Why Risk Transfer for Landlords?

Presented by: Christopher F. Hawthorne, CPCU, CIC

A property owner’s Insurance premiums can be driven upward for rental properties 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 property. When an insurance carrier is determining what it will offer in terms 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 lower the premiums can be offered.

An available risk management technique to lower the size of a property owner’s losses arising from the rental of that property is  the inclusion of  Risk Transfer language in the lease.  Risk Transfer in the lease can protect the landlord’s insurance program and future premiums by transferring the cost of a loss to the tenant’s insurance program.

The major types of protection in risk transfer  are:

Hold Harmless-Tenant holds Landlord harmless for a loss when Tenant has caused part or all of a loss.

Indemnify– Tenant agrees to reimburse Landlord for damages (settlements and judgments).

Defend– Tenant agrees to pay the cost to defend Landlord after a loss if Landlord is named in a claim or suit.

Additional Insured Status– Tenant provides coverage for Landlord under Tenant’s insurance program.

Primary Coverage-Tenant states that it’s coverage is primary should Landlord be brought into the suit.

Non-Contributory-Tenant states it’s policy disallows Landlord’s policies from sharing in the loss.

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

In short, Landlord is highly protected by Tenant through contractual agreement in the lease as well as the tenant’s insurance program.

While not seen in all leases, the above language is quite commonly used and is a very easy risk management tool for a Landlords to implement. The rewards are lower losses, a well insured tenant and a greater number of insurance carriers available to offer coverage / lower future premiums.

It is critical to involve your attorneys as well as your insurance agents when drafting a lease. As always, a team approach and communication will put everyone is a better position to succeed and survive a loss.

Cloudy With a Chance of… Flooding!

Flood insurance has been an afterthought in most Americans’ minds when it comes to insuring property. Well, folks…the time has come for us to re-think the way we view flood insurance—more importantly, how we define and imagine flood. Here are some quick flood facts:

  1. Just one inch of water in a home can cost more than $25,000 in damage.
  2. Floods kill more than 100 people annually, which is more than any other single hazard.
  3. An individual flood claim averages more than $20,000.
  4. Without flood insurance, the only option for assistance with repairs would be to apply for federal disaster assistance.
    1. Federal disaster declarations are issued in less than 50 percent of flooding events.  Federal disaster assistance typically comes in the form of a low-interest disaster loan, which must be repaid.
    2. Hurricane Harvey’s average grant from FEMA was $7,000, while the average National Flood Insurance Program (NFIP) claim was over $100,000.

 

“Rain, Rain, Go Away”
When a hurricane is approaching, the first thought about damage that comes to mind is damage from wind and coastal flooding. However, did you know that flooding is the most common, costly, severe, and deadly weather-related natural disaster in the country? Additionally, did you know that a property does not have to be near water to flood? As a matter of fact, if you live in an area with low or moderate flood risk, you are five times more likely to experience a flood than a fire in your home over the next 30 years! More than 20 percent of all National Flood Insurance Program flood claims come from outside of high-risk flood areas. Floods can result from storms, melting snow, hurricanes, drainage system backups, broken water mains, and changes to land from new construction, among other things.
Heavy precipitation is becoming more intense and more frequent across most of the United States, particularly in the Northeast and Midwest. Extreme precipitation is related to climate change, due to a warmer atmosphere that can “hold” more water vapor, and therefore deliver more rainfall.

 

The Tides (and Sea Level) are Changing
Sea levels are rising. Regardless of what side of the “Climate Change” fence you’re on, there’s no denying that sea levels are rising and storms are becoming more frequent and volatile. Global sea level has risen approximately 7–8 inches since 1900, with about three of those inches occurring since 1993. The current rate of rise is a little more than an inch per decade. To take that a step further, take a look at how this has impacted the Northeast specifically:

  • The Northeast has seen an increase in extreme precipitation, more than any other region in the United States. Between 1958 and 2010, the Northeast saw more than a 70 percent increase in the amount of precipitation falling in heavy weather events.
  • Between 1895 and 2011, temperatures in the Northeast have increased by almost 2˚F (0.16˚F per decade), and precipitation has increased by approximately five inches, or more than 10 percent (0.4 inches per decade).
  • Global sea levels are projected to rise 1 to 4 feet by 2100.
  • A sea level rise of two feet, without any changes in storms, would more than triple the frequency of dangerous coastal flooding throughout most of the Northeast.

