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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...

Contractor’s Guide to Aggregates

Insurance can be a confusing business. Policy language can make little or no sense, especially when you’ve got jobs piling up, subcontractors to deal with and project owners to appease. What is all this “aggregate” business on Commercial General Liability Insurance policies and certificates? Which ones should be checked on your insurance certificate? Which one should your subs be checking? Does it really matter? Yes, it matters. Here is the certificate we are referring to: What’s An Aggregate? The first thing we need to define is what is an aggregate?  A policy has several limits including Each Occurrence and General Aggregate. The General Aggregate limit is often referred to as the policy limit. This is the most that the policy will pay out on all claims over the life of the policy. Policy Aggregate The first checkbox on the certificate indicates that the General Aggregate Limit Applies per POLICY. What does that mean? In the picture above the GENERAL AGGREGATE limit is $2,000,000. The top limit is an Each Occurrence Limit of $1,000,000. So in any one occurrence, the policy will pay out $1,000,000. The General Aggregate or policy limit is $2,000,000. There can be any number of claims on a policy, but the policy limit will be $2,000,000. Once that is exhausted there will be no more claims paid. If the POLICY box is checked on the certificate, that means the policy aggregate limit is $2,000,000. What does that mean to you? It means that if you have a claim against this policy, the dollar value of all claims against the policy will be limited by the amount...

Three Overlooked Policies Business Owners Need

When you start your own business, the main focus is getting things started. That often means going without necessary items in order to make sure the business gets a strong push out of the gate. New (and even some seasoned) business owners will often go without to make sure their hard work isn’t for nothing. One area where it is easy to cut corners is insurance. The policies entrepreneurs often leave on the table are the very ones that could be most helpful. Here are three overlooked policies every business owner needs: 1. Workers Compensation If you have a small business or even a large one with a lot of payroll, it can be tempting to file an exemption or waiver with the state, and leave yourself without workers compensation coverage in the event of an accident. This is not the best decision. As a sole proprietor or new business owner you may be the only employee your company has or you may be one of the hardest-working employees. What happens to your company if your hardest-working employee is unable to work due to a work-related injury? If you think your health insurance will cover you, think again. Many health or medical insurance policies will exclude coverage for on-the-job injuries. If you are injured on the job and unable to work for any length of time, will your business survive? Will your family suffer financially? Solution: Add yourself to the worker’s compensation policy. In most states there is a cap on owner/officer payroll (find out more here), so the premium investment won’t be as much as you think. You...

Assigned Risk Auto: What You Need to Know

In most states, Auto Insurance is mandatory. You cannot register a vehicle without it and if you have it and then lose it, you can lose your drivers license. For businesses, you can also lose important contracts if you do not have auto insurance coverage. For those individuals and businesses that have multiple claims or bad driving records, an Assigned Risk auto insurance policy may be the only option available besides self-insurance (which is another article altogether). Here is what you need to know: Low Cost = Low Coverage Assigned Risk auto insurance plans such as the California Automobile Assigned Risk Plan (CAARP) often bill themselves as “low cost” auto insurers, designed for both high-risk drivers and vehicles and those who cannot afford coverage on the open market. The fact is you get what you pay for. For instance, CAARP offers personal auto limits of $15,000 bodily injury per person; $30,000 bodily injury per accident; and $5,000 property damage (15/30/5) which is the minimum mandatory insurance limits in California. While these limits will satisfy the state, this coverage will most likely not be adequate in the event of an accident. For commercial vehicles, the coverage limit is dependent on the filing requirements for that business. If your business has contracts with general contractors, government agencies or municipalities, higher coverage is usually required, typically $1,000,0000 or more. The assigned risk limit would not be enough. It’s Liability Only Assigned risk coverage typically only covers your personal auto or business needs for liability. Should you require other coverage, you would need to go to an outside market. There is no coverage...

FAIR Plan: What You Need To Know

In the insurance industry, there are two types of risks that can be difficult to insure: those businesses or homeowners that are inherently high risk, and those that become hard-to-place over time due to claims or payment issues. At times, businesses with many claims may end up with an insurer of last resort: the California Fair Access to Insurance Requirements (FAIR) Plan. While this plan can be a godsend to some insureds, it is not without its problems. Is the FAIR Plan right for you? What are the risks of being insured under the FAIR Plan? Read on to find out more. It’s A Last Resort The web page for the FAIR Plan makes it very clear that they are an insurer of last resort: What this means is that you can only get a FAIR Plan policy if your insurance broker has exhausted all other options and been declined. This would include insurance companies in both the admitted markets and non admitted markets. If you receive any other quote from an insurance company, even if it is higher in premium than the FAIR Plan, you must accept the higher quote.   How Did You End Up in the FAIR Plan? There are a few ways your home or business may have ended up in the FAIR Plan: The homeowner had too many claims. If there were multiple break-ins or fires, the open market may have been uninterested in insuring the home, so it was moved to the FAIR Plan. If you have been in the Plan for several years with no claims, you may be eligible once again...

