With regard to general liability policies, taking precautions before an accident can help keep your liability and your insurance rates down. All businesses can take certain steps to lower the chance of a liability insurance claim:

• Set a high standard for product and/or completed operations quality control.
• Make sure all company records are complete and up to date.
• Be sure employees are properly trained and hold regular safety meetings.
• Get safety tips for your type of business from your insurance company.

What factors determine the insurance premiums I pay?

How insurance companies determine premiums is a complicated process that involves many factors – risk, actuarial and losses/claims data for the type of operation, type of insurance, etc. While insurance companies try to be competitive with other companies, each makes decisions based on their own data and experience insuring businesses of similar risk, statistical information on the field of business, and business objectives.

Insurance companies maintain staffs of trained experts, called underwriters, whose primary job is to evaluate the amount of risk the company will assume by issuing an insurance policy for a particular business. If one particular company has experienced a higher rate of loss on a particular field of work, its premiums will likely be higher than another company whose loss ratio is lower.

• Perceived risk. Business owners should first consider the amount of risk associated with their business. For example, a home builder is at a greater risk of being sued for a defect on their completed operation, than a company who does interior painting and wallpapering, and would therefore pay a higher rate for liability insurance. Misrepresenting your business operations to an insurance company is considered insurance fraud so it is important to be up front when describing your business to your insurance broker.
• The state and zip code in which you operate. Businesses that operate in states like California, which has a history of a higher quantity of lawsuits filed, and awarding high damage amounts to plaintiffs typically need to carry liability insurance with higher coverage limits.

How do I know if the premiums I pay are not too high?

Keep in mind that premiums are not the only factors to consider when buying insurance. Similar coverage from several companies will, in all likelihood, vary because of the factors mentioned above and exclusions that may be applied to a policy. You’ve paid too much if your policy excludes coverages that you might need. For example, if you’re an exterior painter, and you use a sprayer every day, it is advised that you buy a policy that does not exclude overspray coverage (a common exclusion on many construction policies). When comparing insurance policies and premiums, it is almost impossible to make a true “apples to apples” comparison because of the many variables that go into making a particular policy. For instance general liability rates for an interior painter with no employees in Los Angeles can vary from $1000 including taxes and fees to $1600 including taxes and fees depending on the breadth of coverage, size and financial stability of the insurance company, and the exclusions that may be added to some of the policies. For these reasons, shopping for insurance based on price alone can be very risky. While one company’s premiums may be lower, the policy may not contain all the features and coverages you want or need. Once again, the assistance and advice offered by a licensed insurance broker can be quite valuable.

Should I pick different companies and agencies for each kind of insurance?

The answer to this question is related to several of the questions above. Depending on your field of work, your choices may be more limited, working with a broker like myself, who represents a variety of companies and lines of insurance, will likely offer more options and allow you to keep all lines of commercial insurance with one agency.

As previously mentioned, you may need to consult with an attorney in order to get more detailed legal advice. I am not a law professional, but through my insurance education and during some legal classes I took during the course of obtaining my Business Management degree, I do know that courts will typically sympathize with the employee, rather than the employer in a claim case where there has been question as to whether someone is a true independent contractor or an employee.

I also received some feedback, specifically some info below from Aaron Henry in a portion of an email that was sent to me that may be of interest:

“MBO Partners – drew my attention to your blog yesterday on IC’s and the possible need for their employers to carry coverage, even if they are paying employees as 1099 contractors.  I don’t know if you are familiar with PER’s, which contract with clients to allow them to service their Independent Contractor’s as W-2 employees instead of 1099 employees – and also offer insurance, health and retirement benefits.  My client’s site is www.mbopartners.com.  They are reaching out right now to freelancers in the entertainment industry (and work already with a number of Fortune 500 companies)”.

Thanks Aaron for the information!

I personally am familiar with PEOs, they provide similar services as the above. I agree with Aaron that this could be of help to those of you who wish to treat your independent contractors as employees.

Some main culprits relating to workers comp claims are back pain and carpal tunnel.

Back pain can be caused by a variety of issues:

• Excess weight and poor muscle tone
• Herniated or slipped discs
• Muscle strains and spasms
• Osteoarthritis; slow cartilage deterioration due to excessive use, injury or aging
• Osteoporosis; a calcium deficiency in the bones
• Sciatica; pressure on a nerve root in the lower back
• Stress

Like back pain, carpal tunnel syndrome is often the result of a combination of factors. Per my research the disorder may be due to a congenital predisposition, HOWEVER, other contributing factors that may be preventable in the workplace include trauma or injury to the wrist that cause swelling, work stress; repeated use of vibrating hand tools or at a computer keyboard and mouse. Because there is little clinical data to prove whether repetitive and forceful movements of the hand and wrist during work activities can cause carpal tunnel syndrome, all an employer can do to help their employees will be preventative.