Preparedness & Recovery
The most important thing you can do in the event of a flood or flash flood is to avoid the impacted areas. Our familiarity with rain and water creates a different risk perception, but it should not be taken lightly. We have a tendency to overlook and internalize what 20+ inches of rain would look like in our daily activities, since it’s something most of us have never experienced. However, when you find yourself in a flash flood or flood area, you can take these helpful measures to avoid further loss of property or life:

  • Use USGS’s WaterAlert system (http://maps.waterdata.usgs.gov/mapper/wateralert) to receive texts or email messages when a stream in your area is rising to flood level.
  • Regularly clear debris from gutters and downspouts.
  • Store copies of irreplaceable documents (such as birth certificates, passports, etc.) in a safe, dry place. Keep originals in a safe deposit box.
  • Build an emergency supply kit. Food, bottled water, first aid supplies, medicines, and a battery-operated radio should be ready to go when you are.
  • Move furniture, valuables and important documents to a safe place.
  • Reduce the risk of damage from flooding by elevating critical utilities, such as electrical panels, switches, sockets, wiring, appliances and heating systems.
  • Turn Around, Don’t Drown: We assume that the amount of water on the road we travel everyday isn’t that bad and that it is surely passable. However, it seems that in every storm that brings flooding, there are videos of cars stalling in that seemingly passable road that need to be rescued.

 

 

National Prescription Drug Take Back Day

On Saturday, April 28, 2018 – 10AM to 2PM local time, communities will team up with law enforcement to host the next National Prescription Drug Take-Back Day. You can call the Drug Enforcement Agency’s (DEA’s) Registration Call Center at 1-800-882-9539 or check the DEA’s website for collection sites in your area. The website will be continuously updated with new take-back locations.

Consumers may also continue to utilize the guidelines How to Dispose of Unused Medicines as posted by the FDA if they are not able to attend a scheduled Take-Back Day.

DEA began hosting National Prescription Drug Take-Back events in 2010. At the previous 14 Take-Back Day events, millions of pounds of unwanted, unneeded or expired medications were surrendered for safe and proper disposal.

At the last Take-Back Day in October 2017 over 5,300 sites spread across the nation collected unwanted medications totaling over 900,000 pounds (456 tons). The disposal service is free and anonymous for consumers, with no questions asked. Keep in mind that needles, sharps, asthma inhalers, mercury thermometers, iodine-containing medications, and illicit drugs (including marijuana which is still a schedule 1 drug under federal law) are not accepted at the drop box.

Opioid abuse is at epidemic levels in the U.S., and a top public health concern. The DEA’s “Take-Back” initiative is one of several strategies to reduce prescription drug abuse and diversion in the nation. Additional strategies include education of health care providers, patients, parents and youth; establishing prescription drug monitoring programs in all 50 states; and increased enforcement to address illicit methods of prescription drug diversion. In 2018, the U.S. government allotted $4.6 billion in the federal budget towards the expanding opioid crisis.

The DEA’s Take Back Day events provide an opportunity for Americans to prevent drug addiction and overdose deaths.  To find a collection site near you, please click here.

RMV Changes to the MA State Markings Regulation 540 CMR 2:22

There has been a change to the Massachusetts State Markings Regulation 540 CMR 2:22 (regulation text below) that will take effect on September 1, 2018 for all commercial motor vehicles that weigh 10,001 lbs. or more used in Intrastate commerce. The RMV changes could affect customers that are written on a Massachusetts Auto Policy class 30 such as plumbers, carpenters, electrician, etc.

The updated regulation affects the type and placement of vehicle markings and will also require any vehicle used in intrastate commerce to have a US DOT number. Affected vehicles include those that are:

  • Engaged in intrastate commerce having a gross vehicle weight rating or gross combination weight rating of 10,001 or more pounds; or
  • Used in the transportation of hazardous materials in a quantity requiring placarding; or
  • Designed to transport more than 15 passengers including the driver, used in intrastate commerce in Massachusetts.

The Massachusetts State Police Truck team has been stopping people to let them know that by September 1, 2018, the USDOT numbers need to be filed with the Federal Motor Carrier Safety Administration (FMCSA) and visible on their vehicles. Click here for a copy of the notice that the State Police Truck Team is handing out.

The updated regulation language is as follows:

2.22: Markings on Commercial Vehicles

(1) Marking.

