Blog - Tag: Measured Risk Insurance Services
Check Subcontractors’ Insurance Policies
Did you know your firm can be held liable under your own workers’ comp policy if a subcontractor’s employee is injured? Courts have ruled time and again that if a company hires a subcontractor without coverage and an employee gets hurt on the job, the injured worker can seek coverage under the hiring company’s policy.
In many cases, an injured worker may even be a third- of fourth-level contractor, but if none of your subcontractors are carrying workers’ comp, a claim can hit your own policy. This scenario is even more likely if your firm, as the main contractor, has substantial control over the sub’s employees.
To determine coverage, courts generally start with the sub whose employee was injured and move up the chain until they find a valid workers’ comp policy.
Protect yourself by requiring your subcontractors to have a certificate of insurance. But don’t stop there; you should call the insurance carrier to see if the certificate is valid.
You can check also with your state’s contractor licensing to see if your subcontractor has workers’ comp coverage.
FAIR Plan Commercial Property Coverage Limits to Rise
California Insurance Commissioner Ricardo Lara has approved a request by the FAIR Plan to increase commercial property coverage limits.
The move is aimed at ensuring that commercial facilities insured by the FAIR Plan are not underinsured, which can be devastating if they suffer a total loss.
Under the new limit, the FAIR Plan will create a new “high-value” commercial property coverage option for larger housing developments, farms and businesses with multiple buildings at one location.
The new limits will be up to $20 million per building, with a total maximum limit of $100 million per location — up from the current limit of $20 million per location. The FAIR Plan must make these new coverage limits available to all eligible applicants for both new and renewal policies before July 26, 2025.
The decision comes as commercial property rates continue rising due to inflationary pressures, particularly for companies in areas considered urban-wildland interfaces.
Insurers have pulled back on underwriting commercial properties as well as homes in the state due to increasingly destructive wildfires and their inability to get rate increase requests approved by the Department of Insurance.
Businesses located in wildfire-prone areas and those in smaller towns have found it increasingly difficult to secure coverage. If they are unable to secure coverage with a private insurer, their only option is the FAIR Plan.
FAIR Plan policies are not a complete replacement of a commercial property insurance policy. These are named peril policies, which provides coverage only for damage caused by the specific causes of loss listed in the policy:
- Fire
- Lightning
- Internal explosion
Optional coverages are available at an additional cost, such as for vandalism and malicious mischief.
Comparatively, typical commercial policies offer the following:
Basic form policies. They provide the least coverage, and usually cover damage caused by fire, windstorms, hail, lightning, explosions, smoke, vandalism, sprinkler leakage, aircraft and vehicle collisions, riots and civil commotion, sinkholes and volcanoes.
Broad form policies. These policies usually cover the causes of loss included in the basic form, as well as damage from leaking appliances, structural collapses, falling objects and the weight of ice, sleet or snow.
If you must go to the FAIR Plan, we can arrange for a “differences in conditions” policy that will cover the areas in which the plan is deficient compared to a commercial property policy.
The FAIR Plan will cover the following commercial structures:
Habitational buildings — Buildings with five or more habitational units, such as apartment buildings, hotels or motels.
Retail establishments — Shops such as boutiques, salons, bakeries and convenience stores.
Manufacturing — Companies that manufacture most types of products.
Office buildings — Offices for professionals such as design firms, doctors, lawyers, architects, consultants or other office-based functions.
Buildings under construction — Residential and commercial buildings under construction from the ground up.
Farms and wineries — Basic property insurance for commercial farms, wineries and ranches, not including coverage for crops and livestock.
A final word
The higher limits will come as a relief to many businesses in California whose properties’ replacement costs far exceeded the FAIR Plan limits. That said, premiums remain high under the FAIR Plan.
Besides the FAIR Plan, there is another option if you can’t find coverage. We can try to find coverage in the “non-admitted” market, which consists of global insurance giants like Lloyd’s of London.
These entities are not licensed in California, but they can still cover properties in the state, which we can access through a surplus lines broker.
If Your Firm Is Sued for Discrimination, Act Fast to Check EEOC Complaint
Employers that are hit with a discrimination complaint must act fast to compare the allegations in the lawsuit to the earlier complaint the worker filed to the Equal Employment Opportunity Commission.
