Category: Business Insurance

In this series, we will discuss ways to properly insure businesses of all different industries, shapes, and sizes.

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How to Properly Insure a General Contractor

There is no gentle way to say it: general contractors need to make sure they are properly insured. Below is a crash course on general contractor insurance: the types of policies you might need, and what to look for in those policies.

Proper contractor insurance isn’t just about having a policy that satisfies a client’s insurance requirements on paper. Real insurance means having policies that will actually pay when an accident happens: if an employee falls off a ladder and can’t work for months, if an uninvited visitor wanders onto your job site and gets injured, if a disconnected sump pump causes an unexpected flood, or if some other accident opens your business up to a costly lawsuit. And it means having a broker who has reviewed every exclusion in your policy, so you know exactly what is covered and what is not.

Here is a handy guide on how to make sure your construction business is properly insured.

Types of Policies a Contractor Should Have

General Liability: This insurance protects you in case somebody gets injured because of your work. Perhaps a tool falls off a roof and lands on a passer-by, or a client falls into a trench while visiting the job site, or some other kind of unexpected accident. Injuries can happen in construction, and this insurance will pay to defend you if the injured party accuses you of being liable for the accident. This insurance also pays if property is damaged during the course of your work. That wrench might falls and damage a parked car, and general liability will pay for the repairs, as well as any legal fees. This is the insurance most often required by clients, so you’ll probably need it before you can start most jobs.

Workers Comp: This insurance is a requirement not only from clients, but also from the state. Workers comp protects your workers in the event of injury, and protects you in the event an injured worker claims that your business was liable for the injury. Even if you only have one part-time employee, you must carry workers comp. Not only is it required by the state and the CSLB, but it’s also just smart: the carrier will pay the injured worker’s hospital bills so that you won’t have to. They may even cover the employee’s lost wages, and protect you, the employer, from liability. Bonus: when you buy workers comp, we will automatically send proof to the CSLB so they know you are compliant.

Tools and Equipment: This insurance is also known as Inland Marine, even if you never go anywhere near the water. An Inland marine policy covers your equipment big and small, from large excavators down to small misc. tools. Since your work happens all over the place at various job sites, this insurance follows you wherever you go. And if you have an office or warehouse, it can also insure all the office equipment and machinery in your space. If you lease or purchase large equipment (like an excavator, large drill, skid steer, etc.), this type of insurance will likely be required by the lender.

Commercial Auto: Oftentimes a new general contractor just starting out in the business will only own one important piece of equipment: a truck. Therefore a commercial auto policy is an important piece of this insurance puzzle: it protects your vehicle, it protects your liability on the road and at job sites, and it protects other drivers. A personal auto policy will not suffice if you are using your truck to haul materials, if your business name is on the truck, or if your employees drive the vehicle. Only a commercial policy can guarantee you’ll be protected in case you back your truck into a building at a job site, drop materials onto the road while driving, or if your employee collides with another driver on the way to a job.

Umbrella: As you start to take on larger jobs, or perform work for commercial entities (like owners of strip malls, apartment buildings, or HOAs), you may find that they require you to carry more liability than what is provided by a standard general liability policy. This is where an umbrella comes in: it provides additional liability to meet such requirements, whether the requirement be $1m, $3m, $5m, or more. An umbrella is especially handy because it can extend additional liability over ALL of your other policies, including general liability, auto, and workers comp. This means that one umbrella can actually increase the limits on all your other policies, protecting you from the types of larger lawsuits that sometimes come from performing work on larger properties.

These are the main types of insurance policies that most general contractors need, though your specific may vary depending on the types of jobs you perform, the size of clients you take on, and how much equipment you own.

Look out for exclusions!

Having the insurance is one thing, but making sure it actually covers your operations is another. As I noted in my article on earthquake retrofitter insurance, it is crucial to work with a broker who will review the exclusions in your policy. Sometimes policies that are very cheap are also riddled with exclusions. Those carriers may refuse to cover work performed underground, work on foundations, new construction, exterior work over 3 stories high, work performed on HOAs, etc. etc.!

