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Christmas Presents, Christmas Perils

Tis almost the season! With the holidays shortly upon us, we thought it would be a good idea to examine how the holidays might impact your homeowner’s insurance coverage. This season is a joyful one, but sometimes bad things happen. How will your current coverage respond? The Peril of Fire As seen in this classic scene from National Lampoon’s Christmas Vacation, Christmas trees are highly flammable: According to the National Fire Protection Association (NFPA) the likelihood of fire increases in December and January. A huge spike in home fires occurs in the 10 days after Christmas, when homeowners have stopped watering the tree regularly, and are more lax about turning the lights off. Electrical shorts from overloaded circuits near a source of kindling (a dried out Christmas tree) accounted for about 40% of Christmas tree fires. See more facts about Christmas tree fires here. The good news: your homeowner’s insurance will cover the peril of fire unless the fire was intentionally set (and 24% of them are). The Peril of Theft All types of theft increase during the holidays, including shoplifting. However, the worst kind of theft to experience at this time of year is the theft of holiday gifts. Christmas lights on the house, a brightly lit tree glowing in the window and no cars in the driveway are a beacon to thieves looking to cash in on some holiday spirit. This family was hit in 2013:  There are many ways to keep your home from being burglarized, including making sure the home looks occupied at all times, installing a security system, and keeping gifts out of sight...

What Does Equipment Breakdown Cover?

As a business owner, you may have been presented a quote by your broker for Equipment Breakdown (aka Boiler & Machinery) coverage. You may have even seen this coverage as a line item on a property, package or business owner’s package (BOP) quote. In many parts of the country, boilers are no longer used, but this coverage is still valuable for many reasons. What Is Equipment Breakdown? Decades ago, this coverage was called Boiler & Machinery and was designed to cover boilers and production machinery used by factories and other businesses. Over time this coverage was expanded to cover such things as air conditioning units and elevators, so the coverage was renamed to Equipment Breakdown insurance. Equipment Breakdown insurance is property coverage. Heating and air conditioning equipment, as well as other machinery components now rely heavily on electricity. Electrical arcing, which is excluded by the property coverage form, is a major reason for equipment breakdown and would be covered under equipment breakdown insurance. What Does Equipment Breakdown Cover? This coverage is designed to cover a significant gap in the Building & Business Personal Property coverage form that specifically excludes: Mechanical breakdown The explosion of boilers and pressure vessels and Electrical arcing The systems that are usually affected by these claims include: Electrical systems Heating, air conditioning, and refrigeration Boiler & other pressure vessels Computers and communications equipment Mechanical Production systems Alternative energy systems Some claim examples: An air conditioning motor burned out in a high rise senior citizens apartment complex at the height of summer. “Spot coolers” were rented to keep the place cool while employees worked overtime to...

Preparing for a Fire Threat: Insurance

We’ve all seen the incredible and horrifying pictures of the devastation from the Camp and Woolsey fires in California over the recent weeks. Whole towns demolished. Property damage estimates are expected to exceed $19 billion for homes and businesses. The amount of uninsured or underinsured losses has not yet been calculated, but it is sure to be some portion of that amount. How could those home and business owners have better protected themselves with insurance? How could you better protect your home and business? First Things First If there is a fire bearing down on your area at this time, you cannot purchase new coverage or  make changes to any of your property or auto insurance policies. Insurance companies will put moratoriums on binding new policies or making changes to existing policies in the face of imminent threat of property damage. Call your broker after the threat has passed to discuss purchasing new coverage or making changes to existing coverage. Properly Insuring Your Property How much is your property worth? It’s an interesting question that has more than one answer. There is, of course, sentimental value. Unfortunately, that cannot be insured. Then there is market value, which fluctuates over time. Your expensive home or business can increase in value in times of economic upturn, but can decrease in times of peril, such as an oncoming fire. While this is a good starting point for insuring a home it does not accurately reflect how much coverage you may need in the event of a covered cause of loss. Replacement cost value is what property insurance policies are based on. Depending...

We Give Thanks

At this time of celebration, we give thanks for all of the blessings of the past year. Thank you for trusting us to protect your business and your family. Happy Thanksgiving from Hayes Brokers.

