Workers’ Compensation and EPLI Claims Are Rising: What Does This Mean?

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Workers’ compensation and employment practices liability insurance (EPLI) claims are increasing across the board. Why is this happening? And what does it mean for businesses?

Let’s discuss.

Workers’ Compensation and EPLI: Defined

Briefly, before diving in, we want to make sure that readers are familiar with both workers’ compensation and EPLI. Below is an abbreviated definition of each.

Workers’ Compensation Insurance

Workers’ compensation is insurance, paid by an employer. This coverage provides wage replacement and medical benefits to employees who are injured during while working for the insured. 

Wages and benefits are provided in exchange for eliminating the employee’s right to file a lawsuit against their employer’s negligence, and can help pay for:

  • Lost wages
  • Medical expenses
  • Rehabilitation costs
  • And more

Read on to understand the basics of workers’ compensation.

Employment Practices Liability Insurance

Employment practices liability insurance (EPLI) “provides coverage to employers against claims made by employees.” Policies typically extend coverage to the following:

  • Wrongful Termination
  • Sexual Harassment
  • Wage-Related Claims
  • Claims of Unequal or Unfair Pay
  • Discrimination Claims (i.e. age, race, gender, sexual orientation)
  • Third-Party Claims

For more information, read our EPLI article.

A Background on Workers’ Compensation and EPLI Claims

Over the past two years, the number of both workers’ compensation and EPLI claims have increased. In fact, research from the Equal Employment Opportunity Commission (EEOC) shows that EPLI claims have increased annually since 2003, with 37,632 workplace retaliation claims filed in 2020.

Moreover, as individuals have begun to return to work in person, the number of claims regarding health and safety in the workplace have increased as well. These claims typically include:

  1. Employee concerns about exposure to COVID-19 due to unsafe working conditions, or
  2. Situations where employees allege they were wrongfully denied a request for a workplace accommodation or leave

What Can You Do as a Business Owner?

So, with this rise in claims, what can you do to protect yourself as a business owner? You can prevent workers’ comp and EPLI claims by:

  • Developing and Distributing an Employee Handbook
  • Developing and Distributing a Code of Ethics Policy
  • Implementing a Handbook Auditing Procedure
  • Prioritizing risk mitigation

Interested in learning more about risk mitigation? Read on in our article “Risk Mitigation: What Is It and How Can You Do It?”

Complying with Insurance Requirements: Construction, Manufacturing, Tech Start-Ups

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Insurance for your business isn’t one size fits all. As we’ve well learned, various industries have different requirements. This rings true, especially for insurance requirements regarding construction, manufacturing, and even tech start-ups.

Requirements can be regulatory or contractual. Moreover, depending on your industry you might need varying levels and types of insurance. Let’s discuss some aspects that stand across the board.

Workers’ Compensation Insurance

Workers’ compensation insurance, purchased by employers, is insurance that covers the medical costs and lost wages for employees who are injured during the course of work for the insured.

Workers’ compensation benefits and wages are provided in exchange for eliminating the employee’s right to file a lawsuit against their employer’s negligence.

Workers’ compensation insurance is required by law in California, and can help pay for:

  • Immediate medical costs (i.e. emergency room expenses)
  • Ongoing medical costs (i.e. physical therapy)
  • Partial lost wages while the employee is unable to work

Lack of proper coverage can result in fines and even criminal exposure. 

Workers’ compensation insurance is extra important in the construction and manufacturing settings, where accidents are more likely to occur. This considered, businesses within the construction and manufacturing industries might opt for higher levels of workers’ compensation to keep their employees and business safe.

General Liability Insurance

General liability insurance (GLI), also known as business liability insurance or commercial general liability insurance, “helps protect your business from claims of bodily injury or property damage that can come up during normal business operations.”

This is important for construction and manufacturing businesses where hands-on work is occurring but also for tech start-ups. According to Insureon, general liability insurance covers “the cost of legal fees and settlements if your company is sued for:

  • Client injuries
  • Client property damage
  • Advertising injuries, like copyright infringement, libel, and slander

General liability insurance is often required as part of a property lease, mortgage, or client contract.” Moreover, the cost of your GLI will depend on the level of risk your company faces.

If you don’t have GLI, medical expenses and property damages will need to be paid for out of pocket. Depending on the injury or event, not investing in general liability insurance could cost you your business.

Employment Practices Liability Insurance

Employment Practices Liability Insurance (EPLI) is insurance that “provides coverage to employers against claims made by employees.”

