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Commercial Crime

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."
 
 
 

Cyber Insurance Risks and Solutions – 2017

Cyber Insurance Risks and Solutions – 2017

Cyber insurance is here to stay. For independent agencies still reluctant to embrace cyber offerings, there's not much choice left. The product reaches into nearly every sector of the economy and is fast becoming a viable commercial insurance product.

In 2015, nearly $1 billion in cyber insurance premiums was reported to regulators. On top of that, global estimates top out at nearly $3 billion in premiums per year. Most experts agree coverage will continue to grow.

Lloyd's of London found that over 92% of businesses in the European Union had experienced a data breach within the last five years. The demand for cyber coverage is here to stay.


What is Cyber Insurance?

Cyber insurance is simply a policy created to protect a business's liability if a data breach were to occur. Common forms of cyber attacks include stealing credit card or social security numbers. 

There are a number of different types of cyber insurance, which are often available separately under a single policy. These include:

  • Security Events Cost: This coverage refers to the cost of hiring a breach coach to advise on regulatory requirements when notifying people about a breach that affected them.
  • Business Interruption: This coverage protects a business from a non-physical loss due to a cyber attack. The attack can occur at an insured site or a dependent location.
  • Loss of Digital Assets: This coverage ensures recovering and recreating data that has been lost or destroyed is covered.
  • Cyber Means: If a theft was perpetrated in a cyber manner than this coverage protects your business from it. Examples could be schemes where thieves impersonate email styles to trick staff into providing data or transferring funds.
  • Liability for Losses: Coverage for individuals who suffered medical, financial and other hardships due to personal information being stolen.
  • Electronic Media Liability: This coverage ensures a company will be protected from personal injury from intellectual property rights claims by producers of content.
  • Regulatory Coverage: Helps cover the costs for fines, penalties, and investigations in the event of a cyber security event.

Understanding Limits and Sub-Limits

As cyber insurance coverage is continually changing, it can be difficult to keep up with everything. Even some great brokers struggle to keep up with all the changes in the marketplace.

Due to the various types of cyber insurance coverage, the complexities stem from the structural differences in policies. Many insured are startled to find out the relationship between sub-limits and limits within their policies.

One important focus for cyber policies is whether a policy requires insured to pay a claimant before being reimbursed or if the policy pays on the insured behalf. This can change depending on the type of coverage within the same policy.


Continual Competition

Cyber insurance is becoming increasingly competitive. Most in the industry view cyber policies as a new growth segment, especially for certain specialty markets. Due to the competitive nature of said coverage, pricing tends to be sticking points for decision makers.

Brokers and agents must focus on the quality of cyber coverage and service – over price. Cyber policies are purchased for their ability to help a company respond to a cyber crisis.

As such, finding a cyber vendor who offers high quality consultants and breach vendors can be paramount. Legal staff, forensic services, network security, and more should be considered, too. 


Cyber in the Future

Cyber insurance is here to stay. The growth is there, along with the need. As such, underwriters are beginning to make moves towards standardization. With language standardized, a simplification of the complicated application process could be forthcoming.

While the need is there, many companies still do not see cyber coverage as mandatory. If more companies begin to make cyber protection a priority, then this market could explode in the coming years. 

For more information about cyber insurance contact Skyline Risk Management, Inc. at (718) 267-6600. 

Unjust Enrichment Claim Upheld by Past New York Law

Unjust Enrichment Claim Upheld by Past New York Law

In the case of MCM Products USA, Inc. v. Aliusta Design, the court addressed the issue of whether a subcontractor could make an unjust enrichment claim against a property owner when the contract is between the general contractor (GC) and the subcontractors. This case occurred due to the GC’s insolvency and the resulting situation in which subcontractors were not paid for work that they did on the project. This led them to try to get paid through the owners of the property instead, who had paid the GC rather than the subcontractors.

How Did This Case Start?

It all started when MCM leased a space for their luggage and accessories store in Manhattan. They hired a general contractor and signed a $1.4 million contract to renovate the leased property in June 2014. This GC hired subcontractors to do the construction, but there was not a contractual relationship between MCM and any of the subcontractors that actually did the majority of the work.

