Contract Surety Bonds

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You don’t hear about government entities using stimulus funds on uncompleted public works projects despite numerous contractor failures during the recent economic downturn. Why is this? Public works projects have a third-party guarantee that ensures that projects are completed and that all bills to subcontractors and suppliers are paid. This guaranty is offered by a surety company and the guarantee is known as a surety bond.

The surety concept is not new. Originally it involved an individual providing surety for another individual. As a result of federal taxpayer losses on uncompleted construction and service contracts in the late 19th century, there have been several pieces of legislation enacted to protect taxpayers from these types of losses. The late 1800s saw the advent of well-funded corporate sureties stepping into the surety bond marketplace. They served as a mechanism to encourage trade over long distance.

Currently, the Miller Act at the national level and “little” Miller Acts at the state level require a surety bond in place on all public projects. However, they do have varying thresholds as to when they are required. For instance, a performance bond is not required on federal contracts under $100,000.

An entity looking to obtain surety “credit” must pass a rigorous prequalification process, much like obtaining a bank loan. The surety evaluates the contractor’s credit, financials, and experience to determine if it will extend surety credit. This process also serves to assist government entities in making sure that only the most qualified contractors are able to bid on government work.

As the New England Regional Director of the National Association of Surety Bond Producers, we work in conjunction with the surety industry to make certain smaller and minority contractors get qualified to participate on government contracts. If you have any questions or think you may be a candidate for a contract surety bond, contact Michael Regan at Cleary Insurance.

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. We are members of the National Association of Surety Bond Producers (NASBP), the professional organization for agents that also specialize in surety bonding. Give us a call today at 617-723-0700.

Automated External Defibrillators in the Workplace

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Automated external defibrillators (AEDs) significantly improve survival rates for sudden cardiac arrest victims. AEDs are easy to use and inexpensive, with the cost for a unit starting around $1,200. They are an important consideration to protect your employees and your customers. Commercial properties, health clubs, restaurants, and retail establishments are especially likely to see sudden cardiac arrest cases in customers. AEDs are also an important consideration for the office, job site, or manufacturing area to protect employees.

OSHA estimates that there are 890 deaths due to cardiac arrest outside of hospitals each day. CPR can buy time but often will not result in resuscitation. The chances of survival diminish by 7% to 10% for each minute that passes after the onset of cardiac arrest. Studies indicate that survival rates rise to the 50% to 60% range when a shock from an AED is administered within three to five minutes.

AEDs are extremely easy to use. The devices provide verbal instructions for the user throughout the process. Manufacturers typically provide a DVD for training along with printed instructional material. It is certainly recommended that at least some employees receive formal training, but the devices are designed to be operated without prior experience.

The cost of AEDs has fallen over the years, so that a quality machine can be purchased in the $1,200 to $1,500 range. The units self-test daily and provide a verbal/visual warning if the batteries are low or the pads obsolete. Batteries typically last for five years and can be replaced when used up.

Most states have passed legislation providing certain legal immunity to AED operators in order to encourage their use. For example, the Massachusetts “Good Samaritan Law” states that a person who “attempts to render emergency care including, but not limited to, cardiopulmonary resuscitation or defibrillation, and does so without compensation, shall not be liable for acts or omissions” (MGL —Chapter 112, Section 12V). A number of states require that certain businesses, such as health clubs, have at least one AED on site.

AEDs are proven life savers, affordable and easy to use. Installing them in the workplace and encouraging CPR training demonstrate a strong commitment to employee and customer welfare. We recommend that you consider adding AEDs to your workplace.

The following websites provide additional information about AEDs:

http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXVI/Chapter112/Section12V

http://www.osha.gov/Publications/osha3174.pdf

http://www.heart.org/HEARTORG/CPRAndECC/CorporateTraining/HeartsaverCourses/Heartsaver-CPR-AED-Online-Part-1_UCM_303283_Article.jsp

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.

MA Workers Compensation Rates

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The Commissioner of Insurance disapproved the Massachusetts Workers Compensation Rating and Inspection Bureau rate increase filing scheduled for September 1st. The obvious good news is that rates are not going up on September 1st. Conversely, the bad news is that this is not necessarily a good thing for everyone!

Workers Compensation rates over the past decade have dropped significantly as various reforms were implemented. However, rates have not kept pace with the increases in medical costs. Insurance carriers have watched margins drastically decline on this line of business and have been closely monitoring what Insurance Commissioner Joseph Murphy was going to do. Now they know.

Why is this potentially a bad thing for employers?

Insurance carriers are going to be conservative when underwriting new business and re-underwriting existing business. They will be looking for the best possible risks. If you are in a less than desirable class of business, have questionable loss experience, marginal safety and return to work programs you will, if offered terms, find them much different (i.e., not in your favor) than your prior plan year policy. If not offered terms, guess what? You will go into the Workers Compensation Assigned Risk Pool. Not a great alternative. (I predict a doubling of the pool population in 2013!)

What to do?

