Key Man Insurance

“Key Man” Insurance

Losing an important employee who plays a large role in the company is a very tough ordeal for the whole organization. There is a large risk that the whole operation may be affected or hindered. For these situations there is the “Key Man” Insurance. It is intended to protect the company from a loss of the “key employee”. Unlike the traditional disability insurance wherein the employee is the recipient of the benefits, here in “Key Man” Insurance the company is the one who would reap the benefits. The insurance vehicles for key man insurance can take two forms: Disability insurance or life insurance. Even if you are your company’s only “key man”, you should consider taking out key man insurance on yourself.  If there is anyone in your organization that you could not operate without or who's skills and experience drive your profitability then you might want to consider purchasing this type of insurance.

ALL IN

What do you think of when you hear the term "All In"?  I think of a poker player who is so confident in his ability to win a hand that he is willing to put all of his chips on the line.  I also think of an entrepreneur who is so confident in his ability to make his business work that he is willing to put all of his resources and the livelihood of his family on the line to make it happen.  There are many people in our business community who have committed everything to building a successful business.  This is what it takes.  You have to be "all in".  There are many factors we can control when it comes to building a successful business such as hard work, providing good service, fulfilling a need, developing good products, and hiring quality people.  Essentially, we are able to choose the hand we are dealt.  That is what makes our country great.  Every single person has this opportunity to bring something innovative and new to the table and build a successful enterprise.  However, there are a lot of people who are not willing to put it all on the line. 

There are certain risks that we have no control over which scare people away from seizing the opportunity to go "all in".  We sometimes get caught up in thinking:  What happens if I go all in then my building burns down?  What if I hire the wrong person who steals money out of my company and sabotages the organization?  What if someone sues me because I did something wrong or didn't perform my work perfectly? What if my products are no good and cause damage to someone of something?  What if an earthquake or other natural disaster puts me out of business?

Fortunately, there are insurance answers for these questions.  This is why we buy insurance.  Sometimes after several years of running a successful business and never having to deal with something going wrong, we start to think that we are somewhat invincible and that all those things we worried about when we started the business are no longer a threat to us.  So we start to cut back on our insurance spending, commit to larger deductibles that we may or may not be able to meet, and shop our policies so competitively that we take the value of a quality agent out of the picture because we no longer need someone looking out for us.  All of a sudden, we just want the lowest premiums attached to somewhat decent service so we can get our insurance certificates to the people that request them.  When was the last time you sat down with your insurance agent and discussed every business exposure you could think of and looked at insurance options before deciding to retain those risks or transfer them to an insurer?  When you let a new agent work on your insurance, are you looking for a lower price on the same product or are you looking for what they can bring to the table as far as advice, knowledge, and superior service?

If you are "all in" with your business as many people are these days, let's get back to the basics.  Let's make sure you are properly insured.  Let's make sure you know what your exposures are and what options you have.  Let's make sure you know what risks you can and can't afford to retain.  Let's make sure you are getting the knowledge and advice you deserve from your insurance agent.  Please give me a call if you feel like it would be valuable to you to have an in-depth discussion on protecting your business assets and liabilities.  If you are a client of mine, let’s spend a little extra time this next year discussing your options as we always do but taking some time to brainstorm and think about the things we might have missed or haven’t discussed before.  I would encourage everyone to go “all in” because that is where success is found; but don’t do it without knowing what your uncontrollable risks are and creating a plan to protect yourself.

A Nice Note From A Client Today

I really appreciate the occasional notes of acknowledgement I get from my insured's.  I really need to do a better job of sending the same kind of notes to those who work hard for me.

"Thank you for following up on this. I appreciate the professional manner Blake and yourself handled this with our insurance company. You fought for our little business. In addition, Blake went a long way in educating me (your client) about our coverage, gave me (your client) options on how to go forward, shift coverage and still get the protection we need. In short, I am a grateful customer."

GENERAL LIABILITY TO THE "T"

Most business owners and professional service providers purchase General Liability insurance because it is a very common requirement that they have it by the people they do business with.  How many people actually understand General Liability insurance and what it is for??  I want to take a minute to walk through an example which will hopefully help us all understand it a little better.  I think if we understand it a little better then we might have a greater appreciation for it, which will also help us to know why it can be so dang expensive!

For my made up example, I am going to use John's Manufacturing Co.  John manufactures children's toys and ships them to various distribution outlets.  EVERYBODY John wants to do business with is requiring him to provide them a certificate of insurance for General Liability which includes Products and Completed Operations.  The retail outlets that sell his goods want to be Additional Insureds on John's policy.  John has never had any problems with any of his toys and has never had a single complaint.  So, let's address some of the questions as to why John needs to have this policy in place.

What does the General Liability policy cover?

This policy protects John's Manufacturing Company againt Bodily Injury or Property Damage arising out of his operations.  Generally, defense costs are outside the limits of insurance so any claim or lawsuit that is brought against John's Manufacturing Co. for Bodily Injury or Property Damage will be defended by his insurance company until settled.  Any idea how much those defense costs alone can add up to??  Then, any settlements will reduce his limits for the policy year accordingly.

Nothing has ever happened before.  What could possibly go wrong?  Here are a few scenarios:

A school class visits John's Manufacturing facility on a field trip.  While touring the buildings, one of the students is badly burned by a piece of equipment.  The students family brings a lawsuit against John's Manufacturing.  This type of injury could happen at any business to any visitor.  A slip and fall, a negligent employee, failure to block access to a dangerous area, etc.  Your premises can be a huge liability exposure for your company.

A child is poisened by a chemical used in the paint on the toys and the family brings a lawsuit against John's Manufacturing because of the unsafe product.  Does your business have any products/completed operations that could potentially harm somebody? 

John hires an electrician to update some wiring in his building.  During the process, the electrician starts a fire which burns a large portion of the neighboring building which belongs to another business.  The other business sues the electrician AND John's Manufacturing for their damages.  John's insurance company will defend him in this circumstance until a settlement is made.  Is what might happen is that the business sues the electrician but finds out that they dont have proper insurance or their insurance is insufficient, then they drag John's Manufacturing into the lawsuit.  This is where the importance of hiring quality subcontractors comes into play and getting insurance certificates from them naming you as an Additional Insured if they are going to perform some work or provide some product on your behalf.  This is why we are all required by the people we do business with to carry our own insurance!

I hope this helps clarify the General Liability policy a little bit.  I am happy to answer any questions or discuss certain circumstances with you individually anytime.  Truth is, there is a wide range of exposures for any business or individual that provides a product or service.  The examples are endless and some of the lawsuits/settlements that go through an insurance carrier would amaze you.  Remember, your business and all of it's assets are at stake and in some instances you can personally be liable in these situations.  As a side note, an Umbrella policy provides excess limits to your insurance policy in the event that you have a huge claim or your base limits are exhausted.  It is not uncommon for us to insure our business clients with a $5,000,000 Umbrella Policy on top of their $1m/$2m General Liability limits but these Umbrella's can go up to whatever limits make you feel comfortable.

Getting To Know Me...

I have read a lot of biographies, self-development and business books over the years and just wanted to put down a few things I have learned and share a little bit about myself.  It may not be worth much to you but it is a good way of reminding me of the things I should be doing to build a profitable book of business and create valuable relationships along the way.  Also, hopefully by getting to know me a little bit we can find more common ground and it will give me an opportunity to know you better as well.  I dont want to be seen as some insurance freak that reads policies all day :)  Please feel free to comment and add your business insights and philosophies and share your interests also!

1)  "Never Eat Alone" This is a book I read by Keith Ferazzi about building your network.  This has been a hard thing for me to do but one way I have been able to use it is by trying to attend a lunch group at least once a week.  For me, these groups include Exchange Club, WSU roundball, Rotary, local business presentations, etc.  I find that I am able to spend about an hour of quality time with people who have some of my same interests and who are generally eager to stay in contact and help each other in our business endeavors.

2)  Never burn bridges.  This can be difficult when you get to the end of a conversation with a long-term client who is ending the relationship because they found a better price or some other reason.  My theory has been and always will be that I should respect my clients decisions and try my best to continue our relationship whether I get their business or not.  For me, it isnt about business so much as it is about people.  Nevertheless, I know that a clients business has to be earned each and every year and am committed to doing everything in my power to keep my clients and provide the best price and service possible.  Sometimes when you lose a client it is only a matter of time before they come back seeking your help.  If you act bitter and upset about their decision then chances are they won't ever be coming back.

