Female Board Seat Mandate - What's In It For Private Companies?

While the new CA law does not apply to private companies, it might serve them well to consider the chatter surrounding the matter and take similar actions.

California Senate Bill 826 went into effect January 1, amending the Corporations Code, now requires at least one woman on every public company Board by year end or face a $100K fine. See the full text here https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB826

Good, bad, right, wrong – doesn’t really matter now that it’s the law. Private companies can choose to ignore it, or see it as the direction their competition will be taking.

Numerous studies have been splashed about touting findings of higher profits and greater return on equity for those companies that have women on their boards. Generalized explanations suggest that companies with women on the Board:

o Are more transparent
o Hold the CEO more accountable
o Employ higher ethical standards
o Are more detail oriented and thorough in vetting threats and opportunities

Lesser publicized studies refute such gender correlation.

Credit Suisse - 2-4% increase in ROE with one woman on the Board – but gender not necessarily causation
reference https://www.credit-suisse.com/corporate/en/articles/media-releases/42035-201207.html accessed on 2/11/2019

MSCI – ROE 9% better and EPS 29% better when 3 or more Board seats were held by women
(study analyzed US companies over a 5 year period, 2011-2016) reference
https://www.msci.com/www/blog-posts/the-tipping-point-women-on/0538249725

Docusign – 4.5% increase in stock price when they announced a new female Board Chair in 2018. Three of their
11 board seats are held by women. Reference
https://www.msci.com/www/blog-posts/the-tipping-point-women-on/0538249725

Free Market competition would suggest that the law isn’t necessary – that consumers, shareholders and investors are demanding Board room diversity to ensure profits and innovation.

Competition is also requiring diversity in a much broader scope (age, gender, race, etc) -companies are taking queues from and investing in younger generations for digital skillsets and perspectives on e-commerce and marketing. Diversity equates to agility in addressing rapid technology advancements, globalization, regulations, management turnover… ever evolving business challenges. Diversity, in other words, keeps companies current and relevant.

This new trend is also requiring companies go beyond their known networks – to cast a wider, deeper net in their search for talent.

Private companies thinking of going public in the future would be wise to recruit female board members now.

Wether for PR purposes or to spur innovative thinking, capture attention and or marketshare, embracing these new practices and incorporating “Diversity” into your Board of Advisors and staff is certainly worth considering. Fortunately, the talent among females does exist - finding the right talent to strategically round-out your Board of Directors or Advisors just may take a bit more networking.

In the end, it’s about the business case and being able to best serve your constituents. Take from this what might serve your private company well!

Workplace Civilization 2.0 - Don't let your employees become #MeToo ers

The issue of harassment has become a frequent topic of conversation. Employees are emboldened by the news to come forward, and in some cases, this is long over-due and will serve to bring all of us forward into Workplace Civilization 2.0. While there will be those that simply attempt to capitalize on the opportunity, other cases will be legitimate. As an employer, you should expect and prepare for claims and allegations to come forward. So, your burning question is - Where does insurance stand in all of this? As your trusted consultant, let me chime in!

FYI:

• Insurance carriers offering EPLI (Employment Practices Liability Insurance, which would be the coverage to respond to harassment claims) are expecting an onslaught of claims
• Workplace harassment is prevalent – guestimation is that 25-85% of employees have experienced sexual harassment in the workplace
• The bad behavior is not discriminatory, it is found among all demographics and industries – all age, gender, race, income, occupation, position, seniority, sexuality, political or religious affiliation, marital status, etc.
• EEOC complaints have doubled in the last few months – triggering investigations
• Harassment allegations are now generating shareholder lawsuits - claims of mismanagement and failure to act causing consumer aversion and stock price drops [potential D&O insurance coverage concerns]

Actions to Consider:

• Although the law only requires Harassment training for management and executives in companies of 50 or more – it is highly recommended that companies train all employees, regardless of company size. This not only creates a more defensible position, but also sends a stronger message that such behavior will not be tolerated
• Empower employees to report on behalf of others when they see unacceptable behavior – See Something, Say Something!
• Use outside resources – for hotlines, independent investigations, policy review and incident consultation, etc.