On March 2015, the GC filed a mechanic’s lien against the property and some subcontractors did as well. The lease that MCM had signed with the landlord required that MCM discharge any mechanic’s liens against the property promptly. MCM filed a lawsuit in May 2015 seeking a judgment, declaring that they did not owe the subcontractors any money. Counterclaims for unjust enrichment were filed against MCM by several subcontractors, saying that the leased property unjustly benefitted from the work done for which payment was not made, and that MCM should be responsible for payment. MCM moved for dismissal of the counterclaims.

A Decision Came Down

When the court came to a decision, they dismissed the unjust enrichment counterclaims made by the subcontractors. The court followed previous case law to hold that a claim of unjust enrichment is not able to be supported simply because a company benefited from the work done by the subcontractor. If there is an express contract between a GC and subcontractor, the law is very clear that the owner is not liable, unless the owner has agreed to pay the subcontractor themselves. The consent of the owner to allow the subcontractor to work on the property is not enough. The owner has to take action that would show clear indication that they were going to pay the subcontractor themselves, rather than the GC doing so. The court did not address the validity of the mechanic’s liens in this decision at all.

Final Thoughts

To reach their decision, the court used existing New York law to bar the unjust enrichment case, simply because there was no evidence that the owner (MCM) had indicated any intention to pay the subcontractors. In some cases, however, a subcontractor could have a valid unjust enrichment claim if they can show that an owner had direct dealings with the subcontractor, even if there was not a contractual relationship. Included in this are situations in which the owner pays the subcontractor director or indicates that they will pay the subcontractor. This backed up existing law in New York. 

5 Simple Ways to Improve Return-to-Work Incentives & Reduce Workers' Comp Costs

5 Simple Ways to Improve Return-to-Work Incentives & Reduce Workers' Comp Costs

Workers' compensation can be confusing. However, the system is built on one thing: mutual accountability. As an employee, you put trust in your employer and insurer to promptly pay out your benefits. As an employer, you expect your employees to return to work as soon as possible. Everyone expects honesty.

While there are expectations, the workers' compensation system offers disincentives to employees who come back early. Many small businesses have workers' compensation systems that encourage employees to stay out of work as long as possible.


What You Need to Do

As a small business owner, you need to find a way to get your employees back to work as soon as possible. The quicker your employee gets back, the less money your workers' compensation program will cost you.

Here is how to reduce workers' comp costs and incentivize employees to come back quickly:

  • Remove All Disincentives

If your employees have no reason to come back to work quickly, they won't. Look into your workers' compensation program and see where you can encourage employees to come back promptly by removing the benefits of staying out of work.

  • Get Proactive

Look throughout your company and see how you can make improvements to the workers' compensation system without infringing on your employees’ rights. Many companies find the benefits employees receive when injured to be excessive upon further examination. Once you identify excessive benefits, it's easy to take proactive action and cut them out.

  • Be Detailed

Employees will find a way to take advantage of any system – that is just human nature. Thus, you need to clearly communicate all policies regarding work injuries and set firm expectations. Give every employee written procedures and policies the day they are hired. Create guidelines to report an injury.

  • Communicate Through the Process

It is imperative that small business owners communicate with the employee throughout the injury, recovery, and return. Find out how your employee is recovering and healing. Get updates. While you should never put pressure on an employee, you need to maintain contact and show support. Then, once the employee comes back, make sure you communicate what they can do through the healing process and what their transitional duties will be.

  • Contest Claims If Need Be

If you believe one of your employees is abusing the system, do not be afraid to contest the claims that come in. This is especially true if the employee is non-compliant or seems to be extending the disability too much. Small business owners should also contest claims where new conditions develop after the injury. Just understand that contesting a claim will often require investigations, documentation, and medical examinations. These things will often require your resources as the business owner.


Encourage Your Employees to Work

The best way to manage your workers' compensation costs is through encouraging employees to get back to work. If you remove the incentive to stay away from work, you'll find employees come back faster than ever before. If you keep offering excessive incentives to employees who don't come back to work, your costs will continue to rise.