3)  Apply your knowledge.  Many of us spend countless hours studying our trade and trying to become experts in our industry but when it comes down to finding new business we end up doing as little as possible to close the deal.  What happens when we apply our knowledge and spend adequate time analyzing and making recommendations for our prospects?  We win.  The amount of effort you put into a proposal will clearly show during the presentation.  Rather than getting the specs and quoting, we need to spend more time analyzing, making recommendations, asking questions, negotiating, and understanding the agreements if we are to truly bring value to our clientele.

4)  "The Golden Rule".  We all know what it is, but do we apply it in our business transactions?  Do we value relationships, service, expertise, and credibility instead of focusing only on the price?  I find it difficult when I am buying a new car or a house or negotiating my cable bill to try to suck every dollar I possibly can out of my provider.  I understand that they need to make a profit also and I seek a fair price based on the options available to me.  I hope that my clients accept this principle as well because I cant always guarantee that there isnt some unknown or overlooked insurance company that will pop up out of nowhere and beat my price.  I normally make suggestions to my clients after reviewing a number of viable and competitive options and it may not always be the one with the lowest price.

5)  Hard Work.  There really is no substitute for putting in the hours, making the phone calls, meticulously reviewing proposals and quotes, responding to emails, making yourself available, seeking others opinions, understanding the marketplace, providing excellent service, going the extra mile, and giving your all.  Day in and day out there are no excuses.  This is what it takes to be successful in any economy.  I am a firm believer that the harder I work the luckier I get.  It always takes a little luck but that luck is usually a direct product of doing everything in my power to make it happen.

6)  Have Fun.  For me, work is fun for the most part but it cannot fill this need.  I have decided that I need to take a break every once in a while to go on vacation, spend time with my family, or take an occasional day off so I can be my best self when I am in the office.  I like to know what my clients do for fun so we have things to talk about besides insurance when we get together.  I find that it is generally pretty easy to find common interests with people and it makes working with them much more enjoyable knowing that they are real people and not 100% business all the time. 

Here are a few of my interests you may not be aware of.  If you have some of these same interests, let's talk about it the next time we get together!

I am an avid exerciser, I played golf in high school, I served a church mission for 2 years in El Salvador, I lived in Puerto Rico for 5 months selling home security, I like to play/watch any sport, I am a snowboarder and a skiier, I love to boat in the summertime, I love to travel and have been fortunate to visit many states and other countries including:  Mexico, Canada, Peru, UAE, and India. I like to hunt and fish.  I like to read business books, american history, and biographies.  I enjoy Utah and BYU athletics but at heart I am a Weber State Wildcat!  Most of all I like spending time with my wife and my 10 nieces and nephews.

I am generally an open book.  I like to be completely honest with my clients about who I am and what I can do for them.  I do not use shady sales tactics and I would never hesitate to answer a client's phone call.  I don't always have every answer immediately but I can always find the answer.  I dont overpromise or always say what you want to hear but I can back up my words every time.

IMPROVE YOUR INSURABILITY!

One of the things I try to do for each of my clients is to build a positive insurance profile and summary before submitting the account to an Underwriter.  Underwriters LOVE information.  They like to see details, descriptions, brochures, contracts, updates, etc.  Most importantly, they like to see an ongoing Risk Management program.  This shows the insurance company that the owner is doing everything in their power to prevent claims.  These are the companies that get the credits and have access to more insurance carriers. 

Often times, insurance carriers will offer quotes in certain industries based on their definition of “Best in Class.”  For example, they may not typically write a Waste Hauler but if they receive a detailed submission showing the things they want to see, then they will likely consider offering a very competitive quote.  Why? Because the truth is that most businesses purchase insurance in lieu of implementing proper risk management.  The ones that do implement a quality risk management program will reap insurance rewards.  Many insurance companies will request an inspection by an outside agency or send their own before deciding whether to provide a quote on something.  So, what are they looking for?

Things to make a building look better to an insurance company include:

• Hard-wired smoke detectors
• Proper handrails and fire escapes
• Child-safe window hardware
• Sidewalks free of major cracks
• Closed fire doors with proper panic hardware
• Well-lit hallways and walkways
• Following regulations for elevators and laundry rooms
• Control of all maintenance issues: Practice good maintenance–no wet floors
• Do routine repairs
• Mold eradication

Make sure your risk profile includes all safety-related improvements in the property such as any alarm systems, security cameras, addition of a doorman, improved lighting, and anything else that makes your building more appealing to an insurance underwriter who can then apply credits for the safety measures taken.

Advise your insurance broker of upgrades and repairs to your building. Upgrades to major systems such as heating, electric, and plumbing greatly improve your risk profile and can present your property better to the insurance company. This may lead to better pricing and broader terms when the insurance companies offer you quotes.  Insurance companies show their appreciation to those risks that have improved profiles and ongoing risk management by offering them lower rates and policies with broader terms.

Similar risk management principles apply to Auto Insurance, Workers Compensation, and General Liability.  Continued maintenance, proper safety restraints and trainings, quality PR and documentation, etc. will greatly improve your insurability.

WHY DO I NEED EMPLOYEE DISHONESTY COVERAGE??

WHAT IS IT?

This insurance protects the employer from financial loss due to the fraudulent activities of an employee or group of employees. The loss can be the result of the employee’s theft of money, securities or other property of the employer.

WHY DO I NEED IT?

Fraud and embezzlement in the workplace is on the rise. The Association of Certified Fraud Examiners (ACFE) estimates business losses $400 billion per year or about 6% of total annual revenue. Small companies can be especially effected by theft and embezzlement because they can’t afford extensive safeguards and aren’t large enough to absorb losses. Workplace crime is carried out by employees 80% of the time. One in four employees who has committed fraud against their employer had been with the company more than ten years.

WHAT DOES IT COVER?

Stand alone policies are designed to cover employee thefts, robbery and safe burglaries. Coverage can also include:

    1. Forgery or alteration

    2. Funds transfer fraud

    3. Computer fraud

    4. Credit card fraud

    5. Money order and counterfeit fraud

On a personal note, My brother in law owns a small business which in many instances requires that you hire one person who you trust to undertake a broad range of responsibilities.  In his case, he hired someone who was in charge of paying bills, balancing books, depositing checks, etc.  After being employed for several years with his company, they found out that this employee had been stealing money and making unauthorized charges on company credit cards then covering them up with other expenses.  This can be a huge devastation for a small business that lives by cash-flow. 

In another example, a local trucking company recently found out that their controller has been embezzling money from them for a number of years to the sum of about $1.3 million.

Many times the people who are found stealing money from their employer are people who feel they are very trusted and might feel entitled to more money or benefits.  The worst thing an employer could do is assume that they have great employees who would never do anything to harm the company.  Employee Dishonesty insurance can help protect you against these financial losses.  If you questions about this or would like to discuss ways to ensure proper limits and coverage please contact me!

phil heath Kai Greene Branch Warren after the 2009 Mr Olympia video phil heath met rx

phil heath

video of phil heath Kai Greene and Branch Warren after the 2009 Mr Olympia, phil heath was unlucky at the 2009 mr olympia due to some illness going into the mr olympia bodybuilding contest.

but aspect to see phil heath pushing for the 2010 mr olympia title and in much better condition then the 2009 mr olympia contest.

phil heath is wearing a met rx t-shirt in the video not sure if phil heath is still sponsored by met rx or not now.

Malocclusion: Disease of Civilization, Part IX

A Summary

For those who didn't want to wade through the entire nerd safari, I offer a simple summary.

Our ancestors had straight teeth, and their wisdom teeth came in without any problem. The same continues to be true of a few non-industrial cultures today, but it's becoming rare. Wild animals also rarely suffer from orthodontic problems.

Today, the majority of people in the US and other affluent nations have some type of malocclusion, whether it's crooked teeth, overbite, open bite or a number of other possibilities.

There are three main factors that I believe contribute to malocclusion in modern societies:

1. Maternal nutrition during the first trimester of pregnancy. Vitamin K2, found in organs, pastured dairy and eggs, is particularly important. We may also make small amounts from the K1 found in green vegetables.
2. Sucking habits from birth to age four. Breast feeding protects against malocclusion. Bottle feeding, pacifiers and finger sucking probably increase the risk of malocclusion. Cup feeding and orthodontic pacifiers are probably acceptable alternatives.
3. Food toughness. The jaws probably require stress from tough food to develop correctly. This can contribute to the widening of the dental arch until roughly age 17. Beef jerky, raw vegetables, raw fruit, tough cuts of meat and nuts are all good ways to exercise the jaws.
   

