A Quick Lesson on General Liability Insurance

A Quick Lesson on General Liability Insurance

What is General Liability Insurance?

General liability insurance (GL) is a form of insurance purchased to protect an insured (usually a business entity) from an array of detrimental claims. GL policies cover losses sustained from a personal injury, bodily injury, property damage, and various losses caused by business operations.


Who needs General Liability Insurance?

Imagine investing years of hard work and countless hours building a successful business, only to have it taken from you because someone slipped and fell on your premises. Businesses without GL policies are exposed to a greater number of potentially detrimental risks.

Experienced business owners invest in general liability insurance because it transfers risk and helps to ensure the longevity of the venture. Every business owner who values their business should have a general liability policy. 


Why should businesses have General Liability Insurance?

When you own a business or piece of real estate anyone can sue you for any reason. If a person takes legal action against you, your general liability policy should protect you. General liability policies cover you for losses listed under the coverages, and also cover the legal fees associated with defending a claim. General liability insurance should cover legal fees regardless of fault! This means whether you are found innocent or guilty, the policy will pay to defend you in court. 


When should I purchase General Liability insurance?

You should purchase general liability insurance when you plan on opening a new business, or when purchasing a new piece of real estate. Any claims filed against you outside of the policy period will not be covered. It is not recommended that you operate a business or own a piece of property without having general liability insurance.  

For business owners, the best time to purchase/issue general liability insurance is anytime before you begin business operations. Businesses under construction should carry general liability insurance even before they begin business operations. Real estate owners should have a general liability policy issued on the date of their closing. 


When does General Liability Insurance “Kick-in”?

General liability insurance "kicks in" when you have a claim filed against you. General liability covers the cost of legal fees and will also cover the damages of a loss if the loss is covered under the policy. All general liability policies differ, but for the most part, they cover personal injury, bodily injury, property damage, and certain losses arising from business operations.

In order to receive payment from a GL policy, the claim must first be settled in court. Once the claim is settled, the carrier must make payment within a "reasonable" amount of time. It is tough to determine how fast a carrier will make payment, however, they usually pay out relatively quickly.  


Where can you purchase General Liability insurance?

If you are interested in purchasing general liability insurance or any type of insurance for your business, you should seriously consider contacting a licensed property and casualty (P&C) broker. Working with a licensed P&C broker is crucial for obtaining quality and affordable coverage. A good broker compiles the different risk exposures of your business, evaluates the appropriate limits of coverage and issues a quote with the most affordable premium. 


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

7 Important Differences Between FMLA and the Paid Family Leave Act

7 Important Differences Between FMLA and the Paid Family Leave Act

For those of you who do not know, starting in 2018, New York state is introducing the Paid Family Leave Act (PFL). New York’s Paid Family Leave program provides wage replacement to employees to help them bond with a child, care for a close relative with a serious health condition, or help relieve family pressures when someone is called to active military service. Employees are also guaranteed to be able to return to their job and continue their health insurance. If you contribute to the cost of employee health insurance, you must continue to pay your portion of the premium while they are out on Paid Family Leave.

FMLA, or The Family Medical Leave Act, has been in effect since 1993 when it was enacted to provide 12 weeks of unpaid job protections for eligible employees at covered employers.


While both PFL and FMLA are designed to protect the family members of an employee, they do have key differences:  

1. Federal vs. State:

FMLA is a federal program where PFL is a state program. All businesses with 50 more employees across the United States must abide by the laws of FMLA. PFL however is a state mandated program and although it has been implemented in other states, it will begin in New York starting in January of 2018.


2. Benefits Comparison:

FMLA is an unpaid benefit, which means no monetary benefit is provided to employees who participate. PFL is a paid benefit, which will start out by providing 50% of an employee’s income capped at New York’s average weekly wage which is currently $1,305.92. By 2021 PF will cover up to 67% of an employee’s income. Payment for PFL comes from employee payroll deductions.


3. Job Protection:

Both FMLA and PFL provide job protection for eligible employees.


4. Time off:

FMLA provides employees with a maximum of 12 weeks off in increments of as little as 15 minutes. This means an employee can miss 15 minutes of work at a time for an FMLA-related event.

PFL will initially be capped at 8 weeks of time off and will increase to a maximum of 12 weeks by 2021. Time off with PFL may be used in 1-day increments.


5. Eligibility:

FMLA applies to employees who work for a company employing 50 or more employees. In order to be eligible for FMLA, an employee must work for the same employer for a minimum of 12 uninterrupted months, or 1,250 hours in the months prior to FMLA event.

PFL applies to all business in New York and other states where PFL has been applied. Any and all New York State companies employing 1 or more employees are required to participate in the PFL. To be eligible an employee must work a minimum of 20+ hours per week for a minimum of 26 consecutive weeks. If an employee is working less than 20 hours per week, they must have been working for their employer for 175 days or more to be eligible.

*Note: If an employee is eligible for both FMLA and PFL the benefits they receive will run concurrently. This means an employee cannot combine FMLA and PFL time to extend the duration of the leave.


6. Qualifying Events:

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For the most part, FMLA and PFL cover the same life events. These events include bonding and caring for a newborn child, caring for a sick family member, and adjusting for a family member’s military deployment.

One major difference between FMLA and PFL is that PFL will not cover an employee who is absent from work because they need to care for themselves and a personal injury or illness they endure. FMLA will cover an employee if they personally become sick or injured.


7. Vacation & Sick Days:

Vacation and sick time benefits are left at the employer’s discretion, however all employees must be treated equally under the governing decisions of the employer. Under FMLA, an employer can force an employee to use their sick or vacation days while they are on leave. Under PFL, an employer cannot require an employee to use their sick or vacation days during leave.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

What is a Primary and Non-Contributory Endorsement?

What is a Primary and Non-Contributory Endorsement?

Contingent on the business, a primary and noncontributory endorsement can be an important part of an insurance policy. Credible businesses who understand the value of proper insurance coverage may want to require the parties they do business with to have insurance that includes them as an additional insured on a primary and non-contributory basis.

In order to truly recognize the importance of the primary and noncontributory endorsement, we must break down and analyze the terms "primary" and "noncontributory" separately.


Primary:

When an insurance policy is considered “primary” it will pay out first in the event of a loss. If there are two policies covering the same risk, the policy deemed “primary” will pay out its limit before the secondary policy and is responsible for the defense costs until liability is determined. This is important because if there is a claim, you want to the other party’s insurance to pay out first if there is a loss as well as pick up the defense costs.

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Noncontributory:

When and insurance policy is considered “noncontributory” the insurance carrier issuing the policy will not seek contribution from an additional insured if it pays out a loss.

