How To Determine Business Risk

We are asked from time to time how to determine business insurance needs, and we tell those who ask that in the end, that determination rests with the owner.

All too often, we hear from people after a disaster, “I thought it was covered under my business insurance.” This is exactly the kind of surprise we do not want people to experience. And it is an easy thing to get with your licensed insurance professional to make sure coverage is adequate.

All businesses need some kind of business insurance in order to be fully protected, and there are many kinds of coverage available.

Some kinds of insurance are mandatory in many states. Vehicle and workers compensation insurance are examples of mandatory insurance. But do not be fooled into thinking that those are the only kinds of coverage which are mandatory, or that those are the only kinds of coverage your business will need.

Below is a list of kinds of insurance available to businesses. For purposes of this list, we assume that property, general liability, and workers compensation are already part of your present package.

Business interruption insurance: This covers losses and expenses due to fire or other incidents.  The policy covers salaries, rent, utilities, and even lost profits.

Directors and Officers Liability: This protects the officers and board members from suits brought against the company and its officers.

Employment practices liability: This covers against lawsuits of sexual harassment and wrongful termination.

Errors and Omissions: Also known as professional liability insurance.  This insurance protects against legal claims of malpractice or failure to perform to professional standard.

Health insurance: Major medical insurance offered to employees.

Product liability insurance: This protects both sellers and manufacturers against defects and injury as a result of product use or components.

Web site insurance: This covers a variety of claims relating to the company website.  It includes copyright infringement, and data breach.

Take this list and compare it to the kinds of coverage you now have. It might be a good idea to talk to your licensed insurance professional about whether those on the list but not currently used by you are important to your business.

Optional Coverages

Every business should consider optional coverage depending on their need.

We often discuss the basic insurance needs of any business. Liability insurance, property insurance and workers compensation insurance fall into this category. In addition, there are coverage options within the general liability and property insurance, or separate insurance which may need to be considered. In this article, we’ll begin to explore the options which should be explored by business owners.

Professional liability insurance should be considered if you recommend and advise or offer a service such as accounting or law.

Equipment breakdown insurance will protect from losses suffered if machinery or equipment vital to the business breaks.

Business interruption insurance will provide income to cover costs if the business in closed or unable to operate for a period of time.

Flood and disaster insurance is not generally covered.  As your agent for the specific coverage in your existing policy.

Debris removal is generally not covered in business property insurance.

A commercial umbrella policy will kick in if cover limits are exceeded for further protection of business assets.

Glass insurance for protection against broken store and plate glass windows.

Crime insurance will protect against burglary, theft, and robbery from outside parties and employees.

Directors and Officers Liability Insurance is for protecting the officers and directors from lawsuits.

Kidnap and Ransom insurance is designed to protect individual and companies working around the globe.

Employment practices insurance deals with hiring and employment issues such as wrongful termination, sexual or other discrimination, privacy issue and more.

Obviously, there are numerous coverage options and endorsements. Work with your licensed insurance professional in determining what makes sense in design your business insurance package.  Remember to review your coverage at least annually, and inform your insurance agent or broker of changes with your business. This includes employees, new types of products or services and how your project your business to evolve.

Do I Need Director’s and Officer’s Liability Insurance?

Businesses change and grow over time.  Sometimes there are changes in ownership or family members assume officer positions within the business.  A business owner may decide it’s time to have a board of director’s for the business.  Another business or business segment may be purchased.  It may be time to consider Director’s and Officer’s liability insurance for your business.

Directors and Officers Liability insurance will offer financial protection for those acting in a fiduciary role and managing the direction and affairs of the business and act with due diligence.  In the absence or perceived absence of a loss to due this diligence, the officers and directors may be held liable.

Directors and Officers Liability insurance will provide coverage for the directors, officers, managers, and employees for suits brought in which it is alleged they were not prudent and caused financial harm as a result.  Many business owners confuse errors and omissions liability coverage.

E & O covers product and services issues and not performance and fiduciary responsibility.  It is important to review this coverage and whether Errors and Omissions coverage is also needed.

Any lawsuit brought against the company and its officers can be costly and time consuming as well as financially devastating.  In this business climate, any issue can trigger a lawsuit.  These issues could be a result of a financial report, a conflict of interest, a financial loss, the perception or actual evidence of fraud or dishonesty, even a company sale or merger.

