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The ABC’s of Contractual Risk Transfer

Joseph Coupal - Thursday, December 27, 2018
TriState Business Insurance - Virginia, Maryland, and DC

Contractual risk transfer is a business strategy designed to reduce the cost of risk by transferring certain risks to another entity's risk program. This transfer takes many forms. It is most commonly employed when a hiring company engages a sub-contractor. It is also employed when an entity rents or leases property to another and wants the lessee (renter) to be responsible for renter’s insurance while they have use and control of the asset. We'll address a few of the more common ones here.

A common insurance requirement is the Additional Insured. A hiring company will often ask the subcontractor to name the hiring company as an additional insured, so if something goes wrong, the sub contractor's insurance program will take care of the claim. By off-loading these from the hiring company's risk program, they transfer the cost also.

Landlords will often ask tenants to name them as additional insureds, so that if a guest of the tenant is injured, the tenant's insurance takes care of the claim. Again, the cost has been transferred.

Another is "waiver of subrogation." Subrogation is the process whereby insurance companies go after each other based on who was ultimately responsible for a loss. A simple example is when my fleet insurance company pays a collision claim, then goes after the company of the driver that actually caused the accident. Agreeing to waiver of subrogation means that the subcontractor's insurance cannot go after a hiring contractor's insurance, even if they are responsible for whatever happened. If an electrician's employee is hurt at an unsafe contractor's work site, the claim still goes on the electrician's experience, not the responsible contractor's.

Many B2B contracts include "hold harmless" and "agree to indemnify" language, which are corollaries to the insurance provisions described above. This can be a very complicated business management challenge and we stand ready to consult you on this subject and any business insurance need. With that said, we’ll likely advise that before pen is put to paper that you consult with your business’ attorney as well.

For questions regarding contractual risk transfer for business residing within Virginia, Maryland, and DC, contact us today!

Happy Holidays from TriState Business Insurance

Joseph Coupal - Wednesday, December 19, 2018
Happy Holidays from TriState Business Insurance

Our warmest Holiday wishes from the entire team here at TriState Business Insurance . Calendar year 2018 was, and continues to be, a truly remarkable year and we take this moment to recognize the joy that each and every one of you has brought to our personal and professional lives. We exist because of your faith and trust in us.

As calendar year 2019 approaches, we reflect upon the foundational recognition that "your success is our success". Our New Year’s wish for 2019 is to nurture our positive and ever strengthening partnership and to deliver ever increasing value to you, your business, and your family through the entirety of 2019.

Throughout this Holiday season may you be blessed with health and surrounded by friends and family. All the best! Cheers!

Home Business Insurance Basics (VA MD DC)

Darren Kincaid - Thursday, December 13, 2018
TriState Business Insurance - home based business insurance va md dc

One of the most common questions presented to us is, "Am I a small business and, if yes, what small business insurance needs do I have"?  Small is a subjective word, meaning different things to different people. For the sake of conversation here, let's just define small business as any S-Corp or C-Corp type business where the owners themselves constitute the full body of the Board of Directors.  "Small" is not usually defined by total revenue sales but rather a combination of business operations management complexity and overall business risk. Almost all home-based businesses can reasonably be considered "small business".  As we explore the kind of risks you face and the kind of insurance you might need we're going to take a life-cycle approach, starting with the most incidental of business pursuits and work our way up to the Fortune 500 level.

Work From Home

Technology and social trends have driven a wave of telecommuting. Many of us work at home at least on some days while some may work from home all the time. For that reason, more and more homes contain a designated office area; with increasing frequency that area is a room.  

If the work you do is not for your own business you can often amend, or endorse, your homeowner's insurance policy, condominium owner or renters insurance policy to extend liability protection for incidental office exposures. Employees working from home can modify their homeowner policy to easily and inexpensively increase the limits for coverage of business property.  Once again, we must distinguish between the business owner working from home and the business employee working from home.  This distinction is significant enough (and complicated enough) that you're very well advised to discuss the subject directly with your team of independent insurance agents like us here at TriState.  

For employees, a typical standard limitation is usually $2,500 for loss to business property on your residence premises but only $250 for business property away from your residence. Many insurers will, in exchange for some small additional premium, allow your Homeowner Policy to cover $5,000 or $10,000 of business property. And for a telecommuter, that's often the best solution.

Home Based Business

According to the Casey Home Based Business Study, 62% of all small business are home based and this includes real estate sales and sales and distribution of products as a part time business. If your home-based (VA, MD, or DC) business is not your main source of income you still need to consider additional risks which may not be covered, even under an amended Homeowner policy. Here are a few:

  • Business-related personal property (equipment and furniture) in excess of the Homeowner Policy limitation - both on and off premises
  • Inventory you store or have on hand
  • Business property of others while in your care or under your responsibility
  • Accounts receivable
  • Valuable papers and records
  • Electronic data coverage

You may need liability to extend to personal injury, products and completed operations, incidental contractual liability, and general commercial liability. Automobile - If you are driving people around for business reasons, transporting supplies or products or visiting customers your personal auto policy may not provide coverage. Most of these additional risks and more can be picked up through a Home Based Business policy. These policies usually allow for up to 3 employees and will allow more adequate limits of protection for liability and property.

If your home business is your primary source of income you will want coverage for business interruption and extra expense. Fortunately, this protection is usually included in a Home Based Business policy. There are a few other kinds of insurance you should be thinking about as well.

