A record number of California apartment buildings have had their insurance non-renewed this year. Some big-name carriers are non-renewing every apartment building in the state. Though ultimately this turmoil is driven by the large number of recent wildfire claims in CA, apartment buildings in the heart of urban centers such as San Francisco and Los Angeles are being non-renewed all the same. Owners of apartment buildings can sometimes feel overwhelmed by this upheaval, especially if they’ve enjoyed stable insurance for the past few decades. If your apartment building has been non-renewed, what you need is a good insurance broker to help you replace that policy. We can help!
At Mighty Oak, our brokers understand how to navigate the nuances of a complex market, and the challenges of owning and managing multiunit apartment buildings. We understand that you face unique risks with tenants living in your building. Our apartment policies include property coverage for the building as well as landlord liability coverage. Our goal is to match the coverages that are on your current (non-renewing) policy, help you protect your investment, and satisfy your lender. And for the individual renters who need insurance for their personal belongings, we work with insurance agents who specialize in personal insurance as well.
If your current insurer has non-renewed your apartment building’s insurance policy, we will work to replace it with a policy comparable to what you previously had. If your price has risen considerably, we will work to find you a lower-priced quote. Along the way, we are happy to offer advice and guidance for steps you can take to lower your future insurance costs and widen your insurance options. We can even help if your non-renewal is due to a history of claims. We work with insurers of all kinds, including those who specialize in “distressed” properties, meaning properties that have had a series of claims, and even currently-damaged buildings and buildings under repair. We have options to insure apartment buildings of any size, and can even find you a quote if you (the owner) occupy one of the units.
Our brokers specialize in apartment building insurance in California, Florida, Texas, Nevada, and we are licensed in other states as well. We have been especially successful with non-renewed apartment buildings in urban areas, and apartment buildings facing a steep insurance price increase.
In this article we will discuss Lawyers Insurance, also known as Errors and Omissions and
Professional Liability
.
What is Professional LiabilityInsurance?
Lawyers Insurance, Errors & Omissions, and Professional Liability all mean the same thing. This type of insurance protects a law firm in the event an attorney (or other employee) makes an error, omission or oversight that causes harm to their client. It pays for the firm’s legal defense, as well as the settlement or judgement made against the firm, up to the policy limit.
In other words, this is Mistake Insurance. If an attorney makes a professional error, Professional Liability should be there to absorb most if not all of the financial liability.
This insurance is also so much more than that! A Professional Liability policy also protects the firm from frivolous lawsuits. So if a particularly litigious client files a groundless lawsuit against his own lawyer, this insurance will pay the lawyer’s defense costs, even if the lawyer made no error whatsoever.
In that sense, Professional Liability insurance is really Lawsuit Insurance. If anyone sues the law firm and claims the firm committed a wrongful act, the insurance company will have a duty to investigate the situation, defend the law firm, and pay damages if necessary. It pays whether the firm committed an error or not.
Many additional types of coverage can appear in a well-constructed Professional Liability policy, but lawsuit protection is the foundation of the whole policy. This pillar is what provides piece of mind to a legal practice. If a lawyer makes an honest mistake while working with a client, the lawyer doesn’t have to fear that the ensuing litigation will lead to bankruptcy for her firm. If a lawyer advises a client to settle but later the client has a change of heart and decides to sue his attorney, Professional Liability insurance is there to defend the attorney so he can continue working for his other clients. If done correctly, a professional liability policy allows a firm of attorneys to practice their craft without distraction, since a large portion of their liability has been absorbed by an insurance carrier.
The insurance contract itself must be crystal clear on this point. Here is a sample clause from a real Professional Liability policy:
Notice how the policy states that the carrier will pay “all damages” that the firm becomes “legally obligated to pay”, up to the “limits of liability”. As with any contract, the definitions of the words themselves affect the whole meaning of the document. This is why it is crucial to work with an experienced broker who understands the complexities of Professional Liability insurance. An attorney’s broker should know what to look for in the policy so he can determine which quotes contain the most favorable policy language, and clearly explain to his client (the attorney) the pros and cons of the policy language.
We will explore policy language more a bit later in the article. For now, let’s talk about why attorneys need Professional Liability, while other types of businesses might not need it.
Why do Lawyers need Professional LiabilityInsurance?
Lawyers, similar to accountants, doctors, financial advisors and the like, make their living by providing legal advice and related services to their clientele. Throughout the course of providing this service, lawyers will make statements, decisions and recommendations that their clients will rely upon, regarding matters of serious importance to them, financial or otherwise.
While most lawyers have a well-honed understanding of the law and take care not to make errors or overstep their authority, every time a client relies upon and acts upon legal advice there is potential liability for the attorney who gave the advice. This is compounded by the possibility of a lawyer making honest mistakes or errors as a result of the pressures that everyone faces: deadlines, demanding clients, sensitive situations, unrelated stress.
When a client relies on legal advice, they expect things to play out according to that advice. As we all know, things do not always turn out as planned. Even if an attorney does his job right, his client could still lose time and/or money, or suffer mental anguish. This can often lead to a written demand for compensation alleging any number of things. Attorneys are already familiar with this reality, since this is the every day risk of practicing law.
This risk of lawsuit creates a unique insurance need. Many other types of businesses don’t need Professional Liability insurance at all. For example, a deli or an electrician both need a completely different kind of insurance. What they need is insurance to protect them in case they accidentally injure someone physically (such as if a customer slips on the deli’s wet floor, or the electrician’s tools fall and injure someone), or in case they damage someone’s property (such as if the electrician accidentally starts a fire in a client’s home). These protections are provided by a standard
General Liability policy
.
Most attorneys, on the other hand, have almost no risk of causing physical injury or property damage over the course of their daily activities. The risks attorneys take on by practicing their profession are of a very different flavor than the risks absorbed by deli owners. If an attorney’s client sues the attorney for giving poor advice, their General Liability policy would not pay a dime. This is why a General Liability policy is never sufficient protection for a legal practice. Clearly an entirely different type of insurance is needed to properly cover these types of claims. That’s exactly what Professional Liability insurance does.
Even the language used to describe a typical claim reveals that lawyers need a unique insurance product. “My lawyer gave me poor advice” is a much more abstract claim than “my electrician burned down my house”. It is harder to define, more likely to carry some nuance. Therefore the policy language in a Professional Liability policy needs to account for that ambiguity, and clearly define the situations where the policy is obligated to pay.
The policy must be written in such a way that it systematically absorbs all the liability risks associated with running a legal practice, so a boilerplate (AKA “miscellaneous” professional liability) policy won’t suffice either. The broker must make sure that the entire operations of the legal practice are protected with specifically tailored policy language. The ultimate goal is to have a policy that is so much in the attorney’s favor, that the insurance company will be obligated to pay any covered claim (we will discuss “misc.” policies in more detail later in the article).
The bottom line is that lawyers need a unique type of insurance. They also need an experienced broker to act as a guide to the policy language. If you run a legal practice, make sure to choose a broker who cares more about diligence than about closing a deal at all costs. A good broker will shop around to lots of carriers, then offer the law firm a clear comparison of the quotes. The broker and law firm may discuss price, coverage, and policy language before coming to a decision, and the broker’s primary objective should be to make sure the law firm gets the most favorable policy language possible. Then at renewal, the broker should shop around all over again, to make sure the law firm’s price is always competitive and the coverage is always the best available.
