Archive for October, 2016

Why Your Business May Need Pollution Coverage


Almost all businesses have some risk of being sued or cited for pollution, even the most benign, such as a property owner.

Pollution exposures for many businesses are obvious – like dry cleaners from the chemicals they use, to printing companies from the ink they use. And any manufacturer would face some type of pollution exposure as well, in addition to warehouse operators and contractors.

Think you’re not exposed? Say you own a business property, even an office building for example, you could have pollution exposure such as:

  • The existence of lead (paint and pipes or asbestos).
  • Releases by tenants from improper or inadequate storage or disposal of lubricant oils, primer or lab waste material.
  • Inadequate containment in loading areas that could lead to the release of pollutants.


However, as the risks have grown for pollution liability, most commercial general liability policies now exclude pollution coverage. It’s something to be aware of for most any business, particularly as the list of what is considered to be a pollutant has grown dramatically.


The exclusion

The easiest way to think of a pollution exclusion is that it can apply to a contaminant. Virtually every commercial general liability policy includes a pollution exclusion.

These policies used to cover pollution but as the risk for being sued for pollution has grown, so then has the exclusion.

The standard policy has two pollution liability coverage forms. It also has a special form for underground storage tanks.

The current version of the Insurance Services Office (ISO) commercial general liability form has pollution coverage narrowed down to a few covered occurrences, typically including:

  • Certain off-premises exposures
  • Certain product-completed operations
  • Smoke, fumes, soot, vapors from your heating equipment or from a fire in your building
  • Gas or fumes from materials you bring into a work site.


The broad definition of pollution

Consider these examples:

  • A food company in Wisconsin recalled a batch of listeria bacteria-contaminated sandwiches and filed a product recall claim with its insurer. However, the insurer denied coverage based on the policy’s pollution exclusion. The court sided with the insurer, concluding that bacteria were an excluded ISO form pollutant.
  • A hospital in California was sued after an outbreak of legionnaire’s disease was traced back to a drinking fountain in the hospital lobby. The insurer rejected coverage for the lawsuits, citing a fungus and bacteria exclusion in their general liability policies.


The solution

What are the solution options when it comes to the pollution insurance question? You can have a specific commercial liability form or a separate pollution liability policy.

Pollution liability insurance is designed to address claims and suits involving pollution losses in which it is alleged that the insured is responsible, as well as property losses related to pollution on owned or occupied property.

Typically a pollution liability policy covers three risks:

Premises pollution liability – Covers first-party claims associated with pollution on the premises of the insured. (Example: It is discovered that instead of clean soil, contaminated soil was used to fill a space formerly occupied by an underground storage tank that leaked. The cost of remediation would be covered.)
It would also cover third-party claims associated with the pollution (like when a person falls sick due to the pollution).

Contractors pollution liability – Covers bodily injury, property damage and remediation costs for which a contractor who causes pollution is liable.

Errors and omissions liability – Covers losses that result from wrongful acts performed in conducting professional services, such as a soil engineer erroneously rendering an opinion that there is no soil pollution, when in fact, there is.


Protective Safeguards Endorsement: How to Avoid Having Your Business Property Damage Claim Denied

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Whether you own and insure your office or other business property, or insure the office or building you rent, you will obviously want to make sure that you have an automatic sprinkler system or some other fire detection or suppression system in place in case of fire.

You’ll also want to make sure that your fire alarms are working and that you have service contracts for periodic inspections of your facilities to identify fire and other risks.
But what happens if there’s a fire in your building and your sprinkler system fails? Well, when you make your insurance claim you could be in for a nasty surprise if your policy has a “protective safeguards endorsement.”

This endorsement would deny coverage if you had failed to maintain and ensure that your system is in proper working order.

If your policy contains a protective safeguards endorsement, and you fail to adequately maintain any of the protective safeguards at your commercial building or manufacturing facilities and you suffer a loss caused by fire, coverage for the fire loss can be denied by your insurance company.