You may now be wondering, so what the heck does Aging and Obesity have to do with back pain, and carpal tunnel? Well, for both ailments, workers can do on-the-job conditioning, perform brief occasional stretching exercises, take frequent brief rest breaks (even 60 seconds helps), use ergonomic equipment to promote correct posture and force improved muscle tone. Employers can develop programs in ergonomics, but they can also promote weight loss, cardio fitness and muscle tone which in turn will help to decrease claims relating to back pain and other ailments caused by aging and obesity.

I am no expert on ergonomics, so employers should utilize resources provided by your workers comp carrier to help create these preventative programs.

Coming soon, The State Fund is offering free seminars to employers:

Aging in the Workplace

America’s workforce is getting increasingly older. People are working longer due to difficult economic conditions.

You Will Learn:

• The effects of aging on your workers
• Simple ergonomic changes you can make
• The benefits of hiring and retaining the older worker

Obesity in the Workplace

There is an epidemic of obesity in America today. The workforce can be affected by medical and weight-related issues.

You Will Learn:

• Factors contributing to obesity in American adults
• Medical complications of obesity
• Ergonomics and weight-related issues for the worker
• Weight as a factor in determining duration of disability
• Weight loss treatment – Who pays?

Seminars are offered such as the one in Riverside on February 17, 2010.

Registration and complimentary continental breakfast begins at 8:30 a.m

State Fund Regional Office, 6301 Day Street, Riverside, CA 92507

Visit www.scif.com for on line registration and more dates/locations

Do I Need Professional Liability if I Just Freelance Occassionally?

Well, this is a loaded question. Of course the answer is that if you do ANY web design work whether you’re a free lancer (independent contractor), a very small company, or a company with many employees….YES you need Professional Liability. The need for the coverages isn’t dependent on the amount of design work you do, it’s based on the fact that you do it for pay, period. It only takes one claim to financially ruin a company or an individual. Remember, if you do design work as an independent contractor (individual proprietor), your personal finances and assets are at risk in the event of a claim.

Do I Need General Liability or a Small Business Liability Package Too?

If you work from home, and you NEVER meet personally with clients (either at their place of business or your home office), you may be fine going without general liability. Most general liability policies for consultants or web design professionals exclude products and completed operations that would be covered on the Professional Liability policy so it is pared down to the potential claims relating to bodily injury and property damage while performing a job. This can be a bodily injury accident caused by a trip over a laptop cord while giving a presentation at your client’s premises, as well as a trip on the front porch as they enter your premises, so if there are person to person client interactions it is advised that General Liability insurance be carried. It is inexpensive in comparison to the Professional Liability because of course carriers know that the risk of a claim in the bodily injury/property damage category is very low. Your risk lies almost entirely on the professional liability coverage side.  As a side note, the small business liability packages combine property coverage (such as your office equipment) with General Liability along with potential other coverages such as Hired/non-owned auto coverage if you have employees that use their vehicles to travel to client’s premises on business etc. Ask for a package if you have employees and/or a substantial amount of business equipment to cover.

Do I Need Workers Compensation?

For Web Designers, as well as related businesses, this raises a whole new issue of whether your employee is a true direct employee or whether they are an independent contractor. Even if you pay your web designers as independent contractors (as 1099′d employees), your designers could still be considered employees under state law depending on whether they meet certain criteria, and California State law requires you carry Workers Compensation Insurance if you have employees.  Workers Comp coverage for web designers is fairly low, and as with all workers comp, is tied directly to your annual payroll costs. Workers compensation and employers liability insurance in California are combined together so you wouldn’t need to apply for separate policies as employers do in other states.

Of course, as an insurance broker, I do not provide legal advice, only a lawyer can provide you the actual legal advice that you may be seeking, however, the following check list applies to any Independent Contractor vs Employee situation and can be found at the Calif Dept of Industrial Relations website http://www.dir.ca.gov/dlse/FAQ_IndependentContractor.html

• Whether the person performing services is engaged in an occupation or business distinct from that of the principal; (do they work for other employers, or just you?)
• Whether or not the work is a part of the regular business of the principal or alleged employer;
• Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
• The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
• Whether the service rendered requires a special skill;
• The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
• The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
• The length of time for which the services are to be performed; (ongoing versus occasional work)
• The degree of permanence of the working relationship;
• The method of payment, whether by time or by the job; and
• Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

I hope that the above questions asked by others, may also be helpful in answering your questions as well. Should you have further questions, or wish to request a quote on any of the above coverages, contact me directly at 877-257-1652 or mluckner@orrandassociates.com and I’ll work with you to get the coverages you need.