If your broker doesn’t meet that standard, contact us today to get a full shop-out of your Professional Liability policy.
Learn from our Experience:
This section is an FAQ/Glossary of the most important considerations and details when it comes to Lawyers Professional Liability insurance. If your question isn’t answered here, please let us know so we can address your specific inquiry and update this living document.
What are the legal requirements regarding Professional Liabilityinsurance in CA?
The State Bar of California does not require attorneys licensed in California to carry Professional Liability insurance. However, attorneys without this insurance are required to disclose this fact to clients for whom legal representation will exceed four hours (source).
For this reason and the arguments laid out previously, the vast majority of practicing attorneys carry some form of Professional Liability insurance.
If I have a hold harmless/indemnification agreement in my client engagement contract, do I still need Professional Liabilityinsurance?
This is a bit of a trick question, because attorneys cannot have indemnity or hold harmless language in their engagement agreements, as prohibited under the California Rules of Professional Conduct (CRPC 1.8.8). But for professionals who can legally use hold harmless agreements, here is some useful information:
While a hold harmless agreement can be helpful, it is not a substitute for having insurance to handle your legal defense and any resulting settlement. Even with such hold harmless agreements in place, a claim against you may still force you to pay attorney fees, lose income while you appear in court, or at worst pay damages anyhow. Insurance exists to cover all these costs.
We typically advise that you consult with a business attorney who specializes in client engagement contracts, to ensure that your contract “dovetails” with the language in your Professional Liability insurance policy.
What do Claims Made Coverage and Retroactive Date mean?
Most Professional Liability policies provide coverage on a claims made basis, meaning that the policy covers the work that you are doing now, as well as work that you completed in the past. If a client from years ago comes back claiming you made an error on an old case, a well-constructed claims made policy can cover that old work. If done correctly, this type of policy can protect an attorney for work he did all the way back to the beginning of his career.
While criminal and civil laws often come with statutes of limitations, insurance does not. Carriers are allowed to set their own terms and come to their own agreements with insured parties. In other words, if you need a new Professional Liability policy, and you need that policy to cover work from many years ago, the policy can be designed to provide your firm with the decades of protection you require.
How far back in the past will your claims made policy cover you? That is determined by your retroactive date.
Your retroactive date is the earliest date that work you performed for a client must have occurred in order to be covered by your Professional Liability policy. That means a recently filed claim involving work you did years ago will only be covered if the work was originally done after your retroactive date.
So imagine it’s the year 2020, and you have a retroactive date of 1/1/2015. Your current policy term is 1/1/2020 to 1/1/2021. Say you did work for a client in 2016, but they didn’t notice your error until August 2020, which is when they file the claim. Though the date of the claim is Aug. 2020, your actual error occurred back in 2016. The retroactive date therefore encompasses the date of the error, so the new policy will cover this new claim.
HOWEVER, if you lose your retroactive date (for example if an inexperienced broker switched you to a new carrier without making sure the new carrier continued or “picked up” your retroactive date), then your new retroactive date is now the date of inception of the new policy: 1/1/20. This means that NO CARRIER will cover your firm for mistakes or wrongful acts committed before that date. (As an aside, if your broker makes such an error and that error causes you financial harm, you may be entitled to file a claim against your broker’s Professional Liability policy.)
If you’ve only ever had one policy in place your entire career, this is a non-issue since your policy has covered you the whole time. However when you switch to a new carrier, it is crucial that they pick up your retroactive date from the expiring policy, so that mistakes or “wrongful acts” from years ago will be covered by the new policy. Your broker must advocate for you with the carrier, and check carefully to make sure the insurance quotes have an acceptable retroactive date.
If you break off from a law firm and form a new one, this will have retroactive date implications as well. Your new firm’s insurance policy may have a fairly recent retroactive date, and therefore would not cover any of your work from your previous firm. So what is to be done about past clients? What happens if a client from the old firm comes back with a claim against you? If these questions apply to you, start this conversation with your broker, and make sure the answers are satisfactory. If your broker doesn’t know how to deal with these situations, reach out to us for help.
The longer your legal career the greater your liability. Clients from decades back could show up with frivolous (or not frivolous) lawsuits at any time. Make sure your Professional Liability policy has the right retroactive date, and make sure you hold on to that retroactive date for as long as possible.
Self Insured Retention (SIR) vs. Deductible; First Dollar Defense
The main difference between Self Insured Retention (SIR) and a Deductible is who pays first. If you have a deductible in your policy, that means the immediate burden of payment is on the insurance company. In the event of a covered claim, they must pay defense costs, damages, and claim expenses up-front; then later they will bill you for your deductible. An SIR, on the other hand, puts the immediate burden of payment on your firm. The SIR must be paid completely, before the insurance company will pay anything.
Example: if you have a deductible of $15,000, then during your claim the insurance company will start covering expenses immediately, then later bill your firm for $15,000. If instead you have a Self Insured Retention of $15,000, then you will still need to incur those expenses up front, and only then will insurance begin paying expenses.
Many policies that contain a deductible will also contain a “First Dollar Defense” clause. This means the deductible only applies to damages, settlements, and judgments – NOT to claim expenses. This generally means that if your claim is resolved without a settlement or judgment, then you will not have to pay a deductible.
Make sure to ask your broker to explain whether your policy has a deductible, Self Insured Retention, or First Dollar Defense.
Who gets to choose defense counsel? What if I want to represent myself or pick my own defense?
The short answer is that it depends on your policy. Typically this is found in the “Defense of Claims” section of your Professional Liability insurance contract. Here “we” refers to the insurance company:
In this case the policy does not provide for selection of your own counsel, though it does make it clear that the carrier cannot settle on your behalf without your written consent. Not every Professional Liability policy is worded like this; the language can vary wildly policy to policy. If it is important that you have the right to appoint your own counsel, or you want a low Self Insured Retention, or you need insurance to cover you for work you did ten years ago, these items can all be negotiated with the insurance company at the client’s request. A good broker must advocate for his client, and seek the most favorable terms possible.
The Hammer Clause: will you be forced to settle when you don’t wish to?
A Hammer Clause is a provision that states that if the insurance carrier wants to settle your case, but you do not agree with the recommended figure, the insurer will not be liable for any additional money above what they already offered in their recommended settlement, should your refusal to settle lead to a higher judgement against you.
A strict Hammer Clause means the carrier really won’t pay anything beyond what they originally offered, whereas a more relaxed Hammer Clause might agree to pay 50% of additional damages after you refused the settlement.
Here is an example of a more relaxed Hammer Clause from a Professional Liability policy:
In this case the insurance company will pay the full settlement they initially offered, followed by 50% of any additional expenses above and beyond the settlement offer. Make sure your broker checks the Hammer Clause in your policy. This clause directly affects the options available to you in the event of a claim. If your broker has no idea what a Hammer Clause is, please reach out for a free break-down of what’s in your current policy.
How much Professional Liabilityinsurance does a lawyer need?
This is a relatively complex question that should be assessed on a case-by-case basis. Here are some general questions to ponder as you decide how much insurance to buy:
Consider the nature and extent of both your business and personal assets, both of which are potentially subject to collection in the event of a judgement against you. Your limit of liability should at least cover your assets.