For example, ABC general contractor needs some help constructing a building and hires XYZ subcontractor.  XYZ names ABC as an additional insured on a primary and non-contributory basis. If a claim arises and XYZ’s insurance company pays out, the noncontributory endorsement prevents them from seeking contribution for the loss from ABC. 

This is important because if the other party’s insurance pays out a claim, you don’t want their insurance carrier coming after you after claiming you were partially at fault and should responsible for contributing to the loss.


Primary & Noncontributory Endorsement (CG 20 01):

If you are named as an additional insured on a policy containing a "primary and noncontributory" endorsement, that policy will generally pay out first, cover the defense costs associated with the claim and be estopped from seeking contribution from you.  This endorsement is ideal for general contractors because it helps transfer the risk associated from the negligence of one of its subcontractors.

To learn more about primary & contributory coverage or proper risk transfer in general, contact us to set up a review of your insurance.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

7 Tips for Managing Certificates of Insurance

7 Tips for Managing Certificates of Insurance

For those who do not know, a certificate of insurance ("COIs") is a document, which summarizes an insured’s coverage as it pertains to a particular risk. More often than not, COIs are issued to third parties who require evidence that proper coverage is in place. If handled irresponsibly, Certificates of Insurance COIs can be a cumbersome issue for your business. Here are 7 tips for managing certificates of insurance:


1. Get it from the broker:

Did you know an insured is prohibited by law to issue its own COI? In order for a COI to legally be issued it needs to come from a licensed insurance broker. To avoid any issues, ask an insured’s broker for a COI directly.

2. Set specific and concise requirements for EVERY risk:

There is no such thing as a universal insurance policy for every risk you encounter, determine the specific coverages necessary to ask for in the COI. Developing insurance guidelines specific to each risk you manage is the best way to ensure proper coverage. 

3. Don’t be afraid to voice your concerns:

At the end of the day, you are responsible for protecting the well-being of your business. If you sense or recognize an insured’s COI is not compliant with your requirements say something. Even if you are wrong, developing the habit of questioning and understanding the coverages listed in a COI will pay dividends for you in the future.

4. Create a system for managing COIs:

This may not be the most exciting part of your day but it will save you from misery in the future. Creating an internal system for managing and overseeing COI is a great way to reduce the risk of improper coverage.

5. Don’t Jump The Gun:

No matter how urgent it is to begin working a job, it is not worth risking the livelihood of your business. All too often businesses permit vendors to begin working on a job without reviewing and approving their COIs. You may get away with this once or twice, however, this bad habit can and will lead to issues moving forward. 

6. Record and Respect the Expiration Date:

One of the first pieces of data to extract from a COI is the expiration date of the policies listed. Ask yourself, what if the insured’s coverage expires in the middle of the project? Record and monitor the expiration dates for all policies listed on the COIs and make sure to follow-up for renewals. 

7. Outsourcing:

Depending on the size of your business, you may not be able to handle a comprehensive system for managing COIs internally. A common alternative is to outsource the responsibility of managing your COIs to your insurance broker. Skyline Risk Management, Inc. can oversee and manage your COIs for you. 

If you have specific questions about how you can manage your COIs, contact Skyline Risk Management, Inc. at (718) 267-6600 for more information. 


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

Commercial General Liability and the Prior Work Exclusion

Commercial General Liability and the Prior Work Exclusion

What is a policy exclusion?

A policy exclusion is anything specifically not covered by your insurance policy. Every insurance policy has a designated section called “Exclusions”. The purpose of an exclusion is to limit coverages appropriately. Some policies offer coverage for certain risks for which the insured may not need coverage. Exclusions serve to limit excess coverages and often help reduce the cost of insurance.

What is a Commercial General Liability (CGL) policy?

Commercial General Liability (CGL) policies are commonly referred to as General Liability (GL) policies and cover a business for liability against bodily injury (BI) and property damage (PD). CGL policies cover claims, which occur on the premises, or from operations, product and completed operations, and/or advertising personal injury (PI) liability.

Commercial General Liability Exclusions:

Excluding certain coverages from your CGL policy is not a bad thing. Of course the more coverage you have the better protected you are, however, excess coverage for risks that are outside the regular scope of operations may be deemed unnecessary. A big reason why policyholders elect to include calculated exclusions is to remove unnecessary coverages for a reduced premium. On the flip side, carriers commonly issue exclusions for certain risks they are not willing to insure against.

The Prior Work Exclusion:

A popular CGL exclusion carriers request is the Prior Work Exclusion. For example, Paul is a contractor and carries a CGL policy with ABC company effective from January 1st, 2016 to December 31st, 2017. All throughout 2016, Paul is working and completing various jobs.

At the end of 2016, Paul is approached by XYZ insurance carrier offering the same coverages as ABC carrier but at a much more affordable premium. However, XYZ carrier’s policy includes something call a prior work exclusion. Not knowing the significance of the prior work exclusion Paul cancels his policy with ABC carrier and binds with XYZ carrier. Paul believes he made a wise decision because he has the same coverage limits he had with ABC carrier but at a more affordable rate. 

Four months later Paul gets a phone call from one of the clients he performed work for during 2016. The client informs Paul that one of the walls Paul built in the client's office unexpectedly cracked and fell down during the middle of the work day. The felled wall caused significant property damage and bodily injury to one of the client’s employees. The client is not happy and plans to sue Paul for damages. 

Paul calls XYZ carrier to submit the claim. XYZ carrier denies Paul’s coverage because of the prior work exclusion, which clearly states no work that was performed before the effective date of the new policy is covered. Paul now realizes that the prior work exclusion leaves him vulnerable to any and all work he completed prior to the effective date of his policy.

The Lesson Learned:

If you take away anything from this article, understand that exclusions can have a major impact on the quality of a policy. Do not take exclusions lightly and do not underestimate their importance. On the other hand, do not be afraid of exclusions either as some exclusions are okay when coverage is deemed excess and/or unnecessary. The best person to help you make these decisions is your insurance broker. A good broker will be able to identify these potential issues and will recommend alternative coverages to fit the unique needs of your business. 


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

Insuring Completed Operations Pollution Risks

Insuring Completed Operations Pollution Risks

Construction companies are increasingly relying on specific insurance policies that protect against lawsuits regarding contamination and pollution. Contractor’s pollution liability, or CPL policies, help construction companies that may face lawsuits related to construction projects.

Pollution and contamination issues related to construction projects garner a lot of negative attention. They can also be financially and professionally difficult to navigate for companies involved in lawsuits. CPL policies can protect project owners and any contractors involved from liability claims.