If the employer can find that the allegations in the complaint filed with the EEOC do not match those in the subsequent lawsuit filed by the worker, it can quickly move to have the case dismissed, but if it waits too long, it loses the chance.
Under procedural rules, employees filing suit under Title VII Title VII of the Civil Rights Act of 1964 must first file a complaint with the EEOC.
The decision that paved the way for this new procedural rule was a unanimous U.S. Supreme Court ruling in the case of Fort Bend County vs. Lois M. Davis in 2019.
The ruling means that employers that are sued for discrimination under Title VII have a limited amount of time to challenge the lawsuit if the allegations differ in any way from the original EEOC complaint. If they act fast, then they stand a good chance of convincing the court to throw out the complaint.
However, if an employer dawdles and waits too long to challenge the case if they find a discrepancy, they may lose the opportunity.
If the employer in this case had acted quickly, it would never have gone to the Supreme Court, legal experts say.
The case details
An IT worker in Texas had reported that her director was sexually harassing her, and after an investigation he was fired. But after that, her supervisors began retaliating by cutting back on her work responsibilities. She filed a charge with the EEOC and, while the charge was pending, she was told to report to work on a Sunday. She refused and went to church instead.
She tried to supplement her allegations and wrote the word “religion” by hand on her EEOC intake questionnaire, but she didn’t change her formal charge document by adding that word.
The case went to trial and was appealed, and then it was sent back to the local U.S. District Court to decide the remaining charge of religious discrimination. The case had been in the courts for three years at that point.
That’s when her former employer asserted that the District Court didn’t have jurisdiction of the case because she had failed to state the claim in her EEOC charge papers. That issue was taken all the way to the Supreme court, which wrote in its decision that an objection to a charge because of a discrepancy may be forfeited “if the party asserting the rule waited too long to raise the point.”
The takeaway
If your organization is the target of a discrimination lawsuit, make sure to check the original EEOC charge for any discrepancies. If there are any, you can consult with your lawyers about filing a motion to have the complaint dismissed.
OSHA Finalizes Rule Requiring Construction PPE to “Properly Fit’ All Workers
Fed-OSHA has finalized a new regulation that requires personal protective equipment for construction workers to be properly fitting.
The lack of access to properly fitting PPE for smaller-framed construction workers — especially women — has been a perennial problem, as ill-fitting gear may not protect employees adequately in case of an incident. The new standard explicitly states that PPE must fit properly to protect workers from workplace hazards.
Often, the industry has just purchased smaller gear for female workers, but that hasn’t worked well because women’s bodies have more variations in size and shape.
What the new standard says
While the new standard does not define what a “proper fit” is, OSHA, in its proposal of the standard, clarified that the phrase means “the PPE is the appropriate size to provide an employee with the necessary protection from hazards and does not create additional safety and health hazards arising from being either too small or too large.”
Under the new rule, construction employers will be required to provide PPE in various sizes and designs that accommodate a diverse workforce. It requires that they assess the fit of PPE for each worker individually. The fit must address different body shapes, proportions and size and applies to all types of PPE, such as:
- Hard hats
- Gloves
- Goggles and safety glasses
- Safety shoes
- Helmets
- Harnesses
- Coveralls
- Vests
- Respirators
- Hearing protection devices
- Boots
The rule applies to PPE that an employer provides to its workers, as well as PPE purchased directly by a worker for personal use.
Employers are also required to incorporate the importance of properly fitting PPE into their training regimens, including:
- Guiding workers on how to adjust the equipment,
- How to recognize when PPE is ill-fitting and
- How to request replacement gear if a worker’s PPE does not fit.
Record-keeping is also required. To comply, construction employers should maintain comprehensive records of their PPE compliance efforts, including documenting:
- PPE assessments,
- Inspections,
- Training sessions and
- Any instances where PPE was replaced or adjusted for proper fit.
The standard applies to all construction companies; there are no exceptions based on size.
Dangers of ill-fitting PPE
- Sleeves of protective clothing that are too long or gloves that do not fit properly may make it difficult to use tools or control equipment, putting other workers at risk of exposure to hazards.