The only way to make sure that your policy is a good fit to to review it, and that is the job of your broker. Some general contractors, especially those who specialize in home remodels, might find that the lowest-cost policy is a perfect fit, since they don’t perform the kind of work those policies exclude. Whereas companies that specialize in foundation repair, demolition, exterior painting, roofing, new construction, and other specific areas of expertise might need a policy that is specifically designed to cover their type of work.

Since we specialize in general contractor insurance, we know what to look for in a contractor’s policy. We aren’t just looking to offer the quickest, cheapest option, but also the CORRECT option, the policy that properly insures the construction company. If your insurance doesn’t cover you properly, why bother paying for it!

As brokers, we will shop around for you, make sure we find all the most competitive quotes available on the market, and review them carefully to make sure they do the job. This is not a one-time service, but something we automatically do every year at renewal. That way you will know that every year you’ve got the best possible deal and best possible coverage. And as your business grows and changes (perhaps your services or types of clientele change drastically over the years), we will make adjustments as needed. In other words, we are people you can talk to over the course of years, not anonymous sales drones who become impossible to reach the second they close the deal.

Contact us today to find out what insurance your business needs.

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HOA Earthquake Insurance – Explained

Many HOA board members are surprised to learn that earthquake coverage is almost always excluded from master HOA policies. Here in California, where earthquakes are more common and can strike without warning, this lack of HOA earthquake insurance often appears as a glaring omission. While individual unit owners can purchase personal earthquake insurance to protect their own belongings, those individual policies will not insure the building itself against earthquake. In the event of a devastating earthquake, an HOA without an earthquake policy will carry the financial burden of repairing the buildings themselves, without the help of an insurer. This can lead to costly special assessments and financial problems of the HOA.

Despite this risk, many HOAs go without earthquake insurance. This is because oftentimes brokers will only present one single expensive quote to HOAs, without much explanation or context, and without thoroughly shopping around to a variety of insurers for competing quotes. This gives HOAs the false impression that HOA earthquake insurance is unaffordable, and that the coverage is “one size fits all”. In reality though, the prices, coverages, and deductibles on these policies can vary widely between carriers, so it’s important for HOAs to work with an experienced broker who can shop around extensively for them, explain the pros and cons of various quotes, and help the HOA determine if earthquake insurance is a good buy.

If you are considering adding earthquake coverage to your HOA’s insurance package, here are some factors to consider:

Price

The cost of HOA earthquake policies tends to fluctuate year to year. While standard property insurance policies have been getting progressively more expensive due to the growing prevalence of wildfires in California, the price of earthquake policies do not align with this trend. There is a vibrant market for HOA earthquake insurance, with many carriers competing with one another for clients. This means that each year, the HOA has an incentive to shop around between carriers, since some insurers may lower their prices in a given year in order to become more competitive than other insurers. A good broker will automatically perform this function each year (this is what we do for our clients).

There are other factors that can lower the pricing on HOA earthquake policies. If an HOA has had retrofitting work done (such as bolting the foundation, installation of steel beams, new foundation, etc.) there is a better chance of finding the most competitive pricing on earthquake policies. That’s why we ask HOAs to tell us about their past retrofit work, since a retrofit can lead to significant discounts on the HOA’s policy. Even if your HOA hasn’t had retrofit work done, it is still worthwhile to find out what it will cost to add earthquake coverage. When we shop around extensively and make insurers compete against one another, we can often uncover a surprisingly affordable offer for earthquake insurance.

Yet another way to keep price under control is to take on a higher deductible. Let’s discuss this in more detail.

Deductible

An important factor that affects price, as well as the quality of the earthquake insurance, is the deductible on the policy. While standard property policies (fire insurance) usually come with deductibles between $2,500 or $5,000, earthquake policy deductibles are significantly higher. The standard deductibles on HOA earthquake policies range from 5% to 25% of the total building value (the cost to rebuild the entire building). So if the entire building would cost $2,000,000 to rebuild, a 5% deductible would mean a deductible of $100,000, while a 25% deductible would mean a deductible of $500,000. These deductibles apply regardless of the amount of damage; this means a $500k deductible could apply even if the damage was only $50k.