Also, if you knowingly turn off or suspend any of the safeguards, even if it is for routine maintenance, and fail to notify the insurance company of the suspension, and a loss occurs during the suspension, coverage can be denied.

Because of the potential coverage gaps that can be created by this endorsement, it’s very important for you to know whether it’s attached to your policy – and if it can be removed. If it can’t be removed, you need to understand your responsibilities in order to avoid having your claim rejected.

These are types of protective safeguards that could be in the endorsement:

  • Automatic sprinkler system
  • Automatic fire alarm
  • Security service
  • Service contract
  • Automatic commercial cooking exhaust and extinguishing system
  • Any other protective system described in the endorsement schedule


Protective Safeguard Horror Stories*

Burmac Metal Finishing Co. – An Illinois appellate court ruled that an insurer was justified in denying coverage for a fire and explosion because Burmac had capped between three and 19 automatic sprinkler systems out of 600 at its industrial building without notifying the insurer. The court ruled that this action constituted failure to maintain the system, justifying denial of coverage.


Y2K Textile, Inc. – A California appeals court ruled that an insurer had properly denied coverage for fire loss when the protective safeguards endorsement required the insured to maintain a contract with a duct-cleaning service and the insured never obtained a copy of such a contract.


* Source: Faegre Baker Daniels blog


Insurers will often offer a premium discount or a credit, or an otherwise uninsurable property may qualify for coverage, if the property policy includes a protective safeguards endorsement.

Typically, a policy will identify the protective safeguards the endorsement covers and then it will have the following key clause:

As a condition of this insurance, you [the insured] are required to maintain the protective devices or services listed in [this endorsement].”


The endorsement will spell out that the insurer will not pay for the loss or damage that is caused by or resulting from a fire if, prior to the fire, the policyholder:

  • Was aware that any of the protective safeguards had been suspended or were impaired prior to the fire, and that the policyholder had failed to inform the insurer.
  • Failed to maintain the protective safeguards in complete working order.


That means that you have two duties under such an endorsement:

  • The duty to notify the insurer of any suspensions or impairments of any safeguards.
  • The duty to maintain the safeguards.


Policies will also include instructions for when you must inform your insurer of a suspension of a safeguard. Most endorsements will include the following safe harbor provision:


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.”


What you should do

If you have an insurance policy for your property, and you are unsure whether it includes a protective safeguards endorsement, you can call us. If your policy does include it, we can also work with you and the insurer to see if can be removed, if you’re so inclined.


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Cal/OSHA Mulls Changes to First Aid Kit Requirement


California employers may have to update and expand their workplace first aid kits next year as Cal/OSHA finalizes new regulations governing what they should contain.

The rule-making board for Cal/OSHA has proposed changes that should make it easier to comply as one of the most confusing parts of the regulation is set to be eliminated. A portion of the current rules lays out the requirements for the first aid kit contents, which the employer can deviate from with a note from an employer-authorized licensed physician.

The regulations being formulated now would do away with those requirements and instead require employers to have adequate first aid supplies based on the hazards of their workplace, or face a Cal/OSHA citation.

The new regulations will essentially be performance standards, since the contents of the kit will be determined by the needs of an employer’s workforce.

Cal/OSHA wants employers to assess the likely injuries in their workplaces and prepare appropriately with supplies and training.

The standard is in need of revision as knowledge about first aid has evolved over time.

Most small employers are unaware of the consulting provision, but members of Cal/OSHA’s rule-making board say that the provision is unnecessary. Often if there is a note, it is merely a photocopy that has been provided by the manufacturer of the first aid kit.

Many of Cal/OSHA’s board members recommend using the first aid kit contents as recommended by the American National Standards Institute (ANSI), and that the contents be checked every three months to ensure all of the required suppliers are there.

Minutes from the October board meeting indicated that the members are leaning towards a three-pronged requirement:

  • That there be a minimum list of materials that are suitable for an office environment and perhaps at least partially include items in the ANSI list.
  • That there are other items in the kit based on the hazards that are specific to the workplace.
  • Requirements for specific hazards, like companies that have chemicals or other substances keeping the proper antidotes on hand for workers who are exposed. That would require a doctor’s certification.