• Estheticians
• Architects
• Engineers
• Property Managers
• Educational Consultants
• Financial Planners
• Internet/Web Designers
• Newspapers & Magazines
• TV & Radio Stations
• Advertising Agencies
• Public Relations Consultants
• Media Buying Agencies
• Graphics Designers
• Publishers & Printers
• Direct Marketing Organizations
• Marketing Consultants

Media and Technology Professional Liability

For the purpose of this post, I’ll concentrate on Media and Technology-related Professional Liability (PL) policies. Media and technology are rapidly changing industries and their insurance policies must continue to improve to meet these needs and protect insureds from third party claims.

What Does Professional Liability Cover

A common exposure media organizations face is a libel/slander claim arising from their content. This is primarily contained in the broadcasts, website content, or articles they run and in advertisements they accept. The typical claim might involve a libel/slander action by a third party, holding the media organization responsible for the libel or slander.

What if a client is not happy with the result of a service provided to them and brings a claim to obtain a different result or avoid paying a fee. These types of claims are often just as difficult and expensive to defend as a clear-cut error. PL Insurance typically pays for the cost of defending this type of claim as if it were a clear-cut error on the part of the insured consultant.

How does a court determine the value of a marred reputation or a stolen idea? Awards can far exceed actual economical damage and often include exemplary damages that can destroy an organization.

Also unique to media liability are unusually high legal expenses: offended plaintiffs tend not to negotiate, prolonging litigation, and defendants often cite their First Amendment right of free speech, refusing to settle.

What Carriers Offer Professional Liability?

Professional liability (PL) insurance for media organizations, often called media liability and sometimes called errors and omissions or E&O insurance is available from a small group of specialty lines insurers. Our agency is appointed directly with several carriers and we have access to many others through wholesale brokerages. We have yet to find a type of company that we were unable to provide a competitive quote for.

What Determines My Rate?

Coverage and pricing varies greatly depending upon the type of professional operation, the specific services provided and its size, experience of the principals in the firm, and location. Carriers may specifically tailor their programs for certain types of media organizations in order to protect their insureds from unique claims arising from their specialized services. For example, a website designer may have advertising injury exposure relating to content used in building websites, while a public relations consultant may have a financial exposure in addition to a libel/slander exposure. When you request a quote, be prepared to fill out an application, and provide a resume from all principals in the firm as well as any advertising materials (brochures, websites etc).

Coverage is typically provided on a claims-made basis. Availability of occurrence depends upon both the type of organization and market conditions, but it is rare. Limits and deductibles vary with the size and type of insured. Standard aggregate limits for most small to medium sized organizations start at $1million. Policy forms vary significantly.

New technology and emerging media exposures – especially those arising from newsgathering – have caused carriers to consistently update their coverages in the traditional media liability policy.

You won’t find a form to fill in on this website for Professional Liability due to the variation in coverages depending on your line of work. Call me at 877-257-1652 or request an application via email to mluckner@orrandassociates.com.

For Starters, What is an Occurrence Policy?

With an Occurrence Policy, the coverage “Trigger” is the date the damage occurs. It provides liability coverage only for injury or damage that takes place or “occurs” during the policy period, regardless of when the claim is actually made. For example, a claim made in the current policy year could be charged against a prior policy period, or may not be covered, if it arises from an occurrence prior to the effective date. It doesn’t matter when damage first manifested. What matters is when the occurrence took place. The occurrence policy insuring agreement states that they will pay for COVERED occurrences that take place during the policy period. PERIOD. If an insurance agent ever tells you that you are covered in the future with your occurrence policy, ask for this in writing along with a copy of the agent’s own professional liability insurance policy because this may be the only policy that will provide you with future coverage.

Claims-Made Coverage

You guessed it! The coverage trigger is when the claim is made, and the claim must be MADE during policy period. The policy provides liability coverage only if a written claim is made during the policy period or any applicable extended reporting period (also known as a tail). Also, a claim made in the current year could be charged against the current policy even if the injury or loss occurred many years in the past except when the policy has a retroactive date, this restricts coverage only to occurrences after that date. Most policies have a retroactive date.

