Not many things are what they seem when it comes to an insurance policy so when we find something that seems straightforward and actually is we should all rejoice. “Medical Payments” found in the General Liability policy is a coverage that is what it sounds like it should be, it pays for medical costs that third parties incur. This being insurance of course there is a bit more to it as the 2 minute video below will explain.
Product recall is one of the most confusing coverages in insurance, particularly when it is included in a Product Liability policy. Find out what constitutes “Product Recall Expense” coverage and what is actually covers and does not cover in this 3 minute video.
The first question on our “What’s In My Insurance Policy?” addresses what happens when you lose power (electric, gas, etc.) and can’t operate your business.
As you will see, this is a big coverage gap, coverage is rarely what we think it is. In most cases it is is pretty much non-existent since the most likely loss of power, downed power lines, are usually excluded or have a very low sub-limit.
The “What’s In My Insurance Policy?” is a video series to help insurance buyers better understand what their insurance policy covers and doesn’t cover. We take questions from you, our viewers, so please feel free to ask a question in the comments section or send an email and we will address it in a future episode.
By now I think we have all seen that Marriott was hacked. What I find astonishing is not that they were hacked but how fast the lawsuits have been filed. I have already read about numerous lawsuits, some coming just hours after the hack was announced. For an insurance broker, making a case of why clients need cyber insurance is not a tough case to make, but there is another lesson that can be learned.
The vast majority of companies I speak with believe there is a very low risk that they will have a claim and I tend to agree with them, but that does not mean insurance will not be used. There is very little that prevents your company from being drawn into lawsuits, even if you were not negligent. Getting pulled into lawsuits costs money, possibly a lot of money, even if you are eventually proven innocent. This is why insurance is important, if the allegation is a covered claim then your insurance policy should be paying to defend you.
There are a couple of things to be cognizant of when it comes to the insurance company defending you.
- It could erode your limits of insurance, meaning you won’t have as much insurance to pay claims.
- The insurance company may have the right to choose counsel and decide how to defend the lawsuit. For example, they could decide to settle the claim against your wishes.
- The amount you spend on defense may not start reducing your deductible/retention until you have put the carrier on notice.
- Most policies have some sort of provisions on when you need to provide notice to the carrier which if not followed could jeopardize coverage.
These are just a few things that you want to pay attention to when you are served with a lawsuit. The important thing to remember is that you should make the carrier aware of the claim sooner rather than later, even if you don’t think the lawsuit is going anywhere. I have seen some desperate plaintiffs drag lawsuits on for a long time making even groundless lawsuits quite expensive.
I want to help people better understand their insurance. All too often people and companies only have a high-level understanding of their insurance policies and unfortunately the devil is in those hundreds of pages called a policy. Often times insurance buyers don’t ask the questions that need to be asked when they renew their insurance and this is where I come in. Leave a comment or send me an email and I will answer your questions on a future segment.
We can learn about risk management and insurance from our daily lives? Think about the times you may have gotten injured or something went wrong in your life that was preventable by incorporating risk management activities into your life. Right now I am going through one of those times in my life.
I am an avid runner but have been suffering through a foot injury all autumn which has prohibited me from running and doing pretty much any other exercise that requires me to put weight on my foot. To add insult to injury (pun intended), the fall is the prime racing season in distance running so I have not been able to race either. Granted, I am no Olympian by any stretch, but I like to challenge myself and get my competitive juices flowing so not being able to race, let alone run, has been very difficult for me.
So how does risk management play into this? First, the injury wasn’t due to some freak accident, it was caused most likely by my lack of doing the ancillary work I should have been doing to take care of my body. If I had stretched, done more strength work, and listened more to my body I probably would not be in the position of having to stay off of my foot. To put it bluntly, if I had done the things (risk management) that I know help prevent injury (loss) but I don’t really enjoy doing I would probably not be injured now.
According to my doctor I will be fine with rest and recuperation but that will take time. Even though I will be fine and my financial cost is limited, that does not mean I will come away unscathed from this injury. There are direct and indirect costs that cannot be redeemed. My stress levels were increased because I could no longer use running and exercise as a release. My health most definitely took a step back. I am sure there were other impacts as well, but the point is even when we are made whole after a loss we still suffer losses that we cannot recover.
We all know there are certain things we should be doing to prevent losses but don’t do them. I don’t do enough stretching, although I like to take comfort in the fact that I am sure I am not the only one not stretching as much as I should. Many companies don’t do the things they should be when it comes to risk management and they too can take solace in the fact their peers aren’t either. There are many reasons why companies don’t implement a risk management program, it could be a lack of resources, either financial or personnel, not knowing how to implement risk management, or it could be they just don’t see an ROI from risk management and therefore won’t even entertain the idea. Whatever the reason might be, in hindsight we all wish we would have done things differently after a loss, especially if we know it could have been prevented.
The less prepared you are the more a loss will hurt, trust me, I am experiencing this right now. Many companies don’t realize that insurance companies want to help you implement a risk management program. Insurance companies realize that investing in preventing a loss is much better for their bottom line then paying claims. What is surprising is how often new clients do not realize that these resources are available and that they cost you nothing, but their prior insurance broker never told them they were available. Your insurance broker should be more than someone who simply transacts an insurance placement on your behalf, they should be helping you manage your risk. This can be done by making sure your policy is actually covering what you need it to cover and helping you find ways to prevent losses in the first place.
Do you remember when insurance companies had to make significant reserve adjustments for Asbestos claims in the early 2000s even though the exposure happened years ago? I worked for Hartford at the time, on their investment side, and even though our sales were great, Hartford’s earnings always seemed to disappoint because they kept having to increase the reserves to pay for asbestos exposure claims that were just starting to be filed even though the asbestos exposure may have occurred decades ago. If you look at your insurance policy you might even see an exclusion titled “Absolute Asbestos Exclusion” that makes clear that any new asbestos exposure will not be covered in the future
Insurance policy wording is shaped by claims that have been paid by the insurance company that they never intended or imagined they would be paying. Asbestos is a pefect example of this happening on a catastrophic level. A large number of people were exposed to Asbestos and it took years to realize the damage that asbestos exposure inflicted on the human body. Today, anytime a claim is contested in court and the insurance company loses we can expect to see policy language change so that the insurance company does have to cover similar claim again. The old saying, “fool me once, shame on you, fool me twice, shame on me,” is alive and wellin the insurance world.
Like asbestos, there will always be risks that do not show their ugly head until years after we have been exposed to them, creating challenges for the insurance companies. Insurance companies cannot underwrite and reserve for losses they are not aware of. I tell you all of this for two reasons:
- Your insurance policy is always changing, even if your broker tells you there are no changes, things are always changing. It could be as simply as a form being updated to comply with state requirements or it could be the addition of a form or wording that excludes all “claims arising from electronic communication.”
- It allows me to share this great video on E-cigarretes I found on Twitter that is a good example of demonstrating that we don’t know always know or understand all the risks that a product might have.
The dude vaping is actually from Barstool Sports and was trolling Laura Ingrahm but the point of unknown risks still prevails.