Friday, November 19, 2010

Make Sure Your Protective Systems Are Operational, or You May Get Hosed

Many policies have an endorsement that is placed on the policy if you claim that you have a protective safeguard i.e. alarm, fire sprinklers, etc. The protective safeguard endorsement is way a company can deny your claim.

For example, a company states on its application that it has a fire suppressant sprinkler system. The owner benefits by having a discount on his policy. Unfortunately, the system broke down and the owner didn't have the time or money to make the repairs. The owner never got around to telling the agent or the insurance company that the system wasn't working.

A few months went by and a tenant left a burning cigarette in a community trash can that started a fire. The owner is relieved that he has insurance for the $150,000 in damages. The insurance company finds that for a number of months the fire suppressant sprinklers were out and to the owners dismay, deny the claim.

The owner now must pay for the repairs and will get no payment for loss of rents.

Even if you don't own a building, this could apply to your office or even your home.
There is a similar endorsement that has to do with theft and burglary alarms.

Is your alarm armed every time you leave your office or house? Are you doing quarterly maintenance on your fire alarm systems? Are fire extinguishers tested? Are batteries replaced?

The company is giving a discount due to your protective safeguards, but if your system isn't operational then your claim could be denied. Make sure to ask your agent if you have this endorsement on your policy.

This is how the actual form on The Hartford policy reads.

We will not pay for loss or damage cause by or resulting from fire, if, prior to the fire, you:

a. Knew of any suspension or impairment of any protective system so described in the property choice - schedule of premises and Coverages and failed to notify us of that fact; or

b. Failed to maintain any protective safeguard so described in the Property Choice - Schedule of Premises and Coverages, and over which you had control, in complete working order.

If part of an Automatic Sprinkler System is shut off due to breakage, leakage, freezing conditions or opening of sprinkler heads, notification to us will not be necessary if you can restore full protection within 48 hours." - Hartford Form PC 40 01 01 09

Tuesday, October 5, 2010

Insurance 101 for a New Business

Insurance is there to get you back where you were in case of an accident. In this litigious society, insurance is your first layer of protection against a law suit arising from an unforeseen accident. There are many types of insurance. Depending on your business you may need one or more policies.

General Liability - This is sometimes called the “trip and fall” policy because it is for third party claims when some one is injured. A third party is anyone that is not involved in the company including customers and the general public.

This covers your business, your work, and your even products after the products are in your customers hands.

Generally, the first time a business gets insurance is because a vendor or a landlord is requiring it. The standard requirements
$1,000,000 per Occurrence
$2,000,000 General Aggregate
In English this means: $1,000,000 per accident and $2,000,000 per year.

One should ask to get the insurance requirements in writing, so you can make sure you fulfill all of them. Many times these requirements are written into the lease or contract in its own section. Give this information to your insurance agent so he can get you the correct coverage to fulfill your lease

Workers’ Compensation - This is the second most common policy as it is mandated by the State of California and most other states to any company with employees. If an employee gets hurt during the course of work, workers’ compensation pays for the workers’ injuries and lost wages.

Without workers’ compensation the employer can become personally liable for employees injuries. In addition, the Department of Industrial Relations can put a stop order on your business and fine you $1,000 per employee.

Professional Liability – This is an important coverage if you are a consulting or giving professional advice. This is also known as Errors & Omissions insurance and Malpractice in the medical field. Consultants, technology professionals, lawyers, accountants, bookkeepers, and other professionals should all carry this protection.

Make sure that you understand the insurance you are buying before signing anything. An insurance policy is a contract and may require you to have certain protections in place in order for you to be covered. Make sure to discuss with your agent your specific needs based on your specific risks in addition to contract requirements from your vendors.