EPLI - Employment Practices Liability Insurance is available to cover harassment claims and allegations. Policies can provide defense costs, handling expertise, and cover expense and settlement costs.
• Defense and settlement costs of harassment claims can easily exceed $150K and take 18-24 months to resolve
• EPLI premiums are based on industry, jurisdiction, company size and claim history
• Although less common, harassment can involve 3rd parties (i.e. sales rep and customer/client or employee/vendor type interactions), coverage for which should be requested in a policy

Reminder:
• Portfolio clients have free access to my independent HR Consultant for the “one- off, unusual incident circumstances” and HR policy questions or reviews
• EPLI carriers offer free HR consulting to policy holders
• Recommendations to attorneys that specialize in HR matters are readily available – call or email me
• Harassment Training is available from attorneys and independent HR consultants – call or email me

Most importantly, recognize that curbing harassment falls on each of us – it’s not solely an HR matter. To be meaningful, efforts need to come from multiple sources and vantage points. Have questions about EPLI insurance? Call me!



Thanks to those that contributed:
David Monks of Fisher & Philips, Renee Schor and Julie Vogelzang of Schor Vogelzang and Eileen Jolly of RT ProExec

Q4 2014 Directors & Officers Insurance Update

Looking ahead to upcoming 2015 Directors & Officers renewals, here is what you can expect

Bottom Line:
Private companies can expect another year of double digit premium increases (10-15%).
Public companies can expect another year of high single digit premium increases (6-9%).
Note that this information applies to the market in general and does not mean that every policy will experience such increases.

Why?
Private company D&O claims are on the rise due primarily to the increase in mergers and
acquisition activity, data breaches and anti-competitive behavior.

All companies are at a higher risk of regulatory investigations, but FCPA, price fixing
and anti-trust investigations continue to hit public companies most.

Trends:
The IPO boom is expected to continue. Although valuations are much more reasonably today (which caused most of the IPO trouble in 2000) investor expectations are often not met –
leading Underwriters to expect continued increase in D&O claim activity.
According to Matthew Shulman, ESQ., a leading D&O Underwriter, in an online IRMI
webinar 10/16/2014, 7 IPOs issued in 2013 have already been hit with class action suits.
IPOs in 2013 totaled 157. IPOs in 2014 hit 112 by mid year – far exceeding 2013.

Data Breaches leading to shareholder derivative claims alleging mismanagement are
expected to increase. All companies, especially public, will be subject to much more
scrutiny of their network security (beyond hardware/software precautions). Executives will
need to proactively enact security measures to meet the increasing due-diligence
expectations of shareholders and stakeholders (customers, vendors, employees) alike.

Demand for private company D&O is on the rise. Executives and investors are taking
much more sophisticated approaches to their entrepreneurial ventures – each requiring
protection of their investment.

Action:
Consider supplemental Side A D&O coverage which only responds with defense coverage for the Ds & Os - no coverage for the entity. Entity coverage under private company
D&O policies is very broad and is being seen to frequently eat up policy limits, leaving little limit left for defense of the Directors and Officers. To ensure adequate coverage for the defense of the directors and officers, more private companies are adding separate Side A D&O coverage policies to their portfolio.

Address Cyber/Information and Privacy Liability Security exposures. Checklists for
identifying exposures, ranging in sophistication, are available upon request.
Precautionary measures suggested in these checklists can help to jumpstart your security program and ensure the most reasonable premiums if/when you decide to obtain such insurance.

Call me with any question or to review your coverage.

Carol L. Corporales, CIC, MLIS
858.202.6187

Paid Sick Leave - News You Need to Know

Hello!

Wanted to pass along the attached bulletin regarding the bill just signed into law requiring mandatory paid sick leave. Please feel free to contact Eric Martin of the American Consulting Group with any questions. As my client, you have complimentary telephone consulting with Eric on all of your HR and Safety matters.

As Eric so cleverly warns – this bulletin might make you sick! Read with caution and don’t panic as it does not apply until July of next year. Feel free to call us with any questions. I have received several of these bulletins so if you would like additional resources just let me know.

Regards,

Carol

ACG Consulting Services Bulletin September 2014

Mandatory Sick Days Means More Headaches for California Employers

Warning: if you’re a business owner or Human Resources professional, you might be tempted after reading this post to call in sick. Come next July, all California employers will be required to provide paid sick leave to all employees – exempt and non-exempt, full time, part time and temporary. Here are the key provisions of AB 1522 which was just signed into law by Gov. Brown.