California Employee/Worker Bonds for LLCs

As part of our ongoing series on insurance coverage for Limited Liability Companies (LLCs), we wanted to tackle the topic of contractor LLCs. Many states do not allow contractors to operate as LLCs due to the ease of terminating the corporate structure. However, California has recently begun allowing contractors to form LLCs, but are requiring additional safeguards for these businesses. The first was increasing the contractor licensing bond amount from $12,500 to $15,000 in 2016. The second was the requirement of an additional bond for contractor LLCs. This bond is the called the Employee/Worker Bond. What Is The Employee/Worker Bond? The California Contractor State Licensing Board (CSLB) now requires the Employee/Worker Bond for all contractor LLCs in order to remain in good standing with the state. The minimum bond amount is $100,000, though higher amounts may be required. This bond is required by LLCs to protect employees and workers of those companies against payroll fraud: underpaying employees and workers or not paying them at all. How prevalent is this problem? Between 2013-2015 a group of companies working on the Pacific Amphitheater in Costa Mesa failed to pay prevailing wages (or to pay workers at all) to the tune of $200,000. A construction company in Paramount is accused of shorting workers payroll or not paying them at all, in addition to other allegations involving workers compensation. These are just two examples in a sea of thousands, with more stories coming out every week. Why Is This Bond Required? For LLCs the ability to cut-and-run becomes easier: they can just shut down the LLC and start a new one if things...

Liquor Liability and Your Business

It is common knowledge that if your business is in the business of providing alcoholic beverages, then you must have a liquor license and purchase liquor liability insurance from your broker. This would be relevant to bars, restaurants, sports facilities and other businesses where liquor is “on the menu”. But what if your business doesn’t typically provide liquor and wants to host an event where liquor is served? Should you allow alcohol at the company picnic? For most businesses, there may be coverage. Let’s examine. Liquor Liability Exclusion The Commercial General Liability Coverage Form (CG 00 01) enumerates a long list of exclusions, including liquor liability. This is how the coverage form reads:               The exclusion says that bodily injury or property damage for which the insured (policyholder) is liable is excluded as it relates to liquor, especially if the business may be held liable for causing intoxication, furnishing alcohol to underage persons or someone who is already intoxicated, or violates any laws with regard to the sale, gift, or distribution of alcoholic beverages. This seems pretty clear. There is no coverage for liquor liability under the policy. But is it completely excluded? Host Liquor Liability You may have heard this term before “host liquor liability”. Does it exist, or is it some mythical creature dreamed up by someone under the influence? It does exist, sort of, but you usually won’t see the words “host liquor liability” on your policy. In fact, the whole premise of host liquor liability is based on the “give back” in the exclusion above. Here is how that looks:...

A Closer Look At Insurance for LLCs

As we have previously discussed, LLCs are a great way to protect company assets, but this corporate structure is not a replacement for actual insurance coverage. Insurance for LLCs should still be a consideration. Let’s take a closer look at why. You Can Still Be Sued In an article on Legal Zoom about LLCs, it is noted that forming an LLC makes a company a separate entity from the company owners. In the eyes of the law, the company “can own money and property, have a bank account, make agreements, sue people, and be sued.” While the corporate structure may protect individual owners from legal liability for company activities, it does not protect the company from being sued. Lawsuits cost money. The best prepaid legal option a company can have is a solid commercial general liability policy to protect against both nuisance claims and legitimate lawsuits. There’s an insurance policy for that: General Liability. You Can Still Make Mistakes Many professional businesses such as lawyers and doctors cannot form LLCs in certain states. If your business is formed as an LLC the corporate structure does not protect you or the business from decisions made by professionals within your company that result in damage or loss to your customers. There’s an insurance policy for that: Professional Liability / Errors & Omissions You Can Still Suffer A Property Loss The physical assets of your business such as your equipment, furnishings, and buildings are still vulnerable to damage or loss. Fire, theft, hurricanes, earthquakes, floods and other natural disasters won’t stop at your front door due to your corporate structure. There are...

