Bret Dixon Insurance News
Our newsletters are intended to keep you up to date on
pertinent industry news and offer more in-depth insight into various
types of coverage and endorsements. We publish our newsletters
at least once each quarter. We hope you enjoy it.
Thank you for your patronage!
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Make Your Camera System Work For
You
Back in 2009
we tackled the value of having a
camera system in your business. They're still a great idea,
both for the discount you're eligible for and the proof they
could afford in claims against you. However, as one of our
insurers reports back to us, they're not always providing the
indisputable proof they'd hope for.
Many
businesses with camera systems on premises suffer from several
drawbacks that are hurting them in times of claim.
- Limited hard drive space means recordings
are overwritten in a matter of days.
- Owners don't know how to pull off segments
of the footage recorded, and sometimes wind up erroneously
deleting them.
- Footage of a particular incident is never
backed up because no one on the staff remembered anything out of
the ordinary on a particular day.
Obviously, if
you can't provide footage that would hopefully exonerate you in some
of these 2nd and 3rd party liability claims, the camera system loses
much of the benefit it's meant to provide. Some
recommendations:
Limited
hard disk space for additional recordings
This one has
too many variables to offer many concrete suggestions. First
off, there's the question of how much hard drive space your system
came with. Whether or not you can hook additional hard drives
to it for more storage space will depend on your manufacturer.
Unfortunately, it seems that many "out of the box" systems
- the more affordable ones that can be bought and installed by
proprietors, seem to be the biggest offenders in this regard.
Still, try contacting a Technology or Computer Specialist firm to see
if they can help get you set up with a configuration that will do
what you really want.
If you're
strapped for storage space, there are a number of things you can do
to preserve how long you can record before footage starts getting
overwritten.
- Reduce cameras.
This isn't ideal, as you want to be able to record all parts of
your premises, if possible. But the less cameras you have
recording, the less data there is being written to the hard
drive, meaning the longer the cycle is before things start
getting overwritten.
- Set cameras to
motion-activated. If a camera is in a
part of your business that doesn't regularly receive foot
traffic, set it to only start recording when activated by motion
into that room or area.
- Reduce recording quality.
The higher-quality the video you capture is, the more disk space
it will use. If you do change your settings, review some
footage recorded at a lower quality. If it's so blurry you
can't make heads or tails of what's going on, it's probably
going to be useless if you need it in event of a claim.
Working
Knowledge of Your System
Someone in the
business needs to know how to go back to a certain date at a certain
time, and copy a segment of footage. Again, without knowing how
to use your system, what good is it doing you? Preferably,
there should be a few people - co-owners, managers - who know how to
use the system, in case the one person who does know what they're
doing is on vacation or leaves their position.
If you're not
sure what you're doing, start off with a section of footage where
nothing out of the ordinary happened. Use it as your test,
until you're confident you've got a handle on what you're
doing. And make use of any owners manuals or tech support
hotlines that came with your camera system.
Backing
Up - Find a Routine
This one falls
on nearly everyone in your operation. Any time someone has to
be cut off, let alone removed from the premises, you should probably
jot down an incident report on it. Any time someone slips and
falls - make an incident report (most policies require you notify the
carrier of any incidents like this one where injury has likely
occurred or a suit is to be expected). Certainly any time the
authorities are called, make an incident report. As soon as
time permits, a manager should then pull the video from the time that
person entered the premises until they left.
Now what you
do with all those video clips is up to you. If you want to copy
them to a data disc or burn them to a DVD, go ahead. But those
can be lost or damaged just like anything else. A favorite idea
of ours is to create a Google
Account for your business, then upload the videos to Youtube with the
same account (Google owns Youtube). There are settings to where
you can keep the videos private, so that only people with the link to
the video can find and view it. This method takes the burden of
keeping the video footage safe out of your hands. Plus, with a
Google account, you have extensive storage with Google's free email
program, Gmail, to archive
information you would jot down on an Incident Report. Type
down the who's (and their contact info), what, where and whens of the
incident, email it to yourself, upload the video privately and
boom - you've archived the incident about as well as you can.
In one recent
case, the owner of an establishment was sued for overserving a
patron, who then injured a 3rd party in an auto accident. The
allegedly intoxicated patron had been asked to leave the bar
earlier in the night. The tavern owner reviewed her camera
footage for the night of the claim and had video that her bartender
only served the man 3 drinks over the course of nearly 3 hours.