Claims can be made for an assortment of reasons, including:

  • Wrongful Termination
  • Sexual Harassment
  • Wage-Related Claims
  • Claims of Unequal or Unfair Pay Discrimination Claims (i.e. age, race, gender, sexual orientation)
  • Third-Party Claims
  • And more

The primary industries that are susceptible to EPLI claims include healthcare, professional services, restaurant, food services, retail, and manufacturing and construction.

Read on to find out if your construction business needs EPLI.

Cyber Liability Insurance

In our digital age today, more businesses than ever are falling victim to cyber-attacks. Having a cyber liability policy in place, for any business, is crucial to keeping your business and your clients safe. This stands even more true for tech start-ups that manage sensitive information and high volumes of data.

There is both first and third-party coverage available. Implementing a quality cyber liability policy can help pay for regulatory fines and penalties, credit and fraud monitoring services, crisis management and public relations, finding and addressing the security defect, and more.

Complying with Insurance Requirements

Complying with Insurance Requirements: Things to Note

The insurance policies listed above are not, of course, an exhaustive list of insurance requirements all construction, manufacturing, and tech start-ups need to meet; but rather, a list to get you thinking about insuring your business.

You might also need automobile liability and property damage Insurance, commercial property insurance, errors and omissions insurance (E&O), the list goes on.

Regardless, there are additional elements to consider regarding insuring any one of these three businesses. Let’s discuss some final things to note.

Occupational Safety and Health Administration

The Occupational Safety and Health Administration, also known as OSHA, has particular requirements regarding insurance as well as health and safety practices for a variety of industries.

Visit the OSHA website for additional information.

Certificates of Insurance

In any project, it’s important to make sure you have the proper insurance to protect yourself and all parties involved.

Every contract with a vendor or a customer will have an indemnity or insurance section of what they want to see from you as far as insurance is concerned. This includes documents that extend your policy to cover them. Those requirements are contractually driven, which means a certificate is necessary.

A Certificate of Insurance (COI) gives a summary of what coverages someone has, whether it be general liability, workers’ compensation, or property. A COI can also include a description of coverages that might be there or attached; such as additional insured status or waivers of subrogation.

Read on for more on what you need to know about certificates of insurance.

Contract Wording

A written contract is a printed document that is legally binding and details what parties can or cannot do. For this reason, the contractual language is extremely important. Contracts for construction, manufacturing, and tech start-ups might include hold harmless clauses and/or indemnification clauses.

Hold Harmless Clause

What is a hold harmless clause? According to Investopedia, “a hold harmless clause is used to protect a party in a contract from liability for damages or losses. In signing such a clause, the other party accepts responsibility for certain risks involved in contracting for the service. In some states, the use of a hold harmless clause is prohibited in certain construction jobs.”

Indemnification Clause

An indemnification or indemnity clause protects “one party from liability if a third-party or third entity is harmed in any way. It’s a clause that contractually obligates one party to compensate another party for losses or damages that have occurred or could occur in the future.”

For this reason, the wording in such contracts must be crystal clear.

With the influx of remote employees in current and previous years, it’s important to consider how workers’ compensation policies might change. Read on for more information on what workers’ compensation looks like for remote employees.

How Does a Building Owner Know if They Are Underinsured?

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As a building owner, the consequences of your building being underinsured can be detrimental. Even so, 75% of commercial buildings are currently underinsured. As a building owner or property investor, how can you make sure your building is adequately insured?

Today, we have Brenda Jo Robyn, founder of Competitive Edge Insurance, on camera to answer this question. What elements can you look at to identify if you’re underinsured? What steps can you take to stay adequately insured?

Let’s see what she has to say.

Elements That Can Show a Property is Underinsured

Picture this: You have a building, but don’t know the last time it was evaluated in terms of a replacement cost. The building has most likely had some renovations in the last five to 10 years.

This considered, what elements do you need to look at to see if your building is underinsured?

Increase in Building Costs

As many have well noticed, the average cost of buildings has gone up. In our community, where the Competitive Edge office is housed, prices have jumped from $275 a square foot to $325 a square foot.

When you’re insuring your building, it’s really important to take this shift into consideration. Moreover, consider appraising the building for the replacement to rebuild from the ground up (but more on this later).

Water Damage Claims

Secondly, most building owners have little or no protection for water damage claims. Hold on
 Don’t roll your eyes yet!

While most building owners have fire on their radar, many don’t think about water. However, they should—considering over 44% of homeowners or property investors have experienced water damage inside the residence.