Right off the bat, this reveals something crucial about HOA earthquake insurance: it is intended to protect your building against large, catastrophic earthquakes, not minor earthquakes that cause minimal damage. If the earthquake policies come with standard deductibles of $100k, $200k, etc., this means the policy is most useful for situations where the building has suffered significant damage. Minor damage that doesn’t exceed the deductible will not be paid for by the insurer. So if you are considering purchasing earthquake insurance, take a hard look at the deductible, because it will determine the purpose and usefulness of the policy. These policies are for HOAs that want insurance that will repair a severely damaged building after the “big one” hits, not for HOAs that are hoping an insurer will pay for some broken roof tiles after a minor quake.

The deductible you choose will have a direct bearing on the price of the policy. Since there is a huge difference between a 5% and 25% deductible, there is a correspondingly large difference in price between these two options. An HOA can save thousands of dollars in premium by taking on the higher deductible, though that will also mean they will pay for more of the damage when they actually need to use the insurance.

So if your HOA wants to ensure that, in the event of a catastrophic quake, the insurer will pay for the largest possible portion of the repairs, you can opt for a low deductible (which will mean paying a higher premium on the front end). If however your HOA prefers to limit premium costs on the front end, and is comfortable with a policy that would really only be useful in the event of an earthquake that causes so much damage that the cost of repairs overcomes the high deductible, then a 25% deductible is a fine choice. The point is: an experienced broker should discuss these options with you, so you make the decision that best matches your HOA’s budget and goals.

Coverages

Yet another factor that will determine the price and quality of an HOA earthquake policy is the level of coverage in the policy. Just like with deductible, you always have the option to improve or lower the quality of the coverage in the policy, and this in turn will affect the price.

HOA earthquake policies, at their core, are designed to insure all commonly-owned portions of the building. This includes the roof, exterior walls, foundations, wiring, plumbing, boilers, and common areas (gyms, clubhouses). In addition to this standard policy, there are many add-ons that an HOA can consider, such as:

  • Loss of Rents: for HOA-owned rental units, this coverage pays for lost rental income during repairs.
  • Ordinance and Law Coverage: pays for costs associated with bringing damaged buildings up to current code, which can be significant in older buildings. This coverage pays for demolition, increased construction costs, and upgraded materials required by law.
  • Additional Property: non-structural property such as lighting, fences, pools, landscaping, parking lots, sidewalks, and underground utilities (sewer lines, water lines) can be added to an HOA’s earthquake policy.
  • Earthquake Sprinkler Leakage: for buildings with fire sprinklers, this coverage can pay for damage caused by sprinkler lines that break during an earthquake.

Just like with deductible, it is critical to discuss your HOA’s goals with your broker. Do you want a pricier policy that will cover every single facet of your building (including lighting, sidewalks, sewer, lost rents, etc.), or a lower-cost policy that does not include all the extra coverages. An experience broker will be able to go over all the pros and cons of these options with you.

It is also important to note what is NOT covered by your HOA’s earthquake policy:

  • personal belongings of unit owners
  • upgrades to the interior units (new flooring, countertops, etc.)
  • lost rent for rental units that are managed by unit owners
  • loss of use for unit owners (hotel costs during repair, for example)

All of these should be included in the individual unit owner’s personal earthquake policy, which can be added to their “HO6” (condo-owners) policy). Every unit owner should talk to their personal insurance agent about adding personal earthquake coverage to insure their own belongings.

Conclusions:

  1. Work with an experienced broker who can explain all of the facets of your policy, and understands how the factors above can influence the price of the policy and the quality of coverage.
  2. Make sure your broker shops around for you. The more carriers your broker approaches, the more you will benefit from competition between insurers. If your broker offers you one single quote with little explanation of the coverages and no mention of which carriers he/she approached, it might be time to work with someone more experienced in the earthquake insurance arena.

Here at Mighty Oak, our brokers are experts not only in shopping around for high quality earthquake insurance policies, but also in explaining those policies in ways that actually make sense. We won’t use jargon or (even worse) throw a single, expensive option at you without explanation. We will check the whole market on your behalf, and make sure you fully understand what you are buying.