And now, an example from the dental literature to motivate you. In 1976, Dr. H. L. Eirew published an interesting paper in the British Dental Journal. He took two 12-year old identical twins, with identical class I malocclusions (crowded incisors), and gave them two different orthodontic treatments. Here's a picture of both girls before the treatment:


In one, he made more space in her jaws by extracting teeth. In the other, he put in an apparatus that broadened her dental arch, which roughly mimics the natural process of arch growth during childhood and adolescence. This had profound effects on the girls' subsequent occlusion and facial structure:

The girl on the left had teeth extracted, while the girl on the right had her arch broadened. Under ideal circumstances, this is what should happen naturally during development. Notice any differences?

Thanks to the Weston A Price foundation's recent newsletter for the study reference.

Magnesium and Insulin Sensitivity

From a paper based on US NHANES nutrition and health survey data (1):

During 1999–2000, the diet of a large proportion of the U.S. population did not contain adequate magnesium... Furthermore, racial or ethnic differences in magnesium persist and may contribute to some health disparities.... Because magnesium intake is low among many people in the United States and inadequate magnesium status is associated with increased risk of acute and chronic conditions, an urgent need exists to perform a current survey to assess the physiologic status of magnesium in the U.S. population.

Magnesium is an essential mineral that's slowly disappearing from the modern diet, as industrial agriculture and industrial food processing increasingly dominate our food choices. One of the many things it's necessary for in mammals is proper insulin sensitivity and glucose control. A loss of glucose control due to insulin resistance can eventually lead to diabetes and all its complications.

Magnesium status is associated with insulin sensitivity (2, 3), and a low magnesium intake predicts the development of type II diabetes in most studies (4, 5) but not all (6). Magnesium supplements largely prevent diabetes in a rat model* (7). Interestingly, excess blood glucose and insulin themselves seem to reduce magnesium status, possibly creating a vicious cycle.

In a 1993 trial, a low-magnesium diet reduced insulin sensitivity in healthy volunteers by 25% in just four weeks (8). It also increased urinary thromboxane concentration, a potential concern for cardiovascular health**.

At least three trials have shown that magnesium supplementation increases insulin sensitivity in insulin-resistant diabetics and non-diabetics (9, 10, 11). In some cases, the results were remarkable. In type II diabetics, 16 weeks of magnesium supplementation improved fasting glucose, calculated insulin sensitivity and HbA1c*** (12). HbA1c dropped by 22 percent.

In insulin resistant volunteers with low blood magnesium, magnesium supplementation for four months reduced estimated insulin resistance by 43 percent and decreased fasting insulin by 32 percent (13). This suggests to me that magnesium deficiency was probably one of the main reasons they were insulin resistant in the first place. But the study had another very interesting finding: magnesium improved the subjects' blood lipid profile remarkably. Total cholesterol decreased, LDL decreased, HDL increased and triglycerides decreased by a whopping 39 percent. The same thing had been reported in the medical literature decades earlier when doctors used magnesium injections to treat heart disease, and also in animals treated with magnesium. Magnesium supplementation also suppresses atherosclerosis (thickening and hardening of the arteries) in animal models, a fact that I may discuss in more detail at some point (14, 15).

In the previous study, participants were given 2.5 g magnesium chloride (MgCl2) per day. That's a bit more than the USDA recommended daily allowance (MgCl2 is mostly chloride by weight), in addition to what they were already getting from their diet. Most of a person's magnesium is in their bones, so correcting a deficiency by eating a nutritious diet may take a while.

Speaking of nutritious diets, how does one get magnesium? Good sources include halibut, leafy greens, chocolate and nuts. Bone broths are also an excellent source of highly absorbable magnesium. Whole grains and beans are also fairly good sources, while refined grains lack most of the magnesium in the whole grain. Organic foods, particularly artisanally produced foods from a farmer's market, are richer in magnesium because they grow on better soil and often use older varieties that are more nutritious.

The problem with seeds such as grains, beans and nuts is that they also contain phytic acid which prevents the absorption of magnesium and other minerals (16). Healthy non-industrial societies that relied on grains took great care in their preparation: they soaked them, often fermented them, and also frequently removed a portion of the bran before cooking (17). These steps all served to reduce the level of phytic acid and other anti-nutrients. I've posted a method for effectively reducing the amount of phytic acid in brown rice (18). Beans should ideally be soaked for 24 hours before cooking, preferably in warm water.

Industrial agriculture has systematically depleted our soil of many minerals, due to high-yield crop varieties and the fact that synthetic fertilizers only replace a few minerals. The mineral content of foods in the US, including magnesium, has dropped sharply in the last 50 years. The reason we need to use fertilizers in the first place is that we've broken the natural nutrient cycle in which minerals always return to the soil in the same place they were removed. In 21st century America, minerals are removed from the soil, pass through our toilets, and end up in the landfill or in waste water. This will continue until we find an acceptable way to return human feces and urine to agricultural soil, as many cultures do to this day****.

I believe that an adequate magnesium intake is critical for proper insulin sensitivity and overall health.


* Zucker rats that lack leptin signaling

** Thromboxane A2 is an omega-6 derived eicosanoid that potently constricts blood vessels and promotes blood clotting. It's interesting that magnesium has such a strong effect on it. It indicates that fatty acid balance is not the only major influence on eicosanoid production.

*** Glycated hemoglobin. A measure of the average blood glucose level over the past few weeks.

**** Anyone interested in further reading on this should look up The Humanure Handbook

Liability Issues For Builders

In an effort to reduce costs, add value, and become more efficient, the building industry is constantly looking for new products and ways to be innovative which may or may not stand the test of time.  Some prime examples of this are synthetic stucco (EIFS), masonite siding, polybutylene plumbing, and Chinese drywall. 

About 10 years ago the insurance industry was hit hard with a construction defect crisis due to the use of some of these products.  At the time, most of the costs of covering these defects were covered by the General Liability policies of the builders, manufacturers, and distributors.  This led to two major insurance changes for these industries:  First, most insurers left the market deciding that they could not be profitable at any premium with these classes of business.  Second, the remaining insurers decided that they did not want to fund the next wave of construction defect claims.  This resulted in adopting exclusion endorsements that could be added to their policies that are designed to limit their risk.

The following are some common exclusions which can severely limit coverage for builders:

1)  EIFS Exclusion:  If you install or repair Synthetic Stucco, you very likely will need to purchase a special General Liability policy from the high-risk insurance markets.

2)  Soil Movement Exclusion:  Expansive soils can lead to and have been a major source for construction defect claims.  You can usually pick up coverage for this through certain home owner's warranty products.

3)  Absolute Pollution Exclusion: This is a powerful exclusion that can have consequences beyond what you normally think of as pollution. This is exemplified in the recently emerging Chinese drywall crisis where its alleged that drywall from certain plants in China release noxious fumes that cause corrosion of metal in a home, a foul smelling odor, and health problems. The insurance carriers plan on denying these claims by using the Absolute Pollution Exclusion. Pollution is broadly defined under this exclusion as any solid, liquid, or gaseous contaminant or irritant. Once again, if you are concerned about this exposure, you can buy a special Pollution Liability policy through the high risk marketplace.

4)  Prior Completed Operations Exclusion: The standard General Liability policy form normally picks up coverage for building operations completed prior to the start of the policy term as long as the covered “property damage” or “bodily injury” occurs during the policy term. However, with the addition of the Prior Completed Operations Exclusion, coverage for prior completed operations is eliminated. This presents a problem because the General Liability forms from the prior years don’t pick up this coverage to the extent that the “property damage” or “bodily injury” occurs after the expiration of the prior policy terms. Some versions of this endorsement limit its scope to “property damage” only. You may want to attempt to negotiate the elimination of this endorsement if it appears on your policy.

5)  Products / Completed Operations Exclusion: This exclusion has perhaps the most devastating impact of any of the construction defect exclusions. Quite simply, this exclusion eliminates coverage for all “bodily injury” and “property damage” that occurs after the home has been sold. This would require you as a builder to purchase separate warranties through another company or find an insurance carrier that will remove this exclusion.