- The legs of a protective garment that are too long could cause tripping hazards and affect others working near the wearer.
- A loose harness when working at elevations may not properly suppress a person’s fall and may get caught up in scaffolding and equipment.
- Goggles worn by an employee with a small face may leave gaps at the temples, allowing flying debris from a machine to enter the eyes.
- Gloves that are too large have a number of issues: the fingers are too long and too wide, the palm area is too big and the cuffs allow sawdust to fill the fingers. Someone wearing such ill-fitting gloves risks getting their fingers caught in machinery or pinched when stacking or carrying lumber.
The takeaway
Manufacturers already make PPE in various sizes, but finding properly fitting PPE for workers may be difficult.
Fortunately, The Center for Construction Research and Training has created a list of manufacturers and suppliers of PPE for female, nonbinary and transgender workers. It includes links to firms that focus specifically on women’s wear and the products they offer.
FAIR Plan increases Commercial Property Limits
California Insurance Commissioner Ricardo Lara has approved a request by the FAIR Plan to increase commercial property coverage limits.
The move is aimed at ensuring that commercial facilities insured by the FAIR Plan are not underinsured, which can be devastating if they suffer a total loss.
Under the new limit, the FAIR Plan will create a new “high-value” commercial property coverage option for larger housing developments, farms and businesses with multiple buildings at one location.
The new limits will be up to $20 million per building, with a total maximum limit of $100 million per location — up from the current limit of $20 million per location. The FAIR Plan must make these new coverage limits available to all eligible applicants for both new and renewal policies before July 26, 2025.
The decision comes as commercial property rates continue rising due to inflationary pressures, particularly for companies in areas considered urban-wildland interfaces.
Insurers have pulled back on underwriting commercial properties as well as homes in the state due to increasingly destructive wildfires and their inability to get rate increase requests approved by the Department of Insurance.
Businesses located in wildfire-prone areas and those in smaller towns have found it increasingly difficult to secure coverage. If they are unable to secure coverage with a private insurer, their only option is the FAIR Plan.
FAIR Plan policies are not a complete replacement of a commercial property insurance policy. These are named peril policies, which provides coverage only for damage caused by the specific causes of loss listed in the policy:
- Fire
- Lightning
- Internal explosion
Optional coverages are available at an additional cost, such as for vandalism and malicious mischief.
Comparatively, typical commercial policies offer the following:
Basic form policies. They provide the least coverage, and usually cover damage caused by fire, windstorms, hail, lightning, explosions, smoke, vandalism, sprinkler leakage, aircraft and vehicle collisions, riots and civil commotion, sinkholes and volcanoes.
Broad form policies. These policies usually cover the causes of loss included in the basic form, as well as damage from leaking appliances, structural collapses, falling objects and the weight of ice, sleet or snow.
If you must go to the FAIR Plan, we can arrange for a “differences in conditions” policy that will cover the areas in which the plan is deficient compared to a commercial property policy.
The FAIR Plan will cover the following commercial structures:
Habitational buildings — Buildings with five or more habitational units, such as apartment buildings, hotels or motels.
Retail establishments — Shops such as boutiques, salons, bakeries and convenience stores.
Manufacturing — Companies that manufacture most types of products.
Office buildings — Offices for professionals such as design firms, doctors, lawyers, architects, consultants or other office-based functions.
Buildings under construction — Residential and commercial buildings under construction from the ground up.
Farms and wineries — Basic property insurance for commercial farms, wineries and ranches, not including coverage for crops and livestock.
A final word
The higher limits will come as a relief to many businesses in California whose properties’ replacement costs far exceeded the FAIR Plan limits. That said, premiums remain high under the FAIR Plan.
Besides the FAIR Plan, there is another option if you can’t find coverage. We can try to find coverage in the “non-admitted” market, which consists of global insurance giants like Lloyd’s of London.
These entities are not licensed in California, but they can still cover properties in the state, which we can access through a surplus lines broker.
More Contractors Increase Deductibles to Reduce Insurance Premiums
As construction projects become larger and more complicated, contractors are taking on more of the risk by increasing their builder’s risk insurance deductibles, according to a recent report.