Water damage can cost a business owner anywhere from $5,000 to $50,000. Today, we’re seeing more $50,000 to $75,000 claims being paid. And why is that? 

There are many ways this can happen. Imagine this scenario: A building owner goes away for the weekend, and there’s been a leak he or she doesn’t know about. Or, maybe it’s in a commercial building and a toilet is leaking into the floor below. Again, the owner is three to four days out, and all of a sudden now there’s mold. It may be in the walls and have to be remediated. It can be quite costly to repair that.

Regardless, many people have a mere $5,000 worth of water damage on their policy. It’s not enough.

What Can I Do to Make Sure My Building Is Properly Insured?

There’s one primary thing a building owner can and should do to ensure that their building is adequately insured.

Property Valuations

The first place Brenda Jo recommends starting is ensuring every building owner has a currently valued property.

Having a currently valued property looks at a replacement cost estimate, which no, it’s not intended to replace the original asset (unless it’s a reproduction), but the valuation is intended that the new building would be able to serve in the same purpose that the old building existed for.

Every building is unique. So, how do you calculate this cost estimate?

A building’s cost estimate is based on:

  • Similar designs
  • Construction standards
  • Quality of workmanship
  • Uniqueness or complexity (i.e. standard building vs. a super custom building)
  • Building age
  • Common elements
  • Current building codes
  • Hard construction costs (i.e. materials)
  • Soft construction costs (i.e. design plans, demolition costs)
  • Location (Is the building in the city or rural?)

Conducting an annual insurance review is also key, and takes little to no time.

It can be difficult to arrive at this figure yourself, which is why our team at Competitive Edge Insurance is here to help.

Now, we’ve talked about water
 Let’s chat about protecting your building from fire. Read on to find out why you need fire insurance as a property investor.

Why Does My Business Need Cyber Insurance?

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Did you know, according to Advisorsmith and Insurance Journal, 42% of small businesses have experienced a cyberattack within the past year and 53% have experienced multiple data breaches?

Cyberattacks target personally identifiable information, personal health data as well as confidential financial information and can result in significant and often devastating financial loss for your business. In fact, the National Cyber Security Alliance found that 60% of small businesses that fell victim to a cyberattack were forced to close within six months due to the high financial costs necessary to recover.

Read our full guide on why your business needs cyber insurance, as well as how you can protect your business from these risks below.

What is Cyber Insurance?

Cyber insurance is a coverage policy that helps protect your business and mitigate financial risk in the event of a cyberattack. Retrieving your company data and rebuilding your systems is time-consuming and costly. 

In addition, the loss of time and productivity, when a data breach does occur can damage your credit, damage your reputation with customers, cost you in service providers restructuring your security, and prevent further losses and possible penalties for improper handling of sensitive financial data.

What Does Cyber Insurance Cover?

Coverage can vary depending on the policy, however, cyber insurance generally covers: 

  • Regulatory fines, legal fees, and penalties
  • Credit and fraud monitoring services
  • Crisis management and public relations
  • Finding and addressing the security defect
  • Notifying customers of a data breach
  • Restoring personal identities of affected customers
  • Recovering compromised data
  • Repairing damaged computer systems

What Businesses Need Cyber Insurance?

Every business that uses digital data—such as saving client information to your network or cloud—needs cyber insurance. However, some businesses are more heavily targeted by cybercriminals because of their valuable data and resources, such as:

Financial Services

According to Business Insider, financial firms are 300 times more likely to be targeted than other companies. Wow!

Financial services are specifically targeted because of their access to financial accounts and/or services such as allowing customers to pay bills online, transfer funds, and view account balances.

Financial institutions including the Securities and Exchange Commission, Equifax, HSBC, Lloyds Banking Group, JPMorgan as well as many other firms have all experienced cyber breaches and attacks.

Health Care

Health care organizations are responsible for significant amounts of sensitive information and, as a result, could potentially put the private records of millions of patients at risk. HIPAA Journal reports that 89% of healthcare organizations have experienced a data breach.

Small Businesses and Start-Ups

Small businesses are often targeted by cybercriminals because of their limited resources and lack of security expertise. According to the National Cyber Security Alliance, 83% of small businesses have no formal cyber security plan and 69% have no plan at all.

What Happens to My Business If I Don’t Have Cyber Insurance?

A cyberattack on a business without cyber insurance can result in the loss of hundreds of thousands of dollars between:

  • Various legal fees and fines
  • Recovery of compromised data
  • Damaged computer systems
  • And other necessary costs

According to the Ponemon Institute, the average small business pays $690,000 to recover from a cyber-attack, whereas middle-market companies can pay upward of $1 million.