What is the net worth of your average sized client? What is the value of the services you are providing to them? If you were to make a critical professional error on your largest account, what is the most money you (or your firm) might realistically be liable to pay? Make sure your insurance at least protects you from mistakes you might make on an average sized client, and at best protects you from mistakes on your largest.
Very low limits of liability in your policy, such as $100,000 per claim, can be swiftly depleted – with defense costs alone – before you even get to a settlement. Consider the cost of legal representation in your area.
“Of Counsel” status with another firm – am I covered?
Coverage will be determined by the specific policy language. Some less expensive policies will exclude such coverage explicitly. Here is an example of the language that would confer coverage while acting as “of counsel” with another firm:
Such language is most often found in the “definitions” section of your Professional Liability policy.
Switching Professional Liabilityinsurance with an ongoing or potential claim – what you need to know.
First, you must give your current Professional Liability insurer immediate notice of any evidence you have of a pending claim. Most policies will refuse to cover any pending claim if you wait more than 60 days to give notice:
If you are currently going through the claims process, most other insurance companies will request that you wait for the process to conclude before you switch to a new insurance contract. The amount of money spent during a claim on your behalf, as well as the nature of the claim both have a direct impact on the price and availability of Professional Liability insurance for your firm.
The danger of “miscellaneous” professional liability for lawyers.
Some lower quality Professional Liability insurance contracts called “miscellaneous” professional liability exist in the market and it’s important to be aware of why these products are inferior to lawyer-specific Professional Liability coverage.
Miscellaneous professional liability is meant to provide coverage for certain types of professionals who don’t fit into standard business classifications used by insurance companies. However law firms are a clearly defined business classification, so a law firm should never wind up with a “misc.” policy. Only a very inexperienced broker would offer one of these boilerplate policies to a law firm.
The main downside to these products are that they often lack definitions for important terms, and often come with broad exclusions that cancel out much of the coverage. For example they may include exclusions for “professional advice” or other general terms that are not defined in the contract. This creates a type of “gray area” in the policy, where the insurance company can define their terms after a claim in such a way as to facilitate denial of the claim. A law firm who thought they had insurance then learns that their carrier will not be covering their most recent claim, due to a vague exclusion in the policy that the broker never explained. Nobody who purchases insurance hopes to engage in a legal dispute with their insurance company or their broker: this is not the point of insurance. Clear and specific policy language in the law firm’s favor will prevent these sorts of nightmare scenarios, but a law firm isn’t likely to find that kind of favorable language in a “misc.” policy.
Here is an example of such a gray area in a “miscellaneous” professional liability policy for an industrial designer who specializes in designing wearable electronics for Silicon Valley tech companies:
In this case, the terms “architect” and “engineer” are not defined anywhere in the contract! What is to stop the insurance carrier from simply alleging that this firm’s “industrial design” work is either “architecture” or “engineering”, and use that interpretation to deny a large claim? It goes without saying that this is bad insurance. A carrier should never be allowed this kind of vague wiggle room in a contract.
A “misc.” policy can cause just as much mischief for a law firm just as it can for an industrial designer. If the policy uses vague language to exclude various facets of a law firm’s operations, the law firm is basically paying a premium for a junk policy.
If your firm has a miscellaneous professional liability policy, reach out for a free synopsis of your current coverage (or lack thereof).
Other Types of Insurance a Law Firm should Consider:
Cyber Liability – for those that work with Personally Identifiable Information (PII); Trade Secrets or Intellectual Property (IP).
Cyber liability coverage covers the legal and regulatory expense of a computer breach that causes your firm to lose clients’ sensitive data. This is especially important if you work with PII, Trade Secrets or IP.
Employer Practices Liability – for firms with employees.
This covers any allegations of wrongful conduct as an employer, including harassment, wrongful termination, failure to promote, discrimination and more. If you have employees this is a coverage worth considering.
General Liability – for firms that see clients in personor keep a rented office.
This covers bodily injury and property damage for which the firm is liable. It is usually required by the firm’s commercial landlord, and otherwise only worth considering for an office with a decent amount of foot traffic.
In Conclusion: Make Sure your Broker is a Professional LiabilitySpecialist
An insurance broker who specializes in Lawyers Professional Liability provides two main services:
Reading the insurance contract language very carefully and explaining all provisions and exclusions to the firm in a concise and focused manner. This ensures that the firm will be aware of what is covered and what is not, so that they can make informed decisions.
Shopping around for new Professional Liability quotes every year, to make sure the firm is always getting the best possible deal when it comes to both price and coverage. The marketplace for Lawyers Professional Liability is dynamic and ever changing. We shop our clients every year and share the results with them, so they can be confident they are getting the best price and service available.
If you are a new law firm seeking insurance advice, we are happy to share our expertise. If you are an established law firm, but you get the impression your broker isn’t a specialist in Lawyers Professional Liability ; or if he offers you the same policy year after year while the price steadily rises, showing no evidence of a shop-out; or every time you call with a question you get routed to a customer service representative who doesn’t know the details of your policy – give us a call so you can get the service you deserve.
How to Insure a Damaged Building and/or a Building with Claims.
Is My Building Uninsurable??
It can be a frustrating experience to hear that your building is “uninsurable”. Oftentimes when a building has some unrepaired damage, a history of claims, or some other problem, many insurance professionals will simply shrug and say, “Sorry your building is probably uninsurable”. If you ever hear this, it usually means that that insurance professional actually doesn’t know how insure such a building. No building is uninsurable.
There are thousands of insurance companies in the US. For every possible type of property, there is an insurance company (or several) that specialize in insuring it. It is crucial to work with a knowledgeable broker who not only knows which carriers will insure damaged buildings, but also which coverage need to be added to the policy to fully protect you, the owner. This article will dive into how to properly insure a damaged building and/or a building with claims.
Insuring a Damaged Building
When a fire burns a portion of a home, or a burst pipe floods a couple floors of an apartment building, a common insurance scenario plays out. The owner files a claim with his/her insurance company, and that carrier pays the claim to cover the repairs. But then, upon renewal, the carrier cancels the policy and tells the owner to find insurance elsewhere. This can happen even while the building is still being repaired, or even before repairs have begun. The previous carrier may still be paying to repair the property, but meanwhile the building owner needs to seek new insurance for the now damaged property, in order to cover the property going forward.
Why does this happen? Insurance companies exist to make a profit, and when there is a claim they lose money. Insurance companies do not want to insure unprofitable clients. This is the basic rule that governs what an insurance company is willing to insure.
Simply put, when your insurance company starts losing money, your insurance coverage is in danger. It could be cancelled or non-renewed anytime at their request with only 30 days notice. This not only means that you need to shop for insurance again – it means that insurance has become much harder to find, because your building is damaged, and your claims history follows you.
Damaged buildings need insurance during the repair process. Vandalism, water damage, and fire damage are all real concerns while a building is being repaired. There are also other risks to consider when contractors and construction people are coming in and out of your building every day during the repair. Due to the increased risks of insuring a damaged building or a building under construction, many standard
“admitted carriers”
will likely decline to quote.
However there is a whole galaxy of options outside of the admitted market. These carriers specialize in insuring buildings that, for one reason or another, have been rejected (or priced out) of the admitted market. This includes damaged buildings, buildings with a history of claims, buildings under construction, and other unique situations.