Michael Cusack, executive vice president of insurance broker Alliant Specialty, told Insurance Business magazine that contractors are willing to take on more of the risk as those that have strong internal risk management regimens will be rewarded with lower premiums, particularly if they can stave off expensive claims.
There are a number of factors at play that are driving this transfer of risk:
- Claims costs are skyrocketing as the cost of rebuilding and materials has continued rising.
- Increasing litigation.
- Larger and larger liability lawsuit settlements and jury awards, and an increase in “nuclear” verdicts of $10 million and more.
“Contractors are taking on more deductible risk and manage that risk effectively using in-house protocols, and the ones that can do that will be the most successful,” Cusack told the trade publication.
“Construction jobs are getting much bigger, and the risks are becoming more complicated. If contractors can develop the systems and the personnel to manage risk, they can do it more efficiently and therefore be rewarded for that,” he explained.
The reason that you carry contractor insurance coverage in the first place is to protect your business from an accident or incident that could be financially devastating, such as a fire that wipes out all of your progress and destroys the materials and supplies that you had stored on-site.
Considerations
Increasing a deductible obviously comes with risk, particularly if you end up having multiple claims.
Raising your deductible amounts can be a smart business move that saves you money on your monthly or yearly premium payments. The extra money can help you grow your business, invest in new equipment, and even increase your available cash flow. But the best use of the extra cash is to create a contingency fund that you can draw on in case you incur a claim.
If you are comfortable assuming some additional risk yourself, and have resources you can draw on if they’re needed, talk to us about the possibility of raising your deductible. If the savings are enough to cover the deductibles on one or two claims, it may be worth making the change.
To make taking on more risk financially viable, you’ll have to prioritize risk management at your worksites. Emphasize the importance of safety to your supervisors, crew members and subcontractors.
By conducting regular safety training, providing personal protective equipment and strictly enforcing safe work practices, you can reduce the risk of on-site accidents and minimize damage and injury claims.
One other major risk to contractors is theft and vandalism. To lower this risk, builders have been erecting fences and walls around worksites since the dawn of construction. Today, there are cost-effective solutions to increase site security and reduce risks, such as:
- Online cameras and smart sensors on the job site can enable continuous monitoring for unauthorized access, unlawful activities, CO2 levels and real-time water leak detection systems like WINT’s water intelligence platform.
- Adequate lighting is much cheaper to procure, and built-in motion sensors can help save energy (while deterring potential trespassers to the site).
- GPS tracking tags on vehicles, equipment and even valuable materials can make it easier to recover them if they are stolen.
- Mobile applications for your workforce management can be a helpful tool in creating ongoing and interactive safety training, and risk-reporting programs to reduce the risks of human error and negligence.
Talk to us first
Builder’s risk premium calculations can be complex, and taking the step to increase your deductible has to be done with forethought and care.
Call us to review your policies before renewal and we can do a deep dive into your policy and risk management practices to see if increasing your deductible is a good move for you.
Top Eight Business Risks for 2025
One of the keys to running a successful business is having in place a robust risk management system to ensure your company can guard against a growing number of threats that can derail operations or cause significant losses.
While each industry and company have different risks they face, a recent survey collected responses from risk managers around the world to identify the top risks facing businesses.
The “Allianz Risk Barometer 2025” highlights the key threats for organizations in an increasingly interconnected and volatile environment.
Below are the top eight risks in 2025 and what you can do to protect against them.
1. Cyber incidents
Cyber risks like ransomware attacks, data breaches and IT outages remain the number one threat globally. With AI accelerating the sophistication of attacks, businesses have to double down on protection.
What you can do — Invest in robust cyber-security measures and training employees on how to detect threats and avoid clicking on links that contain malicious code. Regularly update systems, conduct penetration testing and educate staff on cyber hygiene.
2. Business interruption
Supply chain disruptions, often triggered by cyberattacks or natural disasters, have consistently ranked high. If one of your suppliers suddenly can’t provide you with goods your firm needs or a cyberattack affects your ability to function, you will lose money.