AB 1522 – This bill mandates that private California employers provide paid sick leave for employees, beginning in July 2015. With this becoming law, most employees will be entitled to one hour of paid sick leave for every 30 hours worked. Employees will be able to use sick leave for their own illness or for preventive care, to care for a sick family member, and/or to recover from certain crimes. Employers will be able to cap annual sick leave use at 3 days (24 hours) per year, however unused, accrued sick leave will roll over from year to year (this rollover can be capped at no less than 6 days (48 hours). Employers will be able to set a minimum increment for use of sick leave, but the minimum increment cannot be greater than 2 hours.

Employees will not be entitled to compensation for unused sick leave at the time of separation of employment. Employers will be required to provide notice to employees of their accrued sick leave on their itemized wage statements or on a separate document provided at the same time as wages. Employers will also be required to post a paid sick leave poster to be prepared by the Labor Commissioner’s office.

The bill also prohibits retaliation against an employee for using sick leave and establishes a rebuttable presumption of such retaliation if adverse action is taken against an employee within 30 days after the employee’s use of sick leave. Employees covered by collective bargaining agreements with paid sick leave provisions and other enumerated criteria will be exempted from the new law. Employers that already have paid sick leave policies that comply with at least the minimum leave rights provided under the bill will not be required to provide additional leave.

What should employers do?
Most employers that have sick leave policies will need to revisit and likely revise their policies and employee handbook to insure compliance before July 2015, particularly as it pertains to eligibility for part-time and temporary employees, accrual starting 30 days after hire, and use of sick leave to care for family members. Employers that don’t currently offer sick leave will have to devise a program that meets the minimum requirements and implement by July. All employers will need to make sure their payroll systems reflect the accrual of sick leave and post the required notices. Further, terminations closely following use of sick leave will have to be scrutinized to protect against discrimination and retaliation claims.
In addition to the foregoing, Governor Brown already signed into law AB 2074, which increases employer liability in actions alleging the employer paid the employee less than the minimum wage. Under AB 2074, employees will now be able to recover liquidated damages for violations going back three years (4 years under the Unfair Competition Law).
If there is any positive news for California employers, it is that AB 2416 was not passed by the Legislature. AB 2416 would have provided a procedure for an employee with a wage claim against his or her employer to record a lien against the employer’s real and personal property in the state.

Governor Brown has until September 30 to sign or veto the bills pending before him. Employers who wish to voice opposition should direct comments to the Governor’s office.


Eric Martin
Senior Vice President, American Consulting Group
949.452.1840

Press Release!

CAROL L. CORPORALES EARNS CERTIFICATION AS MANAGEMENT LIABILITY INSURANCE SPECIALIST (MLIS)

Demonstrating a Mastery and Commitment to Excellence in the Field


SAN DIEGO, CA: - WATERIDGE INSURANCE SERVICES is pleased to announce Carol Corporales has been certified as a Management Liability Insurance Specialist (MLIS®). This insurance certification recognizes specialized expertise in the fundamentals of professional liability insurance and the more specific nuances of directors and officers liability, employment practices liability, and fiduciary liability exposures and insurance.


“The MLIS program has helped us show our clients and prospects that we understand their most important, and specific insurance needs,” said Jeff Byroads, Principal of Wateridge Insurance Services. “Carol has further strengthened our firm with the specialized knowledge necessary to provide superior risk management and insurance advice and service to our clients.”


The MLIS continuing education program is a two part specialized curriculum concentrated on elements common to all types of Management and Professional liability policies, such as claims-made coverage triggers and policy conditions. The four courses in Part 2 focus specifically on directors and officers liability (D&O), employment practices liability (EPLI), and fiduciary liability insurance. The non-standard nature of management liability policies necessitates the need for specialized training, which is not included in traditional insurance instruction or continuing education.

Employment Practices Liability Insurance - Statistics

Employment Practices Liability Insurance (EPLI):

Still wondering if you should add this coverage to your insurance portfolio?
Has your EPLI premium gone up significantly?

EPLI claims continue to escalate in both frequency and severity - driving up premiums. The attached report here gives some statistics and data points by industry for 2012. This data may help you decide if it's time to get this coverage for your company, or help to explain the increase in premium.

Wage and Hour claims continue to be popular. Most carriers no longer offer coverage for these claims under the EPLI policy. At best, a few carriers are offering coverage on a sublimit basis -typically $150K.
Statistics on Wage and Hour claims can be seen here.