6)  Exclusion: Damage To Your Work Performed By Subcontractors On Your Behalf (CG2294): Around 2004, most carriers began adding this exclusion to builder’s General Liability policies to eliminate the favorable coverage exception that was granted to builders (that were general contractors) under the Property Damage To Your Work Exclusion listed above. The presence of CG2294 eliminates coverage for construction defect claims. If CG2294 appears on your policy, there are two viable solutions. First, ask if your carrier has a “buyback” of the lost coverage for an additional premium charge. Second, search for a carrier that has a less severe version of this exclusion that only eliminates coverage for “property damage” to the faulty work itself but not to resulting “property damage” to the non-faulty work.  The best thing to do is to make sure you are collecting certificates of insurance from your sub-contractors naming you as an additional insured on their policy.  Also, make sure you are working with subs who are stable enough to remain in business long after the job is completed.  This exclusion has been added to separate liability between subs and GC's so the GC's insurance is designed to protect them for things which they are actually liable for. 

It is imperative that builders employ aggressive risk management techniques to protect themselves and limit their losses.  A couple things I recommend:  First, contractually transfer these risks to your subcontractors by using hold-harmless agreements and enforcing insurance requirements.  Second, make sure you thouroughly document construction files and be proactive in dispute resolution.  Please contact me if you have any general questions about this or specific questions about your policy.

Include/Exclude Option on Work Comp

As the Owner of a business, you have the option under the Workers Compensation Laws to either include or exclude your payroll from your policy.  So, the first question you would ask is “Why would I want to pay for work comp insurance on myself when I would never file a claim?” Besides, you have health insurance, right?

The Owner of a small business often finds they become the installer, delivery driver, salesperson, receptionist, etc. 

Consider this:

You have a large job to finish and your best worker is out sick for the day.  You decide that you will have to throw on some boots and do it yourself.  You get to the job site and climb the ladder to start the job.  For some reason, the ladder becomes unstable and you fall 15 feet to the cement below breaking your arm and causing a serious head injury.  3 months earlier, you decided that it would be better to exclude yourself from work comp coverage because you hate the fact that you are required to purchase this to do business and you want to pay as little as possible for it.  Suddenly, we have a very serious situation to address.  Will your health insurance take care of your hospital bills, medication, rehab?  Maybe.  But it isn’t very likely as most health insurers specifically exclude work-related injuries.  NEVER ASSUME THAT YOUR HEALTH INSURANCE WILL COVER THIS!! 

I highly recommend that all Owners, Officers, Partners, or Members of a company include their payroll on Workers Compensation Insurance.

Here is the breakdown in Utah:

LLC Members, Partners, and Sole Proprietors: Are automatically excluded from the workers compensation coverage, but by written request may elect to be included. Each member, partner, and or sole proprietor that elects coverage will be rated on a stated amount of $39,000 in payroll regardless of the amount of money paid to them by the company (Utah stated payroll effective 12/01/2010).


Officers of a Corporation: Are automatically included in the workers compensation coverage, but by written request may elect to be excluded. Each officer that does not opt out of coverage is subject to a minimum payroll of $39,000 up to a maximum payroll $159,000 per officer (Utah stated payroll effective 12/01/2010). Each officer's payroll that falls in between is subject to their actual payroll.

If you decide to Exclude yourself from Work Comp coverage then there are other options to make sure you are protected in the event of an accident which MIGHT include a rider on your health insurance policy, a long-term disability policy, a life insurance policy, etc.

The safe thing to do is to add that little extra payroll into your Workers Compensation coverage as you never know from day to day which hat you will be wearing to work.  Contrary to somewhat popular belief, the work comp system is a great way to protect owners and employees from accidents in the workplace that affect them and their families.  If you have any questions or would like to discuss this in more detail please contact me.  BE SAFE OUT THERE!

OSHA Crane and Derricks Rule

THIS NEW RULE WILL HAVE WIDESPREAD IMPLICATIONS FOR GENERAL CONTRACTORS, SUB-CONTRACTORS, PROJECT OWNERS, CRANE OPERATORS, TRUCKING COMPANIES, AND OTHERS.

Cyber Liability

I found this article at http://www.riskandinsurancechalkboard.com/ it provides great information and advice on Cyber Liability.  If you store private information on your company computers you will want to consider purchasing this type of insurance.  Any storage of personal information such as credit card numbers, social security numbers, etc. can expose you to this type of loss which is not covered under your General Liability.  The article follows:

I am sure in the 1960's TV show Lost in Space, Will Robinson never envisioned that the Galaxy would suffer a greater threat from cyber hackers than asteroids. Most businesses today are not insured for the criminal risk of unauthorized access to their network systems. These uninvited guests no longer just cause a minor disruption or annoyance. According to the Ponemon Institute study of 2009, the average cost of a data breach globally is over $3 million. Some of the costs incurred are system damage, recovery costs and lost business due to business disruption, as well as negative publicity that results. The focus in this article is the necessary costs associated with notification and credit monitoring for those affected. There are insurance products in the marketplace designed to address cyber liability, but until recently there has been minimal interest.
What has been learned in recent years is that theft and fraudulent use of personal information is not always the major cost of a breach in security. If a corporate database is infiltrated by an outsider, there is the potential infection of personal data that is stored, financial and credit card information of customers and social security numbers of employees. When this occurs, there is a need for individual notification to anyone who may be exposed to the breach.There are over 40 states now that have legislated notification requirements for security breaches and more stringent  federal guidelines are expected in the future.

According to the Ponemon study, the actual cost for individual notification and credit monitoring is in excess of $200. On an individual basis, this may not appear to be that catastrophic. However, consider the need to notify 10,000 customers of possible compromised access to credit/debit cards coupled with post-breach credit monitoring.  We are now talking about costs in excess of $2 million. This is just the “damage control” expense side of the breach and does not begin to address any third party litigation that may follow.

These remediation costs, along with any regulatory fines or penalties, have been an area where most insurers offer minimal limits of coverage. Today, more insurers realize that these costs are the major focus and need for this insurance. Darwin Insurance and Allied World Insurance now extend this coverage up to full policy limits, which also includes regulatory fines or penalties. It is clear this coverage continues to evolve in line with legislative changes and a better understanding of the exposure to loss.

It would be wise for any business responsible for personal information -- credit information, social security numbers or medical data -- to evaluate the need for this insurance. In the words of the Robot, “Danger, danger Will Robinson!”. It is best to be aware of the dangers associated with cyber business risks even if you don’t buy the insurance.

Insuring Your Auto Fleet

The majority of business insurance claims come from their Auto Insurance.  The more vehicles a business has on the road, the more likely they are to have claims.  However, there are several things you can do as a business owner to reduce claims, get the best rates, and make sure you are properly insured.

First, what can you do to reduce claims? 

1. Hire quality employees and check their driving records before allowing them to drive company vehicles.  A general rule in insurance is that frequency leads to severity.  If a driver has a number of violations or accidents on their record, they are far more likely to be involved in a serious accident.  If someone is driving a vehicle with a company name on it and they injure another person, that person will likely come after the company rather than the individual because they perceive that is where they will get the most money.  So, hire people that represent your company well.
2. Maintain your vehicles.  Companies with large auto fleets will find that it is a pretty big expense to constantly change out tires, replace brakes, fix windshields, and service the engine of all those vehicles.  Therefore, they can get lazy in doing it or will put it off because of the expense involved.  This simple step can prevent major accidents from occurring.
3. Implement company policy for drivers.  There should be a zero-tolerance rule for driving under the influence of any drug, rules for cell phone use, speed limitations, seatbelt use, using a guide while backing, limiting distractions, and whatever else you feel is appropriate.

How do I get the best rates?

1. Reduce claims by implementing the above controls and showing the insurance company that you monitor and enforce them.
2. Show pictures of an organized, clean, well-maintained fleet of vehicles.  This shows the insurance company that you take pride in your assets and that you take the responsibility seriously to do everything you can to reduce risks.  If a loss control visit it performed and the insurance company finds a fleet of vehicles with cracked windshields, worn tires, safety violation issues, etc. they are unlikely to offer much credit on their insurance quote.
3. Stay with one insurance company for several years as long as they remain competitive with other markets.

How do I know if I am properly insured?

1. Place your insurance through a quality agent who knows your operations and is able to advise you on all aspects of Auto coverage.
2. Use the same insurance company for your Auto and General Liability insurance.  There are several gray areas as to which policy should respond in certain situations.  Using the same company will eliminate any questions as to who should pay the claims.
3. Make sure you are insuring your business property and property of others that you carry in your vehicles or on your trailers.
4. Purchase an Umbrella policy that you feel comfortable with so you know that you will have adequate limits in the event of a large claim.

These are only a few things to think about when trying to properly insure your company vehicles.  Please contact me if you have any concerns or questions about your Business Auto Policy.