Contractor’s Guide to Waiver of Subrogation

For nearly every job and every general contractor, there is a contract in place for subcontractors. As part of that contract, there are insurance requirements. Those insurance requirements usually include a requirement for a waiver of subrogation in favor of the general contractor and/or the project owner. The questions are: what is a waiver of subrogation, and should you give it to them? What is Subrogation? So what, exactly, is subrogation? The term itself translates to “in place of another”. In insurance terms, subrogation is the right of an insurer to attempt to recover money from another party for their involvement in a claim. For example you have full coverage auto insurance and you are involved in an accident for which you are not at fault. Your insurer pays your claim and then turns to the at-fault driver or his insurance company to recover the money paid to you. In contractor’s terms, if a subcontractor’s insurance pays a claim and the general contractor was wholly or partially responsible for the claim, the subcontractor’s insurance carrier may try to recover all or some of the money paid out on the claim. Why You Should Get a Waiver of Subrogation If you are a contractor and you work with subcontractors, it is a good idea to get a waiver of subrogation to protect both your insurance policy and your claims history. Here is how this works: Your policy is protected: Requiring your subcontractors to provide a waiver of subrogation means that if they are sued due to work done by a subcontractor on a job for you, their insurance company cannot...

Insurance for College Students

It seems just like yesterday your little pumpkin was born, but now he or she is off to college. You pack up his or her belongings, drive the child off to the dorm (or apartment), drop him or her off, and breath a sigh of relief. Will he get enough sleep? Will she get enough to eat? Will he make the football team? Will she get the grades she needs to get into law school? All of these are normal worries. Something else you should be worrying about: is your kid (and his or her belongings) covered while he or she is at university? Now THAT is a good question. Let’s find out more about insurance for college students. Dorm Life vs. Off-Campus Life While Tommy or Jill is living at the dorm or off-campus in an apartment, are their belongings covered? The answer: it depends. If your student lives in the dorms on campus and is registered as a full- or part-time college student, their belongings may be covered by your homeowners’ insurance policy. Typically the amount of coverage will be 10% of the contents limit on your homeowners’ insurance policy. For example, if your contents limit if $50,000, then the limit for your student will be $5,000. Will this cover all of his belongings? If he has an expensive computer or other electronics equipment, you may want to consider increasing your contents limit at home or talking to your broker about special coverage for these items. There may also be an age limit for this coverage, usually age 25 or 26. If you have a college student...

California Governor Signs Insurance Bill

On August 30, 2018, California Governor Jerry Brown signed a bill designed to protect homeowners. This bill requires personal lines insurance companies to perform a replacement cost calculation for homeowners every other year. This bill was prompted by a large number of underinsured homeowners who experienced losses in the recent wildfires. These underinsured homeowners found themselves unable to replace their homes with the checks they received from their insurance companies. What Is A Replacement Cost Estimate? Your home can have many values: Market Value: this is the amount that the home would sell for if it was put up for sale in its current condition. This value is based on other homes in the area, and may fluctuate with the economy or increase with increased demand for homes in a particular area. Actual Cash Value: this is the amount it would cost to replace your home with similar quality and materials less depreciation based on the age and condition of the home. Replacement Cost Value: this is the amount that it would cost to replace your home with similar quality and materials in its current location to bring your family whole again. The condition is not a factor. This amount may be more or less than the Market Value. When insuring, you should always insure for the Replacement Cost, since this is the amount that it will take to rebuild the home at the time of the loss. A replacement cost estimate is a valuation calculator that uses the size, building materials, location and age of your home to estimate how much it would cost to replace the home...

Why Is Flood Insurance So Expensive?