Reach out today to explore earthquake insurance options for your HOA.

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Insurance for Non-Renewed Apartment Buildings

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.

Contact us today to speak with a broker!

(We also specialize in finding insurance for non-renewed HOAs).

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Finding the right insurance for an earthquake retrofit contractor

It can be tricky to find the right insurance for an earthquake retrofit contractor, but we can help!

A general contractor recently called to ask if we can help with his insurance. He is a licensed earthquake retrofit contractor who has been working in construction for decades. He was struggling to find insurance that would actually cover his core operations: earthquake retrofit and foundation repair. When he met us, he had just purchased a policy that officially offered him no coverage for his main services.

Here was the message he had just received from his current broker:

Per our discussion, the policy that you purchased with us doesn’t cover foundation repair or earthquake retrofitting of any type.  Unfortunately we must cancel your policy immediately. We will be unable to provide a replacement policy for you. We are sorry for the inconvenience.

At that moment the contractor had many retrofit jobs running simultaneously across the Bay Area, so this insurance problem had to be corrected immediately.

How did he find himself in this situation? The reason is because many brokers who work with contractors use instant-quoting portals that generate quick and cheap insurance quotes. These quotes are handy because of the speed and price, but they are usually riddled with exclusions. For a contractor who performs standard remodel work, these sorts of quotes might be the perfect fit. But for an earthquake retrofitter, the exclusions render these cheap quotes worthless.

Here’s an example of such an exclusion:

Even though that exclusion for seismic retrofitting work seems pretty obvious, it’s still easy to miss it if the broker doesn’t read the quote carefully. Sometimes the exclusions are even more subtle, like this exclusion, which is often buried on page 80-something of the policy:

The contractor who called us had purchased a cheap policy that his broker had found for him instantly, via a portal that did not ask too many questions. The broker did not review the exclusions before starting the insurance, and carelessly sold a low-priced policy that contained an exclusion for all kinds of retrofitting work. A few weeks later, when the contractor was reviewing his new policy, he discovered the exclusion and called his broker. Only then did the broker realize that the insurance he had sold was worthless. The contractor realized, to his dismay, that he had been operating essentially uninsured for the past three weeks.

We were able to fix this problem for the earthquake retrofitter because we are experts at construction insurance of all kinds. We always read through the policy language before we put a new policy into force, and we know which exclusions to look for. We also know which insurers specialize in specific areas of construction which are often excluded on standard policies, such as earthquake retrofitting, bridge work, utility work, new construction, and remodel work performed for large HOAs. We made sure that the retrofitter got a liability policy that insured his actual operations and did not include any worrisome exclusions, so he could continue with his jobs uninterrupted.

If you are an earthquake retrofit contractor, or any kind of contractor who has struggled to find proper insurance, please reach out. We can help with general liability, workers comp, commercial auto, bonds, and any other kind of construction-related insurance.

Most importantly, we will make sure the job is done right the first time.

Reach out to a broker with any questions
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How to find insurance for HOAs in California

The California insurance market is in a state of turmoil. A handful of big-name carriers are refusing to issue any new quotes in the state, while others are non-renewing existing clients. For small Homeowners Associations (HOAs), this can be a stressful time to seek insurance. Many HOAs (even those in urban areas) have been non-renewed by their long-time carriers, and must go out on the market for new insurance at a time when options seem limited and prices are rising. We can help! We specialize in HOA insurance in California, and can help non-renewed HOAs get new policies!

At Mighty Oak, our brokers understand how to navigate the nuances of a complex market, and the realities of shared homeownership. We understand that HOAs are unique, and as brokers we know how to properly insure them. Our master HOA policies include property coverage for the building as well as liability coverage for the HOA itself. We can also often add coverages like equipment breakdown, directors and officers coverage, sewer back-up, and crime insurance. Our goal is to match the coverages that are on the HOA’s current (non-renewing) policy. And for the individual condo owners 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 HOA’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. We can help even 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.