More D&O Answers

I previously posted a short summary of D&O insurance HERE

The following is a more in depth description of Director and Officer Insurance coverage and what types of things you might ask and look for when you consider purchasing it.

You Should Ask Before Buying D&O Insurance Morrison & Foerster LLP - JDSupra

The Buckner Company

It is not my primary intention to market myself or the company I work for on this blog. I simply hope it is a resource for my clients and others to find valuable information on various topics affecting their business and I use it as a place for me to write down (and hopefully retain) the things I learn along the way.  In this post however, I would like to give a small plug for The Buckner Company.

Some may say that it does not matter which Agent/Agency you work with but I believe that there is a TON of value in working with a qualified agency to place your insurance through.  Rather than getting specific on what you should look for, I would just like to emphasize a few important aspects which set us apart from the competition:

1.  Our Agents have served the Independent Insurance Agents and Brokers of America (IIABA or Big "I") in the highest local and national leadership positions.  Translated- We are very involved in the Insurance Industry and are familiar with the most current topics afffecting insurance legislation and reformation.
2.  The Buckner Company has been named a Best Practices Agency by Reagan Consulting for multiple years.  Translated- We are among the top insurance agencies in America as far as our standards for professional practices.  For more on Reagan Consulting...http://bit.ly/9atAQI
3.  We have one of the top CFO's in Utah according to Utah Business Magazine.  Translated- Our accounting department is well organized and we are financially stable.  http://bit.ly/dxukRA
4.  The Insurance Journal, considered the most read national property and casualty publication for agents and brokers, honored The Buckner Company as one of the Top 60 Independent Property/Casualty Agencies in America!  Translated- Do you know how many agencies there are in America??
5.  We continue to be on the list of the fastest growing companies in Utah formulated by the MountainWest Capital Network.

These are only a few examples of the recognition we have received lately.  Our agents are very involved in their communities and other organizations.  You will find us at Rotary Clubs, Exchange Clubs, Chamber of Commerce, University Organizations, Networking Events/Organizations, AGC and other industry groups, and many others!  Almost every agent is working toward some sort of professional designation and there are several who have achieved many.  In short, we have the experience to do the job right, the stability to be around through the tough times, the staff to provide information when needed, the markets to provide you with options, and the accolades and reputation to back this all up.  If you want to learn more, there is a link to our website on the right side of this page.  Thanks for choosing to do business with The Buckner Company!!

Travelers Insurance - Prized Possession (Dog Commercial)

I thought this was a clever commercial.  Travelers is a good company that does a great job with their advertising.  I liked this commercial because every person has prized posessions in their life that they spend almost every waking hour thinking and worrying about.  Insurance is a good way to protect the things you value.  Hope you enjoy the video!

When Reputation Is At Stake

As a business owner, how often do you think "what would I say if I was the one on the news or the one being interviewed because my company did something wrong?"

This is definitely something to think about.  An insurance company can respond by paying claims and helping to rebuild but they won't stand in for you when there is a crisis and the media wants information.  What if one of your workers ignored certain warnings and started a fire that burnt down another business or someone's home?  What if your product didn't do what it was supposed to do and someone gets hurt?  What if one of your workers wasn't trained properly and was injured on the job?  Who will be the spokesperson for your company? 

There are what if's that apply to every business and it might be worth some time to occasionally consider what they are in your business and how you would respond to them.  A reputation can be killed because someone is unprepared to speak up in the event of a crisis and they do it anyway.  I found the article below in the Wall Street Journal and thought it was worth sharing.

 

When Reputation is at Stake

Managing Reputational Risk in an Age of Accountability

By Bill Coffin
Warren Buffett famously said that a reputation takes twenty years to build and five minutes to ruin, and that notion is truer today than ever before. Many executives consider their enterprise’s reputation to be their most valuable intangible asset, even more than intellectual property.
And why not? Manufacturers, food processors, retailers, energy companies, service firms: All have a reputation to uphold to their clients, their internal stakeholders and a public that passes judgment on their daily behavior. Every year, we see a major firm suffer a serious test to its reputation. Some fare better than others, riding through an operational setback or public embarrassment with relatively little lasting reputational damage, while others lose customer confidence, strategic partners and market share. The difference is having a good reputational risk management program in place, but this is easier said than done.
A few points to consider:
Embrace enterprise risk management (ERM). Managing a firm’s reputation does not rest with any single department or team, but with the entire enterprise. Any function of the company can impact the overall reputation positively or negatively, whether it is maintaining operational standards, behaving appropriately to meet regulatory expectations or working across departmental lines to ensure that no risk goes unnoticed. In times of reputational crisis, even if certain departments take the lead on handling the situation, everyone in the enterprise has a vested interest in making sure the company’s standing with the public and its stakeholders survives intact.
Have a crisis team in place. A reputation in crisis needs immediate triage by a team that knows exactly what to do and can spring into action the moment it is needed. Typically, this falls to corporate communications, legal counsel and the executive leadership, but in reality, representatives from every element of the enterprise should be represented. Once the plan is designed, it does no good for it to collect dust until the moment of truth. The plan should be rehearsed at least once a year. The more authentic the exercise is, the better.
Engage the media. In many cases, the media will make or break a reputation under fire. This includes traditional media outlets, but also the blogosphere, Twitter feeds and social networking. The key is providing access quickly and in such a way that provides actual content and insight to the situation at hand, rather than pat answers and spin. A contrived response is nearly as bad as no response at all. Bear in mind that the need for fresh content will be intense, especially during the first 48 hours of the crisis. There should also be a continuing plan for media outreach strategies to carry through the first week and first month. Even after the initial media blitz, there will still be opportunities to contribute to the story and to help deliver a happy ending for it. It goes without saying that for many firms, having a friendly and open relationship with the media beforehand can be key in helping engage those same sources when it is needed most.
Make the required sacrifices. Depending on the nature of the reputational crisis, doing what is needed to fix it — including purchasing media time and space — can be extremely costly, especially in the case of a product recall or product tampering situation or in a case where any kind of refund is involved. Do not fixate on these costs; consider them a down payment on the reputation’s rescue effort.
Be a leader first, and a manager second. Executive leadership everywhere is expected by the public to take personal responsibility for their firms’ shortcomings, and this is especially true when a reputation is in crisis. Having executive leaders get out in front of the story and engage the public in a meaningful way is critical. Make sure they are comfortable in front of a camera and under fire from an interviewer. History is replete with gun-shy chief executives who look uncomfortable on camera, which only makes the situation worse. Overall, there needs to be a genuine sense of contrition and a willingness to address the crisis: False sincerity or an attempt to shift blame by the top leadership of a firm in trouble will always compound its reputational problems. Be the leader the public expects and deserves.
Know when to get help. Some firms have reputation problems that are more chronic in nature, or their reputational crisis is more significant than first imagined. In such cases, it always pays to know the firm’s limitations and bring in outside branding experts who can help salve a reputational wound and get the enterprise back in good standing with its most important stakeholders.

Commercial Property

I was lucky enough to be able to spend the last half of last week in a Commercial Property insurance course and just wanted to address some issues that some of you might find to be of value.

1.  Now days, some Agents are looking for an easy way out and writing business on a Business Owners Policy for those types of business that can fit under this form of insurance.  Basically, it was originally designed for small businesses to give property and general liability coverage with some built in features that make it easy to manage.  It is usually a less expensive way to get some great coverage.  Well, since the insurance market has become so competitive over the past couple years, many companies have expanded their guidelines to write this type of policy for larger businesses.  Sometimes up to $20m in sales. While there is generally nothing wrong with the policy, it can be very limiting in coverage if it is not endorsed correctly for the needs of your business.  In other words, if the agent doesn't take the time to find out what limits and coverages you need, then you are getting coverage limits designed for small business which might not meet your needs even though you fit into the program. 

2.  Do you know what types of claims are excluded from your commercial property insurance?  Standard policy forms generally exclude the following:
Earthquake, Flood, Property Away From Premise, Property of Others in your Care, Custody, or Control, Ordinance or Law, Vacancy (certain exclusions along with penalties for properties vacant >60 days), Employee Dishonesty, etc.