Whether it is your first time purchasing home or business flood insurance, or your renewal just came in the mail, you’re sure to have sticker shock. How can one policy covering one peril be so expensive? There are a few reasons why, and there are some things you can do about it. Location, Location, Location If you own property in a flood-prone area, your rates will be higher than in areas not prone to flooding. This can mean you are located near a water source such as a lake or river, or it could mean that you live in an area susceptible to run off or dam failure. Your flood zone is the largest determining factor in your premium. The Federal Emergency Management Agency (FEMA) defines flood zones as Special Hazard Flood Area (SFHA – zones starting with A or V), moderate hazard flood area (zones starting with B and X zones that appear shaded on the FEMA map), and minimal flood hazard areas (zone C or unshaded zone X). What can you do? Short of moving, you can check your flood zone to be sure what is on your policy is correct. FEMA is constantly revising maps in all areas. You can check your flood zone in the FEMA Flood Map Service Center. Bear in mind that the flood map link above won’t be enough to change your policy – you will need either a Letter of Map Revision (LOMR) from FEMA or have your elevation certificate updated by a licensed surveyor. The rate change most likely won’t be retroactive, but it would affect your upcoming flood policy...

Get It While It’s Hot: Products Liability Insurance

The July 1, 2018 deadline for updated packaging has come and gone with store shelves looking a bit empty. Retailers and distributors are even still trying to unload items with the old packaging. Though a lawsuit could happen at any time and for any reason, non-compliant packaging could become a source of individual or class action lawsuits. Is your business ready? Even if you have a lawyer on retainer, these lawsuits can get expensive. The best way to protect your business is with Products Liability Insurance. What Is Products Liability Insurance? Products liability insurance is often referred to as products and completed operations insurance. It is sometimes, but not always, included in a General Liability or Business Owners Package policy.  However, this coverage is usually excluded for cannabis operations. The Insurance Services Office (ISO) defines products and completed operations hazard as “‘bodily injury’ or ‘property damage’ occurring away from premises you own or rent and arising out of ‘your product’ or ‘your work’…” (CG0001 Page 15). While this is a standard definition, it may vary slightly by insurance company and policy. It is important to note that products liability covers not only a physical product but also work product such as building and installation.  This coverage is triggered by bodily injury (including death) or property damage.  However, products liability insurance does NOT cover product recall. Do You Have Products Liability Insurance? The best way to determine if you have products liability coverage is to review your policies with your insurance broker.  While this coverage is often included in some policies, it is far more common that it is excluded for medical and recreational cannabis operations due to...

Can Your Wind Deductible Be Eliminated?

Many years ago homeowners and business owners in coastal areas could buy the same policies as everyone else. Property coverage was included and the deductible was the same amount no matter what happened to the building, and life was good. Several years of active hurricane seasons have changed everything. Property insurance in coastal areas is harder to come by, and often includes a higher deductible for wind and hail, named storm, and/or hurricane damage. What Is Your Deductible? If you live in a coastal area, you may have noticed that your policy includes a strong warning that there is a separate deductible for wind-related events. For example, your regular deductible for all other perils might be $1,000, but your deductible for wind/hail, named storm or hurricane might be $5,000. Some areas have even instituted a percentage deductible of 2%, 3%, 5%, or even 10%. The percentage deductible is typically applied to the amount of your insurance, NOT the amount of your damage. For instance, if you have a 5% deductible and you have a building insured for $1,000,000 that sustained $100,000 in damage, your deductible amount would be $50,000, meaning the insurance company would only reimburse you for $50,000 in damage. When Does Your Deductible Apply? Your wind event deductible will apply as it is described in the policy: Wind or Hail: If the damage is incurred due to any event involving wind or hail, such as a tornado or even extremely strong winds, the higher deductible will apply. Named Storm: This is a better option, as the higher deductible will only apply if damage is incurred due to...

Glass Coverage for Wrecking Rooms

There are few sounds more satisfying than breaking glass. Whether it’s a car windshield, a piece of wedding crystal or your ex’s phone hitting the wall, it just feels good when that crash occurs. You can almost feel the stress draining from you. Wrecking rooms are gaining in popularity across the country. People need stress relievers, and they may want breaking glass to be part of that experience. Unfortunately, glass is difficult to insure in wrecking rooms. What’s the Problem? While the crash of breaking glass may be satisfying to business patrons, it does present a problem for insurers. Shattered glass makes a harmful projectile to those creating the breakage, as well as to bystanders. Personal items may also be damaged by flying glass. The glass littering the floor and other flat surfaces can also cause damage or injury. Even a thorough cleaning might not remove small shards.  Safety glass from windshields can cause damage and injury when enough force is applied. Should You Provide Glass Wrecking Objects? Not everyone needs the glass breakage experience to relieve their frustrations, though some may request it. Proper protection in these situations should always be required. Gloves, long sleeves and eye protection should be provided to or required of the person doing the wrecking, as well as any bystanders or other participants. Will Your Liability Release Protect You? If you don’t have participants signing a liability release or waiver prior to participating, you should implement this as soon as possible. A waiver is a good step in protecting your business, but unfortunately they don’t always work. While many states do enforce liability...

