Apr 09, 2015 | By Caterina Pontoriero

What are the most common property and liability claims for small businesses, and how much do they cost? (Monkey Business Images/Shutterstock.com)

Most small business owners probably worry about theft, property damage, and fire risks affecting their businesses. While these are common claims for small business owners, perhaps they should be more worried about customer injury, product liability, and reputational damage.

The Hartford analyzed small business claims from more than one million property and liability policies over five years, and found that the costliest claims aren’t always the most common.

For example, the most common claim — burglary and theft — is actually the least expensive claim in The Hartford’s ranking of the 10 costliest claims. While 20% of small business owners were impacted by theft and burglary in the past five years, the claims only cost them, on average, $8,000. That isn’t much when compared to the costliest claim, which averages $50,000 per claim.

Here are the top 10 property and liability claims for small businesses, as well as some tips from The Hartford to prevent experiencing some of these claims.

(SantiPhotoSS/Shutterstock.com)

Burglary and theft: 20% (Percentage of all small business claims)

Cost: $8,000

When hiring employees, conduct background checks. Protect your business by ensuring your building has adequate devices installed to control unauthorized entry, fencing and gates around the building and parking areas, and sufficient exterior and interior lighting.

By Claire Bushey, Crain’s Chicago Business

Alarmed by their vulnerability to everything from sophisticated hacking to the hapless attorney who attaches the wrong spreadsheet to an email, law firms are turning to new must-have coverage: cyber insurance.

In the past few years, the biggest firms have purchased policies to cover the costs of a data breach: notifying clients or employees, conducting a forensic investigation and, if necessary, writing checks to plaintiffs or regulators.

Now midsize and small firms are eyeing the policies, too.

But without a major claim by a law firm against a cyber insurance policy, attorneys shopping for coverage are left with what Matthew Price, associate general counsel at Milwaukee-based Foley & Lardner L.L.P., calls “the real $64,000 question, which is: How much is enough?”

The answer to that question varies from firm to firm, says Kari Timm, an attorney who specializes in cyber and privacy liability in the Chicago office of insurance boutique BatesCarey. Insurers base underwriting decisions on both a firm’s size, as measured by the number of employee and client records it maintains, and its practice areas. Mergers and acquisitions are attractive hacking targets because of their access to sensitive information. Firms with health care clients can be at risk because of their potential access to records protected by privacy laws.

A survey of insurance claims information in 2014 by NetDiligence, a Philadelphia-based cyber risk assessment company, found 10 percent of the claims originated in the professional services industry, compared with financial services and health care, which together generated almost half the claims. The median cost for a claim in the professional services industry was $230,000. But Attorneys’ Liability Assurance Society Inc., a Chicago-based mutual insurance company for some of the largest law firms in the country, was not included in the survey.

Moreover, there’s no consensus yet among insurers as to what, if anything, is covered by a law firm’s professional liability policy — the insurance that pays out when a lawyer is sued for malpractice. In August, Attorneys’ Liability issued a memo outlining what expenses its standard professional liability policy would cover and introducing a new product that would limit firms’ cyber risk to $250,000. Foley & Lardner has had cyber insurance for several years now, Mr. Price says, but for firms without it, the memo “underscored how big of a deal it is now.”

When cyber insurance first became available seven years ago, law firms operated on a three-year sales cycle, says Regan Miller, a managing director specializing in law firms at Houston-based broker Wortham Insurance. The first year was to see the broker’s presentation, the second year to build the premium into the budget, third year to buy. Now, often spurred by client requests, they ask to buy coverage starting the next month, she says.

In the news

Lawyers also appear to be reading the news: Cyber insurance sales at Chicago-based BigData Insure L.L.C., which targets firms with 50 or fewer lawyers, shot up in the fourth quarter of 2014 following high-profile data breaches at The Home Depot Inc. and Sony Pictures Entertainment Inc., says Michael Flanagan, director of sales and marketing.