The reason for most exclusions on the commercial property forms is because there is generally a different policy designed to cover these items which requires its own specific underwriting.  There can be big differences in the insurance companies policy forms as far as what they include and what has been removed from the policy.  For price shoppers, this is really something to consider because with insurance as with most anything else, you usually get what you pay for.  Insurance rates are down significantly so if your premiums are down, don't assume that you are losing coverage- that is not my point here.  More than anything, if your looking for a better price, BE CAREFUL.  A good quote that has to do with comparing your insurance (or anything else for that matter) solely on price:

It’s Unwise to pay too much…
But it’s worse to pay too little. When you pay too much, you lose a little money – that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.

- John Ruskin

Remember, the best way for me to do my job is to know your business.  A couple hours spent every six months or one year along with constant communication about changes, operations, etc. will go along way in helping me do my job as an insurance agent.  Additionally, this is why a long-term business relationship with your insurance agent can be valuable to you.  Let's spend more time talking about your exposures and what types of policy options we can provide you with to meet your needs.  Keep in mind that not all risks are going to be worth it to you to transfer to an insurance company, but you ought to have the information so you can make those decisions as an Owner or Executive.

Common Insurance Myths

“It’s better to pay small liability claims out-of-pocket rather than report them to the insurance carrier.”

“Statute does not require me to have workers’ compensation, thus you (a higher tier contractor) can’t require it either.”

“I pay him with a 1099. He’s an independent contractor, not an employee.”

“If a workers’ compensation injury is less than a certain amount, I do not have to report it to the insurance company.”

“Flood insurance is only for those in ‘flood zones.’

“If I don’t have anything, they can’t get blood out of a turnip.”

“There is no need to purchase liability limits higher than my net worth.”

“That’s why I buy insurance (no need to implement risk management or loss controls).”

“Corporate status will protect me from liability, I’ll just declare bankruptcy and shut down.”

“Insurance is all the same.”

For more info on these myths read the article here....http://www.mynewmarkets.com/articles/103193/insurance-lies-clients-believe-and-pass-on-to-others

What Can A Soft Insurance Market Do For YOU?

For several years now the Insurance Industry has been pushing through a Soft Market.  Cycles of growth and decline exist within every industry.  In the Insurance world, the soft market is a period marked by low premiums, shrinking profits, high capital base, and fierce competition.  For now, we are not seeing any indication of entering into a Hard Market which normally follows.  From the Insurance Journal, "Abundant capacity coupled with diminished demand keeps downward pressure on rates.  As things now stand, insurance buyers can anticipate another year of favorable insurance prices, although catastrophe claims are always a wild card in the pricing cycle."  A widescale catastrophe can cause underwriting standards to become more rigid which causes premiums and profits to increase while competition loosens.

So what can a soft insurance market do for you?  The soft market is a very beneficial time for consumers because it is ideal for finding the lowest rates and best coverage on most lines of insurance.  This means that now is a great time to be buying insurance!  I faithfully market every client's insurance program about 90 days ahead of renewal time because I realize there is alot of competition out there between agents and also insurance companies and now is a good time to find lower rates and better coverage for you!  The recession has drawn out the soft market and will likely continue to do so as far as I can see.   

I hope this is a beneficial brief look for you of the Insurance industry.  Some agents complain about diminishing volume, heavy competition, and losing business.  I however see this as a great opportunity to save my clients some money and improve their insurance program; and when the market turns I will continue to do my best at saving money for my clients while finding the best coverage available in the marketplace.  Because of these fluctuations, I would rarely if ever allow my clients insurance policy to renew without approaching several markets to be sure we are getting competitive rates and coverage.   

Surety Bonds

I have had many clients come to me recently asking about Surety Bonds and what the requirements would be to obtain a bond. My purpose here is to briefly address the what's, why's, and how's of bonding. Because insurance companies are the primary issuers of surety bonds in the United States, there is a common misperception that bonds and insurance policies are one in the same. That is certainly not the case. Most sureties are large insurance companies primarily because they have the capital necessary to make large commitments in the form of surety bonds. Surety is much more like obtaining credit than purchasing insurance. Unlike insurers, surety companies do not expect to suffer any losses, and if they did they would demand reimbursement from the principal.

What is a Surety Bond?
It is a promise to pay one party (the obligee) a certain amount if the second party (the principal) fails to meet an obligation. Usually set forth in a contract. The surety bond protects the obligee should the principal fail to meet their agreed commitments. As a practical matter, a bond is also an instrument of prequalification, representing that the principal has been examined by the surety and found to be qualified to complete their obligations. There are many types of surety bonds, following are a few examples:

Owner/Contractor- Generally used to guarantee proper performance/completion of contracted job. Might include: Bid Bonds, Payment Bonds, Performance Bonds, Maintenance Bonds, Subdivision Bonds, etc.

Government Entity/Company or Individual- Generally used as a guarantee that they will comply with certain underlying statutes, state laws, ordinances, or regulations. Might include: License Bonds, Customs Bonds, Tax Bonds, Broker's Bonds, ERISA Bonds, Motor Vehicle Dealer Bonds, Health Spa Bonds, etc.

Public Official Bonds- Sometimes required for Notaries, Treasurers, Commissioners, Judges, Law Enforcement Officials.

Misc. Bonds- Often support private relationships and unique business needs.

As you can see, there are a wide variety of bonds available that can be used in almost any type of business to assure completion of a project, compliance, fidelity, and other responsibilities between multiple parties.

Why are Bonds required?
Normally to assure one party of anothers ability to pay, perform, or comply with the conditions of a contract.

How do I obtain a Bond?
Depending on the purpose of the bond, it may be as simple as providing test results or other proof of compliance with licensing procedures or it could be a much more detailed and information intensive underwriting process. In the case of contractors, some requirements to obtaining a bond might include: Financial Statements, Bank Letters, Work Schedules, Tax Returns, Questionnaires, References, Business Continuity Plans, Resumes, Credit History, and Personal Indemnification. This can be an intense underwriting process that the surety will use in determining that your company is well-managed, profitable, deals fairly, and fulfills promises and obligations.

I hope this short explanation will provide some insight into Surety Bonds for those who might need to obtain or require bonds for other people. The decision to take on bonded projects might require a change in how your company does business and manages cash flow. The Buckner Company writes more construction bonds than any other agency in our region and we look forward to helping you with all your bonding questions and needs.

Workers Compensation Insurance

Why do we have to purchase Workers Compensation Insurance? Well, before Workers Compensation Laws were established, the only way for an employee to collect compensation was to pursue their employer in a lawsuit. In which, they would have to prove negligence on the part of the employer which could be a difficult task. So, for employees who were truly injured in the workplace, they could go months or even years with no compensation and limited ability to work which can be a huge problem for society as a whole. Workers Compensation laws were enacted to limit the employees ability to pursue a lawsuit against their employer which also provides the employer a better way of managing and estimating their costs for employee injuries.

Worker’s Compensation Laws are enacted on a state by state basis so it is a good idea to look into what the laws are when considering expanding your work operations into other states. Some states require you to buy insurance from their state fund, others permit your to buy it in the open market, and there are others that don’t require you to purchase it at all. (Texas)

Workers Compensation is a very structured system giving certain values to different types of sustained injuries and disabilities. Each employee is grouped into a classification based on their type of work which assigns an insurance rate to their amount of payroll. Also, individual companies are given credits/debits based on their claims history as it compares to other companies in their same industry. But what can be done to contain my costs??

There are several things that can be done to ensure you are only paying for legitimate injuries from the time the injury occurs until they injured employee can return to a productive task. Consider the following:

• The best thing you can do is show the insurance company that you are committed to managing and preventing claims as best you can.
• Have a safety program in place and a return to work program
• Respond quickly to claims and work with the insurance company and clinics to reduce the costs.
• Maintain a clean and organized work environment
• Train Supervisors on employee safety and regularly check to make sure safety devices/restraints are used properly
• Implement a reward program for employees who follow safety rules and help others to be safe
• Do your own investigation and documentation of the claim as soon as it happens
• Implement a drug testing program to avoid unnecessary injury and Liability while employees are at work
• Attend safety meetings and ask for recommendations from your insurance company. They want to and are very willing to help you keep your costs down
• Identify the risks involved with your line of work and make sure the employees are aware of those risks and are trained properly

Protect Your D's and O's

Oh yes, Directors and Officers. Why would I buy D&O Insurance?

The basic principle is that companies and their shareholders are best served by knowledgeable Directors and Officers who take strategic risks based on the information that is reasonably available to them at the time the decision is made, without the threat of personal liability. But what about the Business Judgement Rule? Won’t that protect me?