Having D & O in place can reduce the risk of these types of suits.  D & O insurance may also offer employment practices liability coverage as part of the policy.  This insurance covers against suits brought against the company by employees for allegations like discrimination and wrongful termination.  Again, this coverage is different from workers compensation.

Sit down with your licensed insurance agent to determine if this coverage makes sense for your business.  As your business grows, don’t let the risk exposure grow with it.

What is Directors and Officers Liability insurance?

Recently, a small business owner decided it was time to put a board of directors in place for the company. After several years of growth and now having a number of employees the owner felt a board could help focus the company’s direction. Upon learning this, several people mentioned that it was prudent to get Directors and Liability insurance.

Directors and Officers Liability insurance offers financial protection for those acting in a fiduciary role and managing the direction and affairs of the business and act with due diligence. In the absence or perceived absence of a loss to due this diligence, the officers and directors may be held liable.

Directors and Officers Liability insurance will provide coverage for the directors, officers, managers, and employees for suits brought in which it is alleged they were not prudent and caused financial harm as a result. Many business owners confuse errors and omissions liability coverage. E & O covers product and services issues and not performance and fiduciary responsibility.

In this business climate, any issue can trigger a lawsuit. These issues could be a result of a financial report, a conflict of interest, a financial loss, the perception or actual evidence of fraud or dishonesty, even a company sale or merger. Any lawsuit brought against the company and its officers can be costly and time consuming as well as financially devastating.

D & O insurance may also offer employment practices liability coverage as part of the policy. This insurance covers against suits brought against the company by employees for allegations like discrimination and wrongful termination.

Talk to your licensed insurance professional about whether your business needs to consider Directors and Officers Liability insurance.

Directors & Officers Or Public Official Liability

Most public and private officers and directors policies are written as a D&O policy.  But there is another to be considered.  It is the POL or public official liability.  This policy is usually written for municipalities, it can also be written for other governmental agencies.  It may be used for many public organizations as long as the organization can be considered “an entity”.  Both policies cover wrongful conduct, but wording within the policies may differ greatly. 

 

The definitions of “wrongful conduct” are specifically named within the D&O policy, but not so in the POL.  Also the reference within the policies to “any act” or “negligent act” is to be of a major consideration.  As a general rule, the more restrictive definition, the smaller the premium which also equates to more constrictive claim payments.  The reverse is also true.  The broader definition within a policy, the more premium will be paid, to equal larger claim payments.  If you have questions regarding your coverage need, please talk with your agent or one of ours.

 

Commercial Insurance.Net, LLC Advisor is not an attorney, accountant or certified financial planner and makes no representations or warranties to that effect.  Always check with your chosen professional as to statements made in this blog for your particular situation.

Directors and Officers Policies

 

 

Directors and Officers Policies – (D&O Insurance)

 

Most small businesses do not purchase D&O insurance coverage for its’ officers, directors and members because they see no need.  But the reality is small businesses are in need just as much as “big business” and financial institutions.  In this economy, bankruptcy occur everyday and no matter the size, the decisions made by the business executives are placed into question.  Did their decisions contribute to the demise of the company?  If so, is there recourse?  Recourse used to mean shareholders or investors.  However, today, it extends to a much broader field.  Employees, vendors, state and federal tax authorities all have an interest.  And these are all outside the bankruptcy court, so one must also add trustees and receivers to the possibility list.  Any one of these mentioned can bring on litigation, and must be defended regardless of error proven.  But if the court deems negligence upon the officers, directors or members’ part, then an award can be made.  All this may be extremely expensive.  This can happen to any size business today and it does not have to be in bankruptcy to experience such issues.  Perhaps one company’s key employee moves to you from your competitor and the other business suffers a loss.  They may claim the loss of business is due to taking their trade secrets to your business.  They may claim one of your directors, officers, or managers encouraged the move and lured their key employee specifically for his/her knowledge.  Whether that is true or not, your company must defend this action at company expense.  Purchasing a D&O Insurance Policy from an insurance agent may aid in limiting your companies’ exposure.  Please call one of our agents to talk more about how this coverage may apply to you.

 

 

Commercial Insurance.Net, LLC Advisor is not an attorney, accountant or certified financial planner and makes no representations or warranties to that effect.  Always check with your chosen professional as to statements made in this blog for your particular situation.