  • Disability Insurance - If you become disabled and are unable to work and generate income, this insurance will help to keep you "paid" during that period. It won't cover ongoing business expenses, however.
  • Life Insurance - Many employers provide at least some life insurance protection to their employees. Since you are the employer, you are on your own on this one. Life insurance is also used as a vehicle for perpetuating a business in the event of the death of an owner; this is sometimes known as Key Man Life.
  • Health Plan - The same thing applies here as to Life Insurance. If you don't have an employer supplying or subsidizing this important protection for you, you'll need to get it on your own.
  • Workers Compensation -- All states require employers, even home based ones, to purchase Workers Compensation if they have employees. Workers compensation insurance offers a schedule of benefits for employees unable to work because of a job or workplace related injury or illness.

Small Business Level

Most Home Based Business Insurance policies assume most of your business is done from home. If that is not the case, you may need a type of policy that will provide coverage for you as you work away from home. There are also limits for Home Based Business policies regarding number of employees and maximum protection limits for Business Personal Property, Business Interruption and Loss of Income and other risks. If you find your business has grown beyond the kind of protection a Home Based Business Policy can provide you may need to consider a Business Owners Package policy.

A Business Owners Package policy (BOP) is a bit like a homeowner policy for your business. A BOP provides a certain amount of coverage for your Building, Business Personal Property, Business Interruption, Liability and more in one package. The policy can be customized to include protection for automobile and business specific exposures as disparate as those related to accounting firms, retailers and dry cleaners.

BOP policy requirements vary from insurer to insurer but if you employ 50 employees or less, have relatively few business locations and are in an easily categorized industry, your business may qualify for a BOP. The same coverage can be acquired by mixing and matching other policies but combining everything in a Business Owners Policy usually results in a lower premium than customized coverage. Many companies also construct BOP policies around very specific kinds, or classes, of business. These are often referred to as program policies.

Additional protection you might want to consider at this stage of the business life cycle, other than those mentioned above, include:

  • Employment Practices Liability - EPL protects you from claims made by current or former employees of discrimination, wrongful termination, harassment and related allegations.
  • Professional Errors and Omissions Insurance - E&O, formerly known as professional liability, covers a variety of advisor or professional roles and pays legal costs and damages should a mistake you make cost a client money. Some common business that might need E and O Insurance include financial planners, computer consultants, real estate agents and appraisers, mortgage brokers, consultants, graphic designers and hair stylists. The list of types of businesses that might need E&O is quite long; one provider alone lists 160 classifications.
  • Directors and Officers Insurance - D&O is like an E&O policy for company officers. It can pay legal costs and damages if officers are sued for their performance in running the company.

Key Insurance Tips to Protect Your Small Business

Joseph Coupal - Thursday, December 06, 2018
TriState Business Insurance - personal and business insurance va md dc

In a few weeks we'll all be contemplating new year's resolutions.  Business owners should always be resolved to seek ways to improve efficiency, profitability, safety.  To launch and keep a business thriving requires a good amount of passion, a strong business plan, usually a hefty financial investment and a few things most people don’t think about. For small business insurance needs in Maryland, Virginia, and DC, this blog post is for you.

With so much at stake, insuring your investment, yourself, you employees via workers compensation insurance, and property the right way is one of the most important decisions every owner must make. From commercial auto and property to workers’ comp, there are a lot of considerations. So, where to start?

  • Know the rules. Check with your state’s Department of Insurance about which coverage is required. As the Small Business Administration points out, “Most states require businesses with employees to pay for workers’ compensation insurance, unemployment insurance, and state disability insurance.” You can find your state’s insurance division here.
  • Imagine the unimaginable. Before you can decide how to protect your business it’s important to understand the threats. With so many commercial insurance options first figure out your needs and your level of exposure. Fire, slip and falls, loss of income, defective products, injured employees or customers, equipment breakdowns. Don’t say, “That won’t happen to me.” Those are the famous last words of too many business owners. Look at each step of your business, imagine the worst and then protect against it.
  • Employment Practices Liability Insurance. Employee relations sometimes sour. Most business owners value and respect their employees, and often treat them like family. But disputes can happen and business owners can protect themselves should those disagreements escalate into litigation. Employment Practices Liability Insurance protects employers from wrongful acts that may arise out of their employment practices (such as race, age, sex discrimination, wrongful termination, failure to promote and retaliation). This coverage is quickly becoming a staple in today’s insurance market.
  • Find security in a digital world. Hackers have breached half of all small businesses in the last 12 months. So, make sure you’re insured against threats that enter your business online. If you conduct transactions or collect personal information digitally, you will want to explore options like Data Compromise coverage and Cyber Risk coverage. Customers may try to take action against you if their information is ever leaked or stolen by a hacker. Data Compromise Coverage typically provides Response Expense Coverage which helps cover the cost of notifying and assisting your clients after a breach. It can also provide Defense and Liability Coverage when this option is selected, which responds to third party action brought against you by those individuals affected by the breach. Additionally, comprehensive Cyber Risk coverage not only provides coverage against damage to electronic data and computer systems from a virus or computer attack but can also protect your business’s liability to third parties if they suffer damage due to vulnerability in your business’s computer system.
  • Home is where the heart is. But if it’s also where the business is you need additional coverage. Your homeowners’ policy does not necessarily protect your home-based business. Once you assess the risks to your business you will want to consider adding a rider to your policy to cover basic business risks. But that is only the start. Add business insurance to protect your business.

Most importantly, be sure to consult with your independent insurance agent(like us here at TriState Business Insurance) to help you determine the coverage your business needs. You may know how to make a mouth-watering orange, cranberry scone or how to build a kitchen that belongs in Architectural Digest. But that doesn’t make you an expert in insurance. Again, for any Talk with your independent insurance agent and have them provide a plan that will keep your business protected.