The Bull Stops Here Blog

If you are ever approached by an insurance agent/broker who wants you to sign a broker of record letter, understand one key thing.

You are FIRING your current agent.

A broker of record letter instructs your insurance company (ex. Safeco, Travelers, Firemans Fund) that you are firing your current agent and authorizing them to deal with the agent for which you are signing the letter for.  Plain and simple.  If you are unhappy with your current agent and wish to change, this is the avenue you take.  However, never sig one under the pretense that the broker needs it to procure proposals.  That is not true.

Only sign a broker of record letter if you are intent on firing your agent.  A “best practice” would be to call your terminated agent before they get word from the company. It saves you getting a call from them and is the courteous thing to do.

© 2010 Dan Weedin. All Rights Reserved

This is an article in today’s Scottrade Stock Market News where I am interviewed on the Tiger Woods fiasco. Companies that hire celebrities to endorse their “brand” face liability issues. Insurance companies are not in the moment if they miss this opportunity to protect their clients. Insurance buyers who engage in hiring celebrities are missing the boat if they don’t look into transferring all or part of the risk.

Read the article

I’m working on a manual for business owners, risk managers, and professionals on liability associated with social media marketing. One of the chapters is slated to be “Questions from Readers.”  To that end, I’m in need of questions.  That’s where you come in.

Please send me your questions on anything dealing with social media - your concerns, challenges, privacy issues, best practices, etc. I will do my best to answer them on whatever forum you ask, and use them in my manual which will be published (no names - just questions). Perhaps you have clients that have questions.

You can ask me questions via e-mail (dan@danweedin.com), Facebook, Twitter, or Linked In, or on this blog. Your help is greatly appreciated!

Five items you can do to do to make sure your audit goes smoothly:

1 - Make sure you know the class codes that are being used to rate you for liability.  They will be a description of your operation.  You will find them on the General Liability section of your insurance policy.  Ascertain if they are correct and complete.

2 - Make sure you know what your rating basis is for liability.  The options will be gross sales, payroll, cost of materials, or area (sq. feet). Determine if the correct basis amount was chosen.  If it’s too low, you will owe money at the end of the policy period.  If it’s too high, you are paying too much and can improve your cash flow.  Depending on the policy, you might not even get it back!

3 - If you’re a contractor, understand the maximum limit you can be rated for on payroll.  It may vary per state.  In Washington State, it’s $600/week or $31,200/year maximum for any laborer.  Ask your agent if you don’t know.

4 - Ask your agent or consultant to attend an audit meeting with you.  If it’s done by mail, ask them to help you complete the forms.

5 - If in doubt about your rates at any time, ask!  It’s better than being surprised.

Be safe…

According to a report by the Kitsap Business Journal this morning, if you are in the State of Washington, your workers compensation rates are going up.

Read the article

Best,

A recent accident at Cowboys Stadium in Dallas left workers injured.  They fell from an icy part of the roof.  Luckily, nobody dies.  Reports are that proper fall protection wasn’t used.  Ouch!  Make sure you train and monitor your employees constantly!

Read the story.

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…

The Puget Sound Business Journal recently reported that the Seattle Rotary Club had $350,000 embezzled from them by an employee.  It was a hired bookkeeper, which is not uncommon in larger service clubs.  I’ve been asked if Directors & Officers Insurance is needed to protect the organization.  You need to know the distinction between Directors & Officers and Employment Practices Liability for your own business insurance.

Directors & Officers coverage provides financial protection for directors and officers of an organization if they are sued with respects to the performance of their duties.  It’s like an Errors & Omissions policy for management of the board. It’s about performance failure and negligence.  This would not protect the Seattle Rotary Club in this situation because this was an intentional act by an employee.

What they need to have (and you too) is Employee Dishonesty coverage.  This protects you if your employee steals money or products from you.  I had a client whose bookkeeper absconded with over $25,000 over a two year period.  She even had the audacity to charge her entire honeymoon to my client’s bank account!

Any organization - profit or not for profit - that has employees needs to have Employee Dishonesty.  Period.  Nobody thinks they are going to be robbed by an employee.  The reality is it happens all too often.  My client was in shock because they thought their employee was golden.  Of course he did.  That’s why they were in that position.  Bad stuff happens.  That’s why you need this insurance.

Be safe.

I saw this article in the Puget Sound Business Journal today.  I have written many times about employee dishonesty.  Too many times I’ve heard clients and others say, “I would have never suspected they would do that.”  No kidding!  If you had, they would have never been put in charge of the money.

Whether it’s your own business or your favorite non-profit, make sure that specific practices are put into place so you don’t wind up on the front page of the paper AND out of your money!

Read the story

Be safe.