Our brokers specialize in HOA insurance in California, Florida, Texas, Nevada, (and we are licensed in other states as well). We have been especially successful with HOAs in urban areas who have been non-renewed or whose prices have risen dramatically.

Reach out today to get a quote!
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Indoor Grow Insurance

marijuana

As recreational and medical cannabis has grown to enjoy more legal status at the local and state level in the last decade or so, the industry has grown from a relatively small, largely underground status into a multi-billion dollar economic engine. From dispensaries to indoor grows, new businesses are cropping up all over the place.

More and more entrepreneurs and individuals are entering the Cannabis industry in various services and sectors, from industrial scale cannabis farming to wholesale brokering to retail and refinement. Inevitably, insurance questions arise as businesses are formed and business relationships take shape.

Up until very recently, the insurance industry lagged significantly behind the explosive growth of the cannabis industry. While many carriers still refuse to do anything cannabis related, we have cultivated a crop of insurers that specialize in Cannabis risks of all types, sizes and market share. We have developed our expertise in this field through meticulous research and experience with different types of businesses – expertise that you deserve as you work to bring your business online, or grow it to the next level.

Here are some of the industry sectors that we specialize in:

  • Medical Dispensaries
  • Recreational or Combined Med/Rec Dispensaries
  • Cannabis Tour Businesses
  • Cannabis Industry Consultants 
  • Edible Manufacturing
  • Oil Concentration Manufacturing
  • Harvesting Contractors
  • Indoor Grow Insurance
  • Outdoor Grow Operations
  • Potency and Purity Laboratories

Give us a call so we can get you what you need to get rolling.

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Lawyers: Have you experienced a frivolous lawsuit in your legal practice?

Many businesses and professionals face frivolous lawsuits as a result of their work, but lawyers probably face this more than anyone else. The source of these lawsuits can be unpredictable, and without insurance you could be left with tens of thousands of dollars in legal defense bills paid out of pocket. With the proper insurance, though, you can rest easy, knowing that you won’t have to come out of pocket to defend yourself from frivolous lawsuits.

What are some examples of frivolous lawsuits that lawyer’s professional insurance would cover?

  • You lose a case due to no fault of your own, but your client feels that you lost the case due to ‘incompetence’ or some other unsubstantiated error. They file a complaint against you with your State Bar. This situation can cost thousands or even tens of thousands of dollars in your own defense. You must pay to defend yourself even if the complaint is dismissed – insurance will cover these disciplinary defense proceedings, often without a deductible.
  • You share an office with another attorney, and they are sued by one of their former clients over a business transaction that did not meet their expectations. They sue you as well, claiming that you were also their attorney since you shared an office with their actual attorney. This can also cost tens of thousands in defense costs which would be covered by insurance – it also helps to get something signed by clients of another attorney that you share space with stating that you are not representing them.

The problem is, that sometimes after an insurance company covers you for such a frivolous claim, they will cancel, non-renew or increase the price of your insurance policy. At the end of the day, these carriers are looking to make a profit, and if they pay a claim they might view you as a bad bet, even if you fixed the problem (perhaps you stopped sharing an office with another attorney).

This problem is compounded by the fact that your claims history follows you and affects your eligibility for insurance elsewhere. Solving this problem requires a broker that has specialized access to and experience with certain insurance carriers that have a higher risk tolerance.

If you find yourself in a situation where you’ve faced a frivolous lawsuit (with or without insurance), and you now want to acquire insurance for the first time or replace your canceled or more expensive policy, reach out to Mighty Oak.

We specialize not only in lawyer’s professional liability but also professionals with a claims history.

