FAQ – Commercial Insurance Topics

Exterior Insulation And Finish Systems

The term Exterior Insulation and Finish Systems (EIFS) refers to any material that is used and applied as a protective (insular) exterior coating to any building or structure. Items that qualify as EIFS include the insulating/protective material as well as the adhesives, coatings, fasteners, finishing materials (such as sealants) that are accessories or components of the foundation insulating materials.

Over the last couple of decades, EIFS have become more widely used in both commercial and residential construction. The system’s popularity increased due to it being an economical method to provide more efficient levels of insulation to both residential and commercial building projects. Further, the material is very flexible, permitting greater freedom in building design. The issue that has developed is losses caused by major defects in many of the installations.

Due to a variety of causes, such as faulty application or installation, material incompatibility, failed or inadequate caulking, many systems tend to trap moisture that results in:

  • Heavy build-up of toxic mold
  • Breakdown and rotting of the finishing material
  • Major damage to material used as the application base (especially wood framing)
  • Collapse of the exterior material

Such incidents create substantial rebuilding and replacement projects that were not intended for coverage under insurance contracts. The insurance industry was prompted to scrutinize the issue as a trend of EIFS-related losses developed, including a number of class-action lawsuits against some major manufacturers of certain types of EIFS.

The result is that most insurance policies that cover commercial property now exclude losses involving EIFS. The typical exclusion wording bars coverage for loss involving:

  • Designing
  • Making
  • Preparing
  • Selling
  • Installing
  • Distributing
  • Maintaining
  • Repairing
  • Adjusting, etc.

of an Exterior Insulation and Finish Systems An exclusion may even apply to a loss involving a policyholder’s product or work related to or used along with an EIFS. The emerging approach being used by insurers is to treat EIFS losses as ones involving faulty or defective work or construction rather than a fortuitous (accidental) loss exposure.

The Silica Problem

A “new” problem has come to the legal forefront, affecting commercial insurers and their clients. Called by various names, the “silica problem,” “silicosis,” or Crystalline Silica, the situation is serious enough that some in the insurance industry refer to it as the second coming of the asbestos problem. It may have a serious impact on your business if it includes operations that expose your employees (or yourself) to the health hazard.

“Silicosis” refers to a lung disease that is triggered by long-term, inhalation of silica particles. In 2003, the Occupational Safety & Health Administration (OSHA) published an estimate that nearly two million American workers were vulnerable to contracting the disease. Persons in the construction industry are particularly at risk. The risk of silica particle exposure is greatest in jobs involving abrasive blasting, mixing/making concrete (or brick) and drilling masonry material. Other areas of concern (again according to OSHA) include the following:

  • asphalt pavement manufacturing
  • ceramics (& china) manufacturing
  • tool and die industry
  • steel and foundry industries
  • any job using abrasive blasting for cleaning, smoothing or etching

Generally, silicosis develops only after years of exposure to Crystalline Silica. The levels of the disease may either be Chronic, Accelerated or Acute. Symptoms include fatigue, shortness of breath (particularly after a strenuous activity), chest pain and weight loss. A chest X-ray may determine lung damage. In some cases, silicosis may be fatal.

Silicosis claims and lawsuits are becoming more common. There have been reports of very costly damages being awarded, since the more serious claims involve long-term health issues. It is important to look for ways to avoid having anyone contract silicosis. Try to apply precautions such as the following:

  • If possible, substitute other materials for silica when performing abrasive blasting
  • Use proper respirators with correct seals
  • Do not permit eating, drinking or smoking near work areas that generate silica particles
  • Use proper ventilation to clear work areas of particles
  • Make showers available to workers, along with either disposable or washable work clothes. NOTE: Clothing should first be vacuumed before it is removed
  • Provide training to employees in how to monitor work situations and in recognizing (and reporting) silica related problems
  • Wash hands and face before eating/drinking
  • Use “wet” sweeping to clear dust from work areas

There are other methods to help fight this problem. If your operations include exposure to this health hazard, be sure to discuss solutions with insurance professional.