From the Utah Division of Corporations and Commercial Code, “Directors and officers must act within their authority and within the powers given to the corporation. They also have the duty to act with due care. Their duty of loyalty requires them to act in the best interests of the corporation as a whole. Most management actions are protected from judicial scrutiny by the business judgement rule: absent bad faith, fraud, or breach of a fiduciary duty.” As practical as that proposition may sound, it is still within the power of states and individual companies to deny such executives indemnification for claims that arise out of their well intended efforts. As a result, D&O insurance exists.

The most sought after D&O’s are concerned with the quality of a companies insurance program because under state law, their personal assets are at risk as well as their hard earned reputation. Therefore, companies with quality D&O coverage are most suited to attract the best directors and officers to serve the corporation. D&O insurance is usually purchased by the company itself even when it is for the sole benefit of the Directors and Officers.

In terms of basic state corporate law (at least in the U.S.A.), directors and officers of a corporation can be liable if they damage the corporation by breaching their duties and contracts to the corporation, mix personal and business assets, or fail to disclose conflicts of interest. Even innocent errors in judgement by an executive can bring D&O insurance to the forefront of the matter in defending and settling the claims.

My purpose in this post is not to go into the various claim scenarios, policies available, exclusions, etc. but to make you aware of this risk (mainly pertaining to any corporation). There are many insurance products out there for D&O coverage and some include a package of other coverages as well that would maybe include Employment Practices, Crime, Fiduciary Liability, Workplace Violence, or others.

Termination Mistakes to Avoid- EPLI Insurance

Shared by Employers Advisor Network (slightly modified), here are a few reasons why employers lose when taken to court by an employee. Good to be aware of and think about these things:

1. The Jury Pool- It is likely that the jurors have never held an Executive or Managerial position. As a result, the jury box generally consists of people who will judge your company from the perspective of the employee rather than the employer. Many employees tend to have an "all bosses are villains and all employees are victims" mentality.

2. Employers focus on justifying rather than taking responsibility. When we make a mistake we should admit it and try our best to render a solution.

3. Failure to document- Judges and juries expect to see proof. If you ever have any question about an employee you should document everything. Poor performance, failure to comply, attempts to work it out, etc. This will go a long ways in swinging the votes.

4. Inconsistency- Do your best to treat all employees the same. Inconsistency in how you have treated people within your company will create distrust.

5. Somebody gets caught lying- Employers will often ignore, bury, or deny conduct that they consider to be potentially damaging. If the plaintiff finds out about a lie it could be potentially devastating. It is best to get everything out in the open and work from there.

6. They never received or signed an agreement- Failure to create and retain and employee/employer agreement can lead to potential problems. An agreement should set forth rules of conduct, expectations, pay, hiring/firing procedures, disciplinary actions, etc. and should be retained on file for all employees and former employees.

7. Being overly agressive- When presenting a case it is best to present both sides of the issue fairly rather than attacking the other side from the get-go.

The fact is, there are many more ways to lose at trial. Employers are the underdog. Even if you win, you are losing a substantial amount of time and money in defense. If you lose a case, it can be real big. The best defense is to have strategies and tools in place designed to prevent the filing of claims in the first place. Purchasing Employment Practices Liability Insurance is a great way of transferring this risk. Most insurance carriers that sell this insurance will make recommendations and help implement proper strategy. A litigious society puts all businesses big or small at risk.

Lawyers.. Always looking for a Loophole

Found this kindof funny! Want to insure those cigars? Think again...

A Charlotte lawyer purchased a box of costly cigars and insured them against flood, storm damage and, of all things, fire. Needless to say, his investment went up in (happily inhaled) smoke within a month, after which the lawyer filed a claim with his homeowners insurance company that he was owed compensation because "the cigars were lost in a series of small fires". The insurer refused to pay, assuming (correctly) that the man had smoked the pack himself. A judge ruled, however, that since the insurer had never stated what was considered to be "unacceptable" fire the company did, in fact, owe him $15,000 to replace his property.
The insurance company paid the claim, but they got their own back in the end. The lawyer was then arrested, sentenced to 24 months in jail and a $24,000 fine for 24 counts of arson and insurance fraud. (as told at www.swapmeetdave.com)

Ain't life grand?

Insurance To English Translations

Here are a few common terms used in insurance that have us saying "What the heck does that mean!?" I will occasionally post new terms. If you have one that you are wondering about, let me know and I will give it my best.

1> Actual Cash Value: This means that your damaged or destroyed property will be replaced at it's current value: Cost new - Depreciation. If you want your property valued at what you paid for it, then you should consider purchasing insurance at Replacement Cost.

2> Coinsurance: In Property insurance, a coinsurance clause requires the policyholder to insure their property to a percentage of it's actual value. If the percentage to value is not met then there can be a penalty paid by the insured at the time of a loss.

3> Deductible: The amount that the insured must pay before insurance will pay anything.

4> Reinsurance: Insurance that an Insurance Company buys to protect itself from paying out catastrophic claims. Who are the Reinsurers of your Insurance Company? That is considered when assigning a financial rating to an insurer. If your Insurance Company does not use solid Reinsurers then you run the risk of their inability to pay out on a large claim.

5> Umbrella Policy: Provides coverage for losses that go beyond the limit of underlying insurance policies such as your Liability and Auto Limits. The Umbrella policy sometimes provides broader coverage and may cover something that is excluded from your primary limits. In this case, a Self Insured Retention would apply which is similar to a deductible.

Book Review: S.P.E.E.D.

This book was sent to me by Matt Schoeneberger, who co-authored it with Jeff Thiboutot. Both have master's degrees in exercise science and health promotion. S.P.E.E.D. stands for Sleep, Psychology, Exercise, Environment and Diet. The authors have attempted to create a concise, comprehensive weight loss strategy based on what they feel is the most compelling scientific evidence available. It's subtitled "The Only Weight Loss Book Worth Reading". Despite the subtitle that's impossible to live up to, it was an interesting and well-researched book. It was a very fast read at 205 large-print pages including 32 pages of appendices and index.

I really appreciate the abundant in-text references the authors provided. I have a hard time taking a health and nutrition book seriously that doesn't provide any basis to evaluate its statements. There are already way too many people flapping their lips out there, without providing any outside support for their statements, for me to tolerate that sort of thing. Even well-referenced books can be a pain if the references aren't in the text itself. Schoeneberger and Thiboutot provided appropriate, accessible references for nearly every major statement in the book.

Chapter one, "What is a Healthy Weight", discusses the evidence for an association between body weight and health. They note that both underweight and obesity are associated with poor health outcomes, whereas moderate overweight isn't. While I agree, I continue to maintain that being fairly lean and appropriately muscled (which doesn't necessarily mean muscular) is probably optimal. The reason that people with a body mass index (BMI) considered to be "ideal" aren't healthier on average than people who are moderately overweight may have to do with the fact that many people with an "ideal" BMI are skinny-fat, i.e. have low muscle mass and too much abdominal fat.

Chapter 2, "Sleep", discusses the importance of sleep in weight regulation and overall health. They reference some good studies and I think they make a compelling case that it's important. Chapter 3, "Psychology", details psychological strategies to motivate and plan for effective weight loss.

Chapter 4, "Exercise", provides an exercise plan for weight loss. The main message: do it! I think they give a fair overview of the different categories of exercise and their relative merits, including high-intensity intermittent training (HIIT). However, the exercise regimen they suggest is intense and will probably lead to overtraining in many people. They recommend resistance training major, multi-joint exercises, 1-3 sets to muscular failure 2-4 days a week. I've been at the higher end of that recommendation and it made my joints hurt, plus I was weaker than when I strength trained less frequently. I think the lower end of their recommendation, 1 set of each exercise to failure twice a week, is more than sufficient to meet the goal of maximizing improvements in body composition in most people. My current routine is one brief strength training session and one sprint session per week (in addition to my leisurely cycle commute), which works well for me on a cost-benefit level. However, I was stronger when I was strength training twice a week and never going to muscular failure (a la Pavel Tsatsouline).

Chapter 5, "Environment", is an interesting discussion of different factors that promote excessive calorie intake, such as the setting of the meal, the company or lack thereof, and food presentation. While they support their statements very well with evidence from scientific studies, I do have a lingering doubt about these types of studies: as far as I know, they're all based on short-term interventions. Science would be a lot easier if short-term always translated to long term, but unfortunately that's not the case. For example, studies lasting one or two weeks show that low glycemic index foods cause a reduction in calorie intake and greater feelings of fullness. However, this effect disappears in the long term, and numerous controlled trials show that low glycemic index diets have no effect on food intake, body weight or insulin sensitivity in the long term. I reviewed those studies here.