Due to the devastating financial fallout, many businesses that experience a cyberattack without cyber insurance can’t recover and are forced to permanently close their doors. 

Cyber insurance is a rapidly growing space and constantly evolving to fit the needs of any business. With the right policy, you can protect your business from the high costs and destructive effects of a cyberattack.

To learn more, read on for seven steps to avoid cyber security threats.

OSHA’s Consultation Services: What You Need to Know

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The Occupational Safety and Health Administration (OSHA) is a government agency whose mission is “to ensure safe and healthful working conditions for workers by setting and enforcing standards and by providing training, outreach, education and assistance.”

Congress created OSHA with the Occupational Safety and Health Act of 1970.

Over the years, OSHA has continued to stay dedicated to its mission, which has resulted in the creation of its ‘On-Site Consultation Program.’ Here’s more on OSHA’s consultation services and how these services can help high-risk businesses.

OSHA’s On-Site Consultation Program: What Is It?

OSHA’s Consultation Program offers safety and health assistance to employers through on-site visits. These services help prevent occupational injuries and illnesses within a business.

Who Conducts On-Site Visits?

According to their website, “consultants from state agencies or universities work with employers to identify workplace hazards, provide advice for compliance with OSHA standards, and assist in establishing and improving safety and health programs.”

Who are these Consulting Services Offered to?

According to their website, OSHA “offers no-cost and confidential occupational safety and health services to small- and medium-sized businesses in all 50 states, the District of Columbia, and several U.S. territories, with priority given to high-hazard worksites.”

How Does OSHA Consulting Help Your Business?

OSHA’s on-site consultation program helps your business by addressing hazards in the workplace.

Additionally, during an on-site visit OSHA consultants:

  • “Suggest general approaches or options for solving a safety or health problem
  • Identify kinds of help available if you need further assistance
  • Provide you a written report summarizing findings
  • Assist you to develop or maintain an effective safety and health programs
  • Provide training and education for you and your employees”

These steps help reduce injury and illness rates, lower workers’ compensation costs, improve worker morale, and increase productivity.  As well as helping to identify, analyze, and remove hazards, use safer work practices, improve safety programs, strengthen safety culture, and provide training assistance, according to the California Department of Industrial Relations.

Best of all, OSHA’s on-site consultation program is free of charge. Throughout this consultation, OSHA does not issue citations or propose penalties for violations, and it is confidential. “Your name, your firm’s name, and any information you provide about your workplace, plus any unsafe or unhealthful working conditions that the consultant uncovers, will not be reported routinely to the OSHA inspection staff,” according to OSHA’s site.

What Does a Consultation Include?

On-site visits might include:

  • Hazard Assessments via walkthrough (find and fix hazards)
  • Industrial Hygiene Surveys (i.e. noise surveys, chemical exposure assessments)
  • Safety and Health Program Assessments
  • Workers’ Training and Education
  • And more

Interested in learning more about OSHA’s on-site consultation program? Download their small business handbook, which is chock full of information and self-inspection checklists.

Seven Steps to Avoid Cyber Security Threats

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Cyber security is more important today than ever before. Many businesses, especially small businesses, are the victims of cyber attacks daily—and the outcome for many is detrimental. In fact, did you know that 60% of small businesses who fall victim to cyber attack close their doors within six months?

The fact of the matter is that cyber threats—whether they be ransomware or phishing—are too grave to ignore the risks. Preparation and prevention are key to keeping your business safe. In this article, we’ll discuss seven steps to avoid cyber security threats.

Train Your Staff

First things first, train your employees. Make the guidelines of your business’s cyber security policy abundantly clear. Apart from training, employees should also be familiarized with and taught how to identify suspicious activity. Lastly, employees should know safe practices for sending and receiving data.

For example, they need to know how not to send excel spreadsheets in an email. Instead, create a zip file or convert the document into a PDF. Why? It is very easy to scrape data from an excel file while in an email.

Train Your IT

Your Information Technology (IT) department should additionally be trained. An IT department, according to Jobs.net, “oversees the installation and maintenance of computer network systems within a company.” They also help businesses maintain their digital infrastructure and provide troubleshooting.

This considered, IT departments need to know what to look for when it comes to cyber security threats.

Regularly Update Software

Firstly, your software should be particularly designed to block ransomware. Secondly, this software should be routinely updated.