Insurance – A Matter Of Trust

Regardless the subject of an insurance policy, be it trucks, manufacturing plants, printing presses, inventory, professional acts or cargo, it involves trust. Insurance policies are contracts. These are written agreements that involve at least two parties. One is the insurance company that provides the applicable form of protection. The other is the party or insured, who is protected by the policy. These two parties have a direct, contractual relationship with each other. The insurer agrees to protect the insured if the insured agrees to pay for the protection.

The trusting relationship begins before any policy is issued. When an insurance company seeks customers, either directly or through agents, it does so under the assumption that their policies will be issued to persons who meet their qualifications. Qualified persons are discovered by using applications. Besides collecting identifying information, applications also gather details that help a company determine if a person is eligible for a type of coverage. Where does trust come in? The insurer relies on the information that an applicant provides on the application. It acts on that information by reviewing it and deciding whether a policy should be issued. The information also helps the insurer decide how much to charge for the coverage, what level of coverage it should agree to grant and the conditions for providing the protection.

The insured also to be able to trust the insurer. He, she (or a business entity) has to rely on the company actually issuing the type of coverage it promises. The insured also trusts the company to pay for a loss (that is eligible under the coverage) and to handle any loss fairly and efficiently. Both parties must approach the contractual agreement honestly and fairly. The contract is affected if either party fails to act in good faith.

For example, an insurance company breaks a contract when it refuses to cover an eligible loss without a valid reason. On the other hand, an insured breaks a contract when he or she refuses to pay for the policy. An insured may also break the contract if he or she either withheld information or intentionally supplies false information. Of course the information must involve some significant item that would have affected the company’s decision to accept the insured. Breaching a contract may allow an insured to sue a company for coverage or allow a company to void the policy it issued.

Whenever policies are not handled in good faith, there are consequences that impact more than just the two parties. Third parties, such as other businesses or persons, may also be harmed by insurance contracts that turn out to be invalid. Modern economies depend upon the role played by insurance contracts. It would be impossible to handle large transactions without a way to protect all parties against possible losses. Further, many parties would not even attempt certain types of transactions without the support of insurance, such as large building projects, major equipment sales, vehicle rentals and numerous other transactions.

Certainly there are many times when one party fails to handle their insurance obligations in good faith. However, such instances are the exception. Our economy and standard of living are made possible because most parties deal with each other honestly and we all benefit when that happens.

Contractual Liability

As far as the insurance industry and the law are concerned, a business entity (sole proprietor, partnership, limited liability company, corporation, etc) is the same as a person. A business is held both civilly and criminally accountable for its actions and for actions that occur on behalf of a business. In other words, a business that harms another party or damages/destroys another’s property may be sued or prosecuted.

For larger businesses, the insurance coverage that protects against liability to third parties is a Commercial General Liability policy. This policy is designed to take care of the business that is described within the policy and its ability to do its job is complicated when the insured business voluntarily agrees to take over someone else’s responsibility. When this agreement is in writing, it is referred to as contractual liability.

Contractual liability throws the CGL for a loop. The policy’s design and cost is based on the assumption that it only has to concern itself with the party that is listed on the policy. Taking on some other business’ liability means that the policy is being asked to either defend or pay for the injuries or damages caused by an entity that it doesn’t “know” and isn’t getting money for that opportunity. A company that decides to step-in for another company has to make sure that it can arrange insurance to handle a loss it has assumed. It may try to take care of the situation by endorsing (changing) its CGL by adding the name of the other party as an additional insured. Or, when the insured company is a property owner and the other party is a contractor, the property owner may buy one special form of coverage called Owners and Contractors Protective Liability.

Of course, regardless the coverage arrangement that is attempted, it doesn’t mean that every situation will be covered. You need to read the CGL policy (including any endorsement form) or Owners and Contractors Policy language to determine what situations are insured. Typically, a covered event has to involve a type of loss that the policy protects against and the persons involved must have a certain arrangement with the party that is insured by the policy. For instance, if someone sues you because your temporary business partner’s employee hits them with a company truck, the policy won’t help. A CGL doesn’t cover auto-related losses. Let’s say you own a printing company and you, in writing, agree to cover your friend’s plumbing business if they are sued by a customer. Neither a CGL nor an OCP would help, because the written agreement has no relationship to your operations.

