Personal Umbrella Liability and Board Service

I am often questioned by a board of directors member who is concerned with their personal liability for their service on the board.

I hear it from board members of non-profit boards and the boards of corporations, alike.

The question goes like this:

"I have a personal umbrella policy that covers me for my actions on this board. Why do we need directors and officers liability?"

A variant is...

"Should I buy a personal umbrella policy in case the directors' and officers' insurance is inadequate?

First, a personal umbrella policy is designed to expand your personal liability insurance and your auto liability insurance by adding $1,000,000 (or more) of coverage.

If you have a $500,000 personal auto policy plus a $1,000,000 personal umbrella policy, you have a total of $1,500,000 of liability coverage for an auto accident.

Your home insurance policy provides personal liability. A $1,000,000 umbrella policy adds $1,000,000 of coverage above the basic policy.

Both the auto policy and the personal liability insurance on your home insurance pays for bodily injury and property damage. The umbrella policy also pays for bodily injury and property damage. The lawsuit must come from somebody being injured or property being damaged.

Directors' and officers' insurance is purchased to protect board members from lawsuits involving poor decisions:

-an employee sues for wrongful termination.

-an employee sues for harassment.

-a community member sues a non-profit for failure to deliver services.

-a stockholder of a for-profit company sues the directors for poor management that results in loss of investment.

D&O insurance excludes bodily injury and property damage - organizations buy general liability insurance for the exposure of bodily injury and property damage.

So, Mr. Board member, you might need a personal umbrella insurance policy. However, it will not protect you from the same things that directors and officers insurance will cover.

Read more...

OSHA Log Posting

Reminder!

OSHA 300A Summary logs must be posted February 1.

They must be up today and left up until April 30

Everything you'd want to know about OSHA - http://www.osha.gov/.

Read more...

Ordinance or Law Coverage

Sometimes I wake up at night thinking about articles for this blog. I'm surprised that this subject has not been included here yet!

After a loss to your building you may find that local laws and building ordinances increase the cost of reconstruction. Perhaps you will have to add a sprinkler system or add handicap access.

Ordinance or law coverage provides additional insurance to pay for the higher cost of reconstruction due to building codes, laws, or regulations.

The coverage actually has three parts:

Coverage A - Loss to the Undamaged Portion of the Building: Coverage is provided for the value of that part of the building that is undamaged but that must be demolished by order of a governmental authority due to a building code.

Coverage B - Demolition Cost to the Undamaged Portion of the Building: Pays the cost of demolishing and removing the undamaged portion of the building.

Coverage C - Increased Cost of Construction: Pays the increased cost of construction due to law or building codes.

Check with your insurance agent to see what limits you have for this coverage. If your building is over ten years old I would be surprised if there are not at least some building codes you would be affected by.

Read more...

Insurance Matters: Property Insurance Issues Part 1

My January column for CU Management:

You’d think that the coverage on your credit union’s buildings and business property would be pretty straightforward. It’s a place I see plenty of problems, though.

This and the next few installments of this column will focus on credit union property insurance, where I’ll pose the issues as questions you can put to your agent.

Do we have replacement cost coverage?

There are two ways most insurance policies value property:

1) Replacement cost is the cost to buy the lost item new. It’s the cost to rebuild the building with current cost of materials and the current cost of labor. It’s the cost to buy a new computer that is stolen.

2) Actual cash value is usually defined as replacement cost minus depreciation. It also can be thought of as the market value of an item. ACV is always less than replacement cost.

Whole Article Here

Read more...

Diary of a Bank Insurance Review

Well over 75% of the calls I get are from bankers who want a review of their bank's insurance coverage.

The process is straightforward. Send me your policies and other information. I review it, ask some questions, and report the issues I find.

Once I get the info I need, I can finish a review and have your bank moving towards improved insurance coverage within 15 days.

Here is a timeline from one of my recent projects:

Day 1 - CFO of ABC Bank emails me. He is interested in a review of his bank’s insurance. We discuss his bank’s situation, current insurance, and his objectives. The call takes less than twenty minutes. Later that night I email a proposal that outlines the project's objectives, accountabilities, and fee.

Day 5 - The CFO gets back to me, asking to move forward. He signs the proposal and cuts me a check for my fee. I email him a letter to send to his agent requesting information for the project - summary of insurance, loss runs, and the like.

