Employment Practices Liability
Experience MOD
Evaluating Deductibles
Commercial Umbrella Policies
Workers Compensation Costs
Hired & Non-Owned Auto Insurance
Waiver of Subrogation
Directors & Officers Liability Insurance
Employees & Independent Contractors
Business Income Coverage

Employment Practices Liability is insurance coverage that protects businesses against claims made by their employees. This type of coverage protects against claims that employees legal rights as workers have been violated by the employer.

Businesses need this type of coverage because no company is invincible to lawsuits. Even the seemingly smallest situation can turn into a costly lawsuit. EPL coverage can protect your businesses from lawsuits involving:

• Discrimination
• Breach of contract
• Sexual harassment
• Wrongful termination
• Wrongful discipline
• Negligence
• Infliction of emotional distress
• Failure to employ and promote
• Mismanagement

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An Experience Mod, or Experience Modification Factor, is an important component in calculating the premiums on your worker’s compensation insurance coverage. Generally, the more injuries and worker’s compensation claims a business has, the higher their experience mod is and in turn, the higher their premiums become.

Worker’s Compensation Insurance is purchased so that an employee’s wages can be paid for should an injury occur on the job. Essentially, the insurance company is not paying these wages for a business, but rather they are providing a way for businesses to finance the costs of the wages and costs of injuries. The Experience Mod is what determines at what rate a business “pays back” the costs of injuries and wages to their insurance company. Depending on how costly an injury is, “points” can be added to an Experience Mod, making rates higher.

The rates of an Experience Mod are based on a few different factors:

• Costs of injuries by employees
• Number of “points” for each type of injury
• Current year’s increase in premium costs due to injuries

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Choosing a deductible for insurance, especially for businesses, is no something to rush through. Although it may seem like an easy option to let your insurance agent create business owner policies for you without taking a look yourself, this can end up costing you in the end.

When choosing a deductible, you want to make sure that your business will have the ability to pay it should something happen. Choosing a higher deductible usually means more coverage, however you do not want to set your deductible so high that your business will have trouble covering it in the event of a claim, accident, etc.

Consider the worth of your business and its ability to cover costs when choosing a deductible. You don’t want to set it too low and end up without enough coverage, but you also don’t want to set it so high that you cannot afford to cover it should something happen.

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An umbrella policy, often referred to as general or excess liability coverage in the business world, is essential for all businesses and companies. Most business owner’s policies will have liability coverage within them, but it is often not enough. An umbrella policy can cover the costs of liabilities issues the go beyond the liability coverage of your BOP. Umbrella insurance provides your business with protection in the case of lawsuits that develop as a result of something your company is being accused of doing in regard to injuries, property damage, etc.

For example, say your business is sued because someone was injured on your property. The costs of the claim and lawsuit add up to $150,000, but your BOP liability coverage only goes up to $100,000; who do you think will be responsible for paying the extra $50,000? Not your insurance company; the responsibility lies solely with the business owner/operator and the company to pay for any costs that reach beyond your insurance policies’ coverage.

Every type of business can benefit from an Umbrella policy, big or small. Accidents happen every day and lawsuits are everywhere; no business is invincible. Purchasing a liability policy helps protect you, your business, and those who rely on it from potentially crippling debt.

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Worker’s Compensation costs can increase in no time and can sometimes creep up on business owners. There are, however, some practices to help reduce these high costs and reduce the amount businesses are spending on worker’s compensation. Building a solid OSHA program can be extremely helpful and can reduce the costs of worker’s compensation to your business. It is important for your business to be in complete compliance with OSHA in order to both reduce the risk of accidents and reduce the rate of coverage. Here are some ways to do this:

• Develop workplace programs as required by OSHA standards
• Integrate such programs into the daily operations of your business
• Thoroughly investigate all injuries and illnesses
• Provide training and programs for all employees to develop safety competence in the workplace
• Audit the programs and training you implement in the workplace on a regular basis; this can stimulate improvement on OSHA compliance in the long run

Complying with OSHA standards is required by law in most states, and for those in which it is not, it’s a great way to reduce incidents, injuries, accidents, and costs to your business.

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Hired Auto is an insurance line that provides liability coverage for when you or an employee is driving a rented, hired, or borrowed vehicle for your business.

Non-Owned Auto is an insurance line that provides liability coverage for when an employee has to drive their own personal vehicle for business purposes; a car that your business does not own or has not rented, hired, or borrowed.