Have an employee or two abusing their right to workers compensation? Contact Skyline Risk Management, Inc. at (718) 267-6600 to voice your concerns. 

Protecting Payment Data

Protecting Payment Data

The theft of financial information can be just as damaging as identity theft. Are you protected?

There have been many stories in the news recently regarding information breaches and data hacks into various retailers, companies, and even against individuals. In an increasingly digital world, protecting information is difficult, and the transfer of so much data around the clock often leaves this information vulnerable to attack. Data breaches, information hacks, and online security are incredibly important to keep track of in order to make sure your information is safe, and how you can best protect yourself and your information.

Technology can be a double-edged sword. On the one hand, we have the ability to transmit a very large amount of data instantly; we can wire money around the world, talk to someone we’ve never met, and conduct nearly every aspect of business on our computers. All this technological availability leaves us vulnerable, though, and with data breaches and hacks on the rise, keeping your information safe is of the utmost priority.


Payment protection plans

A common information breach is identity theft. This is when someone has acquired identifying information about another person, information that they can use for their advantage. This information can include names, Social Security information, or banking information.

Another common data breach is that of a credit or debit card. In cases like this, a person’s name may not have been compromised, but the identifying information from their debit or credit card has been accessed by an outside party. With another person’s payment information a thief could drain a bank account, open a new credit card, or ruin that person’s financial life.

When a credit or debit card has been hacked, the owner may not know about it until the damage has already been done. Charges can accrue very quickly and unless a person is checking their account regularly, they may not even know that their information has been stolen. This is also a problem for retailers, who may be stuck “between a rock and a hard place” when a bank reverses charges because of a payment hack.

Banks have safeguards in place to flag suspicious card activity, and can offer a certain amount of protection for their customers whose cards are tampered with. Each bank has different methods of obtaining this protection, and each retailer that accepts that card must also have protections in place to keep their payment systems safe and secure.


Insuring payment protection

Retailers need insurance in order to protect themselves financially from data hacks, just as individuals should take steps to protect their financial information to the best of their ability. When a person’s payment information has been hacked, retailers have to make sure that the hack didn’t originate with their system.

Working with banks, retailers, and insurance companies to keep things like identity theft and payment information theft to a minimum is a complicated but worthy task. Keeping payment information in the hands of those to whom credit and debit cards actually belong protects the financial relationships between people, banks, and commerce that keep our world going.

To learn more about how you can protect your payment data contact Skyline Risk Management, Inc. at (718) 267-6600 to voice your concerns. 

Unexpected Costs and Coverages for Business Losses

Unexpected Costs and Coverages for Business Losses

When most people think about insuring their business, the first thought that comes to mind is making sure their insurance policy covers their building and inventory. This is understandable—if a fire wipes out your entire shop, you want to make sure that you’re going to have a place to set up shop again. However, many do not think about the indirect losses that happen as the result of having to shut the business down temporarily. Covering lost income and paying for the operating expenses that continue to exist while you close or relocate the business is just as important as covering the building and contents. Business interruption coverage is a coverage specifically designed to cover a business for those indirect losses that hit you when you are forced to close up shop, whether for a short time or permanently.


Business Interruption Coverage

The biggest benefit of business interruption coverage is the provision for lost income while your business is closed. Having lost income covered is especially beneficial for small businesses for which missing out on even a couple of months’ worth of income can make or break them. Also, there are continuous expenses, such as utility bills, that don’t stop coming just because you aren’t able to open your doors to customers. Those bills cause additional costs even when there may be no revenue coming in. Depending on the specifics of your policy, business interruption coverage can step in and cover you for these losses.

Beyond lost income and operating expenses, there are additional indirect losses that can occur. Business interruption coverage is meant to cover costs that come up while attempting to keep your company running. You may have additional expenses for things such as: relocating to a new space, overtime pay for the extra hours that are needed, and other costs that come up as you work through alternate methods of doing business while your insurance company works to restore your building and business property.