Do Limited Liability Companies Need Insurance?

It is a common misconception when setting up a Limited Liability Company, or LLC: the very name says liability is limited. Therefore, no insurance is needed, right? Wrong. While LLCs do offer some protection, it doesn’t negate the need for insurance. Let’s examine why. What Is An LLC? An LLC is a form of business ownership that is designed to protect the personal assets of its managers and members from business liability. The structure itself is easier to maintain than a corporation, as there are no board meetings required or articles of incorporation to be filed. Do LLCs Really Limit Liability? LLCs limit liability in certain ways. If the LLC defaults on a loan, the individual LLC members and managers may not be sued personally on behalf of the LLC due to the corporate structure. Piercing the corporate veil proves to be more difficult than a corporation since there are fewer hoops for LLCs to jump through, so less opportunity for mistakes to be made. While this does offer protection to the members and managers of the company in the event of a lawsuit, it does not protect the LLC from being sued. Does that make a difference? What If My Company Gets Sued? The structure of the LLC protects the individual members and managers from personal liability for corporate decisions, which is a good thing. However, the LLC cannot protect itself from being sued simply by being an LLC. For instance: If you own a small retail shop and someone falls and gets injured while on your premises, they may sue your company. If someone becomes ill or...

Crime Insurance: The Basics

When you think of a crime being committed at your business, the first thing you probably think of is a theft. The good news: your Special Form including Theft property policy covers theft. The bad news? It doesn’t cover other types of crime. What other types of crime? I’m glad you asked! Things such as employee theft, forgery, robbery (but isn’t that theft?), even computer fraud, are all types of crime that your property policy doesn’t cover. Isn’t All Theft Just That – Theft? The Commercial Property Causes of Loss – Special Form (CP 10 30) does include theft, but contains the following exclusion:           The policy excludes coverage for dishonest or criminal acts performed by anyone within your organization at any time. Even leased employees are excluded. In addition, only certain types of physical theft are covered by a commercial property policy. A breakin must show signs of forced entry to be considered theft. If your employees take things during business hours and hand them off to cohorts “on the outside”, their crimes do not fulfill the definition of property theft without forcible entry. Items stolen must also be physical items. Commercial property policies do not cover money and securities, or property other than money or securities that have intrinsic value. Money and securities are defined as currency, coins, current banknotes, traveler’s checks, money orders, tokens, tickets, revenue and other stamps, as well as credit card receipts. None of these items are covered under a standard property insurance policy. What Does Crime Insurance Cover? While limited in scope, Crime Insurance Policies cover 8 types...

Ordinance or Law: Do You Need It?

For buildings of a certain age “grandfathering” is the way to avoid making costly changes to meet certain ordinances or laws such as the Americans with Disabilities Act (ADA). Older buildings are exempt from following these laws since they were constructed prior to the law. However, if the building sustains enough damage during a loss to require repair or rebuilding of a certain amount, then grandfathering no longer applies. The building must then be brought up to current code, resulting in large out-of-pocket expenses. What Can You Do About It? Lenders may require something called Ordinance or Law Coverage, or it may be a coverage recommended by your insurance broker. Because the premium for this coverage isn’t necessarily cheap, you may have passed on it. But what is it? Ordinance or law coverage is a great way to include additional funds for buildings that need to be brought up to code after a property loss. What Does It Cover? This coverage has three separate limits: Coverage A – Coverage For Loss to the Undamaged Portion of the Building. This provides for coverage to the undamaged part of the building that the law may require the owner to demolish in the event of a loss. Coverage B – Demolition Cost Coverage. This provides additional coverage to reimburse for the costs of demolition for the undamaged portion of the building. Coverage C – Increased Cost of Construction. This provides additional coverage to reimburse for increased costs to repair or replace the existing structure and bring all systems up to code including wiring, plumbing, ADA, etc. Coverage A should typically be for...