Large firms might spend between $40,000 and $75,000 annually for $5 million to $10 million in coverage, while small firms might pay $3,500 to $7,500 for a $1 million to $5 million policy. “We always see the trickle-down effect,” Ms. Miller says. “Once the large firms do it, then the medium-sized do it.”

Some firms that bought cyber insurance policies a few years ago now are searching for better deals. Sonia Menon, chief operating officer at Neal Gerber & Eisenberg L.L.P. in Chicago, says the firm bought stand-alone coverage at least two years ago but is considering adding more. Insurance carriers that once refused to cover data breaches resulting from a lost laptop now will do so, she notes. As the carriers chase new business, lawyers and brokers predict the competition over what problems policies will cover will extend to premiums.

Fast-changing market

Mr. Price says Foley & Lardner reviews its coverage more frequently than its other types of business and professional insurance. With the market changing so rapidly, “to be stagnant would not be in our interest.”

Even the companies that run professional development courses for lawyers are capitalizing on the profession’s focus on cyber insurance. Mark Ferguson, general counsel at litigation boutique Bartlit Beck Herman Palenchar & Scott L.L.P. in Chicago, says the firm purchased cyber insurance a couple of years ago. He has noticed an uptick in management courses promising to educate attorneys on how to protect against the risks associated with a data breach. “Five years ago, I don’t remember seeing a ‘cyber liability for law firms’ seminar, and now I think I see one every couple of months,” he says.

Claire Bushey writes for Crain’s Chicago Business, a sister publication of Business Insurance.

By James Jaillet @trucknewsJJ on March 4, 2015

More than 2,000 comments were submitted in the 90-day public feedback window allowed on the Federal Motor Carrier Safety Administration’s solicitation for input from trucking industry stakeholders and the public at large on a potential rule to up the minimum about of liability insurance trucking companies must legally carry.

Motor carriers currently must hold $750,000 in liability insurance. But FMCSA said last April that number, set in the 1980s, hasn’t kept up with inflation and comes up short in covering modern crashes and medical expenses. The agency’s report was required by 2012’s MAP-21 highway funding law.

The trucking industry, however, mostly disagrees with FMCSA’s report, contending an insurance increase is not necessary, especially given the impact it could have on premiums.

The agency published Nov. 26, 2014, an Advanced Notice of Proposed Rulemaking announcing its exploration of increasing insurance minimums for carriers, following up on promises made in its April report.

The ANPR listed 26 questions FMCSA sought input on from the trucking industry — aimed at carriers, brokers and others who would fall under the rule’s scope.

The comment period, however, also attracted a slew of public comments from lawyers, insurance industry stakeholders and members of the public who had been involved in or impacted by a truck-related crash in which the carrier’s liability insurance did not meet the needs of medical bills, out-of-work expenses or other holes stemming from the crashes.

Here’s a small sample of the comments submitted by groups representing the range of stances on the issue:

American Trucking Associations: ATA has maintained in recent years that there is no need to increase the current $750,000 minimum, citing data that shows only one-tenth of 1 percent of crashes involving trucks have claims that exceed that minimum — points reiterated in its public comment on the ANPR.

ATA also points to data from the agency’s own report (the Vole Report) that shows more than 93 percent of policies on heavy trucks already exceed $1 million. Moreover, the Volpe Report showed “catastrophic accidents caused by the carrier are relatively rare,” ATA writes. “Further, crashes that exceed insurance limits are even more rare…estimated at between 30-100 per year.”

ATA also notes concerns in its comments about a potential capacity problem for a broad, nationwide insurance increase. “ATA has often heard there is a limited amount of insurance capacity, and that there are fewer insurance companies writing motor carrier policies than existed 10-15 years ago. Should the increase create a shortage, the cost impact for carriers, regardless of how safe, could be dramatic.”