(a) Effective until August 31, 2018. The owner of every motor truck used for the transportation of goods, wares or merchandise for hire, gain or reward, shall have the owner’s name marked on the truck, to be plainly visible from each side or from the front and rear of the vehicle, provided that motor trucks operated under a lease of more than 30 days shall display either the name of the owner or the lessee, and may display both. For the purpose of 540 CMR 2.22(1), motor truck shall mean any motor vehicle specially designed or equipped to transport personal property over the ways of the Commonwealth and which has a maximum load carrying capacity of over 2,000 lbs., and which is not a Private Passenger Motor Vehicle under 540 CMR 2.05. To the extent there is any conflict between 540 CMR 2.22 and any federal regulation pertaining to markings on commercial motor vehicles, the federal regulation shall control.

(b) Effective September 1, 2018. The owner of every motor truck used for the transportation of goods, wares or merchandise for hire, gain or reward, shall have the owner’s name marked on the truck, to be plainly visible from each side, be in permanent letters that contrast sharply in color with the background on which the letters are placed; be readily legible during daylight hours from a distance of 50 feet while the motor truck is stationary; and be kept and maintained in a manner that retains the legibility required by 540 CMR 2.22(1)(b), provided that motor trucks owned or controlled by a farmer and used to transport agricultural products, farm machinery, and/or farm supplies to or from the farmer’s farm; not used in the operation of a common or contract carrier, and used within 150 air miles of the farmer’s farm need not be so marked; and motor trucks operated under a lease of more than 30 days shall display either the name of the owner or the lessee, and may display both. For the purpose of 540 CMR 2.22(1), Motor Truck shall mean any motor vehicle specially designed or equipped to transport personal property over the ways of the Commonwealth and which has a maximum load carrying capacity of between 2,000 lbs. and 10,000 lbs. and which is not a Private Passenger Motor Vehicle under 540 CMR 2.05. To the extent there is any conflict between 540 CMR 2.22 and any federal regulation pertaining to markings on commercial motor vehicles, the federal regulation shall control.

(2) U.S. DOT Number Assignment for Intrastate Carriers. Effective September 1, 2018, every motor vehicle engaged in intrastate commerce in Massachusetts having a gross vehicle weight rating or gross combination weight rating of 10,001 or more lbs.; and every motor vehicle regardless of weight, engaged in intrastate commerce in Massachusetts and used in the transportation of hazardous materials in a quantity requiring placarding; and every motor vehicle designed to transport more than 15 passengers, including the driver, used in intrastate commerce in Massachusetts must be permanently marked with a USDOT number assigned in a manner conforming to the provisions of 49 CFR 390.21.

(3) Penalty. The penalty for a violation of 540 CMR 2.22 is set forth in M.G.L. c. 90, § 20.

 

Click here for more information on 540 CRM 2.22

 

 

 

Michael Regan Director at Large

Regan Cleary Insurance, a division of Cleary insurance Inc., is pleased to announce that Michael Regan has been elected a Director at Large for the National Association of Surety Bond Producers (NASBP). The NASBP is the national trade organization for insurance agencies that specialize in surety bonding.

What is NASBP?

NASBP producers specialize in providing surety bonds for construction companies and other industries requiring surety. Examples of the types of bonds provided include performance & payment bonds, fidelity bonds, forgery bonds, judicial bonds license & permit bonds, tax and customs bonds. NASBP members engage in surety production throughout the United States, its territories and internationally.

Prior to this national role, Michael served two terms as the New England Regional Director. He also continues as the Government Affairs Representative for Massachusetts. Michael’s new role also makes him a member of the Board of Directors of the NASBP. He will serve a three-year term, participating in recruitment and retention activities for the association acting as a liaison with a subcommittee and participating in strategic and policy decisions for the NASBP. For further information about the NASBP please visit www.nasbp.org.

Leaving Home – Insurance Concerns

Presented by: Christopher F. Hawthorne, CPCU, CIC

When a child moves out of the home, it can be both exciting and heartbreaking. As one phase of life is ending, another wonderful one begins. However, the danger lurking within the parents’ home and auto insurance, as well as within certain privacy laws, can often be overlooked. Both home and auto policies have limitations that can leave a family vulnerable in terms of its financial wellbeing, and privacy laws can leave parents in the dark about their child’s physical wellbeing.