Be proactive. Find out how this is going to affect your next renewal. What is the stance of your existing carrier? Be prepared to tune up your current safety and return to work programs. Aggressively work to reduce reserves and close claims before marketing your program. This is especially critical if you are on a loss sensitive plan.

Workers Compensation Experience Modification Revision

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For renewals as of and after January 1, 2013 the methodology for calculating an “interstate” experience modification will be drastically changing. The bottom line is that those with poor experience are going to see drastic increases in their experience modification, while those with excellent history will see decreases. This is very important to all employers who have NCCI issued modification factors, but extremely important to the construction industry where sometimes you can’t get a job if your experience modification is over 1.00.

The change is a way to more accurately reflect in an experience modification the true cost of claims which have grown multiple times over the past few decades while the methodology hasn’t. The modifications will penalize those accounts with poor loss history, abysmal safety programs, and non-existent claim management and back to work programs. Conversely, It will help the modification factors of those who have good experience and actively work their safety, claim management and back to work programs.

What should you do in anticipation of this change in methodology? Well the first thing I would want to know is what will my modification look like under the new methodology? There are tools available, such as “Mod Master” for doing this. If you benefit from the change; great. If you don’t, then what? I would look into finding any errors in your existing claims information that could be corrected, however that is not always easy. Then I would make sure that I have the proper plans and procedures in place to ensure that moving forward I am taking necessary steps to minimize my claims experience.

I wouldn’t underestimate the potential impact of this methodology change on your costs, ability to get work and profit. Those who get out in front of its rollout and see how it will impact them will be the ones in a better position to use it to their advantage or will be ready to explain its adverse consequences.

If you are concerned about this coming change and how it may impact your business please don’t hesitate to contact me.

Sincerely,

Michael J. Regan
617-305-0346
mregan@clearyinsurance.com

Supreme Court Ruling

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Today the Supreme Court of the United States upheld the constitutionality of the individual mandate provision of the Patient Protection and Affordable Care Act (PPACA). Accordingly, PPACA’s current health insurance reform provisions will remain in force and we will continue implementing the law, as applicable.

Background

PPACA became law on March 23, 2010. Shortly thereafter, 26 states and the National Federation of Independent Business (NFIB) sued the federal government, claiming that PPACA’s “individual mandate” provision (which requires all individuals to have “minimum essential” health coverage beginning in 2014 or be subject to a penalty) was unconstitutional.

Implications

There will be no impact on implementation of PPACA for employers and plan sponsors, which will need to continue the process of activating the various provisions, including the employer mandate, which will go into effect in 2014.

Client Spotlight

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We are delighted to have the National Brian Tumor Society as one of our clients.  Did you know that this year alone, more than 210,000 Americans will be diagnosed with a brain tumor?

National Brain Tumor Society (NBTS) is fiercely committed to finding better treatments, and ultimately a cure, for people living with a brain tumor today and anyone who will be diagnosed tomorrow. This means effecting change in the system at all levels. Learn more about NBTS’s initiatives in research, public policy and advocacy, and how you can get involved.

Workers Compensation

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Do your employees travel to states other than where your business is domiciled? Do your employees perform work in other states? Understanding how Workers Compensation laws respond to interstate operations is important to ensure that you are in compliance with state employment laws.

Workers Compensation insurance is regulated at the state level. Benefit schedules for claims, interpretation of laws, rates and requirements will vary from state to state. Considerations for establishing where an employee is domiciled include:

Where does the employee live?

Where does the employee primarily work?

In what state was the employee hired?

Extraterritorial coverage issues arise when employees travel and work in a state that is not listed on the Workers Compensation policy. In general, domestic short term business trips to other states should not present a coverage problem. However, a number of states, such as NY and NH, are requiring that they be listed on the Workers Compensation policy even if the work only lasts a few days. Noncompliance with these requirements could open you up to a possible fine.

ND, WA, OH, and WY are “monopolistic” states. Workers Compensation coverage for employees located in one these four states is only available through the respective state agency. For example, a Workers Compensation policy would have to be purchased directly through www.ohioBWC.com for an Ohio based employee.

International travel presents additional complications for Workers Compensation. It is likely that your carrier will not have the resources to respond to an employee injured in a foreign location. Traditional Workers Compensation may not apply if the employee was injured during the trip but not engaged in employment related activities. International insurance policies are available to provide 24 hour protection for workers travelling on an overseas business trip.

Understanding how state laws impact your Workers Compensation coverage is important for compliance issues as well as ensuring that your employees are protected. We encourage you to discuss with us any questions you may have regarding your inter-state operations.

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.

Employee Handbooks

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An employee handbook serves as a vital communications tool between a company and its employees. When well prepared, it informs employees about their employer’s mission, its employment policies and perks, and the consequences of not following the rules-all in a tone appropriate to the reading audience. A comprehensive, clearly written employee handbook also can be a protective shield for an employer to use in a lawsuit or less formal employee confrontation situation.