Not every insurance professional knows how to access this portion of the insurance market. In fact, many insurance pros ONLY know how to shop the admitted market (or only have access to one single carrier); when those limited options offer only declines, that insurance pro waves the white flag. This can lead a building owner to (incorrectly) believe that their property needs to remain uninsured for the unforeseeable future.
Here at Mighty Oak, we know how to deal with these situations properly. We have relationships across the
admitted AND the non-admitted markets
, so we are able to provide quotes to any property owner who needs insurance, even those with damaged buildings.
We also have the experience to know which coverage must be added to a damaged building’s insurance policy in order to fully protect the owner. For example, a policy for a building under construction should probably include a coverage such as
Builder’s Risk
, while a policy for a vacant building needs to have the Vacant Property Exclusion removed prior to putting the policy in force. These (and other details) are what we look for when we help an owner of a damaged building acquire insurance.
What if your building isn’t damaged at all, but instead just has a long history of claims?
Earlier this year a homeowner contacted us with a predicament: her homeowner’s insurance had been cancelled after she filed one too many claims. Her house was in pristine condition, worth more than $2 million, yet it seemed like nobody could get her a homeowner’s insurance quote. Her claims history had made her “uninsurable” (or at least that’s what she feared).
For over ten years she had been with a standard carrier, just like all her neighbors. But one day a storm damaged her windows and caused a leak, so she filed a claim. The insurance company paid for the repairs. Soon after that, a tree fell on her fence – which meant another claim and another pay-out by the carrier. Finally a couple months after that, the neighbor’s landscape contractor backed over their lawn irrigation equipment and broke the sprinkler system. This claim cost the carrier another $5,000. Their insurance company canceled her policy about a month later, and their agent had no options to replace it.
When she visited another broker, he checked with all the standard, admitted carriers, and received nothing but declines. Why? Because with every carrier he checked, he was required to explain her claims history. When these carriers heard about the claims, they refused to take on the risk.
None of these these claims were catastrophic, and none were wildly expensive. All were reasonable claims that any insurance company should expect to pay for. Yet just the fact that there were three claims in one year was enough for the client to be shut out of the standard market, even though her house was in excellent condition. When her broker received nothing but declines, he told her she may be uninsurable.
Of course, he was wrong; she was very much insurable. When she was referred to us by a friend, we performed a diligent search of carriers that are willing to take on clients with a history of claims. We found her some quotes that fully insured her property, and she is now insured once more.
Our brokerage specializes in helping owners of “distressed” properties, whether that means buildings under construction, damaged building, or buildings with a history of claims. We can even find insurance for buildings where damage has yet to be repaired. There is a carrier for every situation; no client is uninsurable. We will put our deep knowledge of the insurance market to work for any client that needs insurance, especially those who have been turned away by other brokers.
The Challenge of Properly Insuring a Landscape Architect
As a landscape architect, you have unique insurance needs. On one end, you create designs and conceptual drawings that will later guide a general contractor through a build-out. It is crucial to start with insurance that protects you in the event of a design-related lawsuit, whether the design is actually flawed or whether the lawsuit is frivolous.
This design insurance is not enough however, because you also regularly enter clients’ homes, and (depending on the scope of your operation) perhaps do some gardening, or even run a full design/build operation. These features of your business require insurance that protects you in the event of property damage or accidental client injury. The necessity for these two different types of insurance (the design side and the property damage/injury side) is what makes landscape architect insurance so complicated, and reveals why it is so crucial to work with an experienced broker.
One additional detail to consider, which makes these types of policies even more interesting: What is the relationship you have with the general contractors, tradespeople, and gardeners who build and install your designs? Does the general contractor hire you directly, or are you hired by the homeowner? Do the gardeners who install the plants work for you as sub-contractors, or are they hired by the homeowner? Or do you install the plants yourself?
These questions are critical, because they help determine which coverages need to be included and which are unnecessary. For example, if you hire on a sub-contractor to install the plants, we would need to make sure that work done “on your behalf” is not excluded from the policy. If, however, you never hire any sub-contractors, and you leave the hiring of tradespeople to the general contractor and the homeowner, then we can leave extra coverages for sub-contractors out of your policy, which will likely make it cheaper.
The real point is this: tailor your insurance contract to match your actual operation, so that you get all the coverages that you need, and none of the ones you don’t. Bottom line: you want any legitimate claim you file to be paid by the carrier. The best way to achieve that outcome is to craft a policy that takes all facets of your business into account.
Building a Complete Policy
In order to fully protect a landscape architect, the insurance policy will likely need to contain all of the following:
Errors and Omissions Insurance
This is essentially lawsuit insurance. If you are ever roped into a lawsuit, whether it’s frivolous or valid, in most cases E&O insurance will pay for court attendance costs, lawyers fees, as well as damages you are ordered to pay. This insurance is designed to covers costs that arise from honest mistakes and litigious clients.
Example A: You complete a design for a homeowner in Los Angeles, who then hires a general contractor to build the garden according to your design. However, during construction the G.C. accidentally breaks a water pipe and floods the house. The homeowner sues both the G.C. and you, claiming that your design was partially to blame for the accident. Though your design was fine and you were not to blame for the accident, you still must hire an attorney, travel to L.A., and appear in court to clear your name. Your errors and omissions insurance covers the legal fees and travel/hotel costs for the duration of the lawsuit, even though the lawsuit was frivolous.
Example B: An error in one of your designs is not detected until the garden’s construction has already begun, causing delays and thousands of dollars in extra construction costs. Your client is forced to pay these costs to the G.C. in order to complete the job, so the client later sues you for the extra costs, claiming it was your mistake that caused the mishap. Your E&O insurance pays for your legal fees, court costs, and the settlement you reach with the disgruntled client.
General Liability Insurance
While E&O covers your “professional” work (designs, drawings, etc), a general liability policy pays in the event that you physically injure someone or damage property. This is worksite insurance, and more often than not a general contractor will require you to carry general liability insurance before you are even allowed on a job site. The larger the project, the more common this requirement will be.
Example A: You are visiting a job site where a large backyard is under construction, and while walking with the homeowner you both slip down a muddy hill and fall 8 feet into a trench. The client breaks her leg, and claims that you are liable for the injury. Your general liability policy pays for the legal fees and whatever damages or settlement you reach with the injured client.
Example B: If you run any sort of design/build operation, or even offer gardening services, a general liability policy is crucial for any random accident that could lead to bodily injury or property damage. A child grabs your gardening shears, a tool accidentally breaks a window, a misplaced dig severs a pipe, etc etc. A standard G.L. policy would cover any of these claims up to a $1 million! Without that policy, you pay out of pocket. So for any business owner who finds him/herself in a clients home, a G.L. policy is critical.
Anything else?
If you have employees, you need workers comp. If you have a work vehicle, you need commercial auto. If you hire subcontractors, you need a broker who will show you how to check their insurance, so you know that if they make a mistake it won’t cost you your business. If you are a sub-contractor yourself, you need a broker who can make sure your policy satisfies the typical insurance requirements most general contractors ask for (additional insured endorsement, waiver of subrogation, etc). Whatever your operation looks like, there is a policy out there that will cover you fully.
The first step is always a conversation with an experienced broker. If you need insurance and want to make sure you get a policy that is tailored to fit your operation perfectly, please reach out. If you have any questions we haven’t answered yet, we are happy to chat.