If a child is moving out to live with friends, they have, in effect, set up their own household. If a lease is present, it is clear that there is now a separate residence, even if the child is renting a unit owned by the parent.

If a child is in college, they are typically considered part of the household. However, if during college they rent an apartment outside of the dorm system, then they have created a separate household.

Addressing these issues will help secure the financial wellbeing and peace of mind for both the parents and the child.

Renters Insurance

While a person at this stage may not own much in the way of personal property, they still have much to lose. Along with personal property such as clothing and furniture, a Renters Policy (HO4) also provides liability protection. For example:

• While attending a cookout, a Frisbee flies off-course and lands at a person’s feet. They pick it up to toss it back to the thrower and when they do, the Frisbee misses and slashes someone’s eye. The injured party or their insurance company (health or disability) may come after the person who threw the Frisbee for compensation.

• While in an apartment, the renter starts a fire which causes significant damage. The roommates, neighbors and landlord may pursue the individual for compensation.

In addition, many leases hold the renter liable and not the landlord. Therefore, if a guest visiting the individual slips, falls, and is injured, for example, the renter will be the responsible party.

For those starting out on a bright career path, they may live in a state where future wages can be garnished. If this is the case, without renter’s insurance, the liabilities described above could cancel out much of the financial benefits of the bright career.

If parents or a trust financially support the renter, the injured parties might try to get to the parental or trust assets. Renters coverage will place a barrier between the parental assets that hopefully can pay for any liabilities and if there is a trust in play, the trust should be named as an Additional Insured on the renter’s policy.

If the lease is in the parent’s name, the parents Homeowners policy should be amended to extend coverage E to cover the new location.

Auto Insurance

In Massachusetts, once a child is no longer a resident of the parents’ home, they are no longer covered by the parents’ policy while driving vehicles not owned by their parents. If the child drives a rental car or a friend’s car, their financial wellbeing is at risk because they have no personal protection. In this situation, a Named Non-Owned Auto policy in the name of the child would be appropriate. A Named Non-Owned Auto policy is simply an auto policy without an auto listed and therefore has no Comprehensive and Collision coverage. If the child is driving a car provided by the parents, an alternative would be to retitle the car in the child’s name.

If the child is using a parent’s auto for work purposes such as delivery or Uber, it is critical to report this to the insurance carrier. Unreported commercial use can reduce the limits of protection to Massachusetts Statutory limits such as reducing Bodily Injury of Others from $250,000/$250,000 to $20,000/$40,000.

If the child takes the car out of the state, that must be reported as well to preserve the Comprehensive coverage for glass, theft, and vandalism.

Privacy

Once a person turns eighteen, a parent loses the right to know personal information about their child without the child’s permission. If a child is hospitalized, the hospital is not allowed to reach out to the parents or even share the child’s status with the parents. When a child turns eighteen, parents may wish to discuss with their attorney about obtaining a Health Care Proxy and a Durable Power of Attorney.

Summary

When a child is making their way out of their parents’ home, it can be a dangerous period for the financial wellbeing of both the parents and the child. Insurance agents (and a lawyer), the parents, and the individual leaving home should work closely with one another to make sure everyone is protected appropriately. Education and communication go a long way in this area, and the good news is that the solutions are not expensive.

Left unaddressed, the financial and emotional ramifications of inadequate coverage can be devastating.

Living Benefits of Whole Life Insurance

* Tax-free source of cash

  • Cash values can be accessed either as loans or withdrawals to cost basis and then loans
  • Dividends can be taken in cash, as opposed to buying paid-up additions

* Supplemental income at retirement for Key Employees using

  • Deferred Compensation Plan
  • Section 162 Executive Bonus
  • Split Dollar Plan

* Supplemental income at retirement for Individuals

* Out-of-pocket costs may be reduced as policy cash values grow

Shining a Light on Moonlighting

Presented by: Christopher F. Hawthorne

Many contractor businessowners face the question of what to do about employees that moonlight at night and on weekends.  Does allowing employees to moonlight put a business in harm’s way?  It could.

When an employee moonlights, they are taking on the same general liability, workers compensation, and auto exposures as the employer.  Even if the employee carries their own insurance, their actions may be increasing the employer’s liability and future insurance costs.

If a moonlighting employee uses the employer’s vehicle which is still dressed with the employer’s logo, and is using the employer’s tools, could the customer state that they thought they were working with the employer after a loss occurred?  Since the moonlighting employee might have little or no coverage, it is conceivable that the customer might look to the employer for coverage for damage done by the moonlighting employee. If so, the employer’s general liability, commercial auto, or even workers compensation would respond to a claim filed against the employer.