To many people’s surprise, cyber attacks often happen when systems and/or software aren’t fully up-to-date, leaving room for weakness. These points of weakness are then exploited by cybercriminals to gain access to your network.

Don’t let it get to this point.

Promote a Security-Focused Culture

Forbes states that “the security culture of an organization is foundational to its ability to protect information, data and employee and customer privacy.”

(“Security culture” being “the ideas, customs and social behaviors of an organization that influence its security”).

According to Maryville University, encouraging a strong security culture within a business might look like:

  • Holding regular training sessions for employees to help them recognize external threats 
  • Teaching employees strategies for minimizing their risk of being hacked

Backup and Encrypt Data

Imagine, your business experiences a cyber attack—and none of your data is backed up. This would result in serious financial loss as well as loss of data, not to mention downtime.

Be sure to back up and encrypt your data instead. We advise you to encrypt:

  • Client and customer information
  • Employee information
  • And all other business data

Minimize Access to Your Systems

When it comes to allowing others access to your data, whether it be passwords, email, or a host of other personal information, some humans can lean a bit too far to the trustworthy side.

Having control over who can access your network is crucial—whether online or in-office. Better safe than sorry!

Invest in Cybersecurity Insurance

Of course, we have to mention the benefit of investing in cyber security insurance.

A cyber liability policy might include:

  • Data Breach Coverage
  • Business Interpretation Loss Reimbursement
  • Cyber Extortion Defense
  • Forensic Support
  • Legal Support
  • Coverage beyond a General Liability Policy

When it comes to cyber risk, there’s nothing worse than being ill-prepared. Read on to learn more about cyber coverage: how necessary is it?

Will Homeowners Insurance Cover a Construction Project?

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So, you want to do a renovation or some construction on your home. Well, you’re not the only one! According to various studies, home remodeling has been hotter than ever during the COVID-19 pandemic. In fact, Houzz, an online home remodeling platform, reported a 58% annual increase in project leads for home professionals in June of 2020.

We don’t blame any of you homeowners for wanting to spruce things up, especially considering all the extra time many individuals and families have been spending at home the past two years.

When tackling a construction project on your property, however, it’s important to consider the bandwidth of your homeowners insurance. Is it enough? Or, should you consider investing in builders risk insurance as well?

Homeowners Insurance vs. Builders Risk Insurance

First things first, what’s the difference?

Homeowners Insurance

Homeowners insurance is defined as “a form of property insurance that covers losses and damages to an individual’s residence, along with furnishings and other assets in the home.”

It’s important to note that every homeowners insurance policy has a liability limit. This liability limit “determines the amount of coverage the insured has should an unfortunate incident occur.”

Homeowners insurance is typically used to repair or replace your home and its contents in the event of damage.

Builders Risk Insurance

Builders risk insurance, on the other hand, is not quite the same. Builders risk insurance is also known as “course of construction insurance.”

Hence its name, this type of insurance, is a type of property insurance that protects your home, or other buildings that are under construction. This coverage is essential to protecting projects from property damage that occurs due to:

  • Fire
  • Lightning
  • Hail
  • Explosions
  • Theft
  • Vandalism
  • Acts of God, for example, hurricanes

Builders risk insurance is a crucial part of a homeowner’s risk management strategy.

Will Homeowners Insurance Cover a Construction Project?

Is your homeowners insurance enough?

Whether you’re considering a from-the-ground-up construction project, kitchen or bathroom remodeling, or even room addition, there’s nothing more important than making sure you have the proper coverage.

Although each policy offers valuable coverage, they exist for separate types of risks. It’s important to note that while each policy will, of course, differ from carrier to carrier, homeowners should not rely on a homeowners policy alone to sustain the financial burden should a loss regarding their construction project occur.

After all, if homeowners insurance and builders risk insurance both covered the same risks, there would be no need for each to exist.

As a general rule, homeowners insurance covers damage to a property already in tact; builders risk covers damage to a property that is under construction.

Obtain the Coverage You Need

By consulting with an insurance broker prior to beginning a construction project on your home, you can learn all about gaps in homeowners insurance and where you may need additional coverage depending on your unique policy.

If you’re considering a project of your own, read on to learn more about how the California labor shortage is affecting the construction industry, and if there are qualified workers available to you at all.

Insurance Trends in 2022: What to Watch For

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Competitive Edge Insurance is a commercial insurance brokerage that specializes in hard-to-place risks. This includes businesses that are in chaos or crisis with high-risk exposures such as construction and development, property investors and flippers, and those with excess losses or claims.