What constitutes first aid?

First aid is defined by Cal/OSHA as:

  • Issuing non-prescription medications at non-prescription strengths;
  • Administering tetanus vaccinations;
  • Cleaning and covering wounds;
  • Using hot/cold therapy;
  • Using non-rigid supports and temporary immobilization devices;
  • Drilling fingernails and toenails to relieve pressure;
  • Administering eye patches, irrigating eyes or swabbing them to remove foreign bodies;
  • Removing splinters from areas other than the eye;
  • Using finger guards;
  • Using massage; and
  • Providing fluids for heat stress.


One piece of good news is that the requirements will likely not cost employers a lot of money. If a business already has an ANSI-approved kit, it would most likely suffice unless there are workplace dangers that may require additional materials.

The new rules are expected to take effect in early 2017.


first-aid-kit first-aid-kit_400x180px


Want to Drive for Uber? Better Check Your Coverage


To make ends meet, or to build up their nest eggs, many people have turned to moonlighting as Uber or Lyft drivers

However, if you are planning to make some spending money, you need to understand that doing so could invalidate your personal auto policy.

Uber and Lyft are so-called “ride-hailing” mobile apps that connect passengers to drivers. With the phone app, passengers can hail a driver to their exact location, track the driver using their phone’s GPS and pay for the ride with a credit card. Drivers keep the app on when they are waiting for customers or driving to fetch a passenger.

There are typically two levels of insurance involved in these ride-hailing arrangements. The driver carries their own vehicular insurance, while the ride-hailing company also has its own liability policy in place. Here’s what you need to know:


Your policy bars commercial driving

Your personal auto insurance policy may not provide coverage if you are involved in an accident while driving for Uber.

Personal auto policies have an exclusion for “driving-for-hire” – or commercial driving.

This exclusion means that a driver’s standard personal auto insurance would not likely cover them while the ride-hailing application is turned on, regardless of if they haven’t accepted a ride request and have no passengers in the vehicle.

Check your policy or call us and we can find out the extent of any exclusions in your coverage.
The coverage gap

Some states require ride-hailing companies to carry at least $1 million per incident excess liability coverage. The policies are designed to deal with liability claims that a driver’s insurance doesn’t cover.

Ride-hailing companies’ insurance only covers third parties (injuries to others that an Uber or Lyft driver may hit and any property damage the third party sustained).

However, physical damage to your car or injuries you sustain would have to be borne by you if you only have a personal auto policy, since the ride-hailing company’s policy would not cover you.

There is another risk in the coverage gap: The ride-hailing operator’s insurance policy will not cover you if are you hit by an insured driver. Again, you would have to pay for that out of pocket if all you have is a personal auto policy.


How the insurance works

  • When the Uber app is off, you are covered by your own personal policy.
  • When you have the Uber app turned on, a low level of liability insurance becomes active.
  • When a trip is accepted, a higher level of coverage takes effect and remains active until the passenger exits the vehicle.


Tip: Questions to ask Uber*

  • How much liability insurance does Uber provide while I’m transporting a passenger? Do I need more?
  • Will I be charged a deductible and, if so, what is it?
  • Is the commercial liability insurance coverage my main source of coverage, or is it contingent on denial by my personal auto policy?
  • How do I report a claim?
  • At what times am I covered by Uber’s policy?


* Source: The National Association of Insurance Commissioners



What you can do

Insurers have responded to the ride-hailing trend.

There are two ways you can go to ensure coverage for yourself and your vehicle:

  1. Buy a commercial auto policy that is valid at all times.
  2. Buy a policy that specifically covers you and your vehicle when the ride-hailing app is on.


Ask us about your options!



California to Implement State-mandated Retirement Program

retirement concept

A new law will take effect on Jan. 1, 2017 that will require California employers with five or more workers to offer their staff a retirement plan or enroll them in a new state-run retirement program.