If you are an established landscape architect and you’d like to learn more about what your current policy language actually means, reach out for a free review of your insurance contract. Even if you aren’t our client, we wantto help you understand your current coverage, and make sure that you are getting what you really need out of your insurance policy.
An owner of a business that offers coworking space asked us recently to quote his insurance because he was planning to open a second location.
What we uncovered through working with him was an alarming reality that applies to coworking businesses across the country: their insurance might be based on a falsehood, and therefore worthless.
His business had been operational for about a year when we met him. His previous agent had written him a
Business Owner Policy (BOP)
with a well known standard insurance carrier.
This policy provided ample coverage for his business at $2m of liability coverage per occurrence and more than $550,000 of property insurance for a premium of approximately $2,000 per year. This seemed like an incredible deal.
He was planning to open a second location nearby, so it felt like an opportune time to shop his insurance out and get competing quotes for him.
Liberty Mutual – Declined due to class of business
Allied/Nationwide – Declined due to class of business
USLI – Declined due to class of business
Guard – Declined due to class of business
Each of these carriers informed us that they have a strict rule not to underwrite coworking spaces at all. This perplexed us. The client’s admitted carrier, seemed willing to provide insurance for our client, while all other admitted carriers declined. But since his carrier was apparently willing, we resolved to simply update his existing policy.
Initially the carrier was willing to add the second location and meet the insurance requirements for his new location.
However, when we called to push the changes through, his carrier informed us that additional underwriter review had been triggered.
After only a few minutes of review the underwriter explained that we had a problem: the original agent had submitted an application that had listed their services as Answering Service – nothing more. While answering services are one of the services that this business offers, they also offer many more including coworking space rentals, PO box rentals, desks by the hour and virtual assistant services.
It was for this reason that his carrier determined to cancel his policy for both locations – effective only a few weeks before he was set to open his new location!
While we searched for a replacement for him, he searched on his own and asked his coworking business colleagues for help. Throughout this process we both learned that most coworking space businesses are insured with similar standard carriers, including those previously listed.
This led to an alarming discovery. If what these carriers told us is true – that they do not insure coworking rental businesses – then it would appear that anyone who owns a coworking business AND has a policy with these carriers may not be properly insured.
Inexpensive insurance may seem attractive on the surface. But if your insurance company refuses to pay a claim in a critical moment, that insurance is a worthless contract. Your business might as well be uninsured when it comes to coworking space.
In the event of a bad claim, especially one that touches the coworking aspect of the business, coverage may be denied or significantly reduced if the insurance company does not have a clear picture of what your business actually does.
In our example, our client’s previous agent told the carrier that the client was only an answering service, NOT a coworking space. Therefore the carrier misunderstood the nature of the business they were insuring, and unknowingly offered insurance to this business against their own underwriting rules.
The real lesson of this is something that other coworking business owners ought to hear.
If you have a policy with one of these carriers…
Hartford
Travelers
CNA
Liberty Mutual
Allied/Nationwide
USLI
Guard
…you need to make sure they understand the nature of your business. We strongly recommend calling your insurance company directly to verify this fact.
In the end, we were able to satisfy our client’s insurance requirements and get him a policy with a different carrier that was comfortable insuring coworking spaces (and we made sure the carrier was aware of all the facets of his operation). If it turns out that your insurance company thinks you are an answering service (or some other incorrect class of business) instead of a coworking space, drop us a line. We can help you get the insurance you need to actually cover your operation – coworking spaces included.
We have the knowledge of the market to know which insurance companies actually want to insure coworking spaces. These companies often require more follow-up, detail, and interaction with the client than most insurance agents are willing to provide. We are willing to put in the time necessary to make sure our clients’ insurance gets done correctly.
One of the best ways to protect your business is to make sure your sub-contractors and 1099 employees are properly insured.
It is crucial that your vendors, 1099s, and subcontractors be properly insured. If they ever accidentally cause damage to a person or property, fail to live up to a client contract, or suffer an injury on the job, their insurance situation could have a serious impact on your business. Ensuring that they carry
General Liability
,
Workers Comp
,
Commercial Auto
, and any other type of insurance you deem necessary, is the best way to protect your business.
After all, if your uninsured sub-contractor makes a costly error or injures someone, you will likely pick up the tab. For example, ABC General Contractor brings in a subcontracted electrician to install some wiring in a remodeled house. This electrician accidentally backs his truck into the house, causing thousands of dollars of property damage. The homeowner sues ABC General Contractor, who discovers too late that the electrician did not carry Commercial Auto coverage. The general contractor will likely foot the bill, and try in vain for years to get repayment from the electrician. Had the G.C. enforced strict insurance requirements on his subcontractors, the insurance company would have likely paid the claim.
Don’t take on the financial risk of having to pay for others’ mistakes! Make sure your subcontractors and 1099s are fully insured. Otherwise they transfer all the risks of running their operation onto your books.
An even more common example: a sub-contracted painter is brought on-board by a general contractor and paid in cash (no written contract, no insurance requirements). The painter’s assistant falls off a ladder and breaks his legs, resulting in $65,000 in medical bills. Since there was no written contract and no Workers Comp insurance in place, the painter’s assistant decides to sue the general contractor for repayment of his medical bills (the G.C. is more likely to have the money to pay than the painter). The general contractor is forced by the court to pay the bills, and fined an additional $100,000 for operating without Workers Comp! Even though the painter’s assistant was not really the G.C.’s employee, the G.C. ended up paying the entire mount, all because the G.C hired an uninsured subcontractor. If the G.C. had required his subcontracted painter to carry Workers Comp, the insurance company would have paid the bills for that employee, and a lwsuit could have been avoided. Instead the G.C. hired the painter “off the books”, and it cost him dearly.
Every subcontractor with even one employee must carry Workers Comp. Any sub with a truck must carry Commercial Auto. And every sub need a General Liability policy. A general contractor who requires his subs to carry these policies can sleep soundly knowing that someone else’s mistake won’t cost the G.C. his whole business.
Our goal is to make sure your business is properly protected, without disrupting business operations in any way. If you have a sub-contractor who doesn’t carry insurance, or you just want to check to see if he/she does, reach out to Mighty Oak. We can help you make sure your subs are properly insured.
A mixed use apartment building in Chinatown, San Francisco
What is a “mixed use” property?
A building is “mixed-use” if it has businesses on the street level and apartments up above. Really, a mixed use building is any building that serves multiple functions. It might be part office and part retail, or part government building and part cafe, or part residential and part commercial. Walk around any major city – such as San Francisco – and you’ll see these types of buildings everywhere, especially mixed use apartments. Here at Mighty Oak, we specialize in mixed use property insurance.
Another mixed use apartment building in Chinatown, San Francisco
The Challenge of Insuring Such a Building
Mixed use apartments, which generally feature apartments on top and businesses on the street level, are ubiquitous in San Francisco. They also happen to be a real pickle to insure properly. Every occupant of this building needs a different kind of insurance: the business owner needs to insure his business, the residential tenant needs to insure his belongings, and the building owner needs to insure the entire property.
In the event of a disaster like a fire, it is crucial that all three of those areas (business, tenant’s belongings, and the building itself) have policies that will pay out! Often times the business owners, tenants, and landlords aren’t entirely clear on which types of insurance they actually need, or what it means to be “properly covered”. For example, if a building owner insures his building, it is important for the business owner tenant to understand that his business property is likely NOT covered at all.