You should discuss your business relationships with an insurance professional in order to be sure that you, your business and your related liability are handled efficiently and economically. This often means that the best strategy is to have every party take care of their own insurance needs.

A Look At Lloyd’s

Lloyd’s of London is an organization that has provided insurance worldwide for more than 300 years. In the United States, the organization has a reputation for handling either very expensive or exotic types of insurance. Lloyd’s is neither an insurance company nor, for most of its history, a corporation. It is made up of approximately 17,000 members consisting of the underwriters, the insurance brokers who bring them business, and the investors known as “names.” The underwriters accept insurance business on behalf of syndicates (groups of “names”). Prior to the 1980s, many American insurance agents, producers, and risk managers were reluctant to place insurance in the Lloyd’s market because of lack of familiarity with the organization. Currently, American insurance professionals and private investors have a much higher level of participation with the historic marketplace. In fact, the U.S. is becoming a dominant source of business handled by Lloyd’s.

The history of Lloyd’s begins at Edward Lloyd’s coffeehouse in 1688, where he attracted a clientele of merchants, particularly ship owners with vessels and cargoes needing protection. Mr. Lloyd’s establishment quickly evolved into a meeting place where businessmen sought brokers to place insurance with wealthy, reputable men. Character and integrity were important because the persons (called underwriters) who agreed to invest in the ships and cargoes put their personal fortunes at risk in order to pay their share of any claim. If a ship’s voyage was successful, the underwriter would share in the profits.

Note: The term underwriter came from the practice of persons agreeing to insure a ship and/or its cargo by placing his signature under the name of the vessel he was willing to sponsor.

Lloyd’s of London has long been identified with British history and the growth of worldwide commerce. It is an international insurance market, located in London, whose members cooperate with each other, compete with each other and, of course, compete against other insurance organizations. There are four major markets at Lloyd’s: Marine, Non-Marine, Aviation and Motor. Lloyd’s also has a smaller market that handles short and long term life insurance.

Insurance is not placed with the Corporation of Lloyd’s, a society incorporated under Act of Parliament of 1871. The Corporation provides the premises, shipping information services, administrative staff and other facilities that enable the Lloyd’s market to transact insurance business. The actual insurance transactions are handled by thousands of Lloyd’s members. About one-third of the membership is actively engaged in the market. The remaining members provide capital, but do not actively place business in any of Lloyd’s insurance markets. Only the underwriting members may accept insurance business on behalf of a syndicate.

Historically, a policyholder with a valid claim could be certain that the claim would be paid, whatever the cost to the member who accepted the risk. Formerly, every underwriting member was responsible up to the full extent of his personal assets for his share business. If his personal assets were not enough, Lloyd’s would make any deficit out of its reserve funds.

Today, Lloyd’s liability is more conventional, limited in the same manner as traditional insurance companies. The change was necessary due to its long-term problem in handling losses associated with asbestos claims. However, the changes made by the organization make it likely that Lloyd’s will continue to be an important part of the insurance market.

Loss (Reporting) Control

Are you familiar with the adage “honesty is the best policy”? Are you a firm believer in open, complete communication? Both of these positions are important to hold as you operate your business. However, you may want to re-evaluate how handle minor losses. Why? Because what you say may incriminate you…at least to your insurer.

Daily, insurance consumers are asked to reconsider filing a claim, not because of its merits, but because of the possibility that insurance affordability or availability could be harmed. Insurers are focusing more of their attention on loss history and how past losses affect a given business that they insure or are considering insuring. In the current insurance environment, reporting a minor loss could make you a two-time loser. First, depending upon loss circumstances, coverage may be denied. Second, the fact that the loss occurred may cause your insurer to take a closer look at you.

