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Risk Management Recommendations

Risk Management Recommendations

During the information development process, we found several items that should be addressed.  Should we be selected to service your insurance portfolio, additional site visits could develop further recommendations.  In the interest of risk management and workplace safety, please consider the following recommendations:

 

Develop a Business Disaster Plan

No business should risk operating without a disaster plan. While reports vary, as many as 40 percent of small businesses do not reopen after a major disaster like a fire, flood, tornado or earthquake. These shuttered businesses were unprepared for a disaster; they had no plan or backup systems.  As a client, we can provide you with information on how to develop a business disaster plan.

 

Fire Department Response

It is recommended that each location determine which fire department is the responding facility for that location – city or township.  You should establish a relationship with the local jurisdiction, which includes fire department visits to your site to review the building occupancies.  This information would allow you to work with the fire department on issues such as fire exposures and evacuation methods.

 

Appraisal of Buildings and Business Personal Property

It is common for buildings or personal property values to dramatically increase over the years.  As part of your risk management program we recommend that periodic appraisals be done to check the adequacy of existing coverage for your buildings and equipment.  This is advantageous since it takes the guesswork out of determining what amounts of insurance should be carried and provides a sound basis for settlement if loss occurs.  Even though we personally do not provide such services, we can provide you with names of several professional appraisers who you may retain for such evaluations.

 

Review All Named Insureds

Frequently overlooked, the careful review of all named insureds should be done as a standard renewal procedure.  Policies cover only those individuals, partnerships, corporations, or joint ventures that are actually named in the policy.  Additionally, in the event of a property loss, the amount of settlement could be reduced by the percentage of ownership of any intentionally unnamed individuals.

 

Employee Dishonesty

This coverage is used to insure against loss of money, securities or other property belonging to you, or for which you are liable, that is caused by employee dishonesty.  It pays for any one loss caused by one or more employees up to the face amount stated on the form.

 

Equipment Breakdown

This coverage will provide protection for your boilers or machinery when loss occurs from: (1) explosion of pressurized vessels, (2) mechanical breakdown caused by centrifugal force, or (3) burnout of electrical equipment caused by overload or surge.  This is needed because your standard Property policy excludes losses of this kind.

 

Directors and Officers Liability

It is recommended that your business consider this coverage.  This insurance is used to insure against claims for negligent acts, errors or omissions alleged to have been committed by present or former directors or officers of your corporation.

 

Employment Practices Liability

It is recommended that your business consider this coverage.  This insurance is used to insure you against being sued by your employees, present or past.  Several items included in this coverage are wrongful termination, discrimination, sexual harassment, and workplace harassment.

 

Fiduciary Liability

It is recommended that your business consider this coverage.  This insurance is used to protect you against claims for acts arising out of employers’ status as fiduciary of an employee benefit plan and errors or omissions in the administration of employee benefits.

 

Contingent Loss Protection – Key Employees

The loss of key employees can be disastrous to an organization.  To reduce the impact of such losses, these individuals or groups of individuals should be identified and contingency plans developed as to how your firm will handle such eventualities.

 

Non-Insurance Risk Transfer

In all contractual relationships, it is advisable to transfer to others all risks of loss from chance events appropriate to the transaction and relationship of the parties.  For example, suppliers

and/or subcontractors should be required to provide certificates verifying they have General Liability and Workers Compensation insurance.  Additionally, a hold-harmless provision should be included in all contracts with these individuals to protect you against suits arising from their products or services.

 

Contracts Reviewed For Insurance Requirements

All contracts should be reviewed routinely by legal counsel to ensure that you are not assuming any unintended liability, including hold harmless agreements, lease arrangements, contracts of carriage or purchase orders.

 

Certificates of Insurance – Contractors

As part of your risk management program we recommend that you require insurance certificates verifying General Liability and Workers Compensation insurance by all contractors before they are allowed to start work.  Failure to verify coverage can result in you assuming unintended loss exposure.  For example, current legislation makes you responsible for injury to employees of independent contractors who fail to maintain adequate Workers Compensation Insurance while working for you.

 

Certificates of Insurance – Requirements

To verify insurance requirement compliance, certificates of insurance should be required from all subcontractors, suppliers, vendors or other parties when evidence of coverage is needed or required under contract.

 

Certificates of Insurance – Procedures

To protect against inadvertent loss or claim assumption, control procedures should be established to document all new and renewal certificates of insurance received from others

 

Waivers of Subrogation Reviewed 

Subrogation clauses are found in nearly every insurance contract. Basically, they waive, mutually or unilaterally, you or your insurance company’s right of recovery against a third party.

There are many kinds of situations where one or more of these clauses are appropriate in an overall risk management program.

 

Waivers of Subrogation – Buildings Under Construction 

It is recommended that all construction contracts (including the Builders Risk policy) incorporate clauses waiving all rights of subrogation against all involved contractors or owners.  Failure to do this could allow unnecessary legal action.  Further, many contractors Liability policies may not provide adequate coverage for these types of claims.

 

Waivers of Subrogation – Completed Projects 

It is recommended that you try to obtain, in contracts for all jobs, waivers of subrogation from owners who purchase the permanent insurance on completed projects.  This risk management technique will greatly reduce the possibility of legal action against you as a contractor. This is important since standard General Liability policies greatly restrict or exclude coverage for loss or damage to a contractor’s own work.

 

Review Loss History and Reserves

One of the major components of insurance costs is directly associated with loss experience.  As part of your overall risk management program we have reviewed your past loss history and current loss reserves to ensure that they are accurate in nature.

 

 

Allied Insurance Managers, INC.