While most insurance carriers offer hotline assistance to clients, know too that as a Wateridge client, you also have access to unlimited telephone consultation from American Consulting Group. ACG can address labor and HR questions, provide HR audits, and assist with IIPP and employee handbook updates.

If you have questions about EPLI coverage or your insurance portfolio and what gaps may exist, call me directly at 858.202.6187 or email me at ccorporales@wateridge.com

Reminder: OSHA Log & Summary Due Feb 1st.

Happy New Year!

 

You are probably still digesting all of the new laws for 2013 that I emailed last month, but don’t forget about the pesky OSHA Log and Summary posting requirement due Feb 1^st!

Each year we hear about OSHA visits – the first things they ask to see are the OSHA logs for the last 5 years and your IIPP (Injury & Illness Prevention Program). New requirements as to the content of the IIPP went into affect last year –along with hefty fines for non-compliance.

Please keep in mind that as a Wateridge client you have access to the discounted services of SMC. Jim Zanecosky, the owner of SMC, is a loss control specialist that is available to assist with your loss prevention needs.

Jim and I have put together the following reminder:

• If you had 10 or more employees at any point during 2012, and your business is not classified as exempt (see partial list below) then you need to post 

 

• Posting (of the OSHA 300 Appendix B only) is due Feb 1^st   

• Both OSHA 300 Appendix A and B are required to be kept for 5 years 

• For your convenience, both OSHA forms are available upon request

Please feel free to call me with any questions that may arise on this and for more information on the services of SMC.

Reach me at 858.202.6187 or ccorporales@wateridge.com

 

More detailed information about this OSHA requirement

During each year, OSHA's Form 300, the "Log of Work-Related Injuries and Illnesses", must be used to classify work-related injuries and illnesses and to note the extent and severity of each case. When an incident occurs, employers must use the Log to record specific details about what happened. On this form, employers must record information about every work-related death and about every work-related injury or illness that involves loss of consciousness, restricted work activity or job transfer, days away from work, or medical treatment beyond first aid. They must also report significant work-related injuries and illnesses diagnosed by a physician or licensed health-care professional. Employers must also record work-related injuries and illnesses that meet any of the specific recording criteria listed in 29 CFR Part 1904.8 through 1904.12.

 At the end of the year, all establishments covered in 29 CFR Part 1904 must complete OSHA's Form 300A, the "Summary of Work-Related Injuries and Illnesses", even if no work-related injuries or illnesses occurred during the year. After careful review of the "Log of Work-Related Injuries and Illnesses" to verify that entries are complete and accurate, the total number of incidents in each category listed on OSHA's Form 300 must be transferred to the Form 300A. California law requires employers to post the "Summary" page from February 1, 2013 to April 30, 2013. It must be displayed in a conspicuous location where notices to employees are customarily posted. A copy of the "Summary" must also be made available to employees who move from worksite to worksite and employees who do not report to any fixed establishment on a regular basis. At the end of the three-month period, the "Summary" should be taken down and kept on file for a period of five years following the year to which it pertains.

 This posting requirement applies to employers who had 10 or more employees in 2012 and do not fall within the partially exempt industries.

 Establishments classified in the following SICs are exempt from most of the recordkeeping requirements, regardless of size, unless OSHA or the Bureau of Labor Statistics informs you in writing that you must keep records.

 