What you can do — Diversify suppliers, explore local sourcing and implement business continuity plans that include how to respond to each possible issue that could result in disruption to operations or sales.
3. Natural catastrophes
Events like hurricanes, wildfires, convective storms and flooding can cause significant losses, be that from damage to property and assets, injury to staff, employees being unable to work or business interruption.
What you can do — Put in place a disaster recovery plan that includes how members of your staff will communicate, possible alternative locations for operations, and how to protect your facilities. Evaluate disaster preparedness and explore insurance solutions.
4. Changes in laws, regulations
Regulatory shifts, especially around sustainability and emerging technologies like AI, are creating compliance challenges. Businesses will be faced with plenty of uncertainty under a new Trump presidency, considering his plans to pursue deregulation.
While a boon for business, it could lead to confusion, particularly for those who operate in blue states. As well, the new president’s promises of raising tariffs could lead to higher costs for many businesses that source products, parts and machinery from abroad.
What you can do — It’s important that you stay on top of regulatory and legal changes to avoid penalties or lawsuits. Engage legal advisors or compliance experts to navigate changing laws.
5. Climate change — The physical and operational impacts of climate change, such as extreme weather and resource scarcity, are intensifying and businesses need to harden their operations to cope.
According to the report: “Extreme temperatures can drive up energy demand, which is especially critical for industries reliant on cooling systems, potentially leading to operational cost increases. Water scarcity can threaten businesses reliant on water for operations, while biodiversity loss undermines ecosystem services which many industries depend on, for example, agriculture or maintaining crop yields.”
What you can do — Many of the same preparations businesses can make for dealing with natural catastrophes can also be used for climate change resilience.
6. Fire and explosion
Fires remain a leading cause of business interruption, especially with the rise of lithium-ion battery incidents. “The degree of disruption can be very high, as it can take longer to recover from than many other perils,” the report states.
What you can do — Ensure that you conduct regular fire safety audits and training to staff, particularly if you store flammable materials on-site. Regularly update your fire prevention protocols and provide emergency response training.
7. Macroeconomic developments
Economic uncertainties, including inflation and fluctuating monetary policies, pose challenges for budgeting and forecasting. This will be especially true under the Trump administration as he sets out to reverse Biden’s policies and pursues tariffs that could lead to trade wars.
What you can do — Keep abreast of market trends and adapt to macroeconomic changes with flexible planning. Staying agile and diversifying revenue streams can mitigate risks.
8. Market developments
Many experts believe it is unlikely that there will be a major stock market correction in 2025. Recovering earnings and Trump’s plans for deregulation and strong fundamentals should support continued growth.
What you can do — Strategic planning and market analysis are critical if your organization is reliant on stock market gains.
The takeaway
The above list of risks was gleaned from a survey of companies around the world, but many of the risks also apply to U.S. firms.
It’s important that businesses take a structured approach to managing their risks and creating plans for all eventualities that may affect them. That requires buy-in from management and a focus on protecting the company’s revenue stream, physical and digital assets, employees and supply chains.
Commercial Property Rate Hikes High, but Slowing
While commercial property insurance rates have been increasing for seven straight years, the pace of rate hikes has slowed a bit this year, according to a new report.
With many factors continuing to pressure rates, businesses should expect continued hikes for their commercial properties, with the biggest increases taking place in areas at higher risk of natural catastrophes, which vary depending on which part of the country they are located in.
The third quarter 2024 “Commercial Property/Casualty Market Index” by the Council of Insurance Agents & Brokers reported a 7.9% year-on-year increase in property insurance pricing, which is a significant drop from the 17.1% average rate increase noted in the same period of 2023.
While rates are still rising, analysts say that the pace of increases may finally be catching up with the higher claims costs and other factors affecting insurers.
If your business insurance policy renewal is coming up, here’s an explainer of what is driving rates this year and what you may be able to do about it.
Rate increase drivers
A convergence of factors has caused this extraordinary rate-hardening cycle in commercial property insurance:
Catastrophe losses — This includes hurricanes, floods, wildfires, tornadoes and winter storms. As climate change intensifies, the U.S. and the world at large have seen a surge in the cost and scope of natural catastrophes.