In 2022, we’re observing a noticeable change in favor of insurance buyers. In turn, we are optimistic for many segments of the commercial lines market in the coming year. Welcome to “Insurance Trends in 2022: What to Watch For.”

Let’s dive in.

From Pandemic to Endemic

“Adaptation is a profound process.  Means you figure out how to thrive in the world.” —John Laroch

As we well know, COVID-19 is an ongoing issue. In fact, variants have led many to expect that COVID-19 is here to stay.

Regardless, the sentiment, at least in the insurance industry, has shifted from uncertainty to adaptation.

For the past 10 quarters, rate increases have averaged 10%. Capital in the reinsurance market has increased by 30% which provides support against a large loss event, catastrophe, economic turmoil, and/or adverse claims.

In 2022, we recommend insurees proceed with caution. Additionally, we anticipate price increases to slow. Please note, however, the word “slow” in this sentence. Increases are expected to slow, not create a downward trend in pricing.

Today’s World of Insurance: An Overview

As we know, the past 18 months have been nothing short of eventful. This considered, what are we observing in the insurance world today? Here are a few elements.

  • Catastrophic Losses Continue
  • Social Inflation
  • Skilled Labor Shortages
  • Supply Chain Disruptions

Did you know that according to a study from the Society for Human Resource Management, nearly 90% of businesses are having a hard time filling open positions?

Next, let’s dive into each insurance sector a bit deeper: cyber, commercial property, auto, and workers’ compensation.

Cyber Insurance

When it comes to cyber insurance, premiums are rising but covering less.

What’s Causing Insurance to Increase?

  • Cyber extortion jumped by 150% in a year
  • Companies are more likely to rely on outside attorneys to handle cyber response (in order to contain potential lawsuits)
  • Every claims category has increased in the past year; cases of malicious breaches and unintentional disclosure increased by 18%
  • Cyber coverages are expected to rise sharply, 40% to 50% for optimal risks and 50% to 100% or more for less optimal risks, seeing as ransomware attacks continue to crowd the cyber insurance market

Additionally, executives do not have the knowledge to properly insure their companies from cyber risk. Here are some statistics from Munich RE to paint a picture for you:

  • “81% of C-level respondents think their company is not adequately protected against cyberthreats
  • 35% are considering taking out an insurance policy and will very likely do so
  • Only 34% of C-level respondents have been in contact with their insurers
  • One out of four C-level respondents was totally unaware of the opportunities that cyber solutions offer
  • 17% of C-level respondents still do not have an overview of the cyber insurance products on the market”

The bottom line? C-level executives, while they may be concerned about cyber threats, do not have an understanding of what insurance products and services are available to them.

Commercial Property

What Elements Are Driving Rates?

  • Increasing frequency of natural catastrophes, as well as the severity of those events
  • Higher rebuilding costs due to price inflation of materials and labor shortages

Today, however, commercial property markets are stabilizing. Additionally, increased rates are slowing while capacity is increasing.

We can also anticipate more favorable terms for clients who mitigate risk. Property owners who have been working hard to mitigate risk and decrease claims can see more favorable terms and conditions, and possibly lower rates.

This benefits commercial insurance buyers that maintain quality risks with strong data to back them up. However, rates will continue to be impacted by the location of the risk.

Companies in areas at high risk of natural catastrophes, such as tornadoes, hurricanes, hailstorms, and wildfires, are seeing the highest rate increases, as well as non-renewals and even difficulty in securing coverage. For example, in wildfire areas of California and wind zones of Florida, rates have increased by over 20%.

Auto Insurance

Rates have gone up and up. But what’s driving the increase?

What’s Causing Auto Insurance Rates to Increase?

  • An increasing amount of accidents and deaths caused by distracted driving
  • Higher medical costs for accident victims
  • Rapidly climbing repair costs for vehicles exacerbated by the disrupted supply chain for parts and paucity of skilled and trained labor

As a result, we expect to see averages of 5-15% increases in both commercial and personal auto insurance in 2022.

Workers’ Compensation Insurance

Workers’ compensation is a mixed bag.

There’s a base that’s put into play by The Workers’ Compensation Insurance Rating Bureau of California (WCIRB), which is our rating and statistical bureau for data. The WCIRB gives us the trends and where to go.

The state fund has announced rate increases, the 2022 WCIRB new policy assessment increase sits at 5.9318%.

Beginning January 1, 2022, new assessment levels took effect for the six workers’ compensation surcharges administered by the California Department of Industrial Relations (DIR). The six will total 5.9318% in 2022, compared to 3.9590% in 2021.