Pollution, contamination, and other harmful environmental issues can occur during a construction project or after it has officially been completed. During a construction project, excavating, building roads, operating heavy machinery, and the materials used for the building can have a negative impact on the earth around the project.

If something should go wrong during the construction project, the mistake might not be known until after the project has been completed. A CPL policy helps minimize a project’s liability when it comes to environmental issues.


Project-specific policies

Project-specific CPL policies are useful for insuring a particular project that could have an environmental impact in a concentrated area. Obviously, the risk of pollution or contamination are highest where the construction is occurring. In most cases, contractors on a project will purchase a CPL policy and include the owner of the project as the additional named insured on the policy.

Although the instances of CPL policy purchase have increased, there are still some coverage gaps that need to be addressed. Often, the wording of the insurance requirements from the project owners conflicts with the CPL policies.

CPLs come in occurrence and claims-made forms. When a CPL is claims-made, additional insurance is needed for any issues that may arise after the construction project is completed. An occurrence-based policy doesn’t require any additional insurance purchases, but this can cause an increase in risk of claims made after the project is over. If a project owner or contractors choose not to purchase completed operations insurance additions to their CPL policy, this can leave a dangerous coverage gap.

Regardless of policy type, a project owner or contractor’s liability is only for the time period that the insurance policy is for. If damages occurred during that period, the insurance policy comes into play. Having a CPL policy and a completed operations policy can keep a project protected for longer.

A completed operations period refers to the time that a project has been completed, but issues related to the project may still cause problems. This can be a difficult timeframe to pin down. Some projects are more likely to cause pollution or contamination issues during construction, while others may have a bigger environmental impact after the job is done.


Benefits of CPL policies

CPL policies come with a few benefits. One benefit is that a CPL policy is project-specific, meaning an insurance policy can be tailored to an individual project’s characteristics. A policy holder can take into consideration the expected duration of the project, when the most environmental damage may occur, and what the completed operations period might be.

There are many insurance policies that try to cover environmental issues as part of a blanket policy. Having the ability to cater an insurance policy to the needs of a particular project decreases gaps in coverage and helps keep your risk lower for longer.

Additionally, you can choose to purchase completed operations coverage for claims or occurrence policies to cover all bases left by a construction project. CPL insurance isn’t the same as a general liability policy or other environmental insurance policies. An expert in environmental insurance issues should be consulted for your individual project to determine the best insurance for your project.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."
 
 
 

New York’s New Paid Family Leave

New York’s New Paid Family Leave

New York is Making History:

In 2016, Governor Cuomo signed a new law, which will take effect in a few short months, creating the strongest and most comprehensive paid family leave act in the country.

The act will take effect on January 1, 2018 allowing New York residents to take paid leave to bond with a new child, adopted or born into a family, take care of a family member with urgent health concerns, and even take the needed time to adjust when a family member is called to active military service. No other state in the country offers such a comprehensive policy that protects job security, medical benefits coverage and paid family leave as well.


The Details

New York’s Paid Family Leave will now provide a fair wage replacement for an individual who qualifies according to specific stipulations. Employers have to guarantee an employee's position will be available when the individual is able to return and their health insurance will continue throughout, as long as the employee continues to pay his or her portion of the health insurance as if he or she were receiving a standard paycheck from the company.

The first year of the plan will allow for a qualifying individual to receive 8 weeks off and 50% of their salary during their paid time off. In 2019, this number increases to 10 weeks and 55%. In 2020, the numbers will increase to 60%. Finally, in 2021, the numbers increase to 12 weeks and 67%.

However, in all of these circumstances, you may not take home more than the maximum percentage of the NY State Average Weekly Wage. This time off can be used in consecutive weeks or spread out throughout a 52 week period. This coverage will be fully-funded by employee payroll deductions and included in the business's statutory disability coverage.


How This Will Effect Employers:

All employers are required to participate in the New York Paid Family Leave program. Upon the renewal of a business's statutory disability benefit, employers will be automatically billed for the New York Paid Family Leave program. Employers have the option to pay for these costs themselves, or they can issue a deduction from their employee's gross incomes. If an employer elects to delegate payment to its employees, the deduction will appear on the employee's pay-stub, which will look similar to a tax deduction. 

Draft regulations state an employee who is provided health insurance by his or her employer is entitled to the continuation of that group health insurance coverage during Paid Family Leave on the same terms as if he or she had continued to work. Employees must continue to make their regular contributions to the cost of their health insurance premium. 


Employee Eligibility:

Anyone who is a full or part-time private employee in New York State may be eligible for this coverage if they have been employed for at least 26 weeks or 175 days, if part-time. Participation in the program is mandatory, and therefore, it is advised to utilze it when eligible. The bad news is public employees may not be covered by this program unless their employers opt into the program or the union negotiates that it is part of the contract. Unfortunately, this does not apply to any prenatal issues and is only available after the birth or adoption of the child.

Once the basic measure of eligibility is determined, you must determine if your situation makes you eligible to use the benefit. The first thought everyone considered in this situation is maternity and paternity leave. Under this benefit, you may take up to 8 weeks in 2018 and 12 weeks by 2021 to bond with your newly born, fostered or adopted child. This applies to both mothers and fathers.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."
 
 

Ten Steps to Prepare for a Windstorm

Ten Steps to Prepare for a Windstorm

Whether it be hurricanes, typhoons, cyclones or another type of windstorm – contractors never know when they’ll hit. When the worst happens, small business owners can be in a world of hurt.

Windstorms can have a disastrous effect on company offices or jobsites. Small business owners have a lot to lose when damaging storms come through. Property damage and business interruption are typically covered by insurance coverage, but time out of business can hurt the company’s reputation, which can lead to a loss of market share.

Every business needs to be ready. Here are 10 steps to prepare for a windstorm.


1. CREATE A PLAN

Write down exactly what needs to happen if a windstorm does hinder the business. Detail exactly who in the organization is responsible for what. Assemble any emergency supplies that could be required. Then put together a list of contractors, vendors and other services that could come in handy during an emergency.


2. SECURE THE PERIMETER

Make sure the outside of the building is prepared for a storm. Fasten down any and all loose equipment. Move items indoors if needed. Remove any large trees or limbs that could damage any buildings in the area during a windstorm.


3. TAKE CARE OF THE ROOF

Inspect the roof and make sure no repairs are needed. A roof can take a lot of damage during a windstorm so make sure it is in excellent shape.


4. FUEL UP

Before the storm hits, fill up gas tanks of fire pumps, generators, equipment or company-owned vehicles so they don’t run out of gas during a time of emergency.