Day 8 - I receive a box of the bank’s insurance policies, sent by the CFO. I start my review of coverage. (Note, more and more banks are scanning their policies and emailing them. This speeds up the review process.)

Day 10 - I receive information from the bank’s current insurance agent. As I have the info I need, I call the CFO and we set a date for the review conference call.

Day 15 - I email the CFO a copy of my findings to be used in our phone call later in the day. At the appointed time we review the issues and I provide my recommendations. The CEO, CFO, and SVP of the bank are on the call. We set action plans and accountabilities for each issue. We set a date for the next conference call to review progress.

To start the process just send me an email at Scott@ScottSimmonds.com or call me at 207-284-0085. After a short conversation, I will send you a proposal, bank references, and everything you need to make the decision to go forward.

Once I complete a review of your bank's insurance, you will have a better understanding of your insurance. You'll know the coverage you have, and the coverage you don't have. You'll have specific recommendations on how to improve your coverage, and tactics to broaden your insurance protection.

It all starts with a phone call or an email.

Phone: 207-284-0085
Email: Scott@ScottSimmonds.com

Read more...

State Claim Guidelines

Claims Magazine has compiled a list of state specific claims laws. Learn what your state requires your insurance company to do.

Go Here

Read more...

Loss Control - Water, Hot Spots, Insects and Pests

I'm catching up on my reading... November issue of Best Review (AM Best Company) - article by Scott Spencer on the hidden problems that can lurk in buildings - problems that become evident over time, but by then it is way too late.

(Unfortunately the article is available to subscribers only. Bad on you AM Best!)

Spencer discusses electrical problems, water intrusion and infestation.

Hot spots in the electrical system develop as insulation deteriorates, nails penetrate electrical boxes, and screws loosen-up. Eventually there is a fire or a short.

Water intrusion comes from slow plumbing leaks and small roof leaks. Over time decay sets in and, perhaps mold.

Infestation can be from insects or rodents.

These are not issues I had spent much time thinking on. I should. You should too.

I'm calling a pest control company today and have asked my insurance agent if my insurance company offers risk control services for electrical and plumbing issues.

Read more...

Does Your Dog Bite?

In 2003 there were 17,000 dog bite claims submitted to insurers at an average cost of $19,000.

In 2009 claims were 16,600 at an average cost of almost $25,000.

Dog bites account for 1/3 of all homeowner insurance liability claims.

State Farm paid out over $90,000,000 in claims in 2009.

(From Best's Review Nov, 2010)

Can we say this another way? One third of the cost of personal liability insurance is due to dog bite claims. Is it really fair to charge everyone for the cost of these claims?

Why not a no-dog discount or a big-dog surcharge?

Read more...

2011 In ObamaCare

Here's a listing and commentary from Forbes on what's happening in ObamaCare this year.

Read more...

Policy Renewal Decision Process

A few weeks ago I started playing around with a graphical representation of the policy expiration decision. I started with renew or bid as the options.

This weekend I had the "head-slapper" revelation - renew, bid, or broker selection.

Here is the latest version - subject to change as my thinking evolves. Comments encouraged.

I'm working on a paper that will explain in detail my thoughts on the process. More soon.

Read more...

The Simmonds' Business Insurance Index™ For January, 2011

Here's my read of the current marketplace for upcoming business insurance renewals:

Renewal Premiums: -5%
Renewal Coverages: Liberal Terms
Buyer's Outlook: Long-Term: Prices Flat - Soft Market Continues

There is no change in sight for a move from the current insurance buyer's market. We have supply and demand to thank. Simple as that. The capital / capacity in the insurance business continues to exceed demand. The soft economy and investors have created an environment where there is too much insurance chasing the policies being purchased. Supply outstrips demand - prices drop. As an enticement to policy buyers, insurers continue to offer broad terms and coverage.

Yea for the insurance buyer!

I continue to see insureds who are saving 40% in bid situations where the insured has not bid their coverage in over 5 years - it happened three times in December. My 5% reduction in the index is an average for accounts that have been into the marketplace in the recent past.

I repeat...

--Bid your insurance every 3 years
--Work to make your business an exceptional risk
--Be sure you have a great insurance agent
--Negotiate your renewals for better pricing and better coverage


Go HERE for my comments from past months.

Read more...