Today’s standard insurance programs often include property, general liability, auto and umbrella insurance policies due to legal or contractual business requirements. While such policies might offer broad coverage, there are many inconspicuous exposures that are often overlooked by today’s insurance brokers. While these gaps in coverage may be subtle, they can often create significant financial risk for your company.
“Just because a coverage is not specifically required by contract does not mean it is not important, especially if the exposure can lead to large financial claims,” says Michael Finn, an account executive with GMGS Insurance Services.
Smart Business spoke with Finn about the problems you face by not including these coverages in an insurance program, and how to identify and close these gaps in coverage.
What problems can arise if you do not include these coverages in your insurance program?
Bottom line — gaps in coverage will create uncovered losses. Many business owners find out about these gaps in coverage because they incorrectly believe standard insurance policies cover all loss scenarios. A company that experiences one of these uncovered claims learns a valuable and often expensive lesson. The question is, can your business really afford to learn one of these lessons?
By reviewing and understanding these non-standard coverages, a company can better identify its true exposures and develop potential solutions to address such exposures. The following coverages can often be added to your present insurance program for a nominal premium or potentially for no cost at all.
■ Wage & hour defense coverage can be added to most employment practices liability (EPLI) policies. Wage & hour covers the defense costs for employee lawsuits related to the Fair Labor Standards Act (FLSA). Common claims include employee lawsuits alleging the lack of mandatory breaks/lunches or improper payment of overtime benefits. There should be no extra cost to add this coverage to your present EPLI policy.
■ Employee benefits liability covers an employer when errors or omissions have been made in the administration of the company’s employee benefits program. Coverage can be included for little to no cost. Common claims include failing to properly advise employees of the company’s benefits program or improperly excluding an employee or dependent from the health coverage.
■ Cyber liability fills the gap in coverage created by general liability policies excluding all Internet related business activity. Cyber liability provides coverage for a company’s Web site, Internet media/ads, and other Web-related content. Common claims include libel or trademark and copyright violation for improper display of pictures, logos or products on a company’s Web site. Coverage is generally added to an existing general liability policy via endorsement for no charge.
■ Privacy liability coverage is needed for companies that receive or store customers’ personal information. The most common claim scenario is when credit card or social security information is received by a business and then inadvertently stolen or publicized. Companies are expected to properly protect this private information.
■ Crime/employee dishonesty insurance provides coverage for employee theft of money, securities and business property. Smaller limits of $25,000 to $50,000 can be added to property insurance policies for no additional premium. A separate policy should be placed for businesses requiring higher limits and broader coverage.
■ Fiduciary liability covers those responsible parties, including company owners, for administering 401(k)s and other employee benefit plans. Fiduciaries can be held personally liable for 401(k) plan losses incurred as a result of their alleged mismanagement, error, omission, or breach of fiduciary duties. Such coverage can be added to a D&O/EPLI policy for a minimal premium.
■ Employed lawyers professional liability covers a company’s exposure when an attorney works as in-house general counsel and is not part of an outside law firm. Both general liability and directors & officers liability policies exclude any professional liability arising from an attorney employed at a company. A separate policy should be placed to correctly cover this exposure.
■ Hired & non-owned auto liability protects a company for its liability arising from employees driving personal or rented vehicles for work purposes. Common claims occur when an employee uses his or her personal car to run a work errand and is involved in a serious auto accident. This coverage can be endorsed on to the commercial auto policy for little or no additional premium.
How can you make sure these inconspicuous exposures are properly covered in your policy?
The key to protecting a company’s assets is working closely with a knowledgeable and technical insurance broker. A professional insurance broker should function more as a risk manager than as a salesperson. It is your broker’s responsibility to have regular meetings with you and determine which of these exposures exist in your business. If these exposures are not properly insured, your company may unknowingly be ‘self-insuring’ these risks.
Do you need to include all these overlooked exposures in your policy?
The need for any insurance coverage depends on a company’s individual operations and exposures. Every business is unique and certainly not all of the above exposures pertain to every company. In this turbulent economy, it is important to properly protect your company’s assets by having the appropriate coverages in place, not just the standard contractually required coverages.
Michael Finn is an account executive with GMGS Insurance Services. Reach him at (949) 559-3376 or [email protected].