5. PROTECT WINDOWS AND GLASS

Any window or door that has glass must be protected. Find these areas and attach pre-fitted windstorm shutters. This will seal the perimeter, which ensures no broken glass.


6. PROTECT ELECTRONICS

Computers, machinery and all electronics will be damaged if water reaches them. Right before the storm, try to cover all electronics with a plastic tarp and move things to a safe location. Backing up data is also essential.


7. WATCH FOR CHEMICALS

Are there chemicals on hand? If so, make sure they are properly and safely stored. If not, a storm could cause such chemicals to react in a violent manner if they come together accidentally.


8. PREPARE FOR THE FLOOD

Vulnerable openings around buildings should be covered with sandbags. Electronics should be moved to a higher elevation and covered with a plastic tarp. Turn off the electricity in the building once the storm and flood are nearing.


9. TURN IT ALL OFF

If the storm is nearing, turn everything off. From electricity to gas lines to all flammable sources – make sure everything is off.


10. UNDERSTAND INSURANCE

After the storm has hit, check the insurance policy, including type and level of coverage. Different events can be insured in different manners in certain locations. This includes landslides, tree damage, flash flooding and more. Small business owners have a duty to ensure their business is properly covered by any threat, especially windstorms.


Anthony Kammas is a Partner at Skyline Risk Management, Inc. He serves as the secretary-elect of the Professional Insurance Association (PIA) of N.Y., is a member of the Hellenic American Chamber of Commerce and a member of the Hellenic American Leadership Council. With over a decade of property and casualty experience, Anthony is an industry leader specializing in real estate and construction insurance. In 2015, new construction costs in New York City for residential projects grew to an all-time high of $18 billion. Anthony and Skyline Risk Management procured insurance for almost $1 billion of that total cost in 2015. 


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

Commercial Insurance Policies and Extra Expenses

Commercial Insurance Policies and Extra Expenses

Wading through your existing insurance policies can be daunting. Knowing what you are and aren’t covered for can be a challenge, especially when you are faced with circumstances beyond your control. If you have experienced property damage to a business property that interfered with your business, your commercial insurance may cover business losses and extra expenses.

Commercial insurance policies are incredibly important to have in order to keep your business up and running, no matter what. Natural disasters or fires can be devastating to a community, and businesses that can stay open or reopen quickly will be able to support those communities looking to rebuild. Having the financial protection of a commercial insurance policy means not having to worry about how you’ll recover, but how soon you’ll recover.

Dealing with extra expenses

Some commercial insurance policies have provisions for extra expenses you may incur as a result of your property being damaged by fire or a natural disaster. If your property is damaged and you are losing business because you have to shut down for a period of time, you may be compensated for those business losses by your insurance. Other business losses could be because customers can’t access your business due to the fire or natural disaster shutting down roads.

There may be extra expenses that aren’t expressly covered in your insurance policy, but that could be covered by your insurance. For instance, a small company owned a property that was damaged by fire. The owner was able to set up a temporary office until a suitable alternative was found about two months later.

In this case, his extra expenses were setting up a new office and eventually moving to a more permanent location. As per his commercial business insurance, extra expenses that are covered include expenses that are incurred trying to avoid or minimize the amount of time your business is closed or not operational. This means that moving expenses and other costs associated with continuing operations at another location are covered by your insurance.

Additional expense coverage can be used to replace personal property that you use in your business, like furniture and other office supplies. A commercial insurance policy could compensate someone for the business income loss they might face.

Other extra expenses

Another commercial insurance extra expense comes in the form of preventative measures taken to save a property from further damage. After a storm, water trucks and generators were brought in to a property to save the landscaping, which was a golf course. Since the land was essential for the continued operation of the business, the extra expenses of the water trucks and generators to save the grass would be covered by their commercial insurance policy.

These expenses would be covered because they serve to minimize the time a business is not operational and, ultimately, reduce the total amount of loss a business faces during the time they are closed.

Commercial Insurance

Commercial insurance is designed to keep your business running for as long and as well as possible. If you do face closures or damages because of a natural disaster or a fire, your commercial insurance may cover additional expenses you may face in the course of preventing further losses. Most expenses that you face that minimize your total business losses may be covered by your insurance, as will extra expenses incurred to make sure your business can operate at any sort of functional level.

There are details and stipulations in commercial insurance policies that dictate what extra expenses qualify. If you do have a commercial insurance policy, go over it with your insurance agent to see what sort of expenses you may be covered for if the unexpected happens.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."
 
 
 

Multiple-Employer Welfare Arrangements (MEWA) a Healthcare Alternative

Multiple-Employer Welfare Arrangements (MEWA) a Healthcare Alternative

Multiple-Employer Welfare Arrangements, or MEWAs, are growing in popularity as another alternative to traditional health insurance policies. The Affordable Care Act’s mandate requires a broader range of employers to cover their employees’ healthcare costs. MEWAs are an alternative healthcare option to the federal health insurance exchanges.

MEWAs are a kind of self-funded insurance plan. MEWAs are put together by a group of employers who don’t want to work within the governmental healthcare system. A self-funded MEWA allows a group to get together to pool their health care resources, rather than strike out on their own to fund their health insurance needs individually.

Benefits of MEWAs

MEWAs are beneficial to employers because they allow for risk to be spread to a number of entities, rather than be shouldered by one small business. MEWAs can be used to offer health care incentives to employees or members of a professional association. If a small business doesn’t want to use the existing federal health insurance marketplace in order to provide health insurance for their employees, this can be a viable alternative.

MEWAs are member-owned, meaning the benefits flow around to all the people who are involved in the program. Employers who offer a MEWA health insurance plan are able to keep deductibles and premiums stable while still offering full healthcare coverage to their employees. Profits from the MEWA stay within the group that started the MEWA, so the savings and the risks are spread around.

Many MEWAs are set up like a board of trustees. This means that there is no artificial inflating of health insurance costs and that your payments don’t have to change year to year. If an employer is offering up incentives for their employees in the form of a wellness program, that positive action comes back around in the form of healthier employees and even lower insurance costs. If employees sign on to the MEWA program but don’t use it very often, costs are decreased for everyone.

A board of trustees is usually set up to manage the MEWA, which allows changes and alterations to be made to the program to account for the specific needs of the group that is being insured. This ensures a stability that doesn’t always exist in traditional insurance plans, because people are in control of the costs and not the insurance market.

Although small businesses can benefit from MEWAs, other organizations large and small can create a MEWA, too. Individuals, large groups, and professional associations are also eligible for this kind of insurance program.

What to know about MEWAs

There are some states in the US that allow MEWAs, while others do not. Other states may regulate MEWAs strictly. Although too many restrictions can harm the functioning of a MEWA, a level of regulation isn’t a bad thing. This keeps MEWAs for the people, businesses, and organizations that can benefit from them the most and use them properly.

