result of referrals total more than $10,000 during the preceding four quarterly sales tax periods.
North Carolina and Rhode Island have adopted similar legislation. In California and Hawaii, New York-type statutes have been vetoed by the governors.
In response to the Amazon law, more than 30 electronic retailers registered as sales tax vendors in New York. New York estimates that it will receive approximately $70 million in revenue for fiscal year 2009-10 from these vendors. According to some sources, as many as 60 sellers have ended their affiliate programs in New York to avoid the burden of collecting New York sales tax from customers.
What other approaches have states adopted to increase sales tax collections?
Several states require more reporting by out-of-state vendors. For instance, on Feb. 24, Colorado signed into law legislation that will impact e-commerce and catalog companies.
The first part states that a remote seller that is a member of a controlled group is presumed to be doing business in Colorado and is therefore required to collect sales tax if any member of the controlled group has a physical presence in Colorado. This includes parent-subsidiary, as well as brother-sister, relationships. This started as an affiliate nexus bill similar to the New York law, but the final law requires an actual corporate relationship to impose the sales tax collection obligation.
The second part is aimed at encouraging customers to pay their fair share; for example, the use tax due on purchases. Remote sellers that are not registered and therefore do not collect sales tax are required to notify customers on the sales invoice of the customers’ responsibility to pay use tax to the state.
Colorado also requires the remote seller in January of the following year to send to customers by first class mail an annual information statement detailing purchases for the prior year. This must also be sent to the Colorado Department of Revenue. To persuade remote sellers to comply, Colorado is imposing penalties for failure to notify customers or to submit the annual information statement.
Oklahoma has also passed legislation requiring remote sellers to notify customers on the invoice of their use tax responsibility, but there is no requirement to submit an annual information statement.
Other states, such as California, are considering enacting similar laws to encourage customers to pay use tax on their purchases.
What is economic nexus, and how is it applied?
Economic nexus is a standard touted by states within the context of net income tax. This concept will appeal to many states within the context of sales tax, since this standard is one without a physical presence.
The result of a widespread economic presence standard would put U.S.-based firms at a disadvantage versus foreign-based competitors. In the expanding global marketplace, this is hardly the right policy choice to promote U.S. competitiveness. U.S. companies should only pay business activity taxes in those states in which they are physically present. The physical presence rule is fair to businesses because it requires tax in exchange for government-provided benefits in every state in which companies employ labor and capital.
Physical presence is also more consistent with the language in U.S. tax treaties and thus creates a more level playing field between U.S.-based and foreign-based corporations doing business in the U.S. The physical presence standard has other benefits, including the promotion of a robust interstate market, maintenance of state tax competition and a reduction in the number of states in which corporations have to pay tax.
For these reasons, Congress should consider moving ahead with the adoption of a physical presence standard for state business activity taxes.
Timothy A. Dudek is director, Tax Strategies, at Kreischer Miller. Reach him at (215) 441-4600 or firstname.lastname@example.org.
The term “occurrence” seems simple enough, but when it’s used in insurance situations, it can lead to dangerous misunderstandings, says Kevin Forbes, sales executive with ECBM Insurance Brokers and Consultants.
“The term ‘occurrence’ has several uses in insurance contracts and can be a significant source of misunderstanding,” Forbes says, adding that it is important for policyholders to understand how occurrence is interpreted in their insurance program.
Smart Business spoke with Forbes about the importance of occurrence and how it can affect your insurance claims.
What is an occurrence?
When a claim is made, the first act an insurance company will perform is to determine if the claim meets the definition of an occurrence. An occurrence is defined in most liability insurance policies as ‘an accident, including continuous or repeated exposure to substantially the same general harmful conditions.’ Before any policy responds to a loss, the circumstances must meet the definition of occurrence in the liability policy.
Occurrence can also refer to the type of policy trigger, such as occurrence versus claims made. Finally, occurrence is used to define how the policy limits of insurance are paid.
What is the difference between a claims-made insurance policy and a per-occurrence policy?