Throughout its answers to FMCSA’s 26 questions, ATA attempts to tie the current debate over an insurance increase back to Congress’ intent in 1985, when it set the current minimum.

“When viewed through [that] lens,” ATA writes, “available data…strongly suggests the limits continue to meet their purpose.”

Trucking Alliance/Knight Transportation: The Trucking Alliance (fully, the Alliance for Driver Safety & Security) favors an increase. Led by carrier members like Knight Transportation, J.B. Hunt, Maverick USA and others, the Alliance contends the increase issue should center on the total dollars spent on crash settlements rather than the number of settlements that exceed the minimum.

“If all crash settlements represented in the database were covered by a $750,000 insured limit of liability, then 42 percent of the monetary exposure from these crashes would represent an uninsured liability of the trucking company,” the group writes.

It too argues Congressional intent relative to lawmakers’ action on liability insurance in the 1980s: “Is the current level sufficient to cover the medical and related costs of the public who are injured in trucking accidents? The simple answer is ‘no’ it isn’t,” the Alliance says in its comment. “We believe that by applying any recognized actuarial measurement of risk, the minimum financial responsibility of motor carriers should be increased above the current $750,000 level. To oppose an increase is to ignore simple logic.”

Owner-Operator Independent Drivers Association: OOIDA also reaches back to the establishment of the current limits in the 1980s, saying the DOT agency then responsible for regulating the limit — the Federal Highway Administration — noted that the minimum should be “the lowest limits allowed,” so as to enable carriers to afford it.

OOIDA notes in its comment that regulators faced similar circumstances then as they do today: Trying to balance the needs of catastrophic crashes with those of nearly every crash that occurs.

In short, OOIDA says, data available today does not show a need to increase the current minimums. “The potential disruption that increased insurance premiums could create for these sometimes conflicting interests was weighed carefully…when the original limits were set,” OOIDA writes.

The group, which represents owner-operators and small carriers, also questioned a potential insurance capacity problem and the ripple effect it would have on the trucking industry and potentially the U.S. economy as a whole.

An increase, OOIDA notes, could cause premiums to spike and competition to be limited.

The American Association for Justice Trucking Litigation: This group of 400 lawyers posted a comment in favor of an increase. “The current minimum insurance limits are inadequate in thousands of cases each year. Between 70 percent and 100 percent of fatal and catastrophic liability truck crash cases exceed the current minimum insurance limits,” the group writes.

Their concerns seem to echo other comments made by personal injury lawyers during the comment period.

In addition to inflation since 1985 that has impacted medical expenses and crash claims, wages have also seen inflation-based growth, AAJTL writes, meaning those injured in crashes need to claim much more in lost wages than those when the current minimum was set.

**

Thousands of other comments were made on the agency’s ANPR, with owner-operators, truck drivers, small carriers, large carriers, members of the motoring public, attorneys and more chiming in.

By Christopher J. Boggs | January 5, 2015

Rarely does any insurance practitioner, even hard core ones, undertake to read an entire policy. Generally a specific answer is being sought or a problem is being researched requiring review of only individual parts of the coverage form and/or its applicable endorsements to develop the required answer or opinion.

Whether reading an entire policy or only sections, 12 specific “rules” can be applied in reading the policy form to make finding the needed answer easier and quicker. These are not shortcuts to reading the policy, as there is no shortcut to reading any legal document, just pointers towards correct policy interpretation and application.

12 Rules for Reading an Insurance Policy

1. Ascertain who qualifies as an insured.
2. Annotate the policy form.
3. Confirm all forms and endorsements are attached.
4. Read the Insuring Agreement first.
5. Read the exclusions.
6. Read the exceptions to the exclusions.
7. When the policy refers to another section, read that section immediately.
8. Pay attention to the conjunctions used in a list.
9. Pay attention to key words and phrases.
10. Read and understand the definitions of specifically defined terms.
11. Understand and make sure all the policy conditions have been met.
12. Confirm the coverage limits are adequate for the loss.