When determining your eligibility for a MEWA, your state’s laws regarding this kind of insurance plan will need to be checked. If your state does allow MEWAs, this can be an incredibly helpful opportunity for you and your employees.

MEWAs are member-owned, so the rewards and the risk are contained in that particular group of employers or associated organizations. This allows for a dissemination of pressure if there are a lot of claims one year and not the next. A MEWA is set up to be regulated, but also to give employers the ability to control their own health insurance options and not be vulnerable to the changes in the government-run health insurance exchange.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."
 
 
 

Understanding Coverages and Exclusions of Contractor’s Professional Liability Insurance

Understanding Coverages and Exclusions of Contractor’s Professional Liability Insurance

Contractor's professional liability insurance is a facet of the construction industry that continues to blossom. This growth is good news in many ways. It provides the opportunity for more thorough coverages, more competition and an ability to obtain better overall coverage than ever before. 

However, the growth of contractor’s liability insurance also highlights some common pitfalls that its owners can be subject to if they are not careful. The Insurance Services Office (ISO) regulates contractor’s liability insurance for the entire industry. Even so, each policy can be different. Each insurance carrier has different standards, provisions and exclusions that can take a loss that is entirely covered by one policy and make it into one that is not covered at all under another policy.

MISUNDERSTOOD COVERAGE

One of the most important areas things to watch out for is a gap in coverage. Assuming that one coverage covers all of a contractor’s insurance risks is a dangerous mistake to make. The purpose of contractor’s professional liability coverage is to protect the contractor against any design flaws caused by them or a third party. It is a critical coverage by all means, but does not always provide for every type of unexpected incident that might occur on the job site.

A coverage that can be essential in bridging that coverage gap is pollution coverage. The purpose of pollution coverage is to protect against damages incurred from pollutants in the course of construction. Damages can include injury to a person, damage to property and even cleanup. Sometimes pollution coverage is included in a contractor’s professional liability policy, but other times it is not and has to be purchased as a separate policy. Knowing whether or not the policy contains coverage for pollution introduces us to another area in which to be cautious.

POLICY LANGUAGE

There is nothing more essential in the process of making sure that the business has the coverage it needs than knowing the specifics of the coverage it has. An understanding of what each coverage includes, as well as ensuring that it is fully comprehended how each coverage works in the event of a claim, is imperative to making sure the policy properly covers needs. Policy language can include lots of jargon and unclear terms, so stay informed by asking the agent for clarification on anything that is not understood.

Along with ambiguous language, word definitions can be another trip-up. Some insurance terms can have different definitions from carrier to carrier. Placing a different meaning behind the same insurance term can lead to entirely different coverage than expected in the event of a claim. A perfect example of this is auto insurance, where many people use the term “full coverage” loosely. Some use the term to mean physical damage coverage and to others it implies that policy includes every single coverage available. Pay attention to any words that may have a vague meaning.

EXCLUSIONS

Exclusions to the policy can be a big game-changer regarding whether or not the company is covered. Knowing the specifics of any policy exclusion on the contractor’s professional liability insurance policy creates more awareness of possible coverage pitfalls. Not only can exclusions render coverage useless in certain situations, but violations of some exclusion can also result in insurance fraud.

The best step toward ensuring that a policy covers everything it needs to do is to make sure that it is clearly understood what the policy covers and what it does not. If questions remain, contact the company’s insurance agent.


Anthony Kammas is a Partner at Skyline Risk Management, Inc. He serves as the secretary-elect of the Professional Insurance Association (PIA) of N.Y., is a member of the Hellenic American Chamber of Commerce and a member of the Hellenic American Leadership Council. With over a decade of property and casualty experience, Anthony is an industry leader specializing in real estate and construction insurance. In 2015, new construction costs in New York City for residential projects grew to an all-time high of $18 billion. Anthony and Skyline Risk Management procured insurance for almost $1 billion of that total cost in 2015.

Homeowner’s Coverage Impacted by Cyber Concerns

Homeowner’s Coverage Impacted by Cyber Concerns

There has been a lot of stories in the news lately about digital security and data privacy. When it comes to the security of our digital information, there is a lot at stake. Protecting your identity, financial information, and personal data from theft is incredibly important and can save you from troubles down the road.

Unfortunately, the instances of cybercrime are on the rise. In 2015, nearly $15 billion was lost because and cybercrime. This kind of digital crime has become more popular than property crime in the United States.

Cybercrime’s impacts

Cybercrime has an incredible reach due to the number of technological devices we have at our fingertips. From our phones to computers, tablets to in-car digital systems, we add more and more personal information to our devices every day. These devices then become gold mines for people who want to steal your identity, financial information, and much more.

In addition to hacking into your personal information, cyber criminals can use your identity to send back transfers, extort people for money, and damage your reputation without your knowledge. Right now, this sort of damage is hard to protect against if you aren’t prepared for it.

Cybercrime can have far-reaching impacts. A hacker may not gain much financially, but it causes you a lot of trouble to replace credit cards, make sure your social security number isn’t being used by someone else, and change all your online passwords.

Keep Yourself Safe

There are different ways that you can keep yourself safe online. Make sure to change your passwords regularly and make them strong; a random string of letters, numbers, and symbols is hard to remember, but even harder to hack. If you do need to write your passwords down, make sure they are in a location where only you can access them.

Use encryption data to protect your email and documents you may be storing in the cloud or in another online server. These online locations aren’t immune to breaches, so make sure you have an offline backup of all your important information.

As tempting as it is, limit the personal information you share on social media. Don’t add people you don’t know to sites like Facebook. Remember that a person who hacks into just one of your social accounts can grab enough information to infiltrate further and discover more about you. This can include your location, where you work, your birthday, or your social security number.

Cybercrime and homeowner’s insurance

Homeowner’s insurance hasn’t typically offered protections against most kinds of digital theft that could happen to you. Homeowner’s insurance has offered people a safety net in case they have their identity stolen. In traditional cases, this means refunding fraudulent charges and replacing things like credit cards that may have been compromised.

Cybercrime has added a new level to identity theft. If someone gets your data and pretends to be you online, your reputation could be damaged in addition to your information being spread online. Hackers have gotten around traditional homeowner’s insurance policies because of the nature of their cybercrime.

However, the homeowner’s insurance industry is changing to meet these new needs. A new cyber family policy may begin to be added to some homeowner’s insurance policies to protect your digital assets as well as other aspects of your online life.