Manifestation Provision

The manifestation clause restricts the Occurrence coverage by stating that the damage must manifest during the policy period to be considered an occurrence. The DAMAGE is the coverage “Trigger” rather than the completion of an operation. The bodily injury or property damage must first manifest during the policy period. The insurance does not apply to any bodily injury or property damage that is continuous or progressively deteriorating and that first manifested prior to the effective date of the policy or after the expiration of the policy, even if such injury or damage continued or deteriorated during the time of the policy, and whether or not such occurrence is known to any insured. If the date of the first bodily injury or property damage cannot be determined, then usually the date of first damage or injury shall be deemed to be the earliest date on which the process, which led to the bodily injury or property damage began.Regardless of the policy’s exact definition, the damage can only FIRST manifest once and so only the policy in which it first manifests will have an obligation to pay.

What is the Sunset Provision?

The Sunset Provision sets a limit on the amount of time that a claimant has to submit or report a claim on a policy. The policy will not provide any coverage, regardless of the other terms and conditions of the Policy, including the definition of “occurrence” for any claim or “suit” or demand for damages made against an insured unless the claim or “suit” or demand for damages is reported in writing within the specified number of years after the Policy Period or the state statute of limitation applicable to work performed, if that statute is less than the specified number of years in the sunset.

Why Do Brokers Offer Policies With the Above Restrictions?

We know that in today’s economy, insurance consumers must be very cost-conscious. As a way to reduce the cost of insurance, carriers have developed these Sunset and Manifestation Provisions to reduce their risk exposure. This in turn, provides our clients with the ability to choose basic general liability coverage at a significantly REDUCED COST!

For instance, CIGA’s limit for paying out on liability claims is $500,000. So if a claim for $1,000,000 is filed against you, and your insurance carrier went broke, even if CIGA steps in, you could still be on the hook for the other $500,000. Almost all A rated carriers though, (including non-admitted carriers), are reinsured by another larger carrier. (Your carrier purchases insurance with another carrier to cover your claims in the event they can’t). So in this case, if your carrier goes belly-up regardless of their admitted or non-admitted status, the reinsurance carrier may step in before CIGA does.

By contrast, Non-Admitted companies have elected not to be authorized by the state DOI. Often mistakenly perceived as being “shaky” or questionable companies, these carriers intentionally opt not to be admitted in order to allow more leeway in pricing and coverage scope for policies they will write. Admitted companies may be unable to insure risks due to limitations on premium increases imposed by the DOI, where Non-Admitted companies can be very flexible and can act fast in order to keep up with market changes. This flexibility will often result in a customized coverage solution for complex policy placements or for those who operate businesses seen as higher risk by admitted carriers.

Just because a carrier is admitted, doesn’t mean they are more financially solvent. Sometimes just the opposite can happen, that because of the restrictions on rates and coverage forms, admitted carriers’ claim payouts could increase faster than allowed premium increases in certain classes of business. This could cause a carrier to find itself in financial trouble if they don’t have the freedom to increase premiums in order to keep pace with claims. My agency is careful to write business with carriers in good financial standing , and when in doubt, (because ratings can change quickly), we can look up their financial strength rating with independent rating bureaus like AM Best and supply this to you.

Admitted vs. Non-Admitted

So, now you understand, the question shouldn’t necessarily be “Admitted vs Non-Admitted?”, but “is this company financially capable of paying my claim in the event of an accident?”

It is important to work with an Agent/Broker you can trust, and always take the time to understand the full implications of the offered terms and conditions and know the status and standing of any insurer being considered for coverage.

Once your policy is endorsed to include an AI, depending on the form, and at times, a court’s interpretation, this coverage will pay for damages that the insured becomes legally obligated to pay due to bodily injury, property damage or personal and advertising injury arising from the insureds operations. There is coverage on and off premises, for the limits provided for in your policy. Endorsements are available to adapt coverage to your needs, AIs for landlords, specific projects, or locations as long as there is a clear relationship between the insured and the entity requesting to be named as additional insured. Carriers may or may not include the language required by your additional insured, so prior to signing a commitment to purchase an insurance policy, it is imperative that if you have specific wording/language requirements, you be sure the policy offers the wording and coverage that suits your needs.

