Insurance Insights: The Cleary Insurance Blog
The Cleary Insurance blog covers insurance, risk management, and financial planning for New England businesses and individuals. Our team of licensed advisors and specialists publishes regular articles on commercial and personal coverage, employee benefits, life and financial planning, and insurance compliance. Browse recent articles below, or use the category filters to find topics relevant to your business or personal situation.
Intentional Violence and Insurance
Presented by Christopher F. Hawthorne, CPCU, CIC
In 1966, a veteran—possibly suffering from PTSD—climbed into the watch tower at the University of Texas with a sniper rifle and proceeded to shoot and kill seventeen people, as well as wound another thirty-one. For ninety-six minutes, the nation watched what seemed to be an unimaginable, once-in-a-lifetime happening. This event was a total outlier to the norms of the United States. Surely, it would never happen again.
A few examples of 2018 mass shootings:
- February 14: Parkland, FL—17 killed & 14 wounded in a high school.
- June 28: Annapolis, MD—5 killed & 2 wounded at Capital Gazette.
- August 26: Jacksonville, FL—3 killed & 10 wounded at a convention for video game players.
- September 2: Birmingham, AL—1 killed & 6 wounded in a theater.
- September 28: Aberdeen, MD—4 killed & 3 wounded in a Rite Aid warehouse by an employee.
- October 27: Pittsburgh, PA—11 killed & 5 wounded in a synagogue during a service.
- November 7: Thousand Oaks, CA—12 killed & 11 wounded in a bar.
To date in 2018, there have been 323 mass* shootings in the US; in 2017 there were 346. That equates to 669 in the last 23 months, or an astounding 29 shooting per month. (*The Gun Violence Archive (https://www.gunviolencearchive.org/about) defines a mass shooting as a shooting in which four or more people are shot / injured.)
The shootings in Las Vegas (2017), Seattle (2015), Washington Navy Yard (2013), Aurora (2012), Virginia Tech (2007), Edgewater Tech, Wakefield, MA (2000), and Columbine High (1999) are almost distant memories, crowded out by ever-new stories. These events are so common that to many, they are a given and expected part of life. What was once unthinkable, tragically, is now commonplace.
The Federal Bureau of Investigation (FBI) reports that between 2000 and 2018, these violent outbreaks occurred in the following areas:
Places of Commerce 42%
Schools 21%
Open Spaces 14%
Government Offices 10%
Residences 5%
Places of Worship 4%
Healthcare Facilities 4%
48% of these cases show no known relationship between the assailant and location and/or victims. 21% are committed by an employee, while the remaining 31% are by students, group members and various other parties.
As business owners, community leaders, board members and risk managers, what does this mean to us and the financial wellbeing of our organization and communities? The scope of these events suggests that every organization should consider this as a risk.
If a mass shooting or workplace violence event did occur at your organization, what will the standard coverage in force today provide?
- If employees are injured while working, Workers’ Compensation will respond. The WC benefits will be inadequate.
- If property is damaged, property coverage will probably respond after the deductible is satisfied. Often property damage does not surpass the cost of a property deductible.
- If autos are damaged, Commercial Auto will probably respond under Comprehensive coverage.
- If the property owner or event organizer is sued for negligence, the General Liability might respond up to the limits in place.
After a shooting or a violent act, the typical insurance program is not designed to cover the following:
- An uninjured but severely traumatized employee cannot come back to work and is unable to earn income.
- Employees and the public no longer feel comfortable coming into a place of business leading to a period of income loss; a very long one, at that.
- Massive defense costs and liability settlements / judgements due to multiple deaths.
- Loss of reputation and the cost to rebuild it due to being associated with a heinous act compounding the business income loss.
- Wrongful Management Claims (Directors and Officers (D&O)) in that these types of events do not fall within the definition of wrongful management found in many Directors and Officers insurance policies.
Understandably, today’s insurance programs are not designed to cover these horrific losses. This change in the commonplace of our culture has exposed a weak point and unclear area of insurance coverage. The insurance industry is moving to clarify coverage. Exclusions should be expected to be written into most policies to clearly eliminate coverage for an intended violent act. In addition to exclusions, many coverage forms will begin to change the definitions in the policies as well. This also will eliminate coverage for these situations.
Therefore, just as it was appropriate to look to standalone Cyber coverage policy forms several years ago, it is now time to consider new standalone policy forms specifically designed to protect an organization from loss due to violent acts. Cyber coverage emerged with many different forms from many carriers, and now this coverage is considered “emerging.” In other words, there are many new policy forms and all of them are different.
In the evaluation of these forms, the following issues should be considered:
- Is the coverage location specific? (Event may occur offsite)
- Is the coverage weapon specific? (What if the instrument of destruction is a vehicle?)
- Is coverage limited to acts of terrorism or does it include all acts of violence?
- Does policy exclude acts of terror (TRIA) or include them?
- Is defense inside the limit of liability?Is the policy form designed to be “primary”?
- Does Business Income & Extra Expense coverage include an extended period of recovery?
- Does coverage respond to loss due to the threat of an event?
- Does the policy form include pre-loss Prevention and post-loss Control services?
- Does coverage include post-loss counseling and funeral expenses?
- Does policy provide training and drills?
- Does carrier have a Crisis Management Team at the ready?
- Does policy provide Security after an incident?