There are two ways a liability policy can be written. An occurrence policy is written to cover incidents that take place during a specific time period, the policy period. It does not matter when the suit for damages is filed under these contracts, only when the occurrence that caused the loss takes place. This is what you would typically find on a commercial general liability policy and other public liability policies. Typically, these policies are written for companies where accident or loss exposure is of a specific nature and you can pinpoint the time it took place.
The other policy form is a claims-made coverage form. In these contracts, the coverage is triggered on the date the claim against the company is made. A long time can pass between the time of the occurrence and the actual filing of a claim. These forms are used for businesses that have losses that take place over a long period of time, including such exposures as pollution, pharmaceuticals, chemical exposures and similar operations.
How can occurrence affect an insurance claim?
Managing coverage triggers can be tricky. A company can be in business and make a product for 20 years and be insured under an occurrence form general liability policy for products liability during that time. Let’s assume that company no longer makes the product and discontinues insurance coverage in year 21. If a claim took place during the 19th year but it wasn’t filed against the company until two or three years after it ceased coverage, the policy in effect when the accident took (the year 19 policy) would still provide coverage to the policyholder.
A claims-made policy only covers claims filed during the policy period. Once the policy expires, so does coverage. In the example above, a claim filed after the contract expires would not have coverage, even though it was in force when the accident took place. There are ways to extend the coverage forms to provide a somewhat broader period, but there are still pitfalls that need to be managed.
How do occurrence limits work?
The occurrence limit on the insurance policy is the most the insurance company is going to pay for any one event or accident. Policies may have split occurrence limits between bodily injury to another party and property damage to property of others, or there may be one total limit that applies in the event that an accident or occurrence takes place.
This is important to keep in mind because, regardless of the number of people who are injured or the number who have damaged property, the occurrence limit is the most the policy will pay for that event.
How do recent court decisions affect the interpretation of an occurrence in insurance policies?
Due to a ruling by the Pennsylvania Supreme Court in the 2006 Kvaerner Metals Division v. Commercial Union Insurance Co. case that a subcontractor’s faulty workmanship was not ‘accidental’ and therefore not an occurrence under the policy, claims resulting from faulty workmanship have been limited, if not excluded altogether, under the commercial general liability (CGL) policy.
A ruling in a more recent case in front of the Pennsylvania Superior Court deemed that consequential damage caused by any faulty workmanship was also not covered under the CGL. Your own faulty work was never covered under a policy, but resulting injuries or damages were, prior to this ruling.
Construction defects that develop over time because of poor workmanship are not meant to be covered under a commercial general liability policy. However, it is feared that damage by any faulty workmanship, whether performed by a subcontractor or not, could be construed to be excluded under the CGL policy. This could have the effect of virtually removing all coverage under a general liability policy in Pennsylvania if there is faulty workmanship that results in injury or damage.
What should business owners know about the definition of occurrence in their insurance program?
With the Kvaerner ruling it is important to know the wording in your insurance policies and make sure your insurance policy addresses this potential lack of coverage. Most insurance companies are amending their definitions of an occurrence in their policy language, but some do not address the complete issue.
It is important that you speak with your insurance broker to make sure that your insurance policies are addressing not only giving back the faulty workmanship coverage, but also provide coverage for the consequential damages to the policyholder’s own work.
Kevin Forbes is a sales executive with ECBM. Reach him at (610) 668-7100 or email@example.com.
Born: Richmond, Va.
Education: Bachelor’s degree in engineering, Lafayette College; Ph.D. in materials engineering, Cornell University
First job: As a kid, my first job was the traditional paper route. I was paid a penny a paper, so I had to deliver a lot of papers to make a buck.
What is the best business lesson you’ve learned?
The most valuable lesson is you don’t have all the answers, and you’d be fooling yourself to say that you do. You need to surround yourself with the best people and trust them to do the things you’re not good at.
What traits or skills are essential for a business leader?
The ability to listen. You have to be open to dissenting points of view. It’s very easy for someone in the CEO’s spot to speak up first instead of shutting up and listening to what the problem is. But you need to do that as a leader.
What is your definition of success?
What I like to see is when plans that are set in place come to fruition, and people around me are having success, as well.