This week, the Academy of Insurance hosts a webinar explaining each of these rules and detailing several of them. In addition to these rules, the webinar will explore why exclusions exist and the various classes of exclusions found in most property/casualty insurance policies.

 Source: Insurance Journal Academy of Insurance

About Christopher J. Boggs

Boggs is the vice president for education for Insurance Journal’s Academy of Insurance, responsible for managing all aspects of the Academy from researching, writing and presenting his own classes to managing a group of instructors to developing and managing the education schedule. Since joining the insurance industry in 1990, Boggs has authored more than 300 insurance and risk management-related articles including six e-books. Email: cboggs@ijacademy.com. Website: http://www.ijacademy.com/.

Is the Federal Motor Carrier Safety Administration’s work to raise the minimum amount of liability insurance required for carriers warranted?

DAT Solutions’ Don Thornton says no, and in a recent blog post published on DAT’s site last week, he gives three key reasons.

The first, , is that the data on insurance claims for crashes involving trucks shows that less than 3 percent of claims exceed $500,000, as the graph to the right notes. And just one percent exceed a million. The current minimum is $750,000 — encompassing 99 percent of claims, according to data from ATA.

Second, the trucking industry already faces a capacity crunch and struggles to keep up with the needs of shippers, Thornton writes, and increasing liability minimums would “add another check on capacity growth,” he notes.

Lastly, the increase would hit smaller carriers and owner-operators much harder than larger fleets and could potentially even force many carriers out of business.

Click here to read Thorton’s full blog piece.

FMCSA published last month an Advanced Notice of Proposed Rulemaking, in which it seeks input from carriers on 26 questions, answers for which it says will be used to determine how it proceeds with the rulemaking to raise the minimum liability insurance. Click here to read CCJ’s coverage of those questions and how carriers can give input.

Courtesy of James Jaillet

James Jaillet is the News Editor for CCJ and Overdrive. Reach him at jjaillet@randallreilly.com

Potential hours-of-service changes and typical Congressional drama offered quite a ride this week, news wise. Catch up on that story and five others below with the weekly ICYMI Index:

The number of 1 a.m. to 5 a.m. periods a driver’s 34-hour HOS restart will have to include if Congress passes the “Cromnibus” spending bill being debated now. Current rules, implemented in 2013, dictate that drivers’ 34-hour restarts include two 1 a.m. to 5 a.m. periods. The change would be a reversion to pre-July 2013 rules. The House passed the bill late Thursday, and the ball is now in the Senate’s court. Click here to read the full story.

The number of petitions for elections the Teamsters have withdrawn since it began its campaign to unionize FedEx drivers and workers. FedEx says the withdrawals are done because the union knows it won’t win the election. So far, three FedEx hubs have voted to join the union, while three others have voted not to. Click here to read the full story.

The amount of money, combined, that former Arrow Trucking head James Douglas Pielsticker bilked from one of his creditors, withheld from tax collectors and used for personal expenses, such as weddings, luxury cars and credit card payments. Click here to read the full story.

The amount that Volvo and Mack say a truck costs a fleet — per day — when it is stalled for maintenance. To help fleets keep their Mack and Volvo trucks out of the shop and on the road, the companies unveiled this week their Uptime Center. C CJ Equipment Editor Jack Roberts visited this week.

The share of Driver Vehicle Inspection Reports that have no defects, according to FMCSA, who unveiled a Final Rule this week — set to be published next week — that will eliminate the requirement that drivers file no-defect DVIRs. Click here to read the full story.

The U.S.’ national average price for a gallon of diesel fell below the $3.60 mark for the first time since February 2011 — a near four-year low. It also saw its second biggest price drop in the last 5 years.

 
By James Jaillet
James Jaillet is the News Editor for CCJ and Overdrive. Reach him at jjaillet@randallreilly.com.