One insurance policy can’t keep cybercrime from happening, but it can help you if your digital information should be breached in any way. Even if your reputation is being damaged online, a cyber insurance policy associated with your homeowner’s insurance could help you discover what information has been leaked, where it has gone, and what you can do to prevent it from happening again.

Time will tell how other parts of the insurance industry adjust to the increase in cybercrime.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."
 
 
 

Location is Key to Accurate Auto Insurance Rates

Location is Key to Accurate Auto Insurance Rates

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A recent automobile insurance case in Maine was a victory for fine print. The Dairyland Insurance Company came up against someone who had provided false information on their insurance documents and purchased auto insurance in a different state than the one they were living in. In some cases, an insurance policy cannot be rescinded, which makes this case particularly interesting in the insurance industry.

There are, however, rules regarding falsifying information in order to receive insurance discounts, better rates, and other benefits. As McArthur Sullivan found out, legal fees cost a lot more than just paying a bit extra for your automobile insurance in the first place.

The Case

The case involved a man named McArthur Sullivan, who had purchased multiple personal car insurance policies for his vehicles. He purchased these policies and, on his insurance contract, stated that he lived in Wales, Maine, and kept his cars there as well.

Dairyland Insurance Company, found out that Sullivan had misrepresented himself with the personal information he had given them in order to insure his vehicles. Rather than living and storing his vehicles in Maine, as he had previously stated, evidence was found that he lived in Massachusetts and garaged his vehicles there as well.

The Insurance Company then sought to rescind the insurance policies they had given Sullivan, which resulted in a court case when Sullivan protested the nullification of his existing auto insurance policies.

A federal district court in Maine tried the case and found that an insurance company can pull a policy if the policy was based on false information provided by the person seeking insurance coverage. The application for Sullivan’s insurance policy included a statement that said that any false, incomplete, or misleading information put on the application could lead to consequences that included imprisonment, fines, or a denial of insurance benefits.

Dairyland also provided documentation that stated their right to rescind any insurance policy that was based on misrepresentation or circumstances that affected an applicant’s eligibility of risk (such as where they and their cars reside). This also includes situations where the insurance policy premium is lower than what they would pay if they had provided correct information.

For instance, if Sullivan had purchased auto insurance for his vehicles in Massachusetts, his payments would have been higher than he was paying in Maine.

Maine law also backs up Dairyland’s claims. Maine’s laws state that an insurance carrier can indeed pull an insurance policy that was given as a result of omissions or false information.

The Result

Dairyland won the court case due to the amount of evidence it had that stated a person must provide accurate information about themselves and their vehicles in order for the insurance policy to be considered valid. Maine law and Dairyland’s own insurance contracts provided a foundation for the court case to be heard in a federal court.

Dairyland was able to prove that Sullivan misrepresented himself on purpose and with the intention of gaining benefits from the false information he put in his application. The court found that Dairyland would not have issued an insurance policy to Sullivan based on the actual facts he would have put in his application, had he truthfully represented himself and his situation. The court upheld Dairyland’s decision to rescind Sullivan’s automobile insurance policies.

This case could have further implications not only for the auto insurance industry, but for other insurance policies as well. If someone is issued an insurance policy based on false or withheld information in their profile, an insurance company could be well within their rights to take away that insurance coverage if the person is found to have falsified application information.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."
 
 
 

Issues in Contractual Privity

Issues in Contractual Privity

Legal issues regarding contractual privity have been occurring around the country, many with conflicting results. This issue primarily affects the construction industry, where insurance policies from the parent company or contractor is filtered down through other third party contractors and subcontractors.

Solving this insurance problem would make it financially safer not only for construction companies, but for the people who work as part of the construction industry. Every part is important to one another, and subcontractors are an integral part of the construction industry. Resolving the issue of contractual privity would make it easier to know what is covered by an insurance policy and what is not.


Explaining blanket additional insurance

When a general contractor or a project owner has insurance for a particular project, they are often able to transfer that insurance to include the people and companies they hire to work on that project. The transfer of insurance comes with the obligation to purchase additional insurance and a contractual risk transfer.

This insurance is known as blanket additional insured endorsements. This kind of insurance is triggered by a written contract that outlines the required additional insurance, as well as a loss that is connected to the person or company who holds the original insurance policy. This becomes very important when a company or subcontractors are trying to decide if the original insurance policy is enough, or if all parties need to be insured by the original policy or blanket insurance additions.

In construction, it can be helpful to have direct contractual contact between two companies to ensure insurance coverage for all involved. In this kind of agreement, general contractors or subcontractors under a parent company may be required to name that owner or parent company on their general liability policies. Without a direct contract between the two parties, it may be difficult to decide if the insurance policy will cover the owner or parent company in case there is an issue.


Legal Ramifications

Cases regarding contractual privity have been ongoing in Connecticut, Maine, and Texas. These cases found that contractual privity (that is, the agreement between two entities) is not required for additional insured endorsements.

The first case in Connecticut, known as First Mercury Insurance versus Shawmut Woodworking, was decided in favor of Shawmut Woodworking. An accident occurred with a subcontractor working under a company working under Shawmut Woodworking. Shawmut Woodworking had taken out additional insurance endorsements with First Mercury Insurance, under the contractual policy that “any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.…"

This statement was taken as evidence that a direct contract between Shawmut Woodworking and the two subcontracting companies was not needed.

The case in Maine involved Pro Con, Incorporated, and Interstate Fire and Casualty. Pro Con was doing a project at Bowdoin College and there was a contract required between Pro Con, Bowdoin, and a subcontractor of Pro Con called Canatal. Canatal then hired another subcontractor that was also required to name Pro Con, Bowdoin, and Canatal as additional insureds on their general liability policy.

In the court case, Pro Con was sued by a subcontracted employee. The details of the blanket endorsement didn’t specify that there needed to be a written contract between all the subcontracting companies, but rather that there just needed to be a general written contract.

Opposing legal action

Other legal cases around the country have found that contractual privity is required, putting into question the impacts of differing legal systems between the states. The laws regarding contractual privity are constantly evolving, but remain incredibly important for companies that work in the construction industry.


 

THE SKYLINE DIFFERENCE

 

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."
 
