In order for an insurance company to develop an ongoing presence in this business, they need to establish market share.  There are only four ways to do this: 

1. Provide broader coverage
2. Provide superior claims handling
3. Provide exceptional risk control
4. Provide a lower price

 The policies offered by experienced underwriters are as broad as they have ever been, it is difficult if not impossible for a new company to provide a significantly broader policy form.  In addition most new entrants don’t have the volume to justify in house, experienced, specialized claims adjusters.  As such they have to sub out their claims to Third Party Administrators (TPA’s).  While some TPA’s are qualified, many are not experienced with the design profession.  Similarly, new companies have not had the time to develop risk management programs, or are not inclined to. This is a reflection of the fact that Risk Management takes a substantial commitment of time, money and expertise.  

 So if you can’t compete on 1,2 or 3…that leaves price.  This is exactly what some of the new players are doing.  They are pricing their coverage 20-25% below the experienced underwriters.  Unfortunately, they are not underwriting 20-25% better.  It is only a matter of time before the losses catch up with the premiums.  Unfortunately since Professional Liability is a long-tail business (claims are not usually paid until years after the premiums have been accepted) it can take a long time before a company realizes they have underpriced their product. 

 But why wouldn’t a design professional switch to one of these “newbies” to save some money?  After all, they can just switch back if these companies withdraw from the market.  Unfortunately that is not always the case.

• Although price is extremely important, especially in tough economic times, you are buying insurance to protect your company if you have a claim.  As mentioned above the quality of some of the new players leaves a lot to be desired…who do you want protecting the financial future of your company?  An experienced claims adjuster or some random claims adjuster who can’t spell “architect” or “engineer”?
• If a company does exit a line of business or goes out of business, the quality of personnel dealing with your existing claims is going to drop off also.
• Finally, we are heading in to a hard insurance market.  Coverage is going to be more expensive and more difficult to get.  Companies that abandon their “preferred markets” will be closely underwritten and may not be welcomed back with open arms.

 Many of these “new” companies will not be around long, so it is prudent to evaluate a prospective insurer on factors besides price, such as their commitment and experience in the industry, claims handling abilities and risk management offerings.  You should also consider the qualifications of the broker you deal with.  An experienced broker who specializes in the design profession can work with you to lower the frequency and severity of the claims that ultimately drive your premium costs. 

The National Council on Compensation Insurance’s (NCCI) 2010 analysis of claims and trends revealed a success story. The report, published August 2011 by NCCI, is entitled, “Workers Compensation Claim Frequency.” As more and more U.S. workers began using computer keyboards in the 1990s, the frequency and problem of Carpal Tunnel Syndrome (CTS) became a fast-growing source of Workers’ Compensation (WC) claims throughout the U.S.

Insurance companies sought to slow this trend and reduce the number of CTS claims. They and consultants began targeting the ergonomics of work station design and other conditions that were believed to lead to CTS, providing employers and individuals with measures one could take in the work place to prevent or significantly mitigate the development of CTS. Did all this time and attention to targeting CTS pay off for the insurance companies and employers?

Well, according to the report cited above, the frequency of Carpal Tunnel Claims has declined a successful 47% from 2005 to 2009. Virtually every type of business has the potential for some form of repetitive motion injury or for a similar problem area (e.g., back claims for commercial drivers) that affects a large number of employees. This CTS example shows that focusing on specific operational or procedural environmental issues can yield dramatic results in reducing workers’ compensation claims. The employers who implemented the preventive CTS measures, such as more ergonomic equipment and conditions for their workers, received a reward for their investment. Their efforts reduced costly WC claims and increased worker productivity.

Coordinating the development of targeted loss control and claims reduction programs requires expertise and can be tremendous work. Cavignac and Associates has expert experience with designing and implementing such programs and we provide this as a service to our clients. Just as Carpal Tunnel Syndrome claims were targeted for reduction by multiple parties to the Workers’ Compensation system, and those efforts produced great outcomes, you can rely on Cavignac and Associates to help you identify and attack potential systemic issues in your workplace environment and reduce your long-term Workers’ Compensation costs.

No matter the size or type of your business, a disaster could occur that could seriously curtail or even shut down operations. If you’re office bound, you’re still vulnerable to such troubles as utilities loss or flooding from a faulty building system or tenant. Most technology related businesses feel immune to disaster and it is not unusual for them to overlook creating disaster plans. Further, those companies that do have disaster or continuity plans in place often fail to update their plans on a regular basis. Besides having an updated plan, it is also important to test plans.

Think Negatively, Then Creatively

Business decision makers have to spend time preparing for the possibility of catastrophe. It could be a natural event, or it could have a human origin. Regardless, an owner, manager or executive has to think about the many events that could either temporarily or permanently interrupt their business. In other words, a business must consider what threats exist to their normal, profitable operations. The task may initially appear overwhelming. However, it is just a matter of considering what the business does; where it does it; how it does it; and why it does it; then, examine what could happen to stop any of these things.