PARTIALLY EXEMPT INDUSTRIES IN CALIFORNIA

SIC Code	Industry Description	SIC Code	Industry Description
525	Hardware Stores	731	Advertising Services
542	Meat and Fish Markets	732	Credit Reporting and Collection Services
544	Candy, Nut, and Confectionery Stores	733	Mailing, Reproduction and Stenographic Services
545	Dairy Products Stores
546	Retail Bakeries	737	Computer and Data Processing Services
549	Miscellaneous Food stores	738	Miscellaneous Business Services
551	New and Used car Dealers	764	Reupholstery and Furniture Repair
552	Used Car Dealers	782	Motion Picture Distribution and Allied Services
554	Gasoline Service Stations
557	Motorcycle Dealers 783 Motion Picture Theaters	783	Motion Pictures Theaters
56	Apparel and Accessory Stores	784	Video Tape Rental
573	Radio, Television, and Computer Stores	791	Dance Studios, Schools, and Halls
58	Eating and Drinking Places	792	Producers, Orchestras, Entertainers
591	Drug Stores and Proprietary Stores	793	Bowling Centers
592	Liquor Stores	801	Offices and Clinics of Medical Doctors
594	Miscellaneous Shopping Goods Stores	802	Offices and Clinics of Dentists
599	Retail Stores, Not Elsewhere Classified	803	Offices of Osteopathic
60	Depository Institutions (banks and savings institutions)	804	Offices of Other Health Practitioners
		807	Medical and Dental Laboratories
61	Nondepository	809	Health and Allied Services, Not Elsewhere Classified
62	Security and Commodity Brokers
63	Insurance Carriers	81	Legal Services
64	Insurance Agents, Brokers and Services	82	Educational Services (schools, colleges, universities and libraries)
653	Real Estate Agents and Managers
654	Title Abstract Offices	832	Individual and Family Services
67	Holding and Other Investment Offices	835	Child Day Care Services
722	Photographic Studios, Portrait	839	Social Services, Not Elsewhere Classified
723	Beauty Shops	841	Museums and Art Galleries
724	Barber Shops	86	Membership Organizations
725	Shoe Repair and Shoeshine Parlors	87	Engineering, Accounting, Research, Management, and Related Services
726	Funeral Service and Crematories
729	Miscellaneous Personal Services	899	Services, Not Elsewhere Classified

 

 

Need For International Insurance Often Goes Unrecognized

Thanks to the web, today companies of any size can now operate globally. Many companies have expanded operations to include international sales, travel by employees, overseas manufacturing, importing and exporting of raw materials and finished goods. What has not expanded however, is the insurance portfolio to cover these new exposures.

Standard commercial insurance policies typically only provide coverage for claims and suits brought in the US, Canada and US territories. Activities occurring outside of this coverage territory are not covered by typical insurance portfolios. Many do not realize this.

All too often I discover companies operating globally with no insurance in place to protect them or their employees. The insurance portfolio needs to be considered a living asset. Periodic review and comparison of operations to coverages by a savvy Broker is essential for sound economic and operational security.

In-country insurance requirements of each country that an insured deals with need to be examined and accommodated as well. Doing so ensures that international insurance benefits will be allowed to respond to foreign claims and suits by the foreign government. Foreign national employees that travel to the US or elsewhere outside of their resident country need specific endorsement coverage as well.

            How far does your Product Liability coverage extend?

            When traveling internationally, are your employees covered for:

§         endemic disease?

§         food poisoning?

§         lost travel documents?

§         How about for legal issues that may arise?

International Insurance portfolios can include coverage for property, product liability, excess auto liability, workers’ compensation and more.

If you have questions about your insurance portfolio and what gaps in coverage may exist, call me. You can reach me directly at 858.202.6187.

Treat Your D&O Insurance Policy Like A Used Car... What?!

When you buy a new car from a dealer, negotiations focus on price. Performance of the vehicle is assumed and backed by a warranty. When you buy a used car from an individual owner, consideration is placed on both price and condition of the vehicle. Often you will have a mechanic inspect a used car to determine its fitness in an effort to avoid costly performance surprises later.

Avoid costly performance surprises from your D&O policy by having it inspected like a used car. 

Whether buying D&O insurance for the first time or renewing existing coverage, due diligence in determining policy fitness is highly recommended. Have policies analyzed for potential loopholes and gaps in coverage. Many do not realize that there is no ISO standard D&O policy – each insurance carrier writes their own. Since no two policies are alike, it is important to understand the terms, conditions and extent of exclusions of each policy considered. Once differences are identified, you can then negotiate both cost and performance.

Treating your D&O insurance policy like a used car will help to ensure that it works the way you expect it to when you need it.  

Claim Example:

A recent policy review for a nutraceutical company revealed that there was no coverage for mismanagement arising out of any EPLI (Employment Practices Liability) claim. While there was a separate EPLI policy, it specifically excluded cover for D&O claims. Had a claim arisen, the company and or officers would have been liable for the defense costs of the mismanagement claim.

Such a case played out for a San Diego research company that ended up paying $123K in defense and settlement costs for their HR Director because their D&O and EPLI policies contained the same exclusions.

OSHA Log and Summary - Time to Post!

