The Bull Stops Here Blog

Happy and SAFE Halloween to all of you…

from the Weedin family featuring Captain Jack as the Vampire!

It’s getting to be that time of year in many areas of the country.  The severe cold is coming.  Remember to shut off the water in your garage or other outbuildings.  Save yourself the heartache of cleaning up after the pipes break.  Water damage is never a good thing!

Be safe,

I read an article in the local paper today stating that Washington State Insurance Commissioner Mike Kreidler has mailed out notices to about 200 commercial insurers telling them not to use the “governmental action” exclusion to deny flood claims - Read the Article.

Here’s the problem - many Kent Valley (south of Seattle) homes and businesses are being told they will flood this year due to the restrictions being put on the Howard Hanson dam.  It can only be filled up to 1/3 capacity until it can be tested later this spring.  Because of that, there is almost a certainty that some flooding will occur.  The federal government has a program through FEMA, but for many businesses, the coverage is too low, so they’ve gone to private insurers to pick up the slack.  FEMA has no exclusion for governmental actions; private insurers always have.  Mr. Kreidler has made his political statement by wagging his finger at insurers telling them not to go down this path.

What he has now also done is basically closed off the tap to those businesses who haven’t purchased flood insurance through the private companies.  If they weren’t scared off before, they are now.  My guess is that this action was taken for political reasons.  It makes Mr. Kreidler look good to voters.  The reality is that private insurers don’t go into a situation where there is a certainty that they are going to pay for a loss.  It’s part of a concept called “adverse selection.”  Put yourself in their shoes.  If you were an insurer and all the media is guaranteeing flooding in an area, and the state insurance commissioner is telling you that your exclusions won’t carry any weight, why would you insure anyone in that area?  The answer is, you wouldn’t.

I met last week with a business owner that sits right next to the Green River.  You can barely see the river now, but in the next 60 days, he expects a real chance that his building will flood.  He’s purchased flood insurance within the last 3 weeks.  His timing may be good to have the coverage, but will it stand up when claims roll in?  Mr. Kreidler has thrown down the gauntlet.  Will it end up in court?

The real victims in this mess are the homeowners and businesses.  Many will undoubtedly flood, causing damage to property and potentially long-term damage due to loss of clients who go elsewhere for their business.  That will never be recouped from insurance.  In the meantime, I envision a scenario where insurers and government get into a finger-pointing duel over who is responsible.

If you are in this situation, here are my suggestions:

1. If you’re a homeowner, buy the flood coverage through FEMA.  It should cover the vast majority of your claim.
2. If you’re a business, purchase flood insurance NOW, if it’s still available.
3. Be open about the situation.  Get written (e-mail works) confirmation from the insurer that if it does flood due to the dam situation that there will be coverage.  You don’t want to pay thousands of dollars in premium just to have coverage denied.
4. Plan for the worst.  Find alternate locations for property or workers; reassure customers; set up triage areas, buy sandbags; create e-mail and phone trees; buy supplies; head for the hills and high ground; whatever it takes to set yourself up to continue operations.
5. Video record your operations and/or take photos.  You may need documentation about your property in the case of a loss.

You’ve been given fair warning.  Don’t get caught unprepared.  The business owner I met with has already started preparations.  He is smart.  Whether it’s your home or business you need to do the same thing.

Final thoughts - I understand the media attention and the insurance commissioner taking a strong stand.  The problem now is that with all the hype, it will become virtually impossible to find private insurance if you don’t already have it.  If you are affected, take action now.

OK, I lied…one more final thought.  Flooding will also occur outside the Kent Valley.  Regardless of where you live or have a business, you MUST consider this an exposure.  Even if you’ve never flooded, be prepared and honestly look at your risk.  Take a lesson from Hurricane Katrina where claims for flooding were denied because of the levy failures.  This winter, re-evaluate your exposure to flooding and talk with your agent or consultant.

Be safe,

Dan

I recently had the pleasure of getting together with several associates of mine for a day of professional growth.  Like me, they are solo practitioners in the consulting business.  The topic of professional liability for consultants came up, and several asked me if I really feel there is a need for it.  The answer is an unequivocal “YES.”  For my compadres in the consulting field, here are my five quick reasons why…

1. If you offer advice, design custom applications, or implement strategy or process, you are exposed if anything goes wrong.  For instance, let’s say you are responsible for designing an application and implementing it.  What happens if it’s late and your client loses thousands or millions of dollars?  What if it just doesn’t work and they’ve used employee time and resources?  What if your advice was wrong and they lose market share?  The bottom line is regardless of whether you are truly at fault or not doesn’t matter.  You are exposed to being held liable and sued.
2. Hold harmless agreements don’t hold up in court. Period.
3. Many more municipalities and private organizations are requiring professional liability from their consultants.  May not be the best reason for getting it, but it works!
4. Many consultants also speak.  If you are giving a keynote or training session, there is always a chance you will offend someone or have them fail with your advice.
5. I have it!  As an insurance consultant, if I didn’t think it was needed, I wouldn’t buy it.  You might think that I have more risk as an insurance consultant, but many of you work on systems, technology, process, organizational development, and strategy.  Don’t think there’s risk in those fields?  If there weren’t, you probably wouldn’t be needed.

Professional Liability is not so costly that it’s worth risking not having it.  In most cases, a sole practitioner should be able to purchase a $1,000,000 policy for under $2,000 a year.  Stack it up as a cost of doing business BUT also realize it may come in very handy when you least expect it!

Be safe…

According to the American Veterinary Medical Association’s 2007 Pet Ownership & Demographic Sourcebook, there:

• 72 million pet dogs in the United States.  The average number of dogs in a household are 1.7.  37.2% of households have a dog.
• 82 million pet cats in the United States.  The average number of cats in a household is 2.2.  There are 32.5% of American households with a cat.
• The average veterinary expense per household is $366.
• Nearly 50% of pet owners (49.7% to be exact) consider pets to be family members.

What this all means is that your 4-legged family members most often go uninsured while riding around in your car.  Until now.

There was a very interesting article in this month’s Best’s Review.  Many insurers like Farmers Insurance and Progressive Insurance are including options to insure your pets.  Take it from me, as a dog owner I know how much veterinary bills can be.  I also see tons of dogs (rarely do I see cats) riding around in the car with their owners.  Too often, while sitting on their lap (that is a post for another day).

Bottom line - if you are one of the 50% of pet owners who consider your furry friend a member of the family, ask your agent if your auto insurance company has an option for pet medical insurance.  You may find more than cats and dogs are covered, too.  Most limits range from $500 - $1,000 and are relatively inexpensive.  The return on investment may be well worth it in the event of an accident.

Excellent personal risk management post by my friend Scott Simmonds.  Do you have a black book?

Read the Post

Ask the mayors of these Kentucky towns hit hard by ice storms. They are happy they had a program like Agility in place. What about you?

I hate to blog back to back on the same subject but…

The Puget Sound Business Journal reported that a Costco auditor was just accused of embezzling $60,000 with bogus travel claims - Read the story.

This is yet another reason to insert best practices when it comes to hiring employees and  bookkeeping and auditing functions.  This happens to small and big companies alike.  Profit and Non-profit.  No one is immune.  It’s about doing your due diligence consistently.

Learn from these lessons so they don’t happen to you.

Be safe.