Commercial Auto Insurance

What is DOC?

Presented by Christopher F. Hawthorne, CPCU, CIC

Often people own a vehicle that is in the name of a business with no vehicle in their personal name to be used both personally and commercially. This ownership structure puts one in a position of not having auto insurance coverage in certain situations.

Commercial auto policies work differently than MA personal auto policies. The MA personal auto policy will cover anyone using an insured vehicle if operating with the permission of the vehicle’s owner. The coverage will also follow the insured and those listed on the policy into any other personal vehicle as long as they are operating that vehicle with permission. It is a very flexible policy.

The commercial auto policy is not so flexible. The commercial policy states that it will cover those vehicles that are specifically listed on the policy. Also, the commercial policy will defend the commercial entity named on the policy. This design could leave the driver of a commercially owned vehicle in harms way when they are operating a vehicle not listed on the commercial auto policy.

EXAMPLE: A business owner is attending a family cookout, driving a commercially-owned vehicle and due to getting there early, his/her auto has been blocked in by other guests. The host asks him/her to run to the store for more ice and to take another guest’s car which is not blocked in. During the trip, he/she hits and injures someone, who then sues him/her as well as the owner of the vehicle. If the owner of the vehicle unknowingly had coverage cancelled for non-payment due to an oversight or if the owner simply carried very low liability limits, the business owner who is used to having $1,000,000 of protection from their commercial auto policy as well as possible umbrella coverage, suddenly finds himself/herself on the other end of a lawsuit with little or no coverage.

A solution is to add Drive Other Car (DOC) coverage to the commercial auto policy. This coverage will act as a bridge for when the business owner is using a vehicle not named on the commercial auto policy. When DOC coverage is added, it is added in the name of a driver. The coverage will protect the named person and a spouse. It is important to know it will not automatically cover any other family members. Therefore, each family member other than the spouse must be named separately. The typical cost is typically $300 to $350 per named driver.

A second solution is to purchase a Named Non-Owned Personal Auto policy.  This policy is the equivalent of a personal auto policy but without an auto (no comprehensive or collision coverage). These policies are more expensive ($800+) however they are more flexible and protect the commercial auto policy from claims arising out of personal auto use.

Separation, Divorce and Personal Insurance Considerations

Presented by Christopher F. Hawthorne, CPCU, CIC

 

During the period of a separation and divorce, several issues arise in terms of one’s insurance program.  Unfortunately, the untangling and restructuring of an existing insurance program can be very confusing and is often overlooked.  As an insurance program is rebuilt in what can be a hostile environment it is important to concentrate on coverage, control and accuracy issues.

The following attempts to highlight issues pertaining to personal insurance coverage involved during separation and post-divorce.  For insurance purposes, the work begins when someone leaves the primary residence with no intention of returning in short order (one or two weeks). It is helpful to remember that insurance policies are name and location specific legal contracts. While not flexible, they can be molded to fit your needs if care is taken throughout the process.

HOMEOWNERS, CONDO OR RENTERS

SEPARATION: When a spouse leaves the primary residence, if they have an ownership interests, the departing spouse should check with the agent periodically to make sure coverage is kept in force.  This will help protect what may be the most valuable financial asset in the relationship.

Once a new residence is established for the relocated spouse, a tenant’s policy should be purchased to protect this spouse’s personal liability and personal property.  The language in a homeowner’s policy states that liability protection is excluded for an additional premise rented to an insured.  Therefore, the relocated spouse will need a tenant’s policy for protection. The cost of a renter’s policy(HO4) is minimal, often less than $200 per year.

At same time the homeowner’s policy limits personal property coverage to 10% of the current homeowner’s policy for additional premises occupied by an insured.  If the new residence exceeds the 10% value, the new residence should be insured by the new tenant’s policy. Additionally, the departed spouse if depending on the existing homeowner’s policy may not want a loss payment issued in both names. A renter’s policy will solve this problem as well.

POST – DIVORCE: Once the divorce is finalized and the deed changed, the stationary spouse should have the homeowner policy changed to remove the departed spouse’s name. Also, pay attention to scheduled property as the ownership may have changed and coverage may no longer be needed.