Adding to what insurers pay after these events, Americans have also been migrating for decades to areas that are now most at risk of disasters. With higher population density comes more claims.
Insurers in the U.S. generally paid out increasingly large amounts for natural disasters in the last decade. In recent years the payouts have totalled:
- 2023: $81.6 billion
- 2022: $116 billion
- 2021: $108 billion
- 2020: $98 billion
Catch-up pricing — Insurers have been trying to catch up after years of underpricing their policies. They had done this by not keeping up with the cost of rebuilding, but also not requiring policyholders to increase their policies’ replacement costs to keep up with those higher costs.
Bright spot: It now looks like insurers have caught up with prior years’ underpricing as rate increases continue rising, but at a slower rate, depending on where you live.
Rising reinsurance rates — Insurers buy their own insurance by contracting with reinsurers, which share the risk. Due to rapidly rising catastrophe claims costs, these reinsurance firms have recorded substantial losses in the last few years due to natural catastrophe hits.
Facing financial pressure, reinsurers have:
- Raised their own rates substantially,
- Started requiring insurers to carry more of the risk,
- Tightened their terms, which also transfers more risk to the insurers, or
- Pulled out of markets altogether.
Bright spot: Reinsurance rates are leveling off for 2025 and the companies are starting to take on more risk once again, which could bring some relief to commercial property carriers.
Higher construction costs — The cost or construction and rebuilding has skyrocketed since 2019, due to higher material, energy and labor costs. However, that inflation has cooled as well.
Bright spot: According to CBRE, a real estate firm, in 2023 construction costs rose 4.9% year on year, compared to 14.1% between 2021 and 2022 and 11.1% between 2020 and 2021.
What you can do
Depending on where you live, insurance may be relatively easy to secure or it could be near impossible, forcing you to go to a state-run carrier of last resort.
Insurers have gotten picky about which properties they will insure, but as a property owner you can take steps to improve your insurability or reduce your rates, such as:
- Making sure you have a detailed property maintenance plan in place.
- Replacing or repairing the roof, electrical system and plumbing as necessary, particularly if it’s outdated or decades old.
- Having a disaster recovery and business continuity plan to ensure continued operations in case of an event.
- Installing sprinkler systems and leak-detection sensors that can alert you if there’s a water leak in the building.
- Thinking about increasing property deductibles.
- Giving us a call.
The Growing Risks of Vendor Technology to Your Business
While your organization may have its cyber-security protocols buttoned up using best practices, there is a growing risk to businesses from tech vendors that are used to run their operations.
According to the 2023 SecurityScorecard “Global Third-Party Cybersecurity Breaches” report, 98% of organizations have a relationship with a third party that has been breached and 29% of all breaches were attributed to an attack on a third party outside of the organization.
The findings reflect the growing risk to businesses as they use more third party apps, software and cloud services, some of which have access to troves of important company data.
Also, the costs of a cyberattack on a company’s vendor are often 40% higher than the cost to remediate an internal cyber-security breach.
The findings shine the spotlight on the growing risks from interconnectivity in digital supply chains and vendor relationships that affect virtually all businesses, in particular those that:
- Rely on tech vendors that keep day-to-day operations running.
- Entrust confidential information on clients and employees to a third party vendor.
- Use outside vendors for specific goods and services.
Another survey by the cyber-security firm OneTrust found that:
- 71% of organizations use more outside technology vendors than they did three years ago.
- 73% of businesses have experienced significant disruption caused by a third party, whether it be a data breach or ethical violation.
- 73% say outside vendors have more access to company data than they did three years ago.
- 80% have expanded their third party due diligence questionnaires in recent years.
Examples of third party relationships that may pose risks
- File transfer software
- Client management software
- Business management platforms
- Cloud services
- Hosting provider and external platforms
- Security software
- Outsourced software development
- Facilities management software.
Third party breach examples
The crash. An online store uses a cloud provider to run its business and an outage causes its website to crash, preventing orders from being fulfilled.
Effect: Contingent business interruption (coverage for third party events), in addition to other expenses and costs.
