What is a Reservation of Rights Letter?

You file a claim with your insurance carrier. The carrier acknowledges the claim and starts their investigation.

 A week or so passes and you receive a Reservation of Rights letter.  What is it and what does it mean?

 A Reservation of Rights letter will typically mean one of three things:

1. The carrier is investigating the claim and may think you are not liable for the claim. In this instance, you would have had coverage if you were liable so they mostly likely will continue to defend you if a lawsuit arises.

2. The carrier needs more time to investigate. This ties in with #1; however, the claim might be moving quickly and the carrier wants to make sure their investigation is thoroughