Blog - Month: May 2026
Lenders Crack Down on Insurance Requirements
Lenders are tightening commercial insurance requirements for borrowers to ensure that they are adequately covered as property, liability and business interruption claims costs rise across the board.
With lenders tightening their standards, commercial property buyers should start their insurance planning well before closing or refinancing discussions. Lenders want to know that the property is protected, not only for the sake of your investment but also to safeguard the money they are putting into the loan.
Besides demanding adequate coverage limits, insurers are strictly enforcing A-rated insurer requirements and requiring updated appraisals to avoid underinsurance.
These developments require greater coordination between the lender, your insurance broker and legal counsel.
Essential insurance for loans
When seeking a business loan, lenders may require borrowers to prove they have several types of insurance. Here’s how lenders are scrutinizing three of the most commonly required policies:
Property — Lenders are concerned that property values may be understated in light of rampant rebuilding cost inflation. If a major loss occurs, inadequate coverage could create a funding gap that the policyholder would have to cover out of pocket. If that amount is large enough, it could hurt the borrower’s ability to make loan payments.
As a result, lenders want to see property policy limits that can cover the cost to rebuild rather than just the loan balance.
Business interruption — Lenders prioritize business interruption coverage because it directly impacts a borrower’s ability to make loan payments if disaster strikes. If a business is unable to operate due to a fire or supply chain disruption, it could severely affect its cash flow and imperil its ability to make loan payments.
Business interruption may be included in the language of a commercial property policy, but it’s important to ensure it is also suitable for lending purposes.
General liability — Lenders also want their borrowers to have a general liability policy in place that has adequate policy limits. They may require that the borrower carries additional umbrella insurance to cover the cost of large claims.
Liability insurance rates have been rising rapidly due to an explosion in large settlements, often in the tens of millions of dollars. Lenders are insisting that businesses taking out loans have policy limits that will ensure they can stay viable after a large verdict.
Other considerations
As claims costs have risen, lenders are increasingly reviewing endorsements, limits and policy language more carefully to ensure compliance with loan agreements and confirm that insurance can cover most eventualities.
Lenders often request particular wording and endorsements that ensure their rights are protected. These may be found in certificates of insurance or within the policy, including:
Mortgagee clause and lender loss payable wording — This clause ensures the lender is paid if a covered loss occurs. It prioritizes the lender’s interest in the event of a claim.
Proof of insurance showing correct limits and dates — The lender may request a certificate of insurance that lists policy limits, effective dates and contact information for the insurer. Any mistake can delay closing.
Replacement cost valuation — Lenders want the property insured at full replacement cost. This means the policy should reflect what it would take to rebuild the structure today, not what was originally paid for it.
Acceptable deductible levels — Some lenders limit how high the deductible can be. If the deductible is too high, they may require changes before approving the loan.
Some issues can delay closings on properties or cause problems after the loan is made, such as:
- Missing additional insured endorsements,
- Insufficient umbrella limits, or
- Inconsistent named insured listings.
Finally, if you are applying for a loan, reach out to us early as the market has changed drastically, particularly in high-risk areas.
Workers Eating Lunch at Desks Can Lead to Wage and Hour Lawsuits
With wage and hour litigation increasing in California, employers need to be especially careful of employees who eat lunch at their desks and work while eating.
While it’s not an issue for exempt employees, it is for hourly workers, who should be required to take their regular rest and lunch breaks without working while they are off the clock, a human resources specialist warns in a recent blog.
A recent study found that three in five workers report eating lunch at their desks at least sometimes. Even if they are just answering e-mails, that’s enough to result in a large fine for the employer.
Under California law, employers are required to provide meal and rest breaks to their employees. Additionally, the state Supreme Court ruled in 2021 that employers are not allowed to round up time-clock punches for employee meal periods and that workers must receive their full break allowance.
During their meal breaks, it’s important that workers abstain from working at all. That includes answering calls or checking e-mail.