The law, the first of its kind in the nation, is expected to become a blueprint for other states that are considering creating their own retirement plans.

Employers that already offer their workers a retirement plan, like a 401(k), will not be required to participate, but those that don’t will have to to enroll their employees in the California Secure Choice Retirement Program (SCRP).

Once enrolled, a minimum of 3% will be deducted from employees’ paychecks on a pre-tax basis.

The law does not require employers to match the deduction, nor does it require them to pay their own funds into the plans.

For the first three years of the program, all assets will be invested in U.S. Treasuries, or IRA accounts – the savings program established by the U.S. Department of Treasury that also invests savings in bonds issued by the federal government.

Enabling regulations still have to be written, however the law spells out some of the major provisions, as follows:

  • Workers will be able to opt out of the program.
  • The minimum amount employees will be required to divert to the retirement plan is 3%, but the board of directors for the SCRP is authorized to set the level between 2 and 5% of salary, depending on the length of time an individual enrollee has participated in the program.
  • Over time, deferrals may automatically escalate up to an 8% threshold.
  • Workers will have the option to adjust deferral rates, but must abide by the minimums.
  • The program will be administered by an investment board, comprised of nine members and headed by the state treasurer, and will include several members appointed by the governor.


The law prescribes that it take effect Jan. 1, 2017, but a number of media reports have said that said that the ramping up period for the state may be too short – and that implementation may therefore be delayed.


Large employers first

Mandatory enrollment will be phased based on the size of eligible employers:

  • Employers with 100 or more workers will have 12 months from the time of the program’s launch to enroll them.
  • Employers with 100 or more workers will have two years from the time of the program’s launch to enroll them.
  • All other eligible employers with five or more workers will have three years to enroll them.
retirement concept

retirement concept

Prepare Now for Medicare Open Enrollment

An affectionate, mature couple at a marina standing together on a dock, luxury boats and yachts in the background. The senior man is holding his wife's hand, and she is resting her head on his shoulder, smiling.

Oct. 15 is the official start of open enrollment for Medicare and Medicare Advantage and you should take stock of your situation before signing up for your 2017 plan.

Before you get started this year on either renewing your plan or opting for a new one, there are steps you can take to make sure that you get the plan that is best for you and that fits your budget and meets your expected medical needs for the year.


  1. Understand the open enrollment period

Open enrollment runs from October 15 to Dec. 7, 2015 for Medicare Advantage (Part C) or Medicare Prescription Drug Coverage (Part D), and it’s also the time you can make changes to an existing plan, switch plans and change drug coverage.


  1. Review your plan notice

You should have already received your “Annual Notice of Change” letter from your Medicare plan about changes for next year. Two of the most important things to look at are to make sure your drugs are still covered and ensure your doctors are still in- network.


  1. Evaluate your needs

Because Medicare health and drug plans change each year, you need to stay on top of changes to your plan. Also, your health needs change, as well as your age. You may want to ask yourself, when evaluating different plans:

  • If you need a new primary care doctor.
  • If your network includes a specialist you want for an upcoming surgery or procedure.
  • If your new medication is covered by your current plan or if current medications will be covered by next year’s plan.
  • If there is another plan that offers the same benefits at a lower cost.


You may also want to schedule a checkup before deciding on next year’s plan. Take stock of your health status and determine whether you need to make a change.



  1. Find a plan that meets your budget

You can use Medicare’s plan-finder tool at <i></i> to evaluate the plans available to you. Here are the areas you should consider when looking for a plan that you can afford:

  • The cost of the premium.
  • What are the co-pays, and which drugs are covered – and at what cost.
  • Find a plan that includes your preferred doctors and pharmacy.


If you find that your current coverage still meets your needs, then you’re done. If not, you’ll need to evaluate which one you can afford while ensuring it meets your needs.


  1. Medicare or Medicare Advantage?

If you collect benefits from Social Security, you will automatically get Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance).