Natural interruptions could be caused by wind and rainstorms, flood, snow/ice storms, earthquakes, extended or extreme temperatures, etc. Human events may include fires, break-ins, mobs, sabotage, etc. Typically, a thorough consideration of problems involves identifying the worst possible things that could occur….even when their chance of happening is remote. Remember that a single, unanticipated event could cripple or even terminate a business, so you need to have a plan that contemplates a wide variety of harmful situations.

Consideration must be given to a business’ physical structures and property, machinery/equipment, management, finances, employees, products, stock, finished goods and goods in process, services, communications, transportation, contractual obligations, competition, suppliers, distribution, and so on.

Recovering from disaster depends upon many factors. Regardless the reason for a business suffering a serious interruption, the goal has to be on resuming normal operations as quickly as possible. Getting back into business often depends upon insurance, but other arrangements may be necessary and even be more important. Consider plans that include the following:

Arranging use of another location to run the business

Having duplicates of key business records (kept at another location)

Arranging other sources of product supplies if a key supplier’s business is interrupted

Having access to substitute production machinery

Buying and maintaining generators/alternate sources of light and power

When considering how to deal with events that could threaten your business, the biggest disaster could be the failure to create a viable disaster recovery plan. Insurance professionals at Cavignac and Associates can provide resources to help you develop a disaster recovery plan for your design firm, construction business or other type of business so feel free to contact us and discuss your situation.

Most businesses are computer-dependent. Only the smallest retailer can operate without a computer cash register. Embedded chips and computers operate manufacturing equipment, contractors’ equipment and equipment found in hospital operating rooms. Rather than insuring computers as office or manufacturing equipment, the Electronic Data Processing (EDP) form protects hardware, software, media and other similar property. Coverage is available for hacking (unauthorized computer system access) and virus damage, power shortages, overload and outages.

There isn’t a standard form for providing Electronic Data Processing or Computer coverage. Because so many different forms are offered by many insurers, businesses seeking coverage must take extra care to understand what is covered.

Any commercial operation that owns and/or uses computers and other data processing equipment is eligible for EDP coverage. Commonly a policy covers hardware, media, programs/applications, data records, proprietary programs, loss of income and (on- or off-site) Website servers.

How EDP coverage applies depends upon the policy definitions of key terms, including “computer hacking,” “computer virus,” “data records,” “media,” “telecommunications equipment” and others. EDP policies have many defined terms because technology is dynamic. Liberal use of specific policy language helps to preserve an EDP policy’s intended coverage.

Typically, coverage is provided against a specific list of events that can cause tangible loss to electronic equipment. Different coverage applies to major areas of EDP, such as hardware, software and Website servers. Covered businesses usually must comply with certain provisions to qualify for coverage, such as properly creating and storing back-up programs.

There are certain types of property that, generally, are ineligible for coverage under an EDP policy, such as:

Hardcopy accounts, bills, evidences of debt, records, abstracts, deeds, manuscripts, program documentation and similar property

Portable computers that are stolen or that disappear

Any property used for illegal transportation or that is contraband

Any property that is leased or rented to others

Currency, food stamps, lottery tickets, money, notes and securities

Property held for sale

One area that a business must pay attention to is how losses are settled. Are claims handled according to the current value of the lost equipment (Actual Cash Value – ACV) or according to what is necessary to replace the property? Settlement based on ACV can be a problem for companies that don’t regularly upgrade their EDP equipment. Technology changes so fast that payment for equipment purchased years ago is far less than what is needed to secure new equipment. On the other hand, replacement cost coverage would not be as critical for a firm that regularly changes equipment as damaged property would likely be newer.

Please contact us today to discuss your insurance needs and how our expertise can make a difference for your company.

The holiday season brings with it company-sponsored parties for employees and/or customers, and parties often mean the serving and consuming of alcoholic beverages. Before you plan your events this season, consider your liability. Can a business be held responsible for injuries or damages that result from serving alcohol? Is the current insurance program sufficient to address this concern? Is it necessary to purchase special insurance? The answer is not straightforward as state alcohol laws determine a business entity’s liability for injury or damage arising from serving alcohol. Laws vary, but most assign liability for serving persons who are minors or are visibly intoxicated.

The Commercial General Liability (CGL) policy provides coverage for Liquor Liability EXCEPT for businesses ‘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, that fact 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 proof from the bartender to confirm that he or she carries an adequate level of Liquor Liability insurance. Proof 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.

Today, tolerance for drunk driving is low and an impaired driver who causes an auto accident is much more likely to be sued. Besides the driver, a lawsuit will likely include a business that provided alcohol to the driver. 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. In some cases, the Commercial General Liability policy might provide the necessary defense for the business.

If you have any questions, contact Cavignac and Associates to discuss the types of events your business sponsors or hosts 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