The body has homeostatic mechanisms (homeostatic = maintains the status quo) that regulate long-term energy balance. Whether short-term changes in calorie intake based on environmental cues would translate into sustained changes that would have a significant impact on body fat, I don't know. For example, if you eat a meal with your extended family at a restaurant that serves massive portions, you might eat twice as much as you would by yourself in your own home. But the question is, will your body factor that huge meal into your subsequent calorie intake and energy expenditure over the following days? The answer is clearly yes, but the degree of compensation is unclear. Since I'm not aware of any trials indicating that changing meal context can actually lead to long-term weight loss, I can't put much faith in this strategy (if you know otherwise, please link to the study in the comments).

Chapter 6, "Diet", is a very brief discussion of what to eat for weight loss. They basically recommend a low-calorie, low-carb diet focused on whole, natural foods. I think low-carbohydrate diets can be useful for some overweight people trying to lose weight, if for no other reason than the fact that they make it easier to control appetite. In addition, a subset of people respond very well to carbohydrate restriction in terms of body composition, health and well-being. The authors emphasize nutrient density, but don't really explain how to achieve it. It would have been nice to see a discussion of a few topics such as organ meats, leafy greens, dairy quality (pastured vs. conventional) and vitamin D. These may not help you lose weight, but they will help keep you healthy, particularly on a calorie-restricted diet. The authors also recommend a few energy bars, powders and supplements that I don't support. They state that they have no financial connection to the manufacturers of the products they recommend.

I'm wary of their recommendation to deliberately restrict calorie intake. Although it will clearly cause fat loss if you restrict calories enough, it's been shown to be ineffective for sustainable, long-term fat loss over and over again. The only exception is the rare person with an iron will who is able to withstand misery indefinitely. I'm going to keep an open mind on this question though. There may be a place for deliberate calorie restriction in the right context. But at this point I'm going to require some pretty solid evidence that it's effective, sustainable, and doesn't have unacceptable side effects.

The book contains a nice bonus, an appendix titled "What is Quality Evidence"? It's a brief discussion of common logical pitfalls when evaluating evidence, and I think many people could benefit from reading it.

Overall, S.P.E.E.D. was a worthwhile read, definitely superior to 95% of fat loss books. With some caveats mentioned above, I think it could be a useful resource for someone interested in fat loss.

Thank You

I'd like to extend my sincere thanks to everyone who has supported me through donations this year. The money has allowed me to buy materials that I wouldn't otherwise have been able to afford, and I feel it has enriched the blog for everyone. Here are some of the books I've bought using donations. Some were quite expensive:

Food and western disease: health and nutrition from an evolutionary perspective. Staffan Lindeberg (just released!!)

Nutrition and disease. Edward Mellanby

Migration and health in a small society: the case of Tokelau. Edited by Albert F. Wessen

The saccharine disease. T. L. Cleave

Culture, ecology and dental anthropology. John R. Lukacs

Vitamin K in health and disease. John W. Suttie

Craniofacial development. Geoffrey H. Sperber

Western diseases: their emergence and prevention. Hugh C. Trowell and Denis P. Burkitt

The ultimate omega-3 diet. Evelyn Tribole

Our changing fare. John Yudkin and colleagues


Donations have also paid for many, many photocopies at the medical library. I'd also like to thank everyone who participates in the community by leaving comments, or by linking to my posts. I appreciate your encouragement, and also the learning opportunities.

How to Review Your Homeowners Insurance Renewal Statement

For most of us, our home is our single largest and most important investment. Many of us have poured thousands of dollars and countless hours into maintaining, improving and (hopefully) paying off our homes. Many people own their homes free of any mortgage. These assets are pure equity. Certainly its worthwhile to invest 15 minutes a year to be sure it's properly insured.

Thankfully, the insurance company offers you a perfect reminder and opportunity in sending out your annual renewal statement. Even if your insurance is paid by your mortgage company as part of your impound account, the insurance company still mails you a statement of renewal every year to update you with your current coverage limits and deductible.

Here's a few important steps you can take to be sure that HOME SWEET HOME is properly protected.

1. Check the basics. Check your name, address and any other description of the insured property. Make sure there's been no change of vesting or ownership that needs to be updated. Check your address to be sure no numbers are transposed.

2. Check the mortgagee clause. Here's where you can be sure that the current mortagee on your home is listed correctly. Check the lender, address and your loan number. Be sure there's no old information there. Maybe you had a HELOC (Home Equity Line of Credit) or a second mortgage that no longer applies. Be sure to get them removed.

HEADS UP: Whenever you have a significant claim, the mortgage company will be one of the payees on your claim settlement check. Just that alone can be an inconvenience. But it becomes a major hassle when one of the institutions listed no longer has a vested interest in your home. The insurance company is bound by contract to include the mortgage company on all settlement checks beyond a stated threshold.

*3. Check the coverage on your home (dwelling or building). This is without question the single most important coverage to examine, consider and adjust whenever necessary. Having been an agent during the two raging firestorms in San Diego, CA in this decade, I can tell you that underinsured homes are just NO FUN! Two of my clients lost their homes in the 2003 fires and fortunately they were both adequately insured. (we call all our homeowner clients once a year to review their coverages and suggest improvements and adjustments) But I can tell you that there were literally hundreds of people in the area that were not so fortunate. Many were underinsured by over $100,000! Contractors were giving rebuilding bids on homes for $400,000 with insurance policies with limits less than $300,000. See if that doesn't tweak your financial well-being just a little. Here's the solution.

Get an accurate rendering of the square footage of your home. Check county records, take a look at zillow.com, call your favorite Realtor, or get a tape measure and do your thing. Usually you don't include the garage in this calculation. Once you get your square footage, then you need to determine the building cost per square foot in your area for a home like yours. Call a local contractor for a quick estimate or you can call your insurance agent. Average costs in San Diego run about $200 per square foot. With that, a 2000 square foot would take about $400,000 to rebuild. Custom homes can be significantlly more. For a more complete discussion of this, check out: How Much Homeowners Insurance Do You REALLY Need?

Your contents coverage is usually 75% of the amount you have on your home. For example, if you have $400,000 on your home, you'll have an additional $300,000 to cover your personal property (furniture, clothing, dishes, TV, collections, shoes, tools, etc) Usually this is enough, but think through it anyway. If you have antiques, art, collections of any kind then you may need more. Ask your agent for help if you need to.

4. Look at your Personal Liability Coverage. This is the coverage you need when you get sued. Little Johnny runs across your front yard and trips on one of your sprinklers and ruins his chances to become America's Next Top Model and his parents sue your for $250,000. Make sure you don't scrimp here. It's not too expensive to get $500,000 or even $1 Million of liability coverage. If you have $100,000 or less, you could be setting yourself up for a mess just waiting to happen. Put a really big checkbook between your assets and someone who sees an injury as a lifetime paycheck. You might even consider a Liability Umbrella.

5. Check your 'special limits'. This is a REALLY BROAD subject that I just can't do justice to here in this post. Simply stated, there's limits on many things such as cash, computers, cameras, jewelry, furs, goldware, silverware, tools, etc. Call your company and ask for a review. You can increase many of these limits for just a few dollars a year. Sometimes the available increase isn't enough. That's the perfect time to consider a Personal Articles Floater (or it's called many different names) It's a policy that's designed to place stated amounts of coverage on many items from jewelry, business tools, iPods, hearing aids, cameras, musical instruments and on and on. If you have more than 'the average Joe' of ANYTHING, then check this out FOR SURE!

6. Check your deductible! This can be a tremendous cost-control tool in your insurance spending. Simply stated: The larger your deductible, the greater your savings. Usually you can save close to $100 per year just by going from a $500 deductible to $1000. Pick the largest number you can stand without losing sleep at night and ask your agent or company the savings you'd realize by changing. If you have a $250 or smaller deductible, it's definitely time to change it UP! Keep in mind that you usually hit a point of 'diminishing returns' once you get to $4000 or more. This means that you'll save less and less for each additional $1000 you choose. It might make sense to go from $1000 to $2000 if you save $85 a year by doing so, but not from $5000 to $6000 if you only save another $21 by making that jump.

Monitoring your insurance costs and coverages can result in a lot of savings AND peace of mind. Be sure you keep notes and file your thoughts and changes from year to year. These recoreds will make your annual call quicker and easier each year.

Feel free to contact me anytime if you have questions.

Till next time...

It's a Good Life !