The backdoor attack. A vulnerability in software that connects to a company’s servers turns out to be a backdoor for attackers who install malicious code on the firm’s network.
Effect: The vendor attack could lead to business interruption and additional expenses.
The payroll vendor breach. The payroll company an employer uses suffers a breach, potentially exposing confidential information of clients and/or vendors.
Effect: This could constitute a privacy incident, potentially requiring notification to affected individuals and companies.
What you can do
As attacks on third party vendors continue to increase, it’s important you understand your firm’s third party risks, and how to measure and manage those risks.
Besides strengthening internal cyber-risk protocols, you should consider doing an analysis of your third party risks. While this will vary depending on the business and its industry, here are some ways you can get a better handle on your company’s vulnerabilities:
- Determine which vendors are critical to your operations. For the most critical, you can also determine which suppliers or providers your vendor uses.
- Define and quantify your risk with each third party tech vendor you use, to help you identify the damage to your organization should they suffer an attack that compromises their systems, and subsequently, yours.
- Create an incident response plan that maps out what steps your organization can take in case a vital vendor goes down. Test the plan against different types of scenarios and determine how you would respond. You should allow not only your IT people, but also the rank and file that use these systems to test the plan’s effectiveness.
- Verify that your critical vendors carry cyber-insurance coverage that would address losses your firm may endure if they suffer an event.
Insurance
To ensure that you are not left footing the bill for these types of incidents, review your cyber-insurance policies to see if they cover attacks or incidents on third parties that your firm uses. Call us for a review.
Expensive Litigation Is Driving Insurance Costs
Soaring court judgments and jury awards are pushing up the cost of commercial liability and umbrella insurance policies, particularly for businesses that have been sued before.
There are a number of factors at play, including massive “nuclear” jury awards for tens of millions of dollars, private equity-backed lawsuits and a phenomenon known as “social inflation” — when the costs of jury awards increase faster than the cost of living.
A 2024 A.M. Best report found that social inflation and large verdicts verdicts mostly affect commercial auto, professional liability, product liability and directors and officers liability insurance.
Policyholders are also facing more restrictive general liability coverage as insurers continue to reduce their exposure.
What’s happening
A 2024 study by reinsurance company Swiss Re found that social inflation had increased liability claims by 57% over the previous decade. The increase in 2023 alone was 7%. Another study showed that over a five-year period, the top 50 insurers in the U.S. had allocated half a billion dollars for litigation expenses.
The Insurance Information Institute in early 2024 pointed to legal-system abuse as a leading reason for auto insurance companies losing money to the tune of $1.10 for every $1 in premium.
“As dangerous roads and driving conditions as well as economic costs have been on the rise for several years,” the institute wrote, “the challenges presented by overzealous billboard attorneys are exacerbating the situation.”
Adding fuel to the fire is the increase in “nuclear verdicts” — when a jury awards damages of more than $10 million.
Fears of verdicts this large have encouraged businesses and their insurers to settle claims rather than fight them, leading to higher costs.
Lawsuits have also become investment vehicles. Private equity firms are funding lawsuits against businesses in return for a share of any awarded damages or settlements.
Recent ‘nuclear’ jury awards
- In 2021, a Florida jury awarded a landmark $1 billion verdict to next of kin of a motorist who was killed after a driver for Kahkashan Transportation Inc. was on his cell phone when he flipped his semi truck, plowing into the man’s vehicle.
- A Philadelphia jury in May 2024 ordered Exxon Mobil to pay $725 million to a service station mechanic who developed cancer after being exposed to benzene in gasoline.
- In June 2024, a California jury ordered entertainment mogul Alki David to pay $900 million to a former worker who had accused him of sexual battery.
What you can do
You business can reduce your chances of getting sued by:
- Focusing on risk management,
- Ensuring you hire good drivers and provide training that focuses on reducing risks of distracted driving,
- Preventing workplace discrimination and harassment,
- Maintaining clear and detailed documentation,
- Implementing sound business practices,
- Training employees on legal compliance, and
- Having clear contracts.
You can work with your insurance companies both on loss prevention and managing claims for losses that do occur. Finally, work with us to ensure that you have liability policy limits that are realistic in today’s world.