Cyber Insurance

In addition to business interruption coverage, another incredibly important coverage to consider is cyber insurance. Insurance has adapted in this age of technology and cyber losses, introducing a whole new level of risk and loss that you may never even have considered. Hacking and digital information theft is rampant. It seems as though there is story after story on the news of hackers getting access to customers’ financial information through businesses' computer systems. The theft of your and your clients' information not only puts your company in a tight financial spot, but also causes a loss of reputation. Customers are less likely to put their trust in a company that treated their information without the proper security. Cyber insurance can cover you for those losses and help restore your customers’ faith in your stability.                                                                                                          

Running a business is no easy feat, no matter what the size. Insurance may seem like just another thing to check off a to-do list, but by protecting your business, you are protecting your investment and your future. If your business does suffer a loss and you need to make a claim, ensure that you have all the coverage needed to get on your feet again and to restore you to the same financial place you were before. If you are concerned that your business may not have the right coverage to protect against those types of losses, make sure to contact your agent to review your policy.  

For more information about potential unexpected costs and coverages for your business, contact Skyline Risk Management, Inc. (718) 267-6600 to voice your concerns. 

4 Ways to Detect Employee Fraud

4 Ways to Detect Employee Fraud

Employee fraud can be a drain on the bottom line and have serious implications on an organization. According to a recent report from The Association of CertifiedFraud Examiners, the median loss for an employee fraud case is approximately $140,000. More than a fifth of these cases caused losses of at least $1 million, a significant loss for any size company.

Even considering a well-run organization, over 5% of a company’s revenue losses can be attributed to fraud, which is a staggering drain on the bottom line. When employees get away with this type of fraud, a "me too" mentality can take hold leading to an environment of fraud and waste.

What Can you Do?

So then, if you're a senior manager in an organization with a toxic employee fraud problem, what can you do? Setting a culture of honesty is not simple and doesn't happen immediately, but it must happen none the less. If managers are held accountable for fraud in their departments, then it's safe to assume that they will hold their employees accountable as well. The reality of the situation is that people (employees) are fallible, and there is always going to be a few bad apples in the barrel. When managers become responsible for bad apples in their barrel, a number of bad apples begins to dwindle.

Where Fraud Happens

According to the Association Certified Fraud Examiners, the majority of fraud is the result of asset misappropriation, which occurs in the procurement, payment, and expense areas. If the employer begins to closely monitor these areas, the chances are very good that fraud will be discovered and more importantly, reduced. The five areas in which employee fraud normally occurs is:

o   Purchase to Pay - Purchase to pay fraud takes place when an employee creates a purchase order for goods or services that are diverted for their personal. The employee sets up a fake vendor account where fraudulent invoices are processed and then paid to the employee. To prevent this from happening in your organization, never let an employee create and then approve the same purchase order. Instead delegate the responsibility of approval to a different employee forming a system of checks and balances.

o   Payroll  - Payroll fraud usually exists when a phantom employee is set up on the payroll system and typically receives excessive payments for overtime or when the employee remains on the system after being terminated. Testing should be done to evaluate employees with like addresses, invalid social security numbers, and excessive overtime.

o   Sales and Receivables - Employee collusion with vendors and sales reps can lead to unsuspected fraud. Managers should also be on the lookout for customer accounts with unusually high credit limits, frequent credit memos, unusually large discounts, or suspect returns of goods without matching credit memos. Managers should also check for customer shipment addresses corresponding to employee addresses.

o   Critical Data Hacking - Although employers typically safeguard the sensitive data of customers and vendors, they do not typically understand that most organizations are hacked by employees, both current and former. Terminated employees can become a major threat to an organization's sensitive data for the simple reason of getting even with an employer. Logins and passwords should be changed before a terminated employee has left the building rather than a day or two after.

Regretfully, employee fraud threatens every organization and precautions must be put in place. Employee dishonesty coverage should be a key coverage in the organization's insurance policy, but should not replace key testing that can uncover the problems that may exist. If you have questions about employee fraud contact Skyline Risk Management, Inc. at (718) 267-6600 to discuss your concerns.