When the commercial general liability policy is examined for its wording, there are several troublesome areas.  The first is the definition of an insured; it includes employees acting in the scope of their employment.  This is not great wording in terms of your own protection.  Second, the definition of your product includes products traded or sold under “your” name.  If the   employee is there with the employer’s truck, logo and knowledge, could an attorney-an insurance attorney at that-make a case to pull the employer in? Is this a bet worth taking?  As a contractor with claims experience knows, the process can be unfair, and it can cost significant future premiums while the argument is going through court.  The fact that the employer allowed moonlighting to occur makes a strong argument for vicarious liability.

If the employee got hurt while moonlighting, it could potentially pull the employer’s workers compensation in.  If the employee worked for a few hours the next day and claimed that the injury really happened on the employer’s job, the employer’s workers compensation would be forced to prove the employee was not working at his or her job at the time of the injury. This could prove to be quite difficult and the employer’s workers compensation may end up paying the claim.

If the employer’s vehicle is being used with the employer’s permission, the commercial auto and possibly the umbrella would definitely be involved in a claim should there be an accident.

In short, without being paid for the risk, the employer is at risk. Contractors may wish to consider making it a condition of employment that moonlighting is not allowed. Two methods for preventing moonlight, along with a written policy, are as follows:

  • Equip company vehicles with GPS monitoring so the employer can see when a vehicle is in use after hours.  There have been several reported cases of GPS monitoring even identifying employees that moonlight while on duty for the employer!
  • Leave all company vehicles, tools, and uniforms at the employer’s business location each night. This may require the employer to provide a changing area and cleaning service.

Employees should know that their personal homeowner’s insurance provides no liability for their business pursuits.  From both the employer and the employee’s point of view, moonlighting is not a good idea.

The good news for employers is there are options to help reduce moonlighting.  A possible solution may be to offer employees commissions for business they bring in.  They could also offer discount pricing for the employees friends and family.   These two options would help satisfy the employees desire to increase their income and alleviate the pressure of helping their friends and family after work.

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.

Ways to Foster Workplace Wellness

Managing an office that promotes a healthy work-life balance is a trial-and-error process. Between constant accessibility as a result of technology and the pressure to meet deadlines, employee and workplace wellness is too often compromised.

It may not seem like your responsibility, but you want to encourage your employees to balance their personal and professional wellness. Some of the most successful companies in the country are investing in their employees’ wellness.

We’re here to help. Below are five ways to implement workplace wellness in your office.

Get up and active

Identify a workout studio that is close to your office location and attend a class as a group. Encourage people to initiate fitness groups within the office, or opt for walking meetings. Apps like Eventbrite and Groupon sometimes post special deals for companies looking to explore fitness.

Professional and continuing education

Employee and workplace wellness is not always about physical health – it includes mental, intellectual and emotional. Remind your employees that their careers and growth are important to you. Offer to cover the cost of educational workshops and classes that will help people improve the work they do and strengthen their confidence in their trades.

Keep hydrated and improve workplace snacking options

That third cup of coffee is doing nothing to hydrate you. Water is extremely important to keep your body healthy – from your skin to your kidneys to your blood pressure – and often goes by the wayside during the busy day. Design company water bottles as a friendly reminder to your employees to prioritize hydration. If the budget allows, invest in a flavored water dispenser like this one.

Mandatory mental health days

Well, maybe not mandatory, but employers can do a much better job emphasizing the importance of mental health days. Your employees are hard-working, and don’t want to be seen as slackers though they might very much need a personal day every so often. Drop hints that you are understanding as an employer and encourage your staff to take time when they need it.

Get some sunshine

Encourage your employees to get their daily dose of vitamin D when the weather allows for it. Set an example by eating lunch outside or making it known that you are going for a walk.

Modernize your desk

The research is in: desks are not healthy. Some companies are replacing their chairs with a yoga ball as a way to fix employee’s posture and burn calories. Others are opting for adjustable desks, which allow workers to sit or stand. Both of these options often result in an increase in productivity and decrease in back pain.

The bottom line is this: employee and workplace wellness is not optional, it’s essential. Not only will it help your employee retention, but an increase in productivity and workplace happiness will only benefit your business.