Insurance companies want to have as much information as possible in order to decide whether to offer or continue to offer coverage. Loss history has always been important to insurers. However, an increased emphasis is being placed on using past losses as a way to predict the likelihood of future losses. The difference is that insurers have abandoned asking only about losses that exceed a certain amount. They now look for information on every conceivable loss. This increased sensitivity to losses may cause an insurer to increase premiums or even decide not to renew coverage when, in the past, minor or unpaid claims were not treated as problems.

Look, you have to be honest with your agent and insurer. However, insurers have changed the rules on viewing loss activity. So you owe it to your organization to manage losses in a manner that is in sync with the new reality. Handling more small losses as an operating expense instead of through your insurer may be good business. More organizations are becoming aggressive and creative in managing losses, especially as insurers have changed their attitude toward losses and underwriting.

Discontinued Operations

Regardless the industry, mergers and acquisitions have become the norm. These are very complex legal transactions that can affect an organization’s insurance needs. Unforeseen liabilities may arise for merged entities that produce tangible products. One area of concern is a discontinued operation.

Once a product enters the marketplace, its associated liabilities do not cease with the sale or merger of the original manufacturer nor when that particular product is no longer produced. Liability claims often occur many years after the product was first produced or sold.

Often businesses are sold on an ‘assets only’ basis. If the original business owners retain the corporate structure, then liabilities connected to their original operations will remain with that corporate entity.

For example: Utility Trailers, Inc. manufactured small trailers. The owners of Utility Trailers received an attractive offer from another company. The board decided that a sale was in everyone’s best interest. The sale was ‘assets only’. Utility Trailers, Inc. was not dissolved as a corporate entity. A year after the sale of the company, some customers filed claims for damages due to product defects on trailers that were made by the original entity. The claims reverted to the original corporation and without ‘Discontinued Operations’ Coverage, it could have become the liability of the original owners of the corporation.

Courts take different positions on these issues according to individual cases. In some instances the courts find the new owner responsible, particularly when they continue the operations of the original entity. Statutes of limitation may provide some y protection. Some jurisdictions have laws that prohibit lawsuits after a certain number of years. However, others allow a time limit for filing a suit which lay dormant, not being triggered until some harm has been discovered. Once that occurs, the clock begins to tick for taking legal action. The latter instance means that years could pass before a substantial claim arises.

‘Discontinued Operations’ coverage would provide coverage for bodily injury or property damage caused by defective products. The same coverage can be designed to provide coverage for contractors that have ceased doing business. It would be a disappointing situation to find that after a product has been discontinued or assets sold, all profit from the sale – and perhaps more – has been taken away due to a defective product that is still the responsibility of that entity. So contact your agent and discuss whether you have continuing liability for a discontinued operation.

Business Insurance Costs

Many business insurance customers may have complaints such as the following:

  • Why have my insurance costs gone up so much in the past couple years when I haven’t had any claims?
  • Doesn’t anyone in this state offer affordable business insurance?
  • Why doesn’t my insurer write this type of insurance in my state?
  • I’ve only had two claims, why won’t anyone insure me?

Businesses price their products to cover the costs of production, plus sales and marketing expenses. Prices also reflect some post-sales costs such as repair or replacement under warranty. At one time many industries began pricing their products below their true costs. The strategy was based on the assumption that increased sales would make up the difference. The strategy wasn’t successful. It hasn’t worked for the auto industry, the computer industry or the insurance industry.

The problems of the insurance industry became apparent about three years ago. Individual companies were just beginning to alter pricing as part of the solution. Then the terrorist attack of September 11, 2001 changed everything. Suddenly, a catastrophe beyond imagination hit this country and the insurance industry in a very significant way. Workers Compensation, a coverage that had never experienced a loss of this magnitude, was struck by a catastrophic loss. Property losses, business income losses, liability losses, life insurance claims, every type of policy was affected by this horrific event. What started to be a gradual correction became a sudden and violent change. Now the industry has to handle many more claims being presented many years after their policies have expired. In the case of pollution, asbestos and employment practices, the industry is being asked to handle losses that policies weren’t designed to even cover.