Often these buildings contain many different tenants and businesses that each have their own unique insurance needs. It is absolutely essential to work with a competent insurance broker who can provide insurance options for the business owners, the tenants, and the landlord. Ideally this broker could also educate the whole crew on which occupants are responsible for which insurance pieces.
This iconic corner in North Beach, San Francisco is full of mixed use apartment buildings.
How to Properly Insure a Mixed Use Building
First, we should consider the building itself. Each building needs to have its own Landlords Policy, which will cover the actual building. As the name of the policy implies, this piece is the landlord’s obligation to purchase (and it is the landlord who gains the protection). If the building is damaged or destroyed, this policy will pay back the owner of the property for repairs. Sometimes when an older building is damaged, the city steps in and demands that the property be brought up to code (such as a mandatory earthquake retrofit). This insurance policy can help cover that cost as well. It will even cover lost income, since the owner may lose some rent payments if tenants have to evacuate during repairs.
This policy is crucial for the owner in other ways. For example, if a visitor slips in the stairwell and decides to sue the property owner, this policy will pay the legal bills and damages. If a tenant decides he’s been wrongfully evicted and chooses to sue, this policy may cover the landlord’s legal fees. In other words, the building is the landlord’s business, so it should be insured in almost all the same ways a business would be insured: protect the property itself, protect the owner’s income, and protect the owner from lawsuits.
A typical mixed use property, with apartments upstairs and a bar downstairs. The owner must insure this entire property, since he owns the whole building.
Now that the building itself is covered, the rest of the building’s inhabitants (both residential tenants and business owners) need their own separate insurance. Take the example below: we see that the red units are residential units and the blue units are retail commercial units.
Each occupied unit needs its own insurance coverage. But wait – haven’t we already insured the building? Why should each tenant have to insure their own unit? Actually the tenants do not need to insure any part of the building itself, but rather their own belongings inside their unit. The Landlord’s Policy will not cover any of the tenant’s belongings, and in the event of a fire, the tenant will not be reimbursed for lost items unless he carries his own separate
Renter’s Policy
.
A Renter’s Policy is also known as “contents coverage”, or insurance coverage that does not cover the structure itself, but instead the contents of each unit. Every residential tenant can cover his own belongings without having to pay for coverage for the building that he does not own. These policies are designed to protect the tenant in case something like a burst pipe destroys their belongings. A good Renter’s Policy can even cover a tenant’s liability, say if the tenant accidentally starts a fire that destroys the neighboring tenant’s belongings. The combo of a Landlord’s Policy and Renter’s Policy ensures that the building itself and all the stuff inside it are protected from accident or disaster.
What about the businesses on the ground floor? They are also tenants, but they don’t live in their unit. These commercial tenants need policies that cover their:
Business Property – Covers their equipment, tools, and other contents of the commercial unit, in case they need to be replaced after an accident or disaster.
General Liability– Covers the business owner in case a customer gets injured or someone else’s property is damaged during the normal course of business. If someone slips inside the business and decides to sue the business owner, this policy will pay his legal bills.
– If an employee is injured on the job, this policy will pay the medical bills. This type of insurance is legally required for any business that has at least one employee.
Just like the residential tenants, these business owners do not need to cover any part of the building itself, but only their own businesses inside their unit
This is why a mixed use property is the perfect intersection of personal insurance and commercial insurance, all in one property. A good broker can work with the entire building to cover the owner and every tenant in a way that protects everyone without forcing anyone to pay for insurance they don’t need.
A professional handyman has to be pretty adaptable! Installing a set of cabinets, repairing some drywall, painting a mailbox, realigning a garage door, pouring some concrete, sanding a porch, assembling furniture, removing a door frame, building a shelving unit, remodeling a living room, unclogging a drain, hauling some junk… it’s all part of the job. The more skills a handyman can master, the more jobs he can say yes to.
A handyman’s business insurance needs to be just as adaptable. The more jobs a handyman can take on, the more varied the risks that come with those jobs, and the handyman’s policies MUST cover all those risks in order to be effective (otherwise what’s the point of insurance?). Therefore it is crucially important that the handyman work closely with a business insurance broker to craft an insurance policy that is tailored to the handyman’s actual needs. Being “properly covered” doesn’t mean just piling on more and more insurance (with higher commissions for the broker); it means creating a set of policies that fit a client’s business risks exactly.
“Do I really need insurance?”
The first question many handymen (and other business owners) ask is, “Do I really need insurance?” A good way to answer that question is to think about the risks a handyman takes on just by doing his job, AKA the every day accidents that could result in the handyman having to shell out lots and lots (and lots) of money. A newly installed air conditioning unit could fall and injure a child. A handyman’s assistant could slip off a ladder and break his leg. The handyman could get T-boned while driving his truck to a job site. A client could trip over a peeled-up carpet and decide to sue. A whole set of new tools could be stolen from the truck. And many many more.
These sorts of accidents can happen to anybody, even the most skilled operators. They are the risks of doing business. What insurance does is transfer that risk off of the handyman’s balance sheet and onto the balance sheet of an insurance company. One single lawsuit or car accident can put even a well-established handyman out of business. One theft can set a handyman back for months. By purchasing policies designed to cover these mishaps, the handyman can sleep at night with the knowledge that no matter what goes wrong, he won’t have to pay for the damage. That is, as long as the risk is covered in the policy.
This is why it’s so crucial to work with an insurance broker who isn’t just trying to close a deal quickly for a fast buck, but instead wants to learn every facet of the handyman’s business before agreeing to write the insurance policies. The cost and scope of the insurance will depend on what kind of work the handyman does, whether he has employees, who his clients are, and how large his operation is. If the handyman does more dangerous work, the cost will be higher, but so will the coverage. All of this should be discussed before the broker even attempts to get quotes.
One added perk of insurance: Many clients require certificates of insurance before work can begin. These clients may include apartment complexes, bank-owned properties, clients asking for electrical or plumbing work, and clients who simply want to ensure that if an accident does occur on their property, the handyman will have the resources to pay for the repairs. For these clients, a handyman without insurance is simply unhireable. Therefore proper insurance coverage could lead to more (and better paying) jobs.
Remember: Even if you are very careful and diligent at job sites, accidents can still happen. Insurance protects you and your business from outcomes that are out of your control.
“What types of insurance do I need?”
The types of insurance a handyman might typically need include:
General Liability
– Protects him from paying repair costs in the event that the handyman accidentally harms a customer’s home, appliances, or other property. If the customer himself is injured in an accident, this insurance can cover small medical bills regardless of who was at fault, and large medical bills if the handyman is found to be liable. Should the accident lead to a pricey lawsuit, this policy could cover all the defense costs. A General Liability policy can even pay out if there is a dispute over the handyman’s finished work – this is known as “Completed Products Coverage”. Since so much of his work is performed within a customer’s home, a professional handyman must have protection from lawsuits of all varieties. A G.L. policy provides just that, so a handyman can do his job without worrying that one mistake will cost him his business.
Coverage of tools and equipment (also known as Inland Marine
) – If his tools or equipment are stolen, damaged, or lost, this policy will cover the loss. Imagine the cost to replace an entire set of tools if they are destroyed by fire or some other accident. Inland Marine will not only pay to replace the set, but it may also cover lost income if the accident forced the handyman to suspend his operations for a time. And to top it all off, Inland Marine coverage follows the handyman wherever he takes his equipment (unlike a Commercial Property
policy, which covers only equipment and property that stays in one place). Since most handymen do a lot of traveling with their tools, every piece of a handyman’s equipment should be insured with an Inland Marine policy.