When it is requested that you add a landlord, client or contractor as an “additional insured” , after underwriting approval, your policy is endorsed (changed temporarily) to include the named entity as an insured on YOUR policy in the event of an accident for the duration of the project you are completing for them, or on their premises.  These endorsements do not apply to work performed by uninsured independent contractors or subcontractors, nor does it apply to an insured subcontractor who has not named you as an additional insured on THEIR policy. Some insurers have reinforced their intent to exclude coverage for the AI’s own negligence with language stating just that. For more information see www.irmi.com/online/main-folder-landing-pages/commercial-liability-publications and go to Free Expert Commentary on Additional Insured Issues to get prospective from legal professionals.

Difference between CG 2010 11/85 and Equivalent forms and others:

For years, the additional insured—owners, lessees or contractors—scheduled person or organization endorsement (CG 20 10) has been widely viewed as the preferred additional insured endorsement due to the breadth of coverage it provided. Over time, however, that coverage has been significantly narrowed.  “Additional Insured Endorsements,” in Commercial Liability Insurance. Still, absent the ability to obtain prior editions of the endorsement, CG 20 10 provides the broadest additional insured coverage available to owners, contractors, and lessees under a standard ISO endorsement.

The 2004 edition of CG 20 10 (effective July 1, 2004 in most jurisdictions) provides coverage for claims against the additional insured for liability arising out of the named insured’s “ongoing operations” for the additional insured, provided the covered injury or damage was “caused, in whole or in part, by [the named insured’s] acts or omissions or the acts or omissions of those acting on [the named insured’s] behalf” (emphasis added). The effect of the term “ongoing operations” and the phrase “caused in whole or in part by” is the exclusion of coverage for claims arising out of the named insured’s completed operations and claims arising out of the sole negligence of the additional insured.

Completed Operations. In 1993, ISO replaced the CG 20 10 requirement that liability must arise in connection with “your work” to the current requirement that liability must arise in connection with “your ongoing operations.” This change removed coverage that existed in the original CG 20 10 (11/85 edition) for claims against an additional insured arising out of the named insured contractor’s completed operations for the additional insured. Although this change officially occurred more than a fifteen years ago, the reality of it is more recent. For years, many insurers routinely provided the 11/85 version of the endorsement when requested to do so. The hard market of the early twenty-first century combined with escalating construction defect claims caused this practice to largely cease.

Circling back to the beginning of this post, it is very important before entering into contracts with clients, and before purchasing your General Liability policy (also a contract), to know what is required of you, and by you, with regard to your additional insured endorsements. Budgetary constraints may force a contractor to purchase policies with more restrictive coverage and AI endorsements, but whenever possible it is advised that Contractors purchase the most comprehensive coverage afforded by them. In the end, deciding which policy to purchase on price alone may not provide for a potential client that requires special wording on the AI endorsement. It is also important throughout the year that you understand that your work must fall within your carrier’s guidelines, and that your carrier must approve of the AI endorsement request. Be sure to communicate all potential exposures to  your broker in order to help them find coverage that serves you as a business owner, in addition to satisfying your AI needs.

• Make safety a common goal, having safety and training programs in place shows your employees you care about their welfare as well as helping to keep insurance costs down so that employee payroll has room to go up.
• Avoid the risk of cancellation after “audit” or inspection by giving an honest representation up front of what your employees do in their occupation.
• Make sure your employees know how to lift properly and use all necessary safety equipment, such as goggles, gloves and respirators when necessary.
• Consult with OSHA or visit www.osha.gov and utilize the California State Compensation Insurance Fund site www.scif.com/safety for more safety tips as excellent free resources.
• If possible invest a small percentage (even less than 1% is a great) in safety training or employee time to have regular safety meetings.

Your loss control actions as an employer go a long way toward showing your employees you care, and saving your company’s future dollars. By accessing the OSHA and State Fund sites above, you’ll have a plethora of worker training materials such as fact sheets, checklists, and other educational resources that are available online and can be printed to distribute to workers participating in workplace injury and illness prevention programs. Because a number of factors go into determining your annual premium, it is important to take control of what you can. In addition to safety and prevention, other factors that can positively affect your workers comp premiums are possible special underwriting adjustments such as use of a certified health care organization, and any special group programs you may be eligible for.

Since factors such as your company’s past history of work related injuries (known as your experience modification), your payroll, and classifications are fixed by your type of operation, company size and past claims, it is essential that you take control of what you can. Rates can vary from carrier to carrier and if you have a good track record, or are starting a new business with employees in low risk classifications, we have many Workers Comp markets to solicit quotes from on your behalf. For employers who are in high risk classifications, have had significant past losses, or have started a new business in a type of operation deemed to be higher risk without prior “workers comp experience” we can certainly provide you with a quote, but our markets will be more limited.