Contractors: Time for an Insurance Checkup

As Spring begins to bloom, many contractors come out of hibernation. It’s time now for potential customers to start building, trimming, cleaning, mowing, moving, etc. The phone is about to start ringing again. If your business is just starting to gear up again after a long winter’s nap, now is the time to review your business and your insurance coverage. Are you ready for Spring? Has Your Coverage Lapsed? During the lean months of winter, some contractors find their income from the heavy months wasn’t able to sustain times of no work. If you failed to pay your insurance premium, your policy may have lapsed, meaning you have no insurance at this time. Lack of general liability or workers compensation insurance could put you in jeopardy with general contractors, municipalities, and state agencies that require coverage to get, keep and use your business license. Lack of auto liability insurance could risk your driver’s license. Pull out your policies, dust them off, and call your insurance broker to make sure coverage is still in place and valid. When you make that call, go ahead and schedule an appointment for a risk management analysis to review current coverage and see if there is anything else you might need. Check Your Equipment We know you’d never leave for a job site without the proper tools for the job. Have you purchased any new equipment? Are you planning to lease any equipment over the next several months? Review the scheduled equipment on your inland marine policy and compare it to your current tools on hand to be sure they match. If items need...

Protect Yours: Wrecking Room Insurance

The world these days is steeped in stress. If essential oils and meditation don’t work, perhaps it’s time for a Wrecking Room? These rooms are popping up all over the country and go by many names including wrecking room, rage room, and demolition room. The premise is simple: grab a tool and take out your stress, rage, anger and/or frustration on everything from old cars to computers. These rooms have been somewhat difficult to insure, since the concept is new (and a little strange). However, Hayes Brokers now has a national program aimed at insuring these businesses. Even if your wrecking room is located in an office building, a standard office policy isn’t going to work for you. Here are some things to know about wrecking room insurance: Premises Liability Insurance Waivers are no guarantee that you won’t be sued in the event of an accident on your premises, but you should require waivers from all participants using your tools and equipment. General liability insurance for your premises is the most important coverage you should purchase for your business. General Liability insurance protects against slip-and-fall injuries on premises, as well as advertising injuries, products and completed operations claims and more. Be sure that your broker is properly insuring your business. If you are purchasing an office package policy for this type of business, you may find yourself without liability coverage in the event of a claim. Most general liability policies may have a classification limitation that excludes coverage for any activities that are not specified in the policy. Property Insurance While much of the property your business owns may...

Employment Practices Liability Insurance

Employment Practices Liability Insurance Frequently Asked Questions Employees are typically the single largest expense to a business year after year. Salary, benefits, and training all contribute to the cost per employee. Employees and potential employees can cost your business in other ways. Harassment lawsuits, racial or sexual discrimination and other employment-related causes of action can cost your business money in legal fees and claims payouts. The best way to protect your business is to purchase Employment Practices Liability Insurance (EPLI). Here are some frequently asked questions about this coverage: Isn’t EPLI included in my Commercial General Liability (CGL) insurance policy? This coverage is NOT usually included in your CGL policy. It would need to be added as part of a package policy or purchased as a stand-alone coverage. If you are unsure, check your policy and then talk to your broker. What does EPLI cover? EPLI policies are tailored to fit your business and may include coverage for harassment, discrimination, wrongful termination, breach of contract, failure to employ, failure to promote, violation of civil rights laws and more. See our document titled “SUMMARY OF EPLI (EMPLOYMENT PRACTICES LIABILITY INS.) RISKS” for a more comprehensive list. Does my business need EPLI? Any company that has employees or plans to hire employees needs EPLI coverage. Even if you only employ family members, or you haven’t hired your first employee yet, you should have this coverage in place. Allegations of misconduct or discrimination can come from anyone at any time, even during the interview or hiring process. EPLI claims and lawsuits can be expensive and time-consuming. Even with little or no indemnity...

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