Workers Comp
– If the handyman has employees, this insurance is legally required. It covers medical bills, lost wages, and even death benefits if employees are injured or killed on the job. The more dangerous the work, the more expensive this policy is likely to be. But don’t take that to mean it’s a policy that can be skipped. Aside from the legal requirement, Workers Comp is an absolutely crucial policy for a handyman to carry, just for the sake of his business. Given the strenuous, physical nature of the work, the threat of accidental injury is always present. Workers Comp will not only cover the medical bills for the employees (and the owner if he wants to be included), but it also protects the owner from lawsuits.
Commercial Auto
– Since being a professional handyman involves the daily operation of a work vehicle, having a strong Commercial Auto policy in place is vital. Whether driving to a job site, picking up supplies, backing into a customer’s driveway, or popping out for coffee, every moment spent on the road exposes a handyman to risk. Without a Commercial Auto policy in place, the handyman is on the hook for any harm that comes to people or property as a result of his vehicle (whether the business owner or his employees are driving). If a handyman’s truck backs into some scaffolding, gets T-boned at an intersection, rear-ends a car in traffic, or strikes a pedestrian, this crucial coverage can pay for the damages. It can cover medical bills, replacement of damages property, legal fees, and even repairs to the handyman’s own vehicle should he be hit by an uninsured driver.
The Shield
These policies combine to form a shield that protects a handyman from just about any catastrophe that could strike his business: injured workers, a car accident, a fire at the shop, theft of tools, damage to a customer’s property, a natural disaster, and even lawsuits from dissatisfied customers. This is what we call a “well-tailored” policy, rather than “one size fits all”. It doesn’t just tack on a bunch of insurance a handyman doesn’t actually need; instead it is designed specifically for a handyman, and covers exactly the risks he might face.
To compile such a perfectly tailored policy, it’s usually best to work with a business insurance broker, because brokers can search the whole market for the best deal. Brokers have access to insurance carriers that specialize in handymen and tradesmen of all kinds.
Want to find the right insurance for your business? Drop us a line! You can speak to broker, ask a question, or even suggest a future blog post.
For business owners, general contractors, hotels, manufacturers, restaurants, cleaning services, and any other type of business that interacts every day with clients, General Liability is one of the most crucial types of business insurance.
If a person is injured as a result of your business operations, this insurance can help cover the medical bills, legal fees, and settlements. If property is damaged and your business is legally liable, a General Liability Policy can pay for the repairs and replacement property. Just about every type of business needs a liability policy for the basic protection it provides.
Accidents can happen any time – it’s a part of life – and often these accidents lead to lawsuits. A ladder damages a window, a customer slips on a wet floor, an undercooked burger leads to food poisoning, a toolbox falls from the roof onto a car; in these and other mishaps, a General Liability Policy will act as lawsuit protection. If anyone or anything is harmed from your products, property, services, or operations, this policy might mean the difference between keeping your business open and shuttering it forever.
Property Insurance
Commercial Property Insurance protects a business owner’s valuable assets from fire, theft, explosions, extreme weather, burst pipes, vandalism, and more. This type of insurance can be tailored to fit any type of business, since it can cover buildings, computers, tools, equipment, important documents, inventory, furniture, and even the signs, fences, and landscaping just outside your building.
For business owners who rent a space, this policy will cover only their belongings without covering the building itself (which is the landlord’s job). It can be tailored to protect a few small items (like a computer and some furniture) or large, expensive equipment. For building owners, this policy can cover the building and contents, and even lost rental income.
Nobody can predict when a disaster will strike, but as a business owner you can prepare for it. With a Commercial Property Policy in place, your valuable property (and your livelihood) are protected, even if the unexpected happens.
Landlords Insurance Policy
If you own a building and rent it out, that building is your business. So it should be insured like a business. Whether it’s a commercial building or an apartment building, and whether you rent out just one unit or 100, that precious asset needs to be protected (and you do too).
A well-crafted Landlords Policy will first and foremost cover the property itself. If any part of the building (including the siding, roof, foundation, glass, awnings, garage, railings, etc.) is damaged, this policy should pay the owner to cover the repairs. This policy can also cover loss or theft of the landlord’s items, including janitorial supplies, paint/touch-up supplies, art, and decorations in the lobby. If the building is damaged and the tenants have to move out for a time, this policy can even cover the landlord’s lost income while tenants aren’t paying rent.
Aside from the property, this policy also provides liability coverage for the landlord. This means if someone trips and falls on the stairs and decides to sue the building owner, this policy can cover legal fees, damages, settlements, and medical bills. If a tenant sues for wrongful eviction or invasion of privacy, this policy might help the landlord cover those legal bills as well.
This policy treats a landlord’s property like the business that it is. It protects the actual building, the rental income, and the landlord’s livelihood in the event of a lawsuit. It’s an insurance policy that is tailored to a landlord’s specific needs.
Professional Liability Insurance
If you make a living off of providing expert advice, Professional Liability (also known as Malpractice and Errors & Omissions) should be a serious consideration. This insurance protects you and your business from lawsuits alleging that you made an error. This is a crucial coverage for all kinds of expert professionals, including doctors, CPAs, lawyers, engineers, insurance agents, architects, IT consultants, and certain contractors. As an expert, you rely on your deep training and knowledge to advise and serve your clients. But everybody makes mistakes; if a client ever accuses you of negligence, dispensing bad advice, malpractice, or an error on a critical document, an expensive lawsuit may soon follow. Professional Liability can protect your finances and your business from hefty legal fees. Nobody is perfect. You may never plan to make a costly mistake, but it's wise to be covered just in case. And by the way, Professional Liability will even pay for your defense if the lawsuit is frivolous.
For retail businesses, general contractors, hotels, manufacturers, restaurants, cleaning services, and any other type of business that interacts every day with clients, General Liability is one of the most crucial types of business insurance. If a person is injured as a result of your business operations, this insurance can help cover the medical bills and legal fees. If property is damaged and your business is legally liable, a General Liability (G.L) policy can pay for the repairs and replacement property. Just about every type of business needs a G.L. for the basic protection it provides. Accidents can happen any time - it's a part of life - and often these accidents lead to lawsuits. A ladder damages a window, a customer slips on a wet floor, an undercooked burger leads to food poisoning, a toolbox falls from the roof onto a car; in these and other mishaps, a G.L. policy will act as lawsuit protection, covering defense costs and even damages. If anyone or anything is harmed from your products, property, services, or operations, a G.L. might mean the difference between keeping your business open and shuttering it forever.
"Admitted" insurance policies are those sold by companies that have been licensed by the state where the insured's business operates. These admitted carriers are subject to regulations by that state, which means they tend to be more conservative in their underwriting. In the real world, this means that admitted carriers tend to offer insurance only to businesses that have a lower likelihood of filing large claims. These low risk businesses might include offices, clothing stores, small restaurants, tech start-ups, and other similar businesses. Admitted carriers are also backed up by the state's insurance guaranty fund, which means if that carrier goes bankrupt the fund will step in and pay out claims. Overall, admitted insurance is considered to be ideal due to the state support, low cost, and extra coverage that tend to come along with admitted policies. However, businesses with more risk of filing large claims are usually unable to acquire admitted policies due to the strict underwriting guidelines.