 
 

Health Insurance Relief for NY Business

Health Insurance Relief for NY Business

Finally some good news for New York business owners actively insured in the small group commercial health insurance market. Effective April 1, 2017, businesses with 1-99 employees will now have 7 health insurance carriers to choose from, which is almost double what the market offered in 2016. In January of 2017, New York welcomed Empire Blue Cross Blue Shield, which was the first of three new carriers to enter New York’s commercial health insurance market. Just recently, both Healthfirst and Oscar health insurance companies also announced that they will be participating in New York’s commercial health insurance market beginning on April 1, 2017. Here is what you’ll need to know about these two new carriers: 

Healthfirst:

Healthfirst is a not-for-profit managed care organization sponsored by several prestigious and nationally recognized hospitals and medical centers in New York. Currently, Healthfirst is a major player in the New York individual market offering Medicaid, Medicare Advantage, Child Health Plus, and Managed Long Term care plans for more than 1.2 million members in downstate New York.
Healthfirst’s history in New York indicates a strong track record and has analysts optimistic regarding the carrier’s decision to join the New York commercial health insurance market.
Fun Fact: Healthfirst plans are the only plans in the NY small group market offering dental insurance as additional insurance for no extra cost. When you buy your health plan it comes with a complimentary dental plan at no cost.

Oscar:

Similar to Healthfirst, Oscar has made their reputation in New York’s individual health insurance market. Know for its cutting edge technology, Oscar appeals mainly to a millennial business demographic, keen on simplicity and innovation. Oscar has made an emphasis on enhancing the member’s experience and has created a mobile application allowing users to:

  • Search for symptoms, providers, and drugs
  • Use Doctors on Call to talk with a doctor over the phone at anytime
  • View you Oscar health history
  • Send questions to Oscar’s customer care team
  • Access your digital ID card
 

The Oscar mobile application also rewards members:

  • Track your steps and earn rewards for just hitting daily goals and staying active.
  • By connection to Apple’s Health App, you can see all your steps tracked by your phone and compatible step tracking devices, and get rewarded for your hard work.

Customer Reviews: “Tracks my steps to earn Amazon rewards, links to my watch’s app and account for the steps my watch records.”


Both of these carriers will be available effective April 1st, 2017. It is okay to switch carriers during your plan year. If you are currently insured you do not have to wait until your renewal to change carriers. If you have questions and/or would like to see if these rates and plan designs work for your business please contact Skyline Risk Management, Inc. at (718) 267-6600 for consultation.  

If you have questions and/or would like to see if these rates and plan designs work for your business please contact Skyline Risk Management, Inc. at (718) 267-6600 for consultation.  

ACA Repeal & Tax Returns

ACA Repeal & Tax Returns

On January 20th president Trump signed an executive order, permitting the Department of Health and Human Services to withdraw and repeal certain features of the Affordable Care Act (Obamacare). Prior to this executive order, law under the ACA and the IRS required taxpayers to demonstrate “essential minimum coverage (MEC).” Taxpayers are considered to have MEC if they have health insurance via: Medicaid, Medicare, CHIP, retiree coverage, TRICARE, VA health coverage, or private health insurance purchased from the individual, small group or large group market place. Taxpayers on COBRA or state continuation may also qualify for MEC depending on their plan type.


Taxpayers who do not have MEC are subject to a waiver of exemption or a penalty. This penalty is referred to as the “shared individual responsibility payment.” In 2016, the shared individual responsibility payment for anyone who does not have MEC is 2.5% of your adjusted gross income, or $695 per adult and $347.50 per child, up to a maximum of $2,085, whichever is greater. In 2015, taxpayers without MEC had to pay $325 per adult and $162.50 per child up to $975 per family, or 2% of your household income, whichever was greater.

Results for 2015 aren’t currently available, however in 2014, 7.5 million Americans paid shared individual responsibility payments to the IRS for a total of $1.5 billion in penalties.

Here is the good news, the IRS has recently announced, “Individuals do not have to wait for their Form 1095-B or 1095-C in order to file. While the information on these forms may assist in preparing a return (tax return) they are not required. Like last year (2015), taxpayers can prepare and file their returns using other information about their health insurance.”

The quickest and easiest way for tax payers to indicate that they have coverage is to complete the box on line 61 on page 2 of their individual income tax return:

In 2017, the IRS has said that it will accept and process tax returned even if a taxpayer is silent on coverage. This means that tax payers filing for their tax returned are not obligated to specify their healthcare coverage.

To be clear, this does not mean that tax payers should leave this question on their tax return blank. If possible it is always recommended to complete any IRS document truthfully and to the best of your ability. 


Understanding Liability Under the False Claims Act

Understanding Liability Under the False Claims Act

Over the years, government compliance requirements have grown and grown. They've become more intricate, too – as have the tools needed to enforce them. Using a wide array of enforcement methods, the federal agencies work to control and enforce compliance.

There is one tool the government uses that affect contractors more than others – the False Claims Act. While understanding the False Claims Act can be difficult, it's imperative for contractors and surety professionals. The risks associated with violating the Act are significant.


What is the False Claims Act?

Before we get too far in, let's break down the False Claims Act. While complicated, the Act boils down to this: the law imposes liability on companies and individuals who defraud any government program. The federal government uses the act as the primary litigation device in fighting fraud against the government.

Not Too Difficult?

Contractors are typically aware that defrauding a customer, company, or government is completely prohibited and illegal. The False Claims Act extends beyond full-on fraud. A doctrine known as the "false certification doctrine" states that a contractor who falsely states they have complied with a variety of compliance policies imposed by the government can be held liable under the False Claims Act.

Violating the False Claims Act is far easier than committing traditional fraud. The government doesn't have to prove any damages suffered. They simply have to find a contractor who has submitted a claim that was "known" to be false.

Due to how the Act is enforced and the "false certification doctrine" – it is incredibly simply to violate the False Claims Act. Once you do, the violations can add up. Most contractors find a violation can be exceptionally costly.


Volatile and Expensive

There are two different types of liabilities the government can dish out to violators of the False Claims Act. Both actual damages and statutory penalties can be lobbied against violators.

The penalties can be between $10,781 and $21,563 for each claim submitted by the government. As individual invoices are treated as separate claims, a large penalty can be enforced – even when the government hasn't suffered any actual harm.

Not only are the fines costly, but they can be unpredictable, too. Even subcontractors without a direct relationship to the government can be subjected to liability – just like federal prime contractors.

Due to the whistleblower provisions in the False Claims Act, individuals with knowledge of a company's operations can bring suit on the government's behalf. This clause often catches contractors flat-footed and unaware of the consequences that may be coming.


What Sureties & Their Contractors Should Know

Paying attention to the False Claims Act is mandatory these days. While it seems to be tougher and tougher to stay in compliance with the Act than ever before, the consequences for failing to do so continue to get higher and higher.

As a surety, it's imperative to educate contractors on the perils of the False Claims Act. Contractors can take a number of steps to ensure risks are minimized. For example, a contractor could:

  • Implement a mandatory independent review of every single invoice by a project manager before submitting and completing the project.
  • Continual communication with the federal government through counsel. Details of contractual difficulties that arise and compliance issue may be discussed.
  • Fully implementing a compliance, monitoring, and training program for all employees that covers a majority of significant contractual requirements.