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How to Properly Insure a Building Under Construction

white and brown concrete building

Many property owners are unaware of the fact that major construction is excluded from their standard insurance policy. This is true for homes, commercial buildings, and mixed use properties. If an owner wishes to renovate their property, changes must be made to the insurance policy, since the standard property policy most likely excludes any and all claims pertaining to a building under construction. In fact, many of these policies contain exclusions so strict that even if something unrelated to the construction damages the property during the remodel, it results in a denied claim. Let’s examine the following policy language from a standard homeowners insurance policy:

More likely than not, any loss would probably be at least indirectly related to the construction/renovation. In most cases it might be difficult to prove that a loss had NOTHING to do with renovation/construction, even if that is in fact the case. For example, if a kitchen fire breaks out in a building under construction, the presence of construction materials in the home may cause the fire to spread more rapidly an destroy the home. In this situation, the policy language above may be used to exclude coverage altogether, and thereby render the insurance policy worthless. During a period of construction, an owner must make sure to get a (temporary) insurance policy that is specifically designed to account for a building under construction.

So, what is the alternative? A Builders Risk (also referred to as a Course of Construction) policy is the answer. This is a type of packaged property and liability insurance policy that accounts for the risk posed by a construction project. Properties under construction often have higher risk for fires, theft/vandalism, water damage, and even risk of falling objects injuring people or property. A Builders Risk policy accounts for these risks. These policies also account for both the existing structure and the cost of the building materials on the property, whether on the premises or in transit.

Essentially, the way that a standard homeowners policy becomes a Builders Risk policy, is with the addition of an endorsement for Builders Risk coverage. Here’s an example of the language, clearly expanding coverage to construction:

For commercial buildings under construction, oftentimes a separate Builders Risk policy will temporarily replace the regular property policy, until construction is complete. Typically, these policies will last anywhere from 3-12 months, and are typically not renewed. Once construction is done, the Builders Risk policy is dropped, and the standard property policy is brought back again. For projects that take longer, such as new construction for larger buildings, longer policy terms are an option.

Many standard homeowners carriers do not offer Builders Risk policies. If this is the case with your carrier, we can help secure you a temporary Builders Risk policy to properly cover your home/building during construction. When construction is complete, we simply cancel the Builders Risk policy and refer you back to your previous insurer or we can make a referral to a trusted colleague.

If your building is severely damaged, or you’ve recently had a property claim, we can help you get your building properly insured. This is true even if the building is currently damaged and you don’t plan to repair it for a while. Here is an article on finding insurance for damaged buildings and buildings with claims.

Reach out if you have questions about construction insurance. We are happy to help!

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How to Properly Insure an Interior Designer

What types of insurance does an interior designer need?

The main type of insurance an interior designer will need is Professional Liability (also known as Errors and Omissions). This is the insurance most likely to be required by the designer’s clients, whether the designer works directly with homeowners or as a contractor for a larger firm.

Professional Liability is basically “mistake insurance”. If the designer makes a costly professional error, this insurance steps in to foot the bill. This might mean a design error that delays a construction project, a mishap in ordering materials that doubles the cost of a project, or any other kind of on-the-job mistake. As long as the mistake was an honest professional error, this type of policy protects the designer from the large expenses (or court costs) that can come with fixing the mistake.

Ideally the policy language should make it clear that any professional error is covered. Here is an example of this kind of broad policy language:

We agree to pay on your behalf all sums which you become legally obliged to pay (including liability for claimants’ costs and expenses) as a result of any claim first made against you during the period of the policy arising out of your business activities for any negligent act, error, omission, misstatement or misrepresentation.

In other words, this policy will pay for any professional error the designer makes. It will pay for legal fees, court costs, and damages in the event the designer is sued for negligence, and will even cover the costs of a frivolous lawsuit. Ideally, the policy will say something like “We have a duty to defend any covered claim, even if such claim is groundless, false, or fraudulent.” This means that even if the carrier thinks a lawsuit is groundless, they are bound by their own contract language to defend the designer.

For designers who work as contractors for larger design/development firms, this type of insurance is almost certainly going to be a requirement prior to starting work. Firms that contract with independent designers want to make sure that if a mistake occurs, it isn’t going to bankrupt the designer (or become the responsibility of the firm). A policy with $1mil. limits is an affordable way for the designer to protect his/her own business, as well as the clients and firms he/she works with.

Many designers also have to visit jobs sites to meet with clients, architects, or general contractors. Therefore it may also be wise for the designer to add a General Liability policy as well.

