The Unknown Arsonist

America is experiencing a rise in fires in commercial structures, often due to electrical failure. According to the National Fire Protection Association (NFPA), electrical failure is the second leading cause of fires in commercial buildings, following only incendiary sources.

The NFPA notes that the risk of overloading circuits has become increasingly serious as the demand for electricity continues to grow. Deteriorating electrical distribution systems are a national problem, according to NFPA – and not just a problem in older buildings. Even in newer buildings the electrical wiring was not designed to handle the power-hungry equipment used by today’s businesses. The top power users are computers, air conditioners, copiers and security systems.

The NFPA says that by the time a hot spot trips a circuit breaker, the worst damage may already be done. A hot spot can cause serious damage, since it is usually hot enough to melt metal or spark a fire. The most common problems are a lack of periodic maintenance and overloaded electrical outlets and extension cords. Surge protection is listed as the number-one loss prevention measure.

Wind Damage

As Americans continue their migration to the coasts, we can anticipate more windstorm claims. Although most Commercial Property policies cover these claims as an extended coverage peril, failure to define the term “windstorm” can cause problems.

Time and numerous court cases have produced a generally accepted definition. Generally, most experts agree that for coverage to be provided under the peril of windstorm, it’s reasonable that the wind must be:

• Unusual (greater than normal)
   
• Strong to have caused damage to other property in the area, and
   
• Occurred at a specific time.

If these basic criteria were met, the insurance industry would consider the event a windstorm.

Making Shoplifting Risky Business

Shoplifting continues to plague many retailers. This is a significant problem that can really eat into profits, particularly in businesses where margins are already thin. The average loss per shoplifting incident is $172, according to the National Retail Security Survey. That translates into a cost to U.S. retailers of more than $8 billion a year. Research found that the number one reason people shoplift is because it's easy and there's little risk of getting caught. Some protective strategies can take the “ease” out of shoplifting. What’s more, many crime insurance policies will offer discounts for use of security measures. These include:

• Instituting video surveillance;
   
• Placing convex mirrors to observe all corners and aisles;
   
• Having only one entrance and one exit to your premises;
   
• Keeping expensive merchandise inside locked cases ;
   
• Using electronic tags that cannot be removed.

The most effective measure proved to be video surveillance, which not only reduces the number of thefts but also can be used to investigate incidents that do occur. What’s more, many crime insurance policies will offer discounts for use of one or more of these types of security measures.

Checking the Check

Check fraud is on the rise, as normally happens during economic downturns. The National Check Fraud Center estimates that check fraud accounts for annual losses of more than $12 billion – a figure that’s growing rapidly.

Since changes to the Uniform Commercial Code (UCC) in 1990 transferred the primary responsibility for catching bad checks from banks to their customers, the stakes have risen for the business community. Two types of perpetrators pass bad checks: counterfeiters (who duplicate checks) and procurers (who steal authentic checks). The biggest problem for commercial ventures that accept checks is that, due to the volume of checks, banks can no longer verify signatures. The FBI suggests that businesses make a serious attempt to verify the identity of anyone paying by check. The FBI also recommends that businesses consider using a third-party verification or guarantee service to minimize potential losses.

So Shall It Be Written – But Has It Been Done?

Contracts requiring one party or another to be added as an additional insured to your policy are considered common and effective methods for the concerned party to protect itself from the liabilities created by your actions taken on their behalf. You’re the one “on the scene” and most likely to create the liability. Thus, it appears reasonable that you should bear the primary responsibility for avoiding such liabilities – or, in the event those efforts fail, to be the primary provider of defense and insurance coverage for the claims.

But although such provisions may be "common," whether they are also "effective" is another matter.

Gaps in Coverage

If for any reason the contract language requirements are going to be met, at least in part, by your insurance coverage, now is the time to sit down with your agent and review possibilities. Too often gaps in coverage provisions are discovered only after the claim is filed. At that point it is too late to discover you’ve agreed by contract to an action that is either uninsurable – or, even more depressing, was easily insurable if only some action had been taken to notify your agent and carrier of the need.

There are always limits. The request for additional insured status may be common. However, the burden to shoulder responsibility for liability the other party may be seeking to transfer to you can sometimes be drawn so broadly that the insurance carrier will find it unreasonable to provide such insurance. In fact, the request may be so broad that you would be well advised to refuse such a burden.

For this reason, it’s also advisable to have your legal advisers review the language required of you in all such contracts. Don’t take the requesting party’s word for it. If the provision is standard language, your legal advisers will tell you so, and we likely can help you arrange the proper insurance. It’s better to know prior to risking your hard-earned assets

Additional Insured

Your attorneys also can help you draft appropriate language to utilize in your own requests to others to be added as an additional insured under their policies. After all, successfully getting the other party to take on the broadest possible responsibilities to protect you may seem like a winning strategy. But if the protection is needed and neither they nor their insurance carrier is capable of responding, all of that liability falls right back in your lap. Utilizing so-called “additional insured provisions” that are reasonable and standard are the best method to gain confidence the desired protection will actually be in place precisely when the need arises.

Talk with your legal advisers. Then call us! We stand ready to help.

New Outdoor Sign or Satellite Dish?

If you’ve installed or plan to install a new outdoor sign, radio antennae or satellite dish for your business, please call us to be sure we have adequate coverage for you. Some policies limit coverage for damage to those outdoor items. If you have any questions, just call.

Also, if you’re sprucing up the grounds with landscaping, trees, shrubs or fences, it’s a great time to let us know so we can review your policy.

Coverage of Choice

As small to mid-sized businesses begin to search for ways to trim their Property and Liability expenses, one insurance product may be able to help. It is today’s fastest growing insurance coverage. The Business Owners Policy (BOP) offers an alternative to individual Property and Liability policies.

The BOP, designed to provide broad coverage, typically includes Property, Liability and Umbrella coverages. Some programs also offer Auto Liability. The coverage is designed to the specific needs of the company involved. From a pricing standpoint, the BOP frequently offers small businesses the broadest protection possible for their premium dollar.

If your company would like to consider the benefits of BOP coverage, give our agency a call. We would be happy to discuss this concept with you.

Chamber Survey Says...

The ability of a carrier to pay claims and its financial strength are the two most important factors in determining from which company to purchase insurance, according to a recent survey by the U.S. Chamber of Commerce. The survey found that price was the third most important factor. The survey, completed in November 2001, included responses from more than 1,000 Chamber members and covered a wide range of insurance-related issues.

Turning to risk management, the Chamber members indicated that worker safety programs and formalizing safety policies and procedures were the two most-popular methods of limiting exposures. Another major finding: U.S. businesses are very concerned that costly lawsuits or uninsured claims will drive them out of business. In trying times such as these, it is important to obtain the services of a professional insurance agent. If you have questions or concerns about your company’s insurance program, give one of our staff members a call.

Businesses Face
Increased Risks

Doing business in today’s economic environment can create significant amounts of risk. As companies across the country try to find ways of keeping their doors open, they are having to consider downsizing, merging, and consolidating. Unfortunately, these are just the types of activities that encourage employee fraud: a growing problem that involves serious scams such as asset misappropriation, fraudulent financial statements, and bribery.

It is estimated that fraud costs American businesses more than $400 billion a year. Although conventional wisdom has always held that a trusted bookkeeper would do the most damage, recent studies have found that the most harm comes from the executive suite. One study, prepared by the Treadway Commission, found that the CFO and/or CEO of the victim’s company caused 83% of fraud cases.