However, while trying to transfer the footage to a dvd, she
inadvertently erased the video. When her case went to trial,
the judge barred her from testifying and instructed the jury that
there was missing evidence, which only the defendant had seen prior
to it going missing, and to make of that what they wanted.
The outcome of
this particular case is still pending, but what could've been a trump
card in the insured's favor - showing they didn't negligently
overserve this patron - will now likely be looked upon with some
suspicion by the jury.
The insurance
company litigating this case says that their statistics show that
less than 5% of their claims at establishments with security camera
systems can actually provide video footage of the claims in
question. Needless to say, they're frustrated. They grant
discounts to lots of businesses for the proactive security measures
taken by installing cameras, but rarely get the benefit these systems
are supposed to provide. Make sure you know how to use your system,
and put it to work for your business.
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Illinois Dram Shop Limits Rise Again in '13
The 1998
amendments to the Illinois Liquor Control Act, commonly
known as the Dram Shop Act, require that every January 20th, the
Illinois Comptroller determines the increase or decrease in the
liability limits for causes of action brought under the Act, in
accordance with the consumer price index (CPI-U) published by the
Bureaus of Labor Statistics.
The
2013 figures
are
based on an increase in the CPI-U of 1.74% from 2012. The liability
limits for claims occurring on or after January 20th, 2013 are
$64,057.00 for bodily injury and property damage, and $78,291.89 for
either loss of means of support or loss of society resulting from the
death or injury of any person.
For perspective, below are the limits over the last
decade.
Bodily
Injury & Property Damage
Loss of Society/Loss of Means of
Support
The numbers
speak for themselves. In the last ten years, Bodily Injury and
Property Damage have risen by $12,641.11, respectively, while Loss of
Society/Loss of Means of Support has increased by $15,450.25. The
lesson we try to stress to our clients is that the cost of Liquor
Liability claims goes up every year. If you're still carrying the
state minimum of $300,000 in liquor liability coverage you have a
potentially dangerous exposure, and one that is often inexpensive to
remedy.
In a one person claim, you very well may be ok with a
lower liability limit. But even a two person claim, with maximum
damages awarded per person for Bodily Injury, Property Damage and
LS/LMS, you could face a potential claim well north of $300,000 -
putting you almost $100,000 out of pocket without considering whether
your policy limit includes or excludes defense costs.
Even with a $500,000 Liquor Liability limit, it
doesn't take much stretching of the imagination to envision a
potential claim that would exhaust half a million dollars of
coverage. Increasing damage settlements such as this are precisely
the reason that $1 Million in liquor liability coverage has
been the industry standard.
Whether you're in Illinois and are
"protected" by the Dram Shop limits, or a state without a
dram shop statute to cap the damages you may face in a suit, the
warning is the same: these big claims happen more than you may hear
about. Don't be caught off-guard and underinsured and jeopardize the
the assets and future of your business.
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Spotlight On: Workers Compensation
I recently
came across the story of a business owner who hired a friend to do
some painting at his business. The friend hired one of his
friends to help out with the job. Wouldn't you know it, that
guy fell off a ladder and injured his back.
If I didn't
see some of these claims get filed myself, I'd swear these incidents
were made-up. It should come as no big surprise to find out
that "Friend #1", the one originally hired for the
painting job, didn't have workers compensation coverage.
You may be
wondering did this guy really have to have a work comp policy?
He was picking up some part-time work, just a few days worth.
And he only brought on his buddy for a couple days as well.
To limit the
scope of this column, we'll just focus on Illinois. And the
answer is "yes, he should have had his own
Workers Compensation coverage." (Here is
Indiana's requirements, and here are
Missouri's)
Except in very
few instances, Workers'
compensation insurance is not
optional for businesses under Illinois state law (see below). Though this does
pose a financial burden on employers, the law is designed to protect
employees who get injured or sick from performing regular work
duties. Without workers' compensation insurance, they may not be able
to afford the medical attention they need to return to health.
Requirements
In Illinois, all businesses with at least one employee must carry a
valid workers' compensation insurance policy or meet another of the
state's accepted methods of coverage. Even if your employee is only
part time, you must provide coverage. There is no waiting period, so
from the moment your employee first begins work, you are required to
carry the appropriate insurance protection. You will face
penalties if you are caught in violation of this law.
Exceptions
Virtually every business in Illinois is required to provide insurance
coverage, though there are a few exceptions. If you own an
agricultural business, you may be exempt. Also, real estate brokers,
broker-salesmen and commission-only salespeople are not considered
employees under the Illinois Workers' Compensation Act.