General Liability insurance protects the designer in the event someone is injured at the job site and blames the designer. For example, while meeting with the client at the construction site, the client bumps his head and decides to sue the designer (who had set up the meeting). General Liability will foot the bill for claims related to bodily injury and property damage, whether the designer is actually to blame for the injury or not. For designers who meet with clientele at or near construction sites, a General Liability policy can be an crucial piece of protection.

When combined, these two policies shield the designer from most of the everyday risks associated with their work: they protect the designer from claims stemming from professional mistakes, design flaws, injuries on a job site, accidental damage to someone else’s property, and frivolous lawsuits.

What are some ways a designer can tell if their policy is high quality?

First, make sure the policy is part of an Architect’s and Engineers program. The front of the policy should look something like this:

This means that the policy takes into account the risks that come along with working in construction, even peripherally, and contains broad contract language and many industry-specific coverages. Long story short: this policy is more likely to pay a claim related to construction than a “miscellaneous” (a.k.a. boilerplate) Professional Liability policy.

Most importantly, an “Architects and Engineers” style policy will not contain the kinds of worrisome exclusions often found in “misc.” professional liability policies. It is crucial that the policy not contain clauses that exclude coverage for core parts of a designer’s business.

For example, say an interior design firm brought on an in-house engineer. Almost every “misc.” professional liability policy contains the following exclusion:

So all claims pertaining to engineering are automatically excluded from this policy. If the engineer makes a professional error, the legal fees and claim costs would NOT be covered! This is the danger of a “misc.” policy, rather than one tailored to a designer’s actual operation.

Construction-related lawsuits can take many forms. For example, a homeowner hires a general contractor who then sub-contracts in a number of electricians, plumbers, and other contractors. Meanwhile, the owner hires an interior designer to plan the interior. Ten years after the job is complete, the homeowner discovers a construction defect in the home, and decides to sue everyone that ever worked on the home in any capacity, including the interior designer. Even though the designer is not at fault and the job was a decade ago, he/she still has to pay for a lawyer, take time off work to appear in court, and pay travel expenses, just to make the claim go away. The interior designer’s insurance policies should cover all of these costs. Therefore the policy must contain language that encompasses even these sorts of peripheral construction lawsuits.

Imagine that designer had a “misc.” professional liability policy that contained the following typical exclusion: “This policy excludes all claims based upon, arising out of, directly or indirectly, or in any way involving suitability in design, or performance of any structure with respect to its ability to bear weight”. This policy language is designed to exclude coverage for just the type of lawsuit mentioned above. Though the designer had nothing to do with the defect, the carrier will use this language to deny the claim and refuse to pay the defense costs. In construction, lawsuits like this can pop up any time, so the policy must protect the designer from this common risk.

There are other ways to tell if an interior designer insurance policy is high quality:

  1. Look for industry-specific extra coverages, such as coverage for Defense of Licensing Proceedings, FHA/OSHA/ADA regulatory proceedings, and automatic coverage for the designer’s sub-contractors.
  2. A quality policy might contain Subpoena Assistance and Supplementary Payments, which covers the costs associated with taking off work or traveling to appear in court during a construction-related lawsuit.
  3. Ideally, the policy should include something called “complimentary future claim mitigation”. This means that if the designer even suspects there may have been an error, or a dissatisfied (or overly litigious) client, the designer can contact the carrier before the situation turns into an actual claim. The carrier will advise the designer on how to address the situation and keep it from getting worse.
  4. Another favorable coverage is Public Relations Crisis Management. In the event the designer needs to hire a public relations firm to repair the company’s reputation after a lawsuit or professional error, the carrier will pay for those costs as well.

In conclusion, an interior designer’s insurance needs are more intricate than meets the eye. There needs to be coverage for all kinds of construction-related lawsuits, and policy language that is tailored to fit the designer’s business.

If you would like to speak to a broker who has specialized in interior design insurance, reach out today to get a quote. They are also happy to review your current policy and explain what’s in it.

