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.
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 contractors with claims experience know, 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 (wherein, the employee might rope in professional legal counsel similar to the ones dealing with workers comp attorney in Columbus OH) 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.
Separation, Divorce and Personal Insurance Considerations
Presented by Christopher F. Hawthorne, CPCU, CIC
Separation and divorce can be a stressful and emotional time, even with divorce lawyers in Jonesboro Arkansas handling the majority of the paperwork. Many complications and issues can arise at any time, emotions can make it difficult to process tasks and facts, and divorce marks a permanent change in life that cannot be reversed.
During the period of 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. Although sometimes consulting a family law expert like Jennifer Croker could be useful, as is speaking to an insurance company about your separation can also be beneficial. 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 the 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 owner 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 the 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 ensure 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 addressed 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.