On top of these ideas, a contractor may seek to consult with outside counsel regarding changes to federal regulations and implementation. By doing so, a contractor can limit exposure to liabilities under the Act. 

To learn more about liability under the False Claims Act and how this effects your business contact Skyline Risk Management, Inc. at (718) 267-6600.

Mitigate the Risk of Subcontractor Default With a Surety Bond

Mitigate the Risk of Subcontractor Default With a Surety Bond

 By Yannis Legakis

By Yannis Legakis

The construction industry has been an ever-changing environment during the last decade as it adapts to the rise and fall of the market. Project owner demands and requirements have increased.

With all these changes in play, it becomes a fair question whether bonding subcontractors is still an important part of the business. The answer is a resounding yes. As the construction industry changes, so do risks.

The primary purpose of a surety is to financially protect the obligee (in this case, the general contractor) if the principal (subcontractor or supplier) does not fulfill contractual obligations. With the changes in the market, there are new reasons that this promise is so vital for contractors.


TOUGHER COMPETITION

Increased competition in the marketplace presents more than one factor to the changing construction climate. During the recession, construction was one of the hardest hit industries. Although still recovering, the industry has yet to see conditions equivalent to what they were before the fall of the market. Demands of owners have changed and become surprisingly stringent. More responsibility than ever falls on the heads of contractors from the expectation to finish uncompleted designs to the need to lower overhead costs significantly to stay competitive. With increased responsibility comes an increased opportunity for risk.


ENORMOUS RISK

The likelihood of subcontractor default is a scary, but relevant, factor in construction. A recent risk study conducted by the Associated General Contractors of America and FMI places subcontractor default as one of the three highest risks in construction. Other major risks include highly detailed and onerous contract language and a shortage of skilled laborers.

Some subcontractors have not adjusted to today’s market and as a result may not have the skilled labor needed for the job or the ability to bid competitively. That may leave the remaining subcontractors with more work than they can handle, leaving them open to default.


SURETY BENEFITS

A surety bond can help combat these risk factors. The surety will prequalify the subcontractor and protect the contractor from financial loss if the subcontractor fails to live up to its contract. Before a subcontractor can be bonded, it must undergo scrutiny of its financial condition, ability to perform the work and experience.

Contractors are in many ways in a more precarious position than they were 10 years ago, with more liability risks being tossed to them every day. However, the risks are manageable. With proper management of these risks, contractors can know that they are protecting their business. One of the best ways to mitigate subcontractor risk is with a surety bond.


Yannis Legakis is a Partner at Skyline Risk Management, located in Queens, NY. Skyline is an Insurance, Surety and Risk Management agency, with a specialty in construction, whose clients range from 3MM to 200MM in annual sales.

Mr. Legakis has more than 15 years in the construction insurance and bonding space, with three of those years working as a controller for a construction company, which gave him an invaluable overall view from both the agency side and the contractor side. He has authored several nationally published articles on the topic of Prevailing Wage Fringe Benefit Programs and Accounting. Mr. Legakis graduated from Penn State University in 1996, with a BA in Health Policy Administration. 


For more information about mitigating the risk of subcontractor default with a surety bond contact Skyline Risk Management, Inc. at (718) 267-6600.

Understanding Flood Insurance in 2017

Understanding Flood Insurance in 2017

After flying through the House, many believed the Flood Insurance Market Parity and Modernization Act would zip through the Senate, too. The Act was thought to become law sooner than later. However, things didn't go as smoothly as planned in the Senate.

The National Association of Professional Surplus Lines Offices (NAPSLO) and their officials continue to work to get the bill through the Senate. They continue to work to get this Act into law.


Understanding the Act

Why is the Flood Insurance Market Parity and Modernization Act of such importance for NAPSLO? For a variety of reasons, but one seems to stand out: the bill clarifies the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12).

The new Act defines the ability of privately issue flood insurance when meeting a lenders' purchasing requirements. Initially, the Act required lenders to accept private flood insurance for mandatory purchase. Then language was added before the bill was passed that created confusion. Lenders who were evaluating policies for the purpose of complying with mandatory flood insurance requirements became confused.

Now, the Flood Insurance and Market Parity and Modernization Act clearly defines a private flood insurance policy as:

"A policy issued by a company licensed, admitted or otherwise approved by the state."

According to Brady Kelly, the Executive Director of the NAPSLO, the bill strives to clarify a number of items, including the surplus lines market:

"All we're doing in this legislation is clarifying that the Surplus Lines market is, in fact, an eligible market from which to accept a private Flood insurance policy. I say that because Surplus Lines insurers have long written Flood insurance policies — this isn't a new opportunity.

Before BW-12 was signed, our market has always served as a supplement to the NFIP There are a number of homes and commercial properties that don't fit within the terms and conditions of the NFIP policy.

So we've oftentimes served as an excess option, or an option when the NFIP policy doesn't do the trick. From that perspective, the primary goal is to preserve the types of solutions the market was already providing."


No Smooth Sailing

While the bill is hung up at the Senate now, the House was no issue. In April of last year, the Flood Insurance Market Parity and Modernization Act flew through the House with a vote of 419-0.

While the victory seemed like smooth sailing, many have noted the result stemmed from a lot of hard work. The NAPSLO began educating legislators on the bill and the surplus lines marketplace at the start of 2014. These efforts were in preparation for the day the bill reached the House.

According to NAPSLO higher-up Keri Kish, the surplus line marketplace is:

 "It's not something everyone just knows about and understands. Our education really helped them understand how the Surplus Lines market functions as part of the private insurance market — how we developed and why it's important to maintain our ability to provide those options."

Luckily, many believe the failure in the Senate was more due to timing than legitimate concern over surplus lines. The election took a lot of time and energy for those in Washington. Many Senators were in heated state races and didn't have time or concern to hear about flooding.

Once the elections have passed, many surmise the bill will get more focus in the Senate. Not only will the election be over, but increased interest in flood issue will be coming up next year, as the National Flood Insurance Program is being reauthorized.


Optimism in 2017

Many NAPSLO members are excited and optimistic about the idea of the bill passing the Senate in 2017. Kish certainly is:

"I'm confident it will pass this year. There's no reason not to do it now. Ultimately, this is giving consumers choices. I can see no policy concerns in passing it this year."

While optimism is good, we'll have to wait and see if the bill goes through. If issues arise, the potential impact on the surplus line marketplace will certainly be noticed. The bill needs to be passed if the private market is to be a viable alternative to the NFIP.