Set the tone for your handbook by opening with a bit of history about your company, its goals and mission, and how employees fit in to this. Your employees, and the products they produce or services they provide, are the face of your company, and your handbook should inspire them to strive for excellence, both individually and as a team. Review the process for employee evaluation and opportunities for employee advancement.

Your handbook should summarize the benefits provided to employees. Briefly describe the health, disability, life, other insurance and retirement benefits plans your company offers, along with work/life programs, absence, vacation and leave policies, and government-mandated benefits. Only brief summaries are appropriate, as the employee handbook is not intended to provide the level of detail found in a summary plan description.

Safety in the workplace is important for all companies, regardless of industry, and guidelines ensuring this belong in an employee handbook. Rules regarding building security, drugs and alcohol, weapons, and workplace violence should be covered, along with issues specific to the line of work your company is in that impact safety, such as workplace chemicals, protective gear, etc. Also let employees know the procedures to follow in case of an emergency.

Your employee handbook should also cover workplace rules that comprise what amounts to an employee code of conduct. These include, for example, policies on harassment, discrimination, any dress code, and the like.

The handbook is also the place to inform employees of the consequences of not following company rules, whether they be regarding attendance, company property, workplace decorum or job performance. Clearly spell out grounds for firing, along with procedures for disciplinary action, including warnings, probationary periods and termination.

Advances in technology (and its availability in the workplace) have added new layers to employee handbook content. In addition to the topics covered above, today’s employee handbook needs to address appropriate uses of technology in the workplace, and what employees can and can’t do while on the job (blogging, visiting Facebook and Twitter, online shopping, etc.). Parameters of email communications also should be addressed, including transmission of chain mails and links to inappropriate Web sites.

The process of writing the handbook can be farmed out to a firm specializing in employee communications, or undertaken in house. Templates are available that can be used for this purpose; they contain the basic information common to most employee handbooks, and beyond this can be customized to your company. If using the template approach, be sure to run the finished product past your company legal counsel or human resources professional for a final review.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your business objectives, takes into account state and federal laws, and capitalizes on incentives and innovative solutions now being offered.

Inland Marine Policies

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Inland Marine policies, as compared to Ocean Marine policies, are meant to cover non ocean related property that is under construction, moves from place to place or is of special or high value. These features usually do not make them good candidates to be insured by standard business property policies.

The term “Inland Marine” covers policies that have many different names to describe what they cover. When you see a building under construction, it would be insured under a Builders Risk policy. Cargo in transit would be insured by a Cargo policy. Contractors Equipment would be insured under an Equipment policy. Jewelry stores inventory is covered by a Jewelers Block policy.

What are some of the benefits of insuring property under an Inland Marine Policy form?

  • Most of them have broader coverage than standard property policies
  • Most use a rate structure that is more advantageous to the insured
  • Many insure the property in question under a “stated” value, meaning the stated value of the property insured is what you would receive if it were destroyed or lost as compared with Actual Cash Value which is a depreciated value

These coverages can be written as a stand-alone policy or added to a commercial property policy by endorsement. The industries where you typically see Inland Marine coverage are construction, warehousing and transit and where there is a “bailee” exposure, such as a dry cleaner. Loss to the property of others in their possession is covered under an Inland Marine form.

If you think that you may have an Inland Marine exposure or if you have coverage but are not sure if it is sufficient, please call Mike Regan at Regan Cleary Insurance.

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. We are members of the National Association of Surety Bond Producers (NASBP), the professional organization for agents that also specialize in surety bonding. Give us a call today at 617-723-0700.

Summer Activities

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Liability risk is everywhere: at home, on the road, on vacation. It’s an unfortunate fact that accidents can stem from everyday activities and lead to costly lawsuits. Do you:

  • Own a pool or trampoline?
  • Entertain?
  • Have excited pets?
  • Spend time behind the wheel?
  • Have a teen driver in the household?
  • Own a recreational vehicle or boat?
  • Have staff in your home (gardeners, nannies, housekeepers)?

These are all factors that increase your risk for a lawsuit. Therefore it is important to make sure you understand the risks you face and the options you have to manage those risks.

In today’s litigious society, every family with significant assets faces the risk of lawsuits that could significantly impact their net worth. That’s why we recommend you consider the need for an Excess Liability policy. Financial planners suggest that clients should have excess liability coverage at least equal to their net worth.

Personal Excess Liability policies, more commonly known as Umbrella policies, are very important to your financial well-being and the cost is minimal: usually about $300 annually for the first $1,000,000 in coverage.

Umbrella policies pick up where your homeowner and auto policies leave off. For example, if you are in a car accident and your auto policy provides $500,000 in coverage, and someone is seriously injured, you could be sued for much more than $500,000. The umbrella policy would then take over. The policy would pay for medical bills and in the event of a lawsuit, pay legal fees and the settlement – up to the limits of your policy.

Contact us today so we can customize a policy that balances your assets and risks to provide you with peace of mind.

Concerned about your personal insurance coverage? At Cleary, our experienced Personal Lines department will work with you to evaluate your insurance needs, identify exposures and create a customized insurance portfolio. Give us a call today at 617-723-0700.