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Insurance for Sensitive Client Data or Information

Businesses that deal in sensitive data or personal information face an array of threats to the safety and integrity of that information. The loss of this information via a breach or hacking incident can lead not only to massive business interruptions, but also delays and potentially crippling regulatory fines. There are myriad new laws that regulate how businesses deal with Personally Identifiable Information (PII), trade secrets, and other sensitive data. Due to this regulatory complexity, a hacking event can be a nightmare for a business owner.

Luckily there is insurance available that can respond in the event of a hack, breach, or other internet-related mishap: Cyber Liability Insurance. Besides the steps that businesses can take to mitigate the risk of a cyber incident on their own, Cyber Liability Insurance is one of the best ways to account for the inherently unpredictable risk that comes with storing or dealing in sensitive information.

Cyber Liability Insurance contains many coverage options that can be tailored to your operation to ensure a good fit. What follows is a summary of the possible coverage options and their applicability:

Information Privacy

Maintaining secrecy and confidentiality around sensitive information is one of the main reasons to buy cyber liability insurance for your business. This coverage can be tailored to help you respond to the loss or theft of this information in a timely manner without having to pay for the entire incident out of pocket.

Available coverages include: 

Information Privacy Liability – this pays for your defense and any settlement up to the policy limit as a result of losing sensitive data, trade secrets, PII, etc.

Regulatory Liability – the loss of regulated PII (such as medical records) can carry significant regulatory penalties as well as extensive investigation and court proceedings to determine liability. This coverage pays for your defense and settlement for any actions a regulatory agency might take against you.

Event Response and Management – Most cyber liability carriers offer a suite of services to help make you whole in the event you do suffer a breach that results in the loss of sensitive information. This is essentially a white glove response to assessing what happened, how to fix it, and how to prevent future issues, all paid for by the insurance carrier.

Network Security

In the event that your network is breached by a hacker, you can become a vector for spreading malicious code or other computer viruses to other computers tied to your network or even beyond. 

This coverage is usually broken into two pieces: 1) liability coverage in the event your network causes problems for others, and 2) event response and management coverage, very similar to that offered under the “Information Privacy” coverages.

Business Interruption

In the wake of a cyber incident, business operations are likely to be substantially altered while handling damage control and recovery for your clients. This time period can have a big effect on revenue, not only during the recovery process but also for sometime afterward. 

Business Interruption is included on most cyber liability policies for just this reason. Furthermore, most policies will pay business income regardless of whether interruption originated in your network/system or if it originated from one of your service providers.

Cyber Extortion

Also known as a “ransomware” attack, cyber extortion is becoming more and more common. This coverage will pay the ransom up to the policy limit, as well as assistance to reduce the possibility of this happening again. 

Financial Fraud

Online fraud can take many forms. Cyber Liability policies typically divide the possible forms of fraud into the following two categories:

  1. Social Engineering – the use of deception to manipulate individuals (employees, owners, managers, etc.) into divulging information that is personal or confidential, for the purpose of use in further fraud or personal enrichment.
  2. Computer Fraud – any intentional, fraudulent or unauthorized input, destruction or modification of electronic data by a foreign entity, provided that such fraud causes a loss of funds/securities whether on behalf of your business or any of your clients.

Media Content

The final coverage that is commonly found on cyber liability policies pertains to Media content, which is quite broadly defined.

The Media Liability portion confers coverage in the following situations:

  1. Defamation, libel, slander or tort that causes harm to any person or organization
  2. Infringement of any slogan, logo, trademark, etc. 
  3. Copyright infringement, plagiarism, piracy, misappropriation of intellectual property (provided it was unintentional)
  4. Invasion of privacy, including accidental disclosure of private facts or data
  5. Invasion of privacy including trespass, harassment or eavesdropping

The media content coverage also typically pays to restore a firm’s reputation with the public after a cyber incident – something that is very important when a business is trying to restart operations after a serious breach or similar incident.

If you run a business that relies on or deals in sensitive information, trade secrets, PII, HIPAA  data or anything similar, then you are at a heightened risk for any of the possible situations outlined in this article.

If you want to know more about how to acquire insurance for sensitive data or information, please reach out to us. There’s never any cost to get a quote and have a discussion about your situation.