Well, what can a business owner due to minimize their high insurance cost? Before considering sacrificing the amount of protection you carry to save money, consider alternatives. Some other solutions would be:

1. Review your coverage:

  1. Take a close look at your insurance. Could you increase the deductibles to lower your premium?
  2. Are you carrying physical damage coverage on commercial vehicles that aren’t worth it?
  3. Are you insuring items you could replace out of pocket? Are there pieces of equipment that are insured when they could be replaced from operating funds without submitting a claim?

2. Review your exposures:

  1. Could you reduce the premium by installing an alarm system or fire protection system? Would these premium savings offset the cost of the system?
  2. Could you implement safety programs that would reduce the cost or make the insurance company more interested in providing coverage? For example: driver safety programs, back to work programs, safety training in proper use of equipment and job functions.

3. Identify your insurance goals:

  1. Do you need an insurance company that can provide loss control services?
  2. Do you need an insurance company that can provide claim-handling services for your Workers Compensation insurance?
  3. Do you need an insurance company that will allow you to make payments by phone or on-line 24/7?
  4. Do you need an insurance company that has a local agent/representative that can assist you in your insurance solutions?

Shopping and price are not the only issues in insurance. What you don’t know can cost you more in the long run than you could ever save in premiums. Discuss your situation with an insurance professional and make the choice that works for you.

Umbrella Liability and Uninsured Motorist

How does your business umbrella policy handle a loss involving an uninsured or an underinsured motorist? Uninsured Motorist (UM) laws intend to put an injured person in the position he would have been in if the party causing the injury had met his or her minimum financial responsibility (varies by state). Underinsured Motorist (UIM) laws are intended to put an injured person in the position he would have been in if the party causing the injury had met his or her actual financial responsibility (varies by accident circumstances). Recently, court decisions have favored allowing “full compensation” for losses, resulting in more judgments paid under a coverage part that was designed to be the “last resort” (collecting coverage under your own policy).

Liability coverage is designed to pay for you injuring others. Let’s take a simple example. Phil owns PC Physician, a firm that services personal computers and laptops, including pick up and delivery. While making a house call, a PC Physician service van driver is distracted and fails to see a red light. The van runs into a stopped car. The injury to the car’s driver and the damage to her vehicle are covered by the liability section of PC Physician’s automobile policy. The injury and damage to the PC Physician driver and van are not covered.

An Umbrella Liability policy only provides liability coverage, not coverage to you for any injuries you receive. UM and UIM coverages provide coverage to you for injuries caused by another party, acting as substitute liability coverage. While state laws are fairly clear in their requirement that primary auto policies include UM and UIM protection, it’s not clear if umbrellas (secondary or excess policies) are also subject to the requirement.

In recent years, more attempts have been made to force umbrellas to pay for injuries involving uninsured or underinsured drivers. At each level of the court system, conflicting opinions have been written on this subject. The result is tremendous confusion within the legal system and the insurance industry whether an Umbrella Liability policy provides Uninsured and Underinsured Motorist coverage. The current trend is, where permitted by law, requiring insurance companies to have their policyowners sign that they either accept or reject the coverage in the Umbrella.

The solution is to contact your agent and discuss the issues within your state and the states where you operate automobiles. Determine what options are available from your Umbrella Liability carrier and what best protects your assets.

Office Functions and Alcohol

The office picnic, Christmas party, and client party are all examples of company events that may involve alcohol. Can a business be held responsible for injuries that result from serving alcohol? Is the current insurance program sufficient to address this concern or is it necessary to purchase special insurance?

Individual states govern the answer. Typically, state Dram Shop (liquor) Laws set the standard for liability for injury or damage arising from serving alcohol. The laws vary among states, but often indicate liability exists when serving someone that is underage or visibly intoxicated. In states that do not have Dram Shop Laws, the civil court system sets the standards based on each case. Even in these states, courts often follow the same line of reasoning used in Dram Shop Laws.

The Commercial General Liability policy excludes coverage for Liquor Liability but only if the insured is ‘in the business of’ selling, serving, or manufacturing alcoholic beverages. If the event offers alcohol without a charge, it could be stated that the insured is not ‘in the business of’ selling or serving. If persons have to pay, even if the charge is only to offset the alcohol’s expense, could create a different legal situation.