Remember: There is a premium for Part B. If you are covered through active employment or by your spouse’s insurance, you must follow the directions when you get your Medicare card indicating you don’t want it.

If you are going with original Medicare, you have the option of adding Part D prescription drug coverage, which will better control your medicine expenses.

Or choose a Medicare Advantage (Medicare Part C) plan that bundles original Medicare with extra benefits and may include prescription drug coverage in one plan. Medicare Advantage is akin to an HMO or PPO and you will have to see doctors that are in the insurer’s network or pay higher co-pays if you go outside the network.


  1. Understand deadlines

If you miss the enrollment deadline, you may have to wait until next year before you make changes.

However, there is a second enrollment period – from Jan. 1 to Feb. 14, 2017 – during which you can drop a Medicare Advantage plan and switch to original Medicare.

If you do, you can also sign up for Part D prescription drug coverage.

An affectionate, mature couple at a marina standing together on a dock, luxury boats and yachts in the background. The senior man is holding his wife's hand, and she is resting her head on his shoulder, smiling.

An affectionate, mature couple at a marina standing together on a dock, luxury boats and yachts in the background. The senior man is holding his wife’s hand, and she is resting her head on his shoulder, smiling.

How Three Companies Reduced Their Workers’ Comp Costs


We’ve told you often in these pages about various workplace safety and claims management techniques, but sometimes it’s good to learn from the first-hand experiences of other employers.

The National Underwriter insurance trade publication recently profiled three companies that had reduced their workers’ comp costs using a combination of claims management and safety initiatives.

You can use their experience to apply similar programs at your company.


SMS Holdings’ experience

This housekeeping and maintenance service provider did not roll out a one-size-fits-all approach to safety at is multiple locations in 46 states.

The company instead took a silo approach to improving safety by having its front line staff and their supervisors come up with programs to enhance safety at each work site.

It created safety committees at each of its locations that hold pre-shift safety huddles. Site managers also host weekly safety talks with employees that address hazards that are unique to the location, near misses or more general safety rules.

The company also started a safety-tracking program that provides a forum for managers to exchange ideas on how injuries could have been prevented.

SMS Holdings revised its injury reporting system, standardized claims instructions and forms and provided a claims checklist for its managers. Also, the company provides injured workers with a packet that outlines the process for handling their workers’ comp claim and includes all the forms and contact information they need.

The company says its claims litigation rate fell to 11% of all claims in 2015, from 18% in 2014 since implementing the changes. The number of claims dropped more than 14%, and claims that required lost time from work plunged 52% – all while the payroll has increased by 14%.


Seaboard Foods LLC

After noting a strong uptick in claims, this self-insured pork producer started working more closely with its third-party administrator, which handles its workers’ comp claims, to mine the company’s injury claims for data.

Seaboard, a 5,000-employee company in a small Texas town with a local network of providers, doesn’t always include the required specialist.

The company now ensures that every injured worker receives the appropriate specialized medical care right at the time of injury, even if that means that the employee see a specialist in another town. They can drive themselves and get reimbursed for mileage, but if they can’t, then the company arranges transportation.

Seaboard also started looking for and contracting with new service providers – like physical therapy and pharmacy management firms – that could demonstrate through data how they are able to reduce costs.

Finally, the company started holding quarterly meetings with its senior leadership, workers’ comp team, third-party administrator and workers’ compensation attorney to review claims. They set goals and objectives for closing claims as early as possible and identifying particular claims that the company would try to close prior to the next quarter.

To address injuries sustained in the cutting and packing lines, the company started conducting job-demand analyses to identify how employees get hurt doing certain tasks, and then evaluating workers to make sure they are fit for the work they’ve been assigned.

Finally, it started a “work conditioning program” that helps workers get their bodies in shape to deal with the physical demands of repetitive motions they encounter in the workplace.

All of this has paid off, and between 2012 and 2015 reduced Seaboard’s annual claims numbers by 46%. In addition, claims costs dropped 69% in that period.