It's that time of year again - when Cal OSHA requires the Log of Work-Related Injuries and Illnesses (Form 300) be posted for the previous calendar year from February 1 through April 30.

You must save the Cal/OSHA Form 300, the privacy case list (if one exists), the Cal/OSHA Form 300A, and the Cal/OSHA Form 301 Incident Reports for five (5) years following the end of the calendar year that these records cover. Failure to maintain and post the log could result in a Cal OSHA citation and fines costing an employer thousands of dollars.

If you need more information, or the forms, click here.

For a listing of those exempt industries in California, click here.

 

If you would like to discuss your situation, feel free to contact me directly at 858.202.6187.

 

Current clients can also contact Chris Malicki at the Pacific Safety Council for more information: 858-621-2313 x120

2012 - New Laws for Employers

Hello!

As 2011draws to a close, it is time to start preparing for the New Year!

New laws going into effect January 1^st will require employers to make some changes. As a Wateridge client you have access to the resources of the American Consulting Group, a HR, safety and labor consulting firm. ACG’s attorneys have put together the following update on the new laws that you need to be aware of and appropriate measures to consider:

22 New Employment Laws Will Impact California Businesses in 2012

Beginning January 1, 2012, a variety of new laws will take effect that will impact the employment practices of companies doing business in California.  The American Consulting Group is strongly recommending that all companies begin revising their employment policies and making modifications to employee handbooks in order to conform to the new legislation. 

Recommended Action Items for Employers

• Conduct an audit of wage and hour practices to insure exempt employees and independent contractors qualify for that status.  New Labor Code Section 226.8 mandates stiff penalties ($5000 to $15000 per violation) for misclassifying employees as independent contractors.
• Modify your company’s workers' compensation postings to include the website address and contact information that employees may use to obtain further information about the workers' compensation claims process and an injured employee's rights and obligations, including the location and telephone number of the nearest information and assistance officer.
• Confirm that employee payroll records are retained for at least three years vs. two years (Amended Labor Code section 1174).
• Consider adding an affirmative confirmation on every hourly, non-exempt employee's time sheet, verifying that the hours entered accurately state all of the employee's hours worked during the period covered by the time sheet or record.
• Prepare to provide each employee with a written notice, at the time of hiring, that specifies all of the information required by new Labor Code section 2810.5.
• Begin preparing written commission agreements for employees who receive commissions to prepare for compliance with AB 1396, which requires such written agreements to be in place by 2013.
• Review your leave and benefit policies and make revisions to comply with changes to Pregnancy Disability Leave rights (SB 299).
• Add a Social Media policy to your employee handbook that addresses recent National Labor Relations Board (NLRB) rulings respective to protected concerted activities and rights of employee to disclose information. Additionally, modify company’s electronics within the workplace, confidentiality and conflicts policies to bring current with recent NLRB rulings.
• Review all of your company’s written safety policy programs to ensure the following: 1.) That only the programs that a company is REQUIRED to adhere to are noted in any documentation, 2.) that any “borrowed” or vendor-provided documents are reviewed first by a specialist before implementing and to check that each actually meets YOUR SPECIFIC company’s requirements, 3.) Review all safety programs to ensure that all policies included are actually operational, 4.) Review your company’s system for appeals respective to any government issued citations is functional.

Please feel free to contact me with any questions or assistance.

Have a wonderful and safe New Years!

Carol

Protecting Personal Assets with a D&O policy – a False Sense of Security?

When talking with executives about Directors and Officers insurance, I often hear the same comment - "We already have a policy in place through a Broker that handles all of our insurance". What I have found however, is that even the most sophisticated insureds and those well versed in D&O are unaware of critical exclusions and conditions precedent to coverage contained in their policy. Numerous assumptions are common as well:

• all D&O policies are good ones
• all policies are similar
• all Brokers are knowledgeable on this type of insurance

Unfortunately, many seem to be lured into a false sense of security by the presence of a D&O policy without scrutiny.

Think of an alarm system that you pay for and install to protect you and your possessions. You would probably do some homework on the various brands and features and, not dismiss the installers before they instructed you on how to use the product. Directors and Officers insurance policies are similar to alarm systems in several respects:

If you don’t know how to work them, they may not protect you.

All D&O policies contain conditions precedent to coverage – meaning you have to do certain things according to stipulations in the policy in order to trigger coverage. Failure to do so can result in a denial of coverage by the insurance carrier.

