PROTECT YOUR BUSINESS WITH A POLLUTION LIABILITY POLICY

In April 2010, an oil drilling rig owned and operated by Transocean Ltd. exploded and sank in the Gulf of Mexico. The accident killed 11 people and set off a massive oil spill, causing catastrophic damage to marine life and imperiling coastal areas in four states. Transocean was operating on behalf of the giant energy corporation BP, who owned the rights to the oil field where the rig was located. BP came under intense criticism from the president, Congress, and the public for what was perceived to be inadequate safeguards to prevent the disaster. The companies involved in the incident might have legal liability for economic damages and clean-up costs totaling billions of dollars.

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Most U.S. businesses are not drilling for petroleum in an important waterway, but they could still face similar loss exposures on a smaller scale. Millions of companies have fuel storage tanks above or below ground, or transport fuel or chemicals. Manufacturers use a variety of toxic substances in their operations. If any of these substances leak into the land, water, or air, the companies might be responsible for remediation costs and damages. If these companies do not have the right insurance, these costs could drive them out of business.

The standard Commercial General Liability (CGL) insurance policy does not apply to most accidents involving pollution. It does not cover injuries or damages caused by the escape of a “solid, liquid, gaseous or thermal irritant or contaminant,” nor does it cover any costs the business insures because it was asked or required to clean up the contamination. There are some exceptions; for example, the policy covers a contractor if fuel or fluids leak from construction machinery brought to a job site. It also covers injuries or damages caused by heat, smoke, or fumes resulting from an uncontrollable fire. However, the insurance companies that offer this policy do not intend to cover incidents similar to the gulf oil spill.

Some companies offer a Pollution Liability policy that fills much of the coverage gap. It covers injuries or damages caused by an ““emission, discharge, release or escape of pollutants into or upon land, the atmosphere, or any watercourse or body of water.” It defines pollutants in the same terms as does the General Liability policy. One significant feature is that it is a “claims made” policy; it covers pollution incidents that occur on or after a date specified in the policy (called the “retroactive date”) and for which claims are made during the policy term. For example, if the policy has a term of January 1, 2010 to January 1, 2011 and has a retroactive date of January 1, 2007, it will cover a claim made in May 2010 for an incident that occurred in August 2008. It would not cover a claim for an incident that occurred in August 2006.

Because so many types of businesses use potentially toxic substances (paints, oils, printer chemicals, etc.), the pollution liability exposure is not limited only to manufacturers and energy companies. All business owners should consult with our professional insurance agents to identify their vulnerabilities to pollution claims and ways to handle them -- before a loss occurs.

UNDERSTANDING WORKERS COMPENSATION DEDUCTIBLE PLANS

Insurance deductibles are a common feature for property coverages such as Comprehensive and Collision coverage on an auto, or coverage on a building or personal property. They are less common for coverages applying to bodily injuries. However, some employers are finding that Workers Compensation deductibles make financial sense for their organizations. The options vary from state to state and among insurance companies; before deciding whether to accept a deductible program, a business should learn the alternatives and the consequences of each.

Small deductibles are those ranging from $100 to $10,000 or more, depending on the particular state’s laws. They might apply to medical benefits, indemnity benefits (which compensate an injured worker for lost wages), or both, again depending on the laws of the state. For example, Colorado law permits small deductibles of $500 to $5,000 applied to both types of claims, while Hawaii allows $100 to $10,000 applied only to medical benefits. Some states, such as Hawaii, require insurance companies to offer small deductibles, some require them to offer deductibles upon the employer’s request (Pennsylvania), and others require an offer only if the insurance company determines that the employer can handle it financially (Colorado). The employer receives a small premium discount. Depending on state law, insurance companies may report losses to rating bureaus on a “gross” basis (not reduced by the deductible) or on a “net” basis (reduced by the deductible). The amount reported impacts the employer’s experience modification.

Some insurance companies offer “medium” deductibles, which range from $10,000 to $75,000. No states require the companies to offer these plans; employers who want them must negotiate them with the companies.

Large deductibles are those of $100,000 or more per claim. Some states limit the types of employers that can buy large deductible programs, usually by standard premium size (for example, Florida requires a minimum premium of $500,000). States may also set the minimum deductible on either a flat dollar basis ($100,000 per claim in Florida) or on a percentage basis (40% of standard manual premium in Alabama). While the employer is in effect self-insuring some claims, the insurance company performs the actual claim handling, pays the amounts due, and bills the employer for reimbursement. The policy may include an aggregate deductible which is the most the employer will pay for the policy term, regardless of the number of claims. Some large deductibles make the employer responsible for some or all allocated expenses, such as the cost of legal counsel. This arrangement gives the employer some control over choice of counsel and claim settlement.

To ensure that the employer under a large deductible plan will be able to pay the reimbursement, the insurance company requires the employer to put up security. The company may require the employer to set up an escrow account with a balance large enough to cover a few months’ estimated average claims. It may also require the employer to obtain a bank letter of credit, guaranteeing that the bank will honor the employer’s checks. Like an insurance policy, a letter of credit is a promise of future performance with no up-front expenditures, so the amount guaranteed may be the predicted loss amounts for the entire policy term.

Deductible plans can improve employers’ cash flow, reduce their insurance premiums, provide increased tax deductions, and give them more control over their Workers Compensation costs. However, they are appropriate only for employers that can afford the potentially large cash reserves required. Any employer contemplating a deductible plan should implement an effective workplace safety program -- and consult with our professional insurance agents who can identify and explain the alternatives.

COPY MACHINES: AN IDENTITY THIEF’S DREAM-COME-TRUE

It’s hard to believe that the copy machine just recently celebrated its 50th birthday. There’s no question that these popular technological devices have proven to be worth their weight in gold for countless consumers and businesses. From copying to scanning and even e-mailing documents, copy machines are a must-have for most modern day companies.

However, there’s a secret lurking inside the common copy machine that has identity thieves across the nation salivating. Nearly every copier that was built since 2002 includes a hard drive. This relatively small unit, hidden inside the copy machine, stores an image of every single document scanned or copied by the machine.

An identity thief’s dream

Most copiers store up to 20,000 document images, which might include Social Security numbers, birth certificates, bank records, income tax forms, medical records, and other valuable information. In other words, these hard drives contain the type of data that identity thieves are itching to get their hands on.

Perhaps even more frightening is this fact: Anyone can easily buy used copiers from office supply vendors. Oftentimes, a used copier that initially cost thousands of dollars is sold for just $300 or less. Quite a few vendors sell these used copiers to overseas buyers.

Most sellers do not erase the hard drive before selling a used copier. That means the buyer gains immediate access to all the invaluable information stored on the hard drive for just a few hundred bucks. With a special device, an identity thief can easily scan and download all the document images stored on this hard drive.

However, an identity thief doesn’t even have to buy the copier to gain access to the profitable data inside. He could simply hack into the office copier’s hard drive to get his hands on the wealth of information stored there.

Understanding the risks

Unfortunately, most of the general public is completely unaware of the potential risks associated with copy machines. A recent study revealed that 60% of Americans do not even realize that copiers store images on a hard drive.

Luckily, there are ways to combat the threat of identity thieves stealing data from copy machines. Some copy machine security companies have the ability to “scrub” or delete all of the info on copy machine hard drives before a business gets rid of the copier.

Additionally, some new copy machine models include a feature allowing users to erase images from the copier’s hard drive automatically. This extra feature typically costs about $500. It could be worth the added expense. After all, this feature could end up saving you thousands of dollars in identity theft damages.