Stater Bros. Markets

This supermarket chain started a new program focused on education and injury prevention for all of its employees, be they cashiers at its 168 stores or workers at its 2-million acre warehouse and distribution center in San Bernardino, Calif.

Some changes were small, like requiring all employees who use knives to wear a chain-link metal mesh glove on the hand opposite the one wielding the knife. This reduced cutting injuries from an average of 200 a year to none.

The company reviewed all of the clinics its injured workers are sent to, identifying and selecting facilities based on level of customer service and cleanliness.

The company also started a training regimen that rotates from store to store to train staff and low-level managers on injury prevention, focusing mainly on avoiding sprains and strains – the most common injuries in its stores.

For its warehouse employees, Stater introduced a program called “Ice Pack” in which physical therapists are available onsite at its corporate campus to help employees with taping, wrapping and icing parts of the body to help them do their jobs more efficiently or recover after a shift.

Finally, to address rising prescription drug expenses, it conducted a claims review to identify problematic prescription patterns. It met with the health care providers its employees use and worked with pain-management doctors to find alternatives to prescribing so many drugs, which employees often are not taking.

Since it started this program, Stater has reduced its prescription drug costs by $1 million over two years.



Employers Protest Proposed First Aid Claims Rules

Doctors at the hospital looking at a hand x-ray - medical exam concepts

California employers are protesting a part of the Workers’ Compensation Insurance Rating Bureau’s 2017 rate filing dealing with first aid claims, asking the insurance commissioner to delay adoption.

Businesses say the proposed reporting provisions are unclear and inappropriate in light of impending changes that will exempt the first $250 of every claim from the experience rating calculation.

Many employers simply do not report first aid claims in order to keep their experience modifier down, even though the Rating Bureau requires them to do so. Beginning in 2017, frequency will become a major part of the formula for calculating X-Mods.

Under state regulations, employers are required to report injuries that require first aid and are not severe enough for the employee to seek medical treatment or miss work. But despite the rules, few employers report the claims to their insurance companies.

The Rating Bureau hopes that creating an exemption in the experience rating plan for first aid claims and injuries would increase reporting.

The Rating Bureau’s filing for 2017 would also usher in a new system for calculating X-Mods, and also recommends that workers’ comp benchmark rates be cut by 2.6% from July 1 levels, and by 7% from levels on Jan. 1, 2016.

The proposed regulations in question update the definition of medical-only claims and the rules for reporting these losses. They define a first aid claim as an injury where there is no indemnity and only medical costs.

The added language states that this is a claim “regardless of whether the cost of medical treatment, including first aid, is paid by an employer or insurer, or regardless of whether a Workers’ Compensation Claim Form is filed.”

Bruce Wick, director of risk management for the California Professional Association of Specialty Contractors, who also serves as an employer member of the Rating Bureau’s governing board, wrote a letter to Insurance Commissioner Dave Jones, asking him to delay approving the new first provisions.

“The laws involving first aid claims are confusing. Federal OSHA regulations, state OSHA regulations, state labor law regulations, and the Insurance Code all have overlapping and underlapping information,” Wick wrote. “Trying to clarify existing [Unit Stat Reporting] regulations when there is still uncertainty in these other areas, doesn’t seem to help.”

He asked Jones to “either delay approving this part of the filing until the first aid reduction plan is implemented in 2019, or in the alternative, strongly encourage the WCIRB to expedite the implementation of the first aid reduction plan so it could take effect in 2018.”

When employers fail to report first aid claims it causes problems for claims adjusters, hinders workers’ ability to access workers’ comp benefits and has a negative impact on the employers that play by the rules and report all of their claims.

The Rating Bureau estimates that the $250 threshold would eliminate some 15% of claims in the system.

The Bureau expects that at the $250 threshold, the change would mostly affect employers who have no other claims and that it would push up their X-Mod by just one percentage point on average.

Doctors at the hospital looking at a hand x-ray - medical exam concepts

Doctors at the hospital looking at a hand x-ray – medical exam concepts