For more information on rate increases between 2021 and 2022, visit the graph below.

How Can You Prepare?

Let’s talk about risk management.

First things first, review your policies before they expire!

It is estimated that commercial properties were undervalued for underwriting purposes by more than 30% in November 2021 policies annually.

To rectify undervaluation, more frequent, in-depth property risk appraisals—that take into account more extreme weather events, potential supply chain hurdles, and inflation trends—are recommended.

Second, write your own story. Don’t let the underwriters do it for you! Work with your insurance broker and risk representative to take appropriate steps to reduce your risks whenever possible. This will make you more attractive to underwriters.

Below is simply an outline of factors that owners can address to influence the most favorable underwriting profile, which leads to the most favorable terms, conditions, and pricing:

  • Take inventory of assets
  • Pinpoint current exposures and cost drivers
  • Update contracts to the current environment
  • Review existing risk management techniques
  • Highlight business continuity plans and loss control measures in place
  • Build a company culture focused on safety
  • Manage claims efficiently
  • Be weather-ready

Additionally, to reduce negative consequences from supply chain crunches and labor shortages in the aftermath of a catastrophe, “risk managers and property owners should consider entering agreements with builders before an event occurs to ensure the availability of materials and manpower for the restoration job.”

Underwriters are more critical now than ever on property, asking in-depth questions on what you’re doing to control your risks; not only to employees but to tenants and visitors.

Read on for more on how to prepare as well as what to expect from workers’ compensation policy renewals this year.

Workers’ Compensation Coverage for Independent Contractors

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As an employer, you’re likely familiar with workers’ compensation coverage being purchased to protect your employees. When you decide to work with an independent contractor or 1099 worker, however, the question arises of whether or not your current coverage limits will include coverage for your 1099s as well.

Let’s take a look at workers’ compensation coverage for independent contractors.

What is Workers’ Compensation?

Workers’ compensation coverage is insurance, purchased by employers, to cover medical costs and lost wages for work-related injuries and illnesses for employees. It is required by law in California and lack of proper coverage can result in fines and even criminal exposure. 

Worker’s compensation coverage can help pay for:

  • Immediate medical costs (i.e. emergency room expenses)
  • Ongoing medical costs (i.e. physical therapy)
  • Partial lost wages while the employee is unable to work

Who Needs It?

Laws and requirements regarding workers’ compensation vary on a state-by-state basis. The policy, however, is required in almost every state for businesses with employees.

In California, for example, “all California employers must provide workers’ compensation benefits to their employees under California Labor Code Section 3700,” according to the Department of Industrial Relations.

Who Qualifies as an Independent Contractor?

1099 workers are self-employed independent contractors.

An independent contractor is, in simple terms, “is a self-employed person or entity contracted to perform work for—or provide services to—another entity as a nonemployee,” according to got1099. An independent contractor is also sometimes referred to as a freelancer, a gig worker or an outsourced service provider.  

Unlike traditional employees, independent contractors do not work regularly for an employer but work as required. 

A key part of being classified as an independent contractor, according to the IRS, is that the person who hires an independent contractor can only “control or direct
 the result of the work and not what will be done and how it will be done.”

Assembly Bill 5 (AB-5)

Assembly Bill 5, also referred to as AB-5, or the Gig Work Bill, is a federal law that passed in January 2020. AB-5 introduced further regulations for independent contractor classification.  

Under AB-5, the ABC test is used to set the standard for worker classification. All workers are considered W-2 employees unless they meet all three of the following criteria:

  1. “The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  2. The worker performs work that is outside the usual course of the hiring entity’s business; and
  3. The worker is customarily engaged in an independently established trade occupation or business of the same nature that is involved in the work performed.” 

Long story short, employers cannot hold control over independent contractors. The worker has the freedom to work when they choose, and how they choose within the parameters of their contractual agreement.

Worker’s Compensation Coverage for 1099 Contractors

So, as an employer, do you have to provide workers’ compensation to the independent contractors you partner with? Chances are no. 

According to Gusto, you don’t typically have to cover independent contractors under your workers’ compensation policy. “That’s because they’re not technically considered employees of your business. The line separating independent contractors from employees isn’t always clear, though.”

We’d recommend speaking with trusted financial personnel, like an accountant, to determine if the person is a 1099 contractor or a W-2 employee.

Whether or not you have to provide workers’ compensation for independent contractors, however, also depends on where you conduct your business. Remember, each state has its own laws when it comes to workers’ compensation. Be sure to do your research.