Business
Owners
If you are a sole proprietor, a partner or an executive officer of a
corporation, you do not need to purchase workers' compensation
insurance coverage for yourself. If your business has no employees,
you can avoid a policy altogether. However, if you do purchase a
policy that covers your employees, you must either buy coverage for
yourself and your fellow owners, or exclude yourself from the policy
in writing.
Penalties
Illinois takes its workers' compensation laws seriously. Your
business can be fined up to $500 per day you are without required
coverage, with a minimum fine of $10,000. If the business fails to
pay this fine, you can be held personally liable for the debt, even
if you are a corporate officer of the company. Additionally, you can
be charged with and found guilty of a misdemeanor for failing to
provide the necessary coverage; if it is proved that you willingly
and knowingly refused to provide coverage, the charge escalates to a
felony. If you operate a business with a liquor license, a
felony conviction would preclude you from continuing to hold a
liquor license.
We see a fair
number of attempted end-around runs on Workers Comp and payroll
taxes. Calling someone an independent contractor to avoid
putting them on payroll doesn't make them an independent. To
truly be an independent they need their own policies, license(s),
permit(s), etc...
Who gets the
Work Comp claim in situations like this? It keeps moving right
up the chain of "sub-contractors" until one of them passes
the test of a true sub and has Workers Compensation coverage.
In the instance described above, it's going back to the business
being painted. In absence of his own Workers Comp
coverage, the painter isn't considered a sub-contractor, but rather
an employee
of the business owner and likewise for his assistant. Their
payroll will be included at the time of policy audit, and any claims
will go against the business owner's coverage.
Now, the
insurer will try to "subrogate" against the
"sub-contractor", Friend #1. But as an individual, they're
not likely to collect much, if anything from him.
Ideally, when
contracting out work, you should hire someone with the proper
credentials. But if you're insistent on throwing a little work
to a friend, bite the bullet and do things the right way: put them on
the payroll for however long the job takes.
Now, this
business owner will have to live with the consequences. The
additional
payroll will still be added at time of audit and probably generate a
small, additional premium due. Also, they'll have the claim on
their record for the next 3-5 years. Additionally, companies will view the
risk as less favorable, and the Workers Comp insurance will carry a
higher rate.
The morale of
the story: PROTECT YOURSELF. No matter how small or
inconsequential a job seems make sure you're hiring someone who
carries the appropriate insurance (General Liability, Workers
Compensation, and even Business Auto coverage). Just as
important, make sure their limits are adequate. Don't let
anyone start working a job on your business or home until they can
provide you a current certificate of insurance showing all of these
coverages in force. Because if something does go wrong, their
problems will eventually become your problems.
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Illinois Gaming - Business Personal Property
Endorsement Coming
Since the Illinois Gaming Bill was approved and
machines began going online last fall, we've seen a steady stream of
clients who are participating increasing their Business Personal
Property (BPP) and Money & Securities (cash) limits.
With up to five machines, plus the vault, valued at
around $12,000 - $15,000 apiece, and depending on the wording of
your contract with your gaming vendor, your establishment could be
responsible for providing coverage on the equipment. At the
maximum number of machines, that may mean adding up to $90,000 to
your BPP limit.
As for Money & Securities, we've seen varying
amounts of cash coverage needed, depending on how many machines an
establishment has and how much they're being played. But
the highest we've seen to date has been $40,000 added for cash inside
the premises.
These endorsements to your policy, if your contract
stipulates you're responsible for them, can really bump your premium
up. It's not inconceivable to add $800 - $1000 to your premium.
We've been speaking with our carriers who specialize
in businesses that are adding video gaming. We're working with
them to create a Video Gaming endorsement, which would raise your
BPP and Money & Securities - Inside Premise limits for a
flat charge. We're hopeful that this will satisfy most
contractual obligations we've seen thus far, while easing the strain
on business owners' pocketbooks for the additional coverage.
One of our carriers, Illinois Casualty Company,
has such an endorsement they'll be rolling out soon. It's
been delayed a little, but they're still hopeful to roll it out in
March. We're still working with a couple more carriers
to develop similar endorsements.
Stay tuned to this space for additional information
about the endorsements as it becomes available.
Has your business started Video Gaming yet? What
do you think of it thus far? Worth the hype?
Over-rated? We'd love to hear more feedback on the
subject. Drop us a line on our
Facebook page.