The law
Employers are required to provide a half hour for a meal break to all non-exempt employees who work more than five hours in a day, unless the shift will finish in six hours or less and both the worker and employer agree to skip the meal break.
Meal periods can be taken during work and counted as time worked only if the nature of work prevents relief from all duties and if both the employer and worker agree to working through lunch in writing. Employees have the right to revoke that agreement at any time.
If an employee works more than 10 hours in a day, they are entitled to a second meal break of at least 30 minutes. That’s unless the total hours worked is no more than 12 hours, and both parties agree to waive the second meal break.
In addition to meal breaks, state law requires employers to provide a paid 10-minute rest period for every four hours worked. No break is required if the employee works three and a half hours or less.
Who’s exempt?
Some workers are exempt from these laws, in particular certain executive, administrative and professional employees. In order to be exempt:
- Their primary duties must be executive, administrative or professional, and they should devote more than half of their time to these duties.
- They must regularly and customarily exercise discretion and independent judgment at work; and
- They must earn a salary equivalent to at least twice the state minimum wage for full-time (40 hours/week) work.
What you can do
It’s imperative that you put policies in place to avoid being sued for infringing on your workers’ meal breaks. And your employees should understand they are not to work during their breaks.
You may want to consider:
- Requiring supervisors and managers not to contact workers while they are on their meal breaks. That includes calls, text messages or e-mails.
- Instituting a policy that bars employees from working during their meal breaks or anytime they are not on the clock.
- Encouraging staff to take breaks by normalizing the habit of briefly stepping away from work. Managers can lead by example by taking lunch breaks with their workers.
- Having a designated space like a break room for your staff to take their lunches. Ideally, it should be equipped with one or more tables, a refrigerator, microwave, plates, cups, glasses, sink and dishwasher.
- Recording these breaks so that you can prove your employees actually took them. This is essential in case you are sued. Provide a mechanism for your staff to record their meal periods, and require them to use it.
Cal/OSHA Urges Employers to Protect Outdoor Workers Against Heat Illness
As we get closer to another scorching California summer, Cal/OSHA is reminding employers with outdoor workers to take precautions to protect them against the heat.
California employers need to be especially mindful as Cal/OSHA has workplace safety regulations governing the prevention of heat illness and the agency actively enforces its heat illness prevention standard.
Employers should also comply for the safety and well-being of their workers, as heat illness can be deadly.
Cal/OSHA is urging employers to take the following steps to prevent heat-related illness among their employees who work outdoors:
Plan — Develop and implement an effective written heat illness prevention plan (HIPP) that is specific and customized to your specific operations.
The plan must include the following heat illness prevention and response procedures:
Training — Train all employees and supervisors on heat illness prevention. Nobody should be working outside in heat if they have not been trained in heat illness prevention and emergency procedures.
Water — Provide drinking water that is fresh, pure, suitably cool and free of charge so each worker can drink at least 1 quart per hour, and encourage workers to do so. Water should be located as close as practicable to where employees are working.
Access to shade — When temperatures reach 80 degrees, you must have and maintain one or more areas of shade at all times, when employees are present. Locate the shade as close as practical to the area where employees are working and provide enough to accommodate the number of employees on meal, recovery or rest periods at any time
Even if temperatures are less than 80 degrees, you must permit access to shade for workers to rest.
The importance of rest — Encourage workers to take a cool-down rest in the shade for at least five minutes when they feel the need to do so to protect themselves from overheating. Workers should not wait until they feel sick to cool down.
If an employee starts feeling unwell, they must be monitored for symptoms of heat illness and emergency procedures should be initiated if they don’t improve.
High-heat procedures — During heatwaves (when the mercury reaches 95 degrees), employers must institute high-heat procedures that include monitoring of employees, regular communication, more frequent reminders to drink water and rest, and additional cool-down rest periods.
Emergency response procedures should be site-specific and include who/how to call emergency services and steps to respond to signs and symptoms of heat illness.