I hate winter. Being from the northeastern U.S., I can’t stand the cold and think snow is a major inconvenience — and many homeowners probably share my feelings.

The frigid temperatures and heavy snowfall in cold-weather states, along with wind and hail storms in other areas, can cause damage to homes, and in many instances result in homeowners needing to file an insurance claim.

The Hartford recently analyzed homeowner claims data from the last five full winters (December to March) and conducted an online survey of 184 of its property adjusters to find out what are the most costliest winter claims. The analysis also determined the five most common winter weather claims and the top five U.S. states for winter weather claims.

3. Tree collapse 

Average Claim Cost: $6,000

Tree collapses are the third most costly winter weather claim. Trees in the western U.S. are generally larger than in other parts of the country and claims in this area average more than $10,000. By comparison, tree collapse claims range on average from $3,000 to $5,000 in the northeast, midwest, and south.

The Hartford recommends regularly assessing the trees and other vegetation on your property. Weakened tree limbs can easily come down in windy weather, so the company suggests maintaining and trimming trees near the home that could fall on the house, other buildings or vehicles, before storm season.

2. Hail damage 

Average Claim Cost: $10,000

Hail damage is the second costliest winter weather claim.

In the south, it is three times more common than in other areas. Roof damage from hail is more likely at the end of winter and can lead to claims that average $10,000.

Claims for hail damage are often filed late because the damage isn’t always easy to see. After a large hail storm, a homeowner may want to consider hiring a professional to examine the roof if they’re not able to safely inspect it. Filing an insurance claim as soon as damage is noticed allows the insurance company to start working with the homeowner sooner to minimize the damage.

1. Frozen pipes 

Average Claim Cost: $18,000

According to The Hartford, the costliest cold weather claim is frozen pipes.

While most common in the northeast and midwest, frozen pipes happen in all areas of the country and average about $18,000 per claim.

The Hartford’s adjusters recommend learning where the water shut-off is before you’re faced with a frozen pipe or water leak. If damage occurs from a water leak or frozen pipe, a homeowner may need to find a service company to help clean up the mess, which may help save money and prevent further damage.

To help homeowners prepare for the worst winter can throw at them, The Hartford suggests the following tips:

• Perform seasonal maintenance: Have the heating system serviced on an annual basis, including testing to make sure the heat is working throughout the home. It’s also important to insulate any pipes that are susceptible to freezing and unhook hoses from outdoor faucets.
• Prepare for winter storms: Move vehicles off the street and/or away from large tree limbs. Have the snow blower serviced. Become familiar with how to trip the manual release on overhead garage door openers and have shovels ready ahead of the storm.
• Stock up on supplies: In the event of an extended power outage, have bottled water and non-perishable foods, clothing and blankets, batteries and flashlights. It’s also helpful to have a supply of rock salt, other ice melt or sand, in case the stores run out during a storm.

Half of The Hartford’s adjusters surveyed say they begin preparing their own homes for winter at the end of summer, around Labor Day. Another 45% said they start as soon as the first cold front hits. Only 4% said they wait for a specific storm warning.

In the event that a customer does need to file an insurance claim after winter storm damage, The Hartford’s adjusters recommend homeowners avoid making the most common claim filing mistakes: Not trying to mitigate or limit damage while waiting for an adjuster to arrive, waiting to file a claim, and throwing away items without taking an inventory or capturing documentation.

See the infographic below for more tips from The Hartford and more information on the most damaging winter weather claims.

 
Courtesy of:www.propertycasualty360.com

by James Jaillet

Is the current amount of “financial responsibility” — liability insurance, essentially — for carriers too low?

That’s a question the Federal Motor Carrier Safety Administration has been grappling with since an April-issued report by the agency concluded, yes, the amount is insufficient and that many crashes run well above the current $750,000 minimum.

Trucking groups like the American Trucking Associations and the Owner-Operator Independent Drivers Associations, however, contend that just 1 percent of all trucking-related crashes exceed the minimum, therefore making it impractical to impose an increase and the probable burden of increased premiums on motor carriers.