When hosting an event that includes liquor, some businesses have decided that hiring a bartender will reduce their risk of being held liable. This step at least offers the benefit of another party being held primarily responsible and reducing the amount the business might be required to pay. The main issue is obtaining a Certificate of Insurance from the bartender to confirm that he or she carries an adequate level of Liquor Liability insurance. The certificate should be obtained PRIOR to the event. Otherwise, it may be too late when you find out that there isn’t a policy or that the limits are insufficient.

Society is less tolerant of drinking and driving. An impaired driver who causes an auto accident is much more likely to be sued. Besides the driver, the lawsuit will probably be extended to include a business that provided alcohol. Why, because such a business is considered as contributing to the loss and is called on to share (or fully bear) the cost of injury or damage. The Commercial General Liability policy could provide the necessary defense for the business, if it is not ‘in the business of’ providing or selling the alcohol.

The solution is to discuss the types of events your business sponsors or hosts with your agent to determine if you need to purchase special coverage. This discussion may also help you take steps to reduce potential lawsuits. Some businesses may find it easiest and safest to ban drinking during business hours, including business lunches, dinners or other events. Your insurance agent and legal counsel can assist you in determining ways to protect your assets.

Commercial Umbrella Liability Policy

The Umbrella Liability policy is still a relatively new type of insurance coverage for the average business. As recently as 25 years ago, it was seen as only needed by the very largest of business entities. Liability claims and court decisions involving millions of dollars are no longer uncommon; any business can be found legally responsible for this type of judgment.

The coverage form is still not standard, varying greatly among companies and some jurisdictions may create unique coverage issues. Punitive damages are an example. Some states only permit responsible parties to pay punitive damages; others allow them to be paid by insurers. Another area of difference is that no policy covers everything; every policy has exclusions.

A business owner may consider an accident that does not involve a fatality a minor item. The reality is that such an accident may result in millions of dollars of medical care, lost income and other expenses. Can your business afford a payment of millions of dollars? Think of accidents involving vehicles which, today, are much safer than 5 or 10 years ago. That means that accidental deaths are less likely while severe head injury is very likely. Severe head trauma can significantly increase a claim’s cost because it may take up to seven years to determine the ultimate extent of injury. Recovery is often slow and sporadic. These elements combine to make regular insurance coverage insufficient.

A business may have auto liability coverage but insurance limits of more than $500,000 is rare. This is because insurers are reluctant to offer higher coverage at an affordable price. When the limit under the business auto policy is not enough to meet the amount of a loss, the business is responsible for the difference.

An Umbrella Liability policy could be the difference between bankruptcy and an on-going business venture. The Umbrella policy would take over where the business auto policy stopped, providing defense coverage and additional limits to pay large judgments.

There are no standard Umbrella Liability policy forms; each company has their own variation. Each form offers different options that can help tailor coverage to specific business needs. One thing to remember is that an Umbrella Liability policy will not cover everything; there are exclusions in this form as in any other contract of insurance.

Contact an insurance agent to discuss securing this valuable form of liability coverage. It could help preserve your business in the event of a liability claim.

Joint Ventures

A joint venture is an entity formed by two or more businesses that want to pursue a specific purpose for a specified period of time. While some states require a legal filing of the venture, other states recognize any entity that meets the definition. A partnership differs from a joint venture as the former lasts indefinitely and its purpose may change.

A joint venture can consist of sole proprietors, corporations, partnerships or any combination of these entities. Such ventures often bring together two areas of expertise into a single endeavor in order to capitalize on that combined expertise for a specified time period.

Insurance policies generally do not cover a joint venture unless the venture’s name is shown on the policy. There is no automatic coverage for a business that begins a joint venture during a policy term. For instance, two contractors are interested in bidding on a major project. They decide that it may be beneficial to bid on the project as a single entity. In this case, the joint venture is recognized as a distinct legal entity formed for pursuing the project. Unfortunately, it’s equally common for businesses to fail to recognize their formation of a joint venture. The oversight could result in the joint venture suffering a loss that isn’t covered by insurance.