PERSONAL AUTO

SEPARATION: This is a very tricky area as autos are titled and until the autos are retitled, liability for both owners is in play. The safest move is to:

1) Change garaging address of an auto if the moving spouse changes towns.
2) Add all drivers to the current auto policy (including new significant others/household members in either household) as traumatic as this might be.
Note: If there are young drivers involved, while determining financial considerations for post-divorce, remember to address which parent will act as the primary auto policy for the young driver. This can be quite expensive and should be determined before the divorce is finalized.

POST – DIVORCE: The autos should be retitled.  Once retitled, the drivers listed may be limited to the drivers and household member of each individual.

UMBRELLA

SEPARATION: As with the auto, all new locations, drivers and autos should be added to the current umbrella.

POST – DIVORCE: A new umbrella should be purchased for the moving spouse and then exposures may be limited to only those locations, drivers and auto of the individual.

GROUP PLANS

SEPARATION: Contact the plan administrator to discuss the situation to see if any changes must be made. A departing spouse may be moving out of the Group Health territory and changes could be required.

POST – DIVORCE: The group or plan administrator at the spouse’s place of employment should be notified of any new addresses and any change in beneficiaries.  The administrator will then notify the various plans of the needed changes.

Note: Having a divorce decree that is clear on who will be responsible for providing and paying for group health coverage will be quite helpful. The divorce decree should also address if the providing ex-spouse gets remarried. Will the ex-spouse providing coverage be expected to also insure both the ex-spouse and the new spouse as well as children? The group health carriers and employers will look to the divorce decree for instruction.

LIFE & DISABILITY

SEPARATION: Agents should be notified of new addresses and any change in beneficiary requests.  If divorce decree calls for mandatory life insurance, consider having ownership of life insurance be held by each ex-spouse to insure control of payments and benefits.

POST – DIVORCE: Finalize any changes in beneficiaries as needed.

SUMMARY

Just as it took a team to build the financial structure pre-separation and divorce it will take a team to navigate what can be a perilous period in terms of both parties’ financial well-being.  As stated earlier, insurance policies are not very flexible and if not address appropriately, a person might discover they do not have the needed protection.

Finally, it may be a good idea for each spouse to obtain their own advisors rather than rely on the ones that were in place before the separation. There is an inherent conflict of interest in this situation and each spouse should have an advisor that is looking out for their individual interests alone.

 
 

 

 

Tax Cut & Jobs Act – Estate Planning Issues

The Tax Cut & Jobs Act now provides each taxpayer an $11.2 million estate tax exemption {very unlike the MA $1 million threshold exemption applicable to Massachusetts residents} – doubling the exemption established by the Obama Administration.  Now is a good time for all clients to review their existing plans with their advisor team to ensure they have accomplished their goals, including:

  1. Probate Avoidance,
  2. Maximize Asset Protection,
  3. Minimizing income tax,
  4. Enhance retirement income,
  5. Accomplish incapacity/disability planning,
  6. Ensure your desired estate disposition,
  7. Protect against spendthrift or imprudent heirs,
  8. Provide for Special Needs heirs,
  9. Accomplish any charitable goals, and
  10. Complete or update your business succession plans.

For those ultra-high net worth folks who have the ability and desire to make substantial gifts to their heirs now, such a plan has the advantage of:

  1. Using some/all of their exemption now, avoiding the possibility of a Democratic Congress’s likely reduction of the exemption in the future, and
  2. Avoiding MA estate tax on the gifted assets and ensuing growth outside your taxable estate.

Such a gift(s) can be asset protected within a spendthrift irrevocable trust, as opposed to going outright to your heirs, and be subject to their divorce, bankruptcy, premature demise, incapacity and other factors that can arise, threatening the integrity of your planning. In fact, leverage gifting techniques exist for situations where folks wish to make enhanced use of the new gift/estate tax FED exemptions. Give Cleary Insurance a call to follow up on any of these ideas, so that you can make the most of this current change, and ensure your personal goals are indeed met in the most efficient manner.

Wellness programs are out. Wellbeing strategies are in.

Something isn’t right. As a country, we are getting sicker every day. Productivity is on the decline, and most employees report not being engaged while on the clock. Relentless increases in healthcare costs are crippling organizations, and the future promises more of the same. We are quickly reaching a crossroads where the cost of healthcare and the impact of lost productivity will cause irreparable damage to organizations of all sizes.