Observe all employees and any newly assigned to a high-heat area. You should consider giving employees who have not been working in high temperatures time to adapt to the new conditions. You can do this by initially providing them with lighter work, frequent breaks or shorter hours.
Get the plan right
Your heat illness prevention plan must be in writing and include all of the above. The HIPP must be written both in English and in the language understood by the majority of employees. It must also be available to employees at the work site.
Additional information about heat illness prevention, including details on upcoming training sessions throughout the state, are posted on Cal/OSHA’s Heat Illness Prevention page.
The agency also has extensive multilingual materials for employers, workers and trainers on its “Water. Rest. Shade.” public awareness campaign website.
Bureau Recommends Workers’ Comp Benchmark Rate Hike
California’s workers’ compensation rate-making agency has recommended that average benchmark “pure premium” rates increase by 10.4% for policies incepting on or after Sept. 1, 2026.
The Workers’ Compensation Insurance Rating Bureau cited an increase in cumulative trauma claims as well as rising medical and administrative costs. The filing, if approved by the California Department of Insurance, would be the second consecutive year that the benchmark rate insurers use to price their policies has increased. Last year the DOI approved an 8.1% hike after WCIRB had recommended an 11.2% increase.
The pure premium rate increase has not resulted in employers with few or no workers’ compensation claims paying higher premiums since insurers only use the pure premium rate as a guidepost when pricing their policies. The pure premium rate remains at historical lows and the market is quite competitive.
The 10.4% recommended increase is an average across all the state’s workers’ compensation class codes, and each class will see a different change.
Here’s a look at the cost drivers:
Cumulative trauma claims
WCIRB estimates that 26.4% of all workers’ comp claims filed in the state in 2025 are for cumulative trauma injuries, compared to 15% in 2021. CT claims are not for sudden injuries, but rather those that develop over time through repetitive motions, such as:
- Carpal tunnel syndrome — Often claimed by office workers, data entry personnel and assembly line workers due to repetitive hand and wrist movements.
- Chronic back and neck injuries — Caused by years of lifting, bending, twisting or maintaining poor posture.
- Tendonitis and tendon disorders — Inflammation from repetitive shoulder or arm movements, common in construction, warehouse and food service jobs.
- Shoulder injuries — Rotator cuff tears or bursitis from repetitive overhead lifting.
- Knee problems — Develops from repetitive kneeling, squatting or climbing stairs, frequently seen in plumbers or floor layers.
About three out of every five CT claims are filed after an employee is terminated, according to WCIRB. There is a cottage industry of lawyers who find recently laid-off workers and convince them to file these claims. Adding to the cost: nearly all CT claims are litigated, in most cases from the first notice.
Medical costs
One anomaly in CT claims is that they usually have few medical costs in the first year, which masks the growing issue of rising medical costs for workers’ comp claims. According to WCIRB, average medical costs per claim increased 1.7% between 2021 and 2023, but excluding CT claims, that number rises to 3%.
Associated medical-legal costs are up 14% per claim in 2025, while medical equipment and other medical services costs jumped 7% in the same period.
Claims adjusting costs
The high litigation rates for CT claims are seeping into the cost of adjusting claims, according to WCIRB. It projects that insurers’ loss adjustment expense ratio (the cost of adjusting claims) will increase to 37.7% of claims costs, up from 35.7% in the Sept. 1, 2025, filing.
The total cost of claims adjusting increased from $12,636 per claim in 2024 to $14,235 in 2025 and is expected to rise 5.5% annually between 2026 and 2028 to $16,184.
The takeaway
The Rating Bureau has sent the rate recommendation to the Department of Insurance, which will hold a public hearing in the coming months, after which the insurance commissioner, with input from the public and department actuaries, will either accept the recommendation or order a different rate.
While the workers’ comp market is expected to stay competitive, the rate recommendation could portend moderately increasing rates in the coming years.