Larger business, or those with higher risk of filing large claims (such as construction companies, roofers, manufacturing operations, farms, and damaged properties or properties with a history of claims) tend to get immediately declined by admitted carriers. Therefore they have to get their insurance from "non-admitted" carriers. This simply means that the carrier is not licensed by the state. They may be licensed in another state, or even another country (such as Lloyd's of London). Since they are licensed elsewhere, they do not need to comply with the strict state insurance regulations. Therefore these carriers are free to take on higher-risk businesses. These carriers are also not supported by the state insurance guaranty fund. If a non-admitted carrier goes bankrupt there will be no bailout. While this seems risky on the surface, there are other ways to check the financial reliability of a carrier, such as the AM Best score, which rates carriers from A++ to F. Many non-admitted carriers are rated A- (Excellent) and higher, which means they have are considered financially stable. For businesses with more risk or claims, non-admitted carriers are often their only option for acquiring business insurance. There is a vibrant market for non-admitted (also known as "surplus lines") insurance, and lots of options available for business owners.
Builder's Risk Insurance
If your property is undergoing a significant remodel, or if you are building from the ground up, or if your building has been damaged and needs to be reconstructed, you may want to consider Builder's Risk Insurance. This type of coverage protects buildings while they are under construction, as well as materials, fixtures, and/or equipment used during the construction or renovation of a building. If this property is damaged or stolen, Builder's Risk can pay to replace it, and keep your construction project running smoothly. Buildings under construction tend to be more susceptible to theft, vandalism, fire, and extreme weather. Sleep easy at night knowing that your investment is protected from hazards you can't prevent.
A BOP is a handy insurance package that combines General Liability insurance with property insurance, plus a bunch of extra coverages and frills thrown in. These frills include things like business interruption coverage, coverage for outdoor signs, employee theft coverage, coverage for valuable paper and records, data loss coverage, and even small things like lock replacement coverage. These BOPs are typically only offered to small businesses that do not have a ton of liability/property risk, such as CPA firms, retail businesses, restaurants, offices. BOPs also tend to be more affordable than stand-alone General Liability and Property policies, allowing new business owners to get off the ground with minimal insurance costs. Larger businesses with more risk, such as construction companies, farms, coworking spaces, roofers, and manufacturing companies would likely not qualify for these little packages.
Workers Compensation Insurance
If one or more of your employees gets hurt on the job, Workers Compensation Insurance (Workers Comp) can cover the medical bills, and even cover lost wages. As an employer you are required by law to have Workers Comp, even if you only have one employee. This type of insurance is based on a "social contract" between business owners and employees. Employees are entitled to prompt and effective medical treatment for work-related injuries (paid for by a business owner-funded insurance policy), and in return business owners are protected from lawsuits related to those injuries (if there is a Workers Comp policy in place, injured employees generally cannot sue their employer for damages). Without a Workers Comp policy in place, a business owner is legally on the hook for every work-related injury his employees suffer, plus whatever damages might be awarded in the lawsuit that follows. In the case of even a moderately bad accident, this can quickly bankrupt a business and leave the injured employees without income or the money to pay their medical bills. This is why in California failing to have Workers Comp is considered a criminal offense (Section 3700.5 of the California Labor Code), punishable with fines up to $100,000. On the plus side, once you have it in place, you, your employees, and your business are all protected from sky-rocketing medical bills and endless lawsuits. If there is a claim, the insurance company will step in and cover the costs, so the employer can focus on running the business. Workers Comp can even provide death benefits in the event an employee is killed on the job.
If you or your employees drive a vehicle as part of the job, Commercial Auto Insurance is a must-have coverage. In the event that one of your business vehicles is involved in an accident, Commercial Auto can protect you and your business from sky-rocketing legal fees and medical bills. If your work vehicles are damaged by theft, weather conditions, or vandalism, Commercial Auto might pay for the repairs so you don't have to. If an employee injures himself or someone else while driving a work vehicle, Commercial Auto can cover the medical bills so the business owner doesn't have to. Remember: if you or an employee is regularly driving a vehicle for work, it's very likely your Personal Auto policy does NOT cover you properly. And if an employee gets in an accident on the job, even while running out for bagels, you the business owner can be held liable. Commercial Auto can help cover the cost of property damage and injury, so your business doesn't go bankrupt paying damages.
If you are a renter, you are not responsible for insuring the property in which you live (that's the landlord's job). You DO however need to insure your belongings. Your landlord's policy will not cover any of the stuff inside your apartment or rented home, so a Renter's Policy is there to fill in the gap! In the event of extreme weather, burst pipes, theft, fire, vandalism, and other disasters, your Renter's Policy will pay to replace your damaged belongings. These policies can be crafted to cover exactly what you own, including clothing, furniture, jewelry, musical equipment, appliances, and more. Just make sure you work with a good broker to create a detailed inventory of your belongings, so you get a policy that meets your individual needs (your broker can also help you organize receipts and photos of your belongings, so it will be easy to demonstrate to the insurance company what you lost after a disaster). A Renter's Policy can even pay for injuries and property damage that you accidentally cause, in case someone is injured in your apartment, or if you leave your bathtub running and flood the apartment below yours. Some policies can even cover living expenses, in case a disaster forces you and your family out of your home for a certain period of time. Renter's Policies are generally pretty affordable, especially when bundled with car insurance, so it's usually not a huge hassle to protect your belongings.
If you or your employees frequently transport business property to multiple locations, Inland Marine is an important coverage to consider. Though it has the word "marine" in it, don't let the name fool you; this coverage is designed to protect anything of value you carry over land. That means tools, equipment, and materials that move around with you. While commercial property coverage can cover anything that stays in one location, this insurance is portable. Handymen, equipment installers, plumbers, photographers, IT professionals, and construction workers (and anyone else that carries tools/equipment) should all consider Inland Marine when crafting an insurance package. It can also cover shipped items, medical & scientific equipment, fine art on exhibit, client property left in your care, and even buildings under construction.
Commercial Property Insurance protects a business owner's valuable assets from fire, theft, explosions, extreme weather, burst pipes, vandalism, and more. This type of insurance can be tailored to fit any type of business, since it can cover buildings, computers, tools, equipment, important documents, inventory, furniture, and even the signs, fences, and landscaping just outside your building. If a business owner only has a small amount of equipment, often times this property can be covered at no additional cost (if tacked onto a Business Owner's Policy). If a business owner has a lot of expensive equipment (such a $100k piece of machinery), a policy can be crafted to cover that exact piece of equipment, and much more.
These policies are great for business owners who own or rent their space. For renters, it will cover only their belongings without covering the building itself (which is the landlord's job), so the business owner won't have to pay for insurance he doesn't need. If a business owner works from home, this policy can cover their business equipment there too, since most homeowner's policies do not automatically cover business equipment. And for the building owner, a well-constructed Commercial Property policy is a must-have. The policy needs to be set up so that even in the event of a devastating fire (or other disaster), the building owner will be made whole in the end. Make sure you work with a good broker who can create a policy to fit your exact needs.
Nobody can predict when a disaster will strike, but as a business owner you can prepare for it. With a well-tailored Commercial Property policy in place, your valuable property (and your livelihood) are protected, even if the unexpected happens.