Part of the problem is that traditional approaches to wellness have not delivered on the promise of reduced cost and improved productivity. Many of these wellness programs were poorly constructed and inconsistently delivered. As more vendors poured into the space, the quality of services offered began to vary widely and choosing an effective partner became more and more challenging for employers. Even the higher quality programs available were limited in their impact because they focused only on physical health problems instead of fueling the whole person.

The bottom line is this: It’s time to set aside wellness “programs” in favor of wellbeing strategies. It’s time for a new approach that goes beyond wellness to true potential.

True potential occurs when individuals are exceling in every facet of their lives: physically, emotionally, socially, and financially. It occurs when an organization is experiencing higher performance, organizational trustworthiness and employee engagement.

Reaching true potential is marked by:

  • Individuals who are thriving, contributing, connecting and learning.
  • Lower healthcare costs and improved productivity.
  • A culture built on trust where people do their best work.

True potential isn’t about managing someone’s health or changing behaviors. It’s about creating opportunities for individuals to live their best lives and do their best work. It’s about establishing a fresh perspective, shaping a trustworthy culture and nurturing healthy habits. This approach requires us to reevaluate everything we have come to accept with the status quo and to move beyond it.

Applying this new mindset starts with re-evaluating what success looks like. It requires us to specifically identify what we are trying to accomplish and how to meaningfully measure it.

Too often, vendors create their own metrics for demonstrating ROI, based on their specific strengths or self-generated formulas that don’t hold up to intense scrutiny. This has created a lot of noise and eroded the credibility of outcomes generated by traditional wellness programs. Measuring ROI has been a huge debate and an enormous distraction for decades. In the new model, we must set our sights on a meaningful method to measure progress toward true potential, one that can be an accurate and credible barometer of value.

Where do we find such a standard? Thanks to foundational research by the University of Michigan, which spans 40 years and 4 million healthcare claims, we have the answer. Through this research, the University identified 15 benchmark risks in physical, emotional, social and financial wellbeing that most directly impact healthcare costs and productivity.

This set of benchmark wellbeing risks is the gold standard when gauging the effectiveness of wellbeing strategies aimed at fueling true potential. These benchmark wellbeing risks are the set of factors that most directly affect the bottom line and the wellbeing of a population, the factors that make the difference between reaching true potential and falling short of it. By using this scientifically-valid standard to measure and evaluate your efforts, you can hold vendors and partners accountable for delivering and demonstrating results and have confidence that you are receiving a return on your investment of time and money. This is a necessary first step in taking a fresh approach to improving the wellbeing of your population.

Want to learn more about the roadmap for reaching true potential? Contact us today for a consultation and also receive a free whitepaper from our partner CHC Wellbeing. We can help you transform your wellness programs into wellbeing strategies that get results.

 

 

 

Why Pipe Freezing is a Problem

Water has a unique property in that it expands as it freezes. This expansion puts tremendous pressure on whatever is containing it, including metal or plastic pipes. No matter the strength of a container, expanding water can cause pipes to break.

Pipes that freeze most frequently are:

  • Pipes that are exposed to severe cold, like outdoor hose bibs, swimming pool supply lines, and water sprinkler lines.
  • Water supply pipes in unheated interior areas like basements and crawl spaces, attics, garages, or kitchen cabinets.
  • Pipes that run against exterior walls that have little or no insulation.

How to Protect Pipes From Freezing

Before the onset of cold weather, protect your pipes from freezing by following these recommendations:

  • Drain water from swimming pool and water sprinkler supply lines following manufacturer’s or installer’s directions. Do not put antifreeze in these lines unless directed. Antifreeze is environmentally harmful, and is dangerous to humans, pets, wildlife, and landscaping.
  • Remove, drain, and store hoses used outdoors. Close inside valves supplying outdoor hose bibs. Open the outside hose bibs to allow water to drain. Keep the outside valve open so that any water remaining in the pipe can expand without causing the pipe to break.
  • Add insulation to attics, basements and crawl spaces. Insulation will maintain higher temperatures in these areas.
  • Check around the home for other areas where water supply lines are located in unheated areas. Look in the garage, and under kitchen and bathroom cabinets. Both hot and cold water pipes in these areas should be insulated.
  • Consider installing specific products made to insulate water pipes like a “pipe sleeve” or installing UL-listed “heat tape,” “heat cable,” or similar materials on exposed water pipes. Newspaper can provide some degree of insulation and protection to exposed pipes – even ¼” of newspaper can provide significant protection in areas that usually do not have frequent or prolonged temperatures below freezing.
  • Consider relocating exposed pipes to provide increased protection from freezing.