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Consider Your Homeowners
Coverage When Picking Out Your Next
Pooch
To say that
canines are the worst enemy of insurance companies is a bit of an
exaggeration, but an estimated one-third of all homeowners liability
insurance claims (source: Insurance
Information Institute) stem from canines.
Homeowners policies commonly exclude property coverage for damage
caused by a pet. For example, the ISO Homeowners 3 - Special
Form excludes damage to Coverage A - Dwelling or Coverage B - Other
Structures if the loss is caused by an animal owned or kept by an
insured, but there is a growing trend to address canine claims on the
liability side. To protect the bottom line, many insurers are
taking measures to restrict or eliminate coverage for canine-related
liability claims.
Why Exclude?
According to the Centers for Disease Control and Prevention (CDC),
about 4.5 million people in the U.S. are bitten by dogs each year
causing about 885,000 people to seek medical attention. These
dog bites cost insurance companies an estimated $1 billion
annually. To keep premiums competitive, the insurance market
now offers a variety of solutions to exclude canine liability
coverage.
Beyond the current cost of canine claims, there is little
encouragement that these costs will decline as an increasing number
of jurisdictions adopt canine legislation. There are two types
of canine legislation: Breed Specific Legislation (BSL) and the One
Bite Rule.
In some jurisdictions the increasing problem of dog attacks has been
addressed with legislation that is specific to a breed or multiple
breeds. In hopes of reducing dog inflicted injuries and
fatalities, breeds labeled as dangerous or vicious are either
regulated or banned completely. Such regulations may include
higher pet registration fees, minimum liability insurance
requirements, mandatory muzzling in public areas such as parks, and
stricter fencing regulations. This legislation impacts insurers
because, in some jurisdictions, the liability for any injury or death
caused by a regulated or banned dog is assigned to the owner of the
dog with little regard to the circumstances surrounding the
attack. An assignment of liability seriously impairs any
defense that an insurer may otherwise be able to provide. Most
Breed Specific Legislation applies to pit bulls with some
jurisdictions also regulating Rottweilers or other notorious
breeds. The vast majority of BSL is enacted at the local level;
however, each military branch also has specific regulations
applicable to US military installations, and in rare cases, there are
laws at the state level.
Many feel that Breed Specific Legislation is ineffective in
preventing dog bites and related injuries and fatalities because
enforcement of such regulations is impractical and costly. Any
breed of dog is capable of docile or dangerous behavior, so targeting
specific breeds does not effectively address other prevalent
offenders like unneutered male dogs. Rather than singling out a
specific breed, many jurisdictions have enacted legislation
characteristic of the One Bite Rule. Depending on the wording
of the specific law, this type of legislation may protect a dog owner
from liability associated with an animal's first attack unless there
is evidence of a violent tendency.
The origin of this type of law can be traced back to English common
law. The rationale being that a pet dog is a domesticated
animal, and is, by definition, tamed and not expected to inflict
injury. Based on this type of law, the owner of a domesticated
animal such as a dog may not be held strictly liable for any damages
unless there is evidence of a dangerous or vicious propensity.
While criterion for a violent tendency classification varies, many
places have definitions for "vicious dog" or
"dangerous dog" to assist with this determination.
Though this type of law may shield a dog owners from a lawsuit on the
first offense, the dog owner assumes strict liability for any
subsequent occurrences. Again, this type of law impedes an
insurance company's ability to defend. The One Bite Rule
applied in a unaltered state provides protection for a dog owner
should the dog cause bodily injury if the owner has no indication of
vicious or dangerous behavior. Under this type of rule, in
order to hold the dog owners liable, the injured party must show that
the dog has exhibited past violent behavior, not necessarily an
attack, or has a vicious propensity. In many states or
jurisdictions the One Bite Rule no longer exists in its pure form,
but rather statutes and case law have modified this approach to take
into consideration other indications of negligence such as a
violation of leash law or other similar restrictions.
Dog bite laws are constantly changing and vary greatly from place to
place. This unique legal environment creates a serious
challenge to insurers. To answer this challenge and keep
premiums competitive, the insurance market now offers a variety of
solutions to limit or exclude canine liability coverage.
Approaches
Many in the insurance industry recognize canine liability as a
growing exposure. Rather than a single solution, there are a
variety of approaches that are currently utilized within the
insurance industry.