Require 1099s to Have Their Own Insurance

In the likely case that you are not required to provide workers’ compensation insurance for the independent contractors that you hire, we would strongly suggest that you require any 1099 workers to prove that they have their own workers’ compensation insurance.

This way, if they are injured on the job, they’ll have their own coverage and will not trigger a claim on your policy and cost you money. 

Working with 1099s Who Don’t Have Their Own Insurance

On the other hand, if an independent contractor doesn’t have their own workers’ compensation insurance, you must account for this financially as an employer. 

Logically, if you hire a 1099 worker who doesn’t have their own workers’ comp insurance, your own insurance carrier may charge you higher rates in order to account for the coverage of these additional workers.  

If your 1099 has not provided proof of Workers’ Compensation coverage and they were to get injured while working for you, your insurance carrier would look at the role tehy perform and assess additional coverage charges based on the fee structures for that category of work.  This can result in a heft upcharge.  So, be sure to check with your 1099s to ensure they have their own coverage (not only Worker’s Compensation but General Liability as well). 

As always, be sure to ask independent contractors for a Certificate of Insurance (COI) when hiring 1099s. Read on to learn more about the importance of COIs.

EPLI: Does Your Construction Business Need It?

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In the world of insurance, there are so many acronyms to keep track of. Today, let’s chat about Employment Practices Liability Insurance (EPLI).

More specifically, we’re going to cover the industries that need EPLI as well as answer the question, does your construction business need it? If so, why?

infographic for EPLI: Does Your Construction Business Need It?

WHAT IS EPLI?

Employment Practices Liability Insurance, or EPLI, is insurance that “provides coverage to employers against claims made by employees.”

WHAT DOES EPLI COVERAGE COVER?

Employment Practices Liability Insurance policies typically extend coverage to the following:

  • Wrongful Termination
  • Sexual Harassment
  • Wage-Related Claims
  • Claims of Unequal or Unfair Pay
  • Discrimination Claims (i.e. age, race, gender, sexual orientation)
  • Third-Party Claims

According to Amtrust Financial, the below are also common employer missteps that may be covered:

  • Failure to Hire or Promote
  • Libel, Slander, Defamation of Character, or Invasion of Privacy
  • Wrongful Infliction of Emotional Distress
  • Wrongful Discipline or Demotion

WHY IS EPLI IMPORTANT?

According to Advisen, only 32% of all construction firms with 50 to 200 employees and 20% of all firms with fewer than 50 employees have stand-alone EPLI coverage.

This statistic is low and frightening as the costs associated with EPLI claims can be shocking.

EPLI claims can be detrimental to businesses of all sizes and types. EPLI helps protect against many kinds of employee lawsuits, which is why it’s important for businesses to invest in coverage.

WHAT INDUSTRIES NEED EPLI?

The fact of the matter is that some industries are more susceptible to these types of claims than others. These industries include:

  • Healthcare
  • Professional services
  • Restaurant and food services
  • Retail, and
  • Manufacturing

An additional industry that should consider EPLI is construction. Continue reading to find out why.

DOES YOUR CONSTRUCTION BUSINESS NEED EPLI?

The answer is most likely ‘yes.’

As Kevin Howard, CRIS, puts it, “Rapid growth and layoffs are unique aspects of the construction industry that can cause the elimination of a specific position and/or termination.”

Furthermore, “with these ebbs and flows, contractors unintentionally open themselves up to wrongful termination cases which can carry into discrimination charges, as well.”

Employees also often introduce post-employment wage and hour claims, which stem from improper overtime and breaks.

Lastly, as Howard notes, “contractors’ work very often involves interaction and exposure to the public. This interaction can lead to comments, inferences, or specific actions that non-employees find offensive. Claims brought by these third parties are difficult to prove when the employer is unable to witness the events first-hand.”

HOW TO MINIMIZE EPLI CLAIMS AS AN EMPLOYER

So, how can an employer minimize expensive EPLI claims against their construction business?

Most importantly, study and adhere to the guidelines established by the Equal Employment Opportunity Commission (EEOC). Some of these guidelines include:

  • Clearly define employment practices and policies
  • Schedule training workshops
  • Keep your eye on your workplace
  • Let your workforce know employment practices violations will not be tolerated
  • Maintain an “open door” policy

As discussed above, hiring employees carries inherent risks. Because of this, we’ve put together a few tips on how to reduce your risk when hiring, in California specifically.

LET’S TALK

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