How to Prevent Frozen Pipes

  •  Keep garage doors closed if there are water supply lines in the garage.
  • Open kitchen and bathroom cabinet doors to allow warmer air to circulate around the plumbing. Be sure to move any harmful cleaners and household chemicals up out of the reach of children.
  • When the weather is very cold outside, let the cold water drip from the faucet served by exposed pipes. Running water through the pipe – even at a trickle – helps prevent pipes from freezing.
  • Keep the thermostat set to the same temperature both during the day and at night. By temporarily suspending the use of lower nighttime temperatures, you may incur a higher heating bill, but you can prevent a much more costly repair job if pipes freeze and burst.
  • If you will be going away during cold weather, leave the heat on in your home, set to a temperature no lower than 55° F.

 How to Thaw Frozen Pipes

If you turn on a faucet and only a trickle comes out, suspect a frozen pipe. Likely places for frozen pipes include against exterior walls or where your water service enters your home through the foundation.

  • Keep the faucet open. As you treat the frozen pipe and the frozen area begins to melt, water will begin to flow through the frozen area. Running water through the pipe will help melt ice in the pipe.
  • Apply heat to the section of pipe using an electric heating pad wrapped around the pipe, an electric hair dryer, a portable space heater (kept away from flammable materials), or by wrapping pipes with towels soaked in hot water. Do not use a blowtorch, kerosene or propane heater, charcoal stove, or other open flame device.
  • Apply heat until full water pressure is restored. If you are unable to locate the frozen area, if the frozen area is not accessible, or if you can not thaw the pipe, call a licensed plumber.

Check all other faucets in your home to find out if you have additional frozen pipes. If one pipe freezes, others may freeze, too.

 

Why Risk Transfer?

Presented by Christopher F. Hawthorne, CPCU, CIC

Insurance premiums fluctuate annually due to sales and payroll activity of a contractor and also due to loss history.  The insurance policy provides money to rebuild damaged property, to defend in a liability suit, to pay settlements as well as take care of employees when they are injured on the job.  These combined costs are labeled as losses.

An insurance loss has the potential of driving insurance premiums up for four or five years as well as limiting which carriers will wish to work with a contractor. When an insurance carrier is determining what it will offer in term of premiums, it will incorporate the prior four years of losses as part of the pricing mechanism.  The fewer and smaller the losses, the more carriers will be interested and the carriers can justify offering lower premiums.

An available risk management technique to lower the size of a contractors losses arising from working with a sub-contractor is Risk Transfer.  Risk Transfer can protect one party’s insurance program and future premiums by transferring the cost of a loss to another party. Conversely, it can increase the future costs of the other party’s insurance program.

The major types of protection in risk transfer agreements are as follows:

Hold Harmless-Party A holds Party B harmless for a loss when Party A has caused part or all of a loss.

Indemnify– Party A agrees to reimburse Party B for damages (settlements and judgments).

Defend– Party A agrees to pay the cost to defend Party B after a loss if Party B is named in a claim or suit.

Additional Insured Status– Party A provides coverage for Party B under Party A’s insurance program for Operations and Completed Operations.

Primary Coverage-Party A states that it’s coverage is primary should Party B be brought into the suit.

Non-Contributory– Coverage-Party A states it’s policy disallows Party B’s policies from sharing in the loss.

Waiver of Subrogation-Party A disallows its insurance company from pursuing Party B’s insurance carrier for any amount due to Party B’s negligence that may have contributed to the loss.

In short Party A is highly protected by Party B.

When is it appropriate for one to agree to these terms? While this question is to be answered on a case by case basis, in general if accepting work from a General Contractor (GC), it is the norm that the GC will expect the terms to be agreed to, to some degree. The economic value of the relationship should be considered before agreeing to adding this exposure to one’s liability.

When is it appropriate to ask for these terms? Whenever possible, as it greatly enhances the protection for an operation.

Not all agreements are the same and not all insurance policies can back them up. It is critical both parties involve their attorneys as well as their agents before signing. As always, a team approach and communication will put everyone is a better position to succeed and survive a loss.