Consider contacting an insurance agent to discuss your possible coverage needs which may include general liability, automobile liability and, if the joint venture has employees, workers compensation insurance. It is also important to determine if the joint venture will need insurance to continue after it ceases to exist. The issues are unique to each joint venture and should be carefully addressed by legal counsel and the insurance agent in cooperation with the joint venture principals.

Certificates of Insurance

Business transactions frequently require insurance and a Certificate of Insurance as proof of compliance. A certificate is not the same as the policy. It can’t alter an insurance policy, so requests to “endorse the certificate of insurance” are inappropriate. A certificate is a separate document used to comply with a common contract requirement to verify certain types and amounts of insurance.

Certificate holders, the entity requiring the certificate, often demand being named “additional insureds.” This requires an endorsement to the policy and it gives them coverage for injury or damage resulting from the contract. A lease of premises is a common example. The tenant is required to add the property owner to their insurance coverage as an additional insured. If a customer is injured on the premises and sues both the property owner and the tenant, the tenant’s liability policy would provide coverage for both parties.

Construction contracts require certain forms of insurance, certain limits be maintained, hold harmless agreement and additional insured requirements. A “hold harmless” agreement is a contract provision that states how much responsibility each party accepts for damages arising out of the agreement.

The Certificate of Insurance can confirm that the appropriate policies were issued and that the other requirements were also met. It is important to have a system for monitoring receipt of the Certificates of Insurance BEFORE any sub-contractors are allowed to begin work. If Certificates are not obtained or kept current, when the contractor’s Workers Compensation and General Liability policies are audited, the payroll for the sub-contractors without Certificates will be included with the contractor’s resulting in an additional premium charge.

Ask your insurance agent to help determine if you should be obtaining Certificates of Insurance from your business relationships. In addition, when you’re required to provide a Certificate, send your agent a copy of the contract. The contract allows the agent to assist you in determining what liabilities you are accepting and what can be done to modify your insurance program to best protect your financial well-being.

The Businessowners Policy

If you own and/or run a smaller business, your insurance needs may be properly handled by a businessowner policy or BOP. BOPs are similar to a homeowners policy, offering both property and liability protection. Businesses such as retailers, wholesalers, small contractors, artisan contractors, dry cleaners, restaurants, offices and convenience stores (including those with gas pumps) are eligible for BOP coverage. All such operations may be insured by a BOP as long as they are not larger than 25,000 square feet in total floor area or have gross annual sales greater than $3,000,000 (per location). More restrictive guidelines typically apply to businesses that include cooking operations.

BOPs protect buildings as well as other features such as additions (completed or being built); indoor and outdoor fixtures; machinery and equipment; landlord furnishings, and maintenance property (such as mowers, snowblowers, ladders, etc). BOPs also cover outdoor furniture, floor coverings, and appliances used for refrigerating, ventilating, cooking, dishwashing, and laundering. The building coverage also applies to materials, equipment, supplies and temporary structures located near the insured premises.

The policy’s protection to business personal property applies whether the property is located inside or immediately outside the covered buildings. Business personal property (such as office equipment, copiers, desks, etc.) includes property you own, lease or control (i.e., borrow or control) as long as the property is used by the business.

Businessowners liability coverage provides comprehensive protection for claims or suits made by other parties. Its liability section covers losses involving injury to other persons or damage to property that belongs to others. It also provides limited protection against personal injury (slander or libel), advertising injury and losses involving an operation’s products or services.

Naturally, there are certain situations that are not covered by a BOP. For instance, there is no coverage for losses involving most vehicles, money and securities; illegal property (contraband), land, water, growing crops or lawns; or watercraft.

A BOP may be supplemented to provide additional protection. Property coverage options include adding insurance for accounts receivable, valuable papers and records, earthquake, spoilage, etc. Liability coverage can be expanded to handle additional business interests, limited vehicle liability, losses related to personnel situations, liquor liability and injuries to leased employees.

A BOP may be the answer to your company’s coverage needs and it may be worthwhile to get more information on the BOP from the nearest insurance professional.