Any business that makes use of rental, hired, borrowed, or any employee’s own personal vehicle needs to purchase hired and/or non-owned auto insurance coverage. It may be difficult to get enough coverage for these types of vehicles in a regular commercial auto policy, since your company does not own them.

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A waiver of subrogation is a contractual agreement that states you have given up your right to sue a third party if a claim should present itself. Such a waiver must be written and signed PRIOR to loss and liability issues. For example, if you rent out a hall for a party and they ask you to sign a waiver of subrogation in your agreement, you’re giving up your right to sue the hall should anything happen to someone at or while leaving the party.

In business, a waiver of subrogation is usually used in regard to worker’s compensation. In terms of worker’s compensation, a waiver of subrogation would ensure that third parties would not be held liable for claims.

For example: A painting company is painting a home. Should an employee of the company be hurt on the customer’s property, without a waiver of subrogation in their worker’s compensation contract, the insurer of the painting company can try to collect some of the cost of the claim from the customer. If there is a waiver of subrogation in the contract, then the insurer will pay the whole claim cost and would not be able to go after the customer.

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Directors & Officers Liability Insurance is a policy that all business owners should look into purchasing. General liability and excess liability insurance coverage can help up to a point, so you may find yourself needing additional and more specialized coverage should you be faced with a claim and/or lawsuit. Any company that has a board of directors and chief officers needs this coverage in case of lawsuits in conjunction with performance of duties in relation to a company. Do not confuse this with errors & omissions coverage, as this is concerned primarily with the performance of products and services, not individuals.

Businesses should definitely purchase Directors & Officers Liability Insurance for the following reasons:

• Employment practices lawsuits make up the single largest areas of claims under directors & officers policies (over 50%).
• You don’t want investors, officers, and board members/directors to have to risk their personal assets to serve your company, and oftentimes, they aren’t willing to do this.
• Employee, stockholder, and client claims will be made against the investors, officers, board, and company. These individuals are directly responsible for the company’s operations and can pay a big price in both the company’s assets and their own personal assets should a lawsuit ensue.

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Especially in today’s rough economy, hiring an Independent Contractor can be beneficial to the expenses of business owners. Unlike an employee, business owners do not have to provide independent contractors with contractual salary/wages, benefits, worker’s compensation, overtime, payroll taxes, etc. Usually the basic costs to the employer for hiring an Independent Contractor are to supply a workspace, equipment and tools, and work related supplies. You must be careful to know the difference between an employee and an independent contractor, however, or you can face huge penalties from the government. You must submit a separate tax form for independent contractors that proves they are not regular employees and prove that the aforementioned coverages and procedures need not be taken for them. If you cannot prove to the IRS that you have not “abused” the privilege of hiring an independent contractor, then you can be faced with costly punishments.

In order for someone to be characterized as an independent contractor and NOT an employee, they must have total control of the work they do. In other words, a business owner can control the result of the work of independent contractor (i.e. order that something else be done if they are unsatisfied with the work after completion), but they cannot give them orders on how to get the work completed. The company that the independent contractor is actually employed by is who takes charge of how/when their work gets done. A business owner can in no way control the work of an independent contractor, but they can bring in a different independent contractor should the work not meet their expectations.

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In the most basic of terms, Business Income Coverage is protection against the loss of your income should anything happen to your business. For example, if a fire occurs on the property of your business and you are unable to operate and make money for a period of time, Business Income Coverage will make sure that you are still paid and have income. This kind of coverage not only protects you as a business owner, but also your employees and their income.

Business Income Coverage policies and their limits, like most business coverage, are determined solely by the business owner/operator. There are a few things to factor into the makeup of your coverage.

• “Period of restoration” or the amount of time your business may take to recover from a loss and the amount of time you and your employees will need income coverage.
• Calculate an anticipated amount of income that will be lost by you and your employees.
• Calculate an anticipated amount of money you may need to cover the physical rebuilding/restoration of your business and the lease/rent of the property.
• Calculate any “extra expenses” outside a normal coverage range. (i.e. if your business has specialized and expensive equipment that needs to be replaced)
• Calculate the anticipated expenses of your business for up to a 12 month period. You never know what can happen and in order to adequately cover your business and your employees, you should plan for the worst case scenario.
• Finally, consider what is called an “extended period of indemnity.” This is a period of time which your business may need to get “back on its feet,” even after it is repaired and brought back to 100% operating status. This type of coverage protects you if it happens to take a while before your customers start “coming back.”

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