What is Difference in Conditions?

All over the country and around the world, natural disasters and man-made catastrophes seem to happen on a daily basis. Earthquakes, hurricanes, fires, and flooding have begun to take their toll in certain areas, causing ripple effects in the insurance industry. After several years of hurricanes in the late 90s and early 2000s, Florida created Citizens Property Insurance Corporation in 2002. This was to be the insurer of last resort for homeowners, condominium associations, and co-ops that could no longer find property and/or wind insurance coverage through the open market. Much like the FAIR Plan in California, Citizens offered coverage that was basic perils only. While it did cover windstorm, hail and hurricane coverage, it left many other important perils uninsured. Situations like this are where a Difference in Conditions (DIC) policy comes in handy. Read on to find out more about DIC and if this coverage is right for you. What is Difference in Conditions? A Difference in Conditions policy is the property insurance equivalent of “gap” coverage. This coverage can be written to cover many different perils that may not be covered by a standard property insurance policy. If you want or need coverage not offered under your personal lines or commercial policy coverage, DIC is right for you. Some of the most important coverage items include: Perils to bring either basic or broad form up to special form, such as: Weight of ice, snow or sleet Collapse from specified causes Falling objects Water damage (in the form of leakage, not flooding) Theft Earthquake (earth movement) Flood Are All DIC Policies the Same? There is no standard...

Disability Insurance for Individuals

When it comes to insurance, most people understand the basics: you need to protect your property and your vehicles, as well as obtain liability insurance “just in case”. Most also understand the need for health insurance if you get sick or life insurance if you die. But what happens if illness or injury affects your ability to provide for your family? Disability insurance should be there for those times when you’re unable to work due to illness or injury. However, most people don’t understand the need for disability insurance, the purpose of it, or how to get it. We hope to answer some of your questions here. What Is Disability Insurance? Disability insurance, also known as disability income insurance, is a policy that pays an injured person over a short or long-term period of time if that person is unable to work due to illness or injury. Payments can be used to pay bills, mortgage, and other expenses incurred during the time of injury or illness while the injured party is unable to work and receive income from his or her job. Why Is Disability Insurance Important? A 2008 study by the National Safety Council found that a disabling injury occurs in the US every 1 second. The majority of these disabling incidents are attributed to back injuries and illnesses such as cancer or heart disease. Disability is often overlooked because many people think that they would be covered by their employer’s workers compensation policy. However, coverage through workers compensation is only available to employees who contract an illness or are injured on-the-job. According to the same 2008 National...

How To Obtain High-Risk Fire Insurance

As fire season continues to rage, lawmakers in Western states are discussing changes that would restrict building or rebuilding in areas that are prone to fire risk. The numbers would seem to back up this plan: in 2017 in California alone there were over 15,000 structures damaged or destroyed and 45 people killed. While state governments grapple with how to mitigate losses in fire-prone areas, insurance carriers are already doing what they think is best: canceling policies for those areas where they are seeing numerous and repetitive fire claims. Other companies are restricting the number of policies they write in these areas or refusing to write them at all. If you own a home or business in areas where fires are common, what can you do? Have You Been Nonrenewed? If you already own property in these areas, you may see your insurance premium skyrocket, or you may be nonrenewed if your insurance carrier decides to of the area. What do you do if you get a nonrenewal notice? Call your current broker or insurance company to get a loss history on your current policy. The loss history should be at least three (3) years, but five (5) years is better. Call Hayes Brokers to discuss your options. If your premium has increased tremendously, call Hayes Brokers to find out what other insurance carriers and premium options are available to you. Don’t Wait Until The Last Minute Insurance companies are required to give at least 30 days written notice of nonrenewal, though most states require them to give at least 90 days notice. This allows the policyholder sufficient time...

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