25% of D&O claims are denied with no contest! - simply because the insured did not comply with one provision of the policy (they did not report in time).

Product specifications, operation, features and characteristics differ by brand.

D&O policies differ significantly from one another and are more sophisticated than other types of policies. Let me address some common myths.

Myth #1: Insurance is a commodity; all policies are the same or similar.

            Many common insurance policies are derived from an ISO (Insurance Services

            Office) standard. There is however, no ISO standard D&O policy; each insurance

            carrier writes their own. Language, terms, conditions, clauses and exclusions all

differ from policy to policy. As such, specimen copies of each quoted policy

need to be requested, read and compared in order to truly understand what is

being quoted and what you are getting. It’s a challenging task which begs the

question – how often is it being done?

                       

Myth #2: All Insurance Brokers are created equal and they all know everything you need them to know about D&O insurance.

You might be surprised to know that information on D&O insurance is not included in Broker training or common Continuing Education curriculum. Like doctors and attorneys, each Broker evolves expertise in certain areas. You would not ask a patent attorney to handle your divorce or a dermatologist to treat a vision problem. D&O insurance requires attention to details that are not readily apparent. Knowing what to look for and how to negotiate such policies is not a common skill set. Unfortunately, for insureds and Brokers alike,

                        “You don’t know what you don’t know!”

Understandably, insureds are reluctance to address the D&O policy in depth. In today’s environment bandwidths are stretched beyond capacity – no one has the time or inclination to take on another potential problem. Rules, regulations and standards by which companies are held however, keep increasing. Publicly we see these standards being difficult to meet even by large companies that have resources with which to comply. Small and mid-size companies with few resources are actually more at risk. Claim statistics show frequency and claim costs rising. Reliance on an existing D&O policy may be convenient but might not provide the protection that you are expecting.

Do not fall prey to a false sense of security

It’s not realistic or wise to assume protection just because you have a D&O policy.

You rely on the D&O policy to protect your personal assets: your home, savings and possessions. Find out what the professionals you are relying on really know about the coverage. Ask questions!

            What do they look for in a policy?

            What are the red flags in a policy?

            How can they negotiate a policy to be more in your favor?

You may find that a generalist Broker is not appropriate.

Make sure that you know how to operate your policy by asking your Broker what the conditions are. Find out what is excluded – you will be alarmed at the sheer number of exclusions! Most importantly, when obtaining or renewing a D&O policy work with an Insurance Broker that specializes in D&O coverage and has attorney resources that specialize in insurance to refer to. 

Commercial Auto Insurance – Coverage details often forgotten

Company Autos

When it comes to company autos, there are several very important insurance coverages that often get overlooked.

Drive Other Car  (DOC) coverage

Loan/Lease Gap coverage

Employees as Additional Insureds

DOC:

This is important for employees who drive company cars and do not have their own personal auto insurance. In order to be covered while driving autos other than the company car, say a car belonging to a spouse, relative or friend, then alternative liability coverage is necessary in addition to the commercial auto policy. This can be accomplished by either adding the DOC endorsement to the commercial auto policy or by the employee obtaining a personal auto policy. Often, family vehicles are insured under the other family member’s names – in which case, it is usually cheaper to get the employees name added as an additionally insured driver under the family auto policy.

Loan  / Lease Gap:

In the event of a total loss, situations can arise in which the actual cash value of the car is less than what is still owed on the vehicle or the lease payoff amount. Note that the value of a new car can be 20-30% less than what you paid for it for several months after you drive it off of the new car lot. This endorsement when added to the physical damage portion of your commercial auto policy endeavors to cover unforeseen gaps between the cars value and what is still owed. Early termination fees could also be covered by such endorsement.

Employees as Additional Insureds:

Once in a while we see employee owned autos get insured by the company and get referred to as company autos. Since technically you cannot insure property that you do not own, a problem can arise if a claim occurs and is submitted to the commercial auto carrier but the car is registered under the employee’s name. To avoid the potential denial of coverage in this case, it is necessary to add the registered owner of the vehicle as an additional insured on the commercial auto policy.

These endorsements are simple and inexpensive to obtain – but you do need to ask for them!

Call me – I can help!

Carol L. Corporales, CIC
Wateridge Insurance Services
858.202.6187 Direct
ccorporales@wateridge.com