Eligibility
In some cases, the high risk canine breeds are addressed through
underwriting considerations. Answer "yes" to certain
questions related to dog breeds and a carrier deems the client an
undesirable risk. At a minimum, the list of ineligible dog
breeds often includes German shepherd, Pit Bull, Rottweiler, and Siberian
husky. Breeds such as Dachshunds and Chihuahua have a higher
tendency to nip or bite, but these breeds do not generally cause
significant injury. The notoriety of particular breeds is often
linked to the extent of damage inflicted. Insurance companies
that use dog breeds as an underwriting consideration may follow state
or local dog statutes in determining ineligible breeds, so an
insurance company may decline to write a homeowners policy for the
owner of a forbidden or restricted dog breed. In other cases
the insurance company maintains a list of undesirable
varieties. Regardless of the basis of the list, this approach
prevents owners of particular dogs from obtaining homeowners
policies.
Commonly blacklisted breeds:
- German shepherd
- Pit Bull
- Rottweiler
- Siberian husky or husky-type
- Akita
- Chow Chow
- Doberman
- Presa Canario
Policy Language
Under Personal Liability and Medical Payments to Others, the standard
Homeowners Policy provides coverage for injury caused by an animal
the insured owns or is in the insured's custody; however, some
insurers have altered this policy language to remove or limit
Personal Liability coverage. Because most consider Medical
Payment to Others to be a goodwill type of coverage, the animal or
canine exclusion is not always applicable to that coverage, so there
may be some coverage available to assist with medical bills.
In most dog bite claims, the coverage provided under Medical Payments
to Others is inadequate since the average hospital stay cost for
treatment of a dog bite is over $18,000 according to a December 2010
report from the Agency for Healthcare Research and Quality.
Other insurers alter the policy language with a different
approach. For example, a company may exclude any loss arising
from certain animals. Though applicable to all animals, as it
pertains to canines, the list of excluded animals may include any
animal that is illegal to acquire or own, breeds that are named or
controlled by any ordinance or law because of a safety concern, any
animal that has previously killed or seriously harmed a human or
domestic animal, or any animal that has been trained to fight or
kill. Other commonly excluded animals are primates, anything
venomous, and other species that are not generally domesticated such
as exotic animals. This type of policy language excludes a
claim that stems from any insured owning, acquiring or keeping an
excluded animal.
Exclusions
Rather than
turn away otherwise desirable Homeowners business, many carriers in
the last few years have implemented various types of endorsements
that exclude coverage. The Canine Exclusion Endorsement
may be added to policies where homeowners have a blacklisted
canine. This protects the insurance company from the
undesirable exposure, yet allows dog owners a better selection
of coverage alternatives. The exclusion applies only to
canine-related liability that specifically pertains to a scheduled
(listed) canine. the endorsement must include the name and
description of the dog that is to be excluded. Policy holder would
have to sign off on the exclusion at the time of policy inception for
the endorsement to be added to the policy.
Another option
being used is an endorsement called Exclusion - Injury or Damage Arising Out of a
Canine. With this type of endorsement, the
canine is not specifically named, however a description of the
animal is still required in the endorsement
schedule. Again, the policy holder would have to sign
an acknowledgement of the endorsement for the exclusion to apply.
Beyond
the Homeowners Policy
In the past,
the personal umbrella policy often bridged the gap in coverage
left by canine exclusions in the homeowners policy; don't assume this
is still the case. Coverage for canine-related liability is
sometimes also excluded in a personal umbrella policy. As with the
homeowners policy, there are different approaches to excluding
coverage. Some umbrella policies use an endorsement to remove
coverage while some build a restriction into the policy language.
Considering
the large number of dog owners in the United States and
the exposures to loss and potential coverage gaps that emanate
from potential dog ownership, it's apparent that dog bite issues
aren't going away any time soon. If you and your family has a
pooch, or are considering getting one, it's worth checking
into what a certain type of dog could do to your homeowners
coverage.
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Check Out our Personal Lines in 2013
We offer a full range of personal lines coverages for homeowners, condos,
renters and rental property, auto, boats, motorcycles, RVs and more.
Give us a shot at your next renewal to see how we compete.
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Carrier Corner
We represent over 15
insurance carriers directly and have access to many more via brokers,
but you may only know one or two that we deal with. Each issue,
we'll highlight one of our valued partners in this space.
North
Pointe is an A rated company writing business in all 50 states.
We've been contracted with them for nearly a decade. We use
them for bowling centers, restaurants, fraternal organizations and some
contractors.
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 Bret
Dixon Insurance recently became a Trusted Choice Agency. Learn
more about it
here.
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