- Does policy provide post-loss Public Relations services and/or expenses?
What types of organizations should consider this type of specialty coverage? While all organizations could suffer this type of loss, the following are clear candidates:
- Religious organizations such as a Church or a Synagogue
- Schools
- Non-Profits (Special Events, Walks, Runs, Picnics)
- Businesses
- Government offices
- Healthcare facilities
- Entertainment operations
- Any organization with a Board of Directors
- Any business with chemicals as part of the processThe time has come to recognize this form of loss as a reality. From a small office in Wakefield, MA in 2000, to the tragic events in 2018, it is evident we all can suffer this type of loss and possible financial ruin. Specific policies are available to address this horrid peril. As with all risks, investing time in exposure analysis, loss prevention & control techniques, and considering / procuring insurance can mean the difference between an organization’s survival and financial destruction.
The new insurance programs can bring many services and coverages described above. In that the odds of this happening to any one organization are minimal, the premiums are on the lower end. While the odds and the premiums are low, the severity is enormous. As part of your organization’s program review, the time has come to include this sad aspect of our culture into our risk management and insurance planning.
Christopher F. Hawthorne, CPCU, CIC
Cleary Insurance, Inc.
chawthorne@clearyinsurance.com
Finding Ways to Afford Alzheimer’s Care
Presented by: June Duncan
More than five million Americans are affected by Alzheimer’s disease, dementia, and other memory-related disorders. These individuals may require 24-hour care, depending on their disease’s progression, and those costs can skyrocket because specialized dementia services are expensive. Whilst you may be struggling to find practices such as a Windsor medical clinic or one closer to your home, that could offer affordable urgent care should you need it. Hopefully, after reading more on this topic you may feel better equipped.
Finding affordable, quality care
When it’s clear that a loved one will require additional caregiving, take steps to protect their assets and secure affordable, quality care. Memory care for Alzheimer’s or dementia patients differs from facilities that provide more comprehensive assisted living support.
Identify family resources, update your loved one’s legal and financial affairs, and monitor accounts to protect finances from fraud or bad decisions. Evaluate a variety of senior care communities; if one appeals, join the waiting list. Use this checklist to help evaluate a facility that includes programs exclusively dedicated to helping those with memory issues.
Negotiate costs. Many assisted living facilities have the flexibility to negotiate the monthly rate. You could check online at websites similar to https://www.chelseaseniorliving.com/mental-health-services-nj/ and even ask a health care professional for advice on affording the specialized care that may be needed. Ask about move-in incentives, too. The cost of assisted living also varies by location; suburbs and outlying communities may charge less, so you could try finding a nursing home outside your zip code.
Compare inclusive pricing with a la carte costs. Some facilities allow you to pick and choose the services you or your loved one will receive-and that may translate into cost savings if you’re able to fill in those gaps yourself or with other low-cost/no-cost services.
Options to covering the cost of care
Expect to pay for at least a portion of this care out of pocket, especially since Medicare covers nursing home benefits only up to 100 days. If someone with Alzheimer’s requires care in a psychiatric hospital, Medicare will extend its coverage an additional 90 days. It does not pay for personal or custodial care in assisted living facilities or for those living at home, although it does cover medical care in either location.
Medicaid, on the other hand, differs from state to state. You can apply for a Medicaid Waiver to help cover the cost of receiving care outside of a nursing home. Patients with mid to late-stage Alzheimer’s often qualify for Medicaid coverage; however, there are financial eligibility restrictions for the program, which also takes into account applicants’ capacity for self-care. To learn more about the advantages of the program and ultimately decide whether or not to join, those who are still perplexed about the matter can seek the advice of a trustworthy expert who offers medicaid consulting services.
Alternative funding sources for long-term nursing home care
Cash in personal assets. Those assets may include investments like stocks, bonds, savings accounts, real estate, and personal property, like jewelry or artwork. Selling a home that’s grown in equity may help liquidate much-needed cash, or you can convert a home’s equity into cash with a reverse mortgage. While reverse mortgages won’t impact Social Security or Medicare benefits, they can disqualify someone from other government programs, like Supplemental Security Income (SSI) and Medicaid.
A variety of state-managed and funded programs are available for lower-income residents, including those with Alzheimer’s. This list of state non-Medicaid assistance programs is a good place to start.
Take out a personal loan. A cost-effective short-term solution to covering costs of care may be to secure a personal loan rather than charging the expense on a credit card. Ultimately, choosing the right loan comes down to finding the lowest possible rate-APRs typically range between 4.99% and 35.99%, so research carefully.
Explore government programs. In addition to Medicare, the government offers other programs to those who qualify, like SSI, which guarantees a minimum monthly income to people age 65 and older.
Secure long-term care insurance. This insurance won’t be granted to individuals already diagnosed with Alzheimer’s. However, if the person carries this insurance prior to a diagnosis-and the best time to get long-term care insurance is in your mid-50s-review the policy to see if Alzheimer’s care is covered. If it isn’t, check with the policyholder about adding a rider to cover that expense.
The National Institute on Aging provides an exceptional resource for caregivers seeking support and information about getting help for people with Alzheimer’s. The site offers a variety of contacts to help you find low-cost or free community support services as well as other sources to help you cover the costs not covered by the programs listed above.
Photo Credit: pixabay.com
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.