As part of a potential rulemaking to increase the minimum, the agency published Nov. 26 a list of 26 questions it hopes to have answered by carriers – both fleets and owner-operators.

The agency published the questions as an Advanced Notice of Proposed Rulemaking, aimed at gathering industry input on the issue before proceeding with any rulemaking.

Carriers have until Feb. 26 to offer their formal input on the regulations.gov portal (click here to submit your comment), but here are some of the topics and questions the agency is seeking trucking’s input on:

Premiums:

-What are the current rates for carriers currently? And how do they vary based on FMCSA’s safety ratings?

-How much would premiums increase for each 10 percent increase in the liability insurance coverage?

-What percentage of fleets have coverage currently above the current minimums?

Current insurance levels:

-How often do crashes exceed the current minimums? And how often are carriers liable for the costs exceeding those minimums? Do these crashes cause carriers to go bankrupt?

Impacts of increasing insurance coverage:

-Would the effects of an increase be disparate for smaller carriers relative to larger ones?

-Would an increase affect carriers’ ability to obtain insurance?

-Would increasing minimums affect carriers’ investment in safety programs, preventive maintenance or investing in technology?

Timeline:

-What’s a reasonable phase-in period if FMCSA does increase the minimum coverage amounts?

-Should there be a process for updating the minimum in the future using inflation metrics? And how often should it be updated?

Self-insurance:

-Should the agency enhance the requirement for carriers that self-insure to have “adequate safety programs”?

Courtesy of www.ccjdigital.com

Finding that, under New York law, brokers “are charged with knowledge and responsibility to check the public records to confirm any information the broker is conveying to the potential purchasers,” a New York court has held a listing broker (“Listing Broker”) liable for $4,200 to reimburse a homebuyer (“Buyer”) for the costs Buyer expended to hook up a purchased property (“Property”) to the municipal sewer line.

In early 2013, Buyer began looking for a home to purchase. He was only interested in houses with connections to the municipal sewer system. His real estate broker showed him the Property, which Listing Broker, based upon information supplied by the Property’s seller (“Seller”), had listed as having “city sewers.” Apparently relying exclusively on the listing information regarding the Property’s sewage system, Buyer purchased the home.

After closing on the Property, Buyer discovered that the Property was not, in fact, connected to the city sewers, but rather had a septic tank system. Buyer spent $4,200 to connect the Property to the city sewer line located beneath the street in front of the Property, and then filed a small claims action against Listing Broker for reimbursement of his costs. In his suit, Buyer alleged that Listing Broker’s failure to use due diligence in checking the public records for the accuracy of the listing information amounted to a breach of Listing Broker’s duties under New York real estate law.

The court found “several problems with [Buyer’s] allegations,” including the fact that Buyer worked for the New York City Department of Environmental Protection, and, as part of this job, did sewer maintenance for the city. In addition, the court determined that both parties had failed to submit into evidence a number of key documents, including the contract of sale and the title report. The court pointed out that either or both of these missing documents may have included information and disclosures related to the Property’s sewage system. Despite these factual and evidentiary issues, the court relied on New York’s real estate license law statutes and case law to determine that, “although [Buyer’s] alleged lack of knowledge borders on being less than credible, taking into account all of the facts, the primary responsibility for discovering the inaccurate information must fall on the [Listing Broker.]”

Concluding that, “had [Listing Broker] acted as a ‘professional’ and checked out the public records, the listing would have been corrected and claimant would not have even looked at the house,” the court determined that Broker had failed to use the requisite due diligence required by New York law, and was therefore liable to Buyer for the costs of connecting the property to the municipal sewer system.

McDermott v Related Assets, LLC 2014 NY Slip Op 51464(U) ( September 16, 2014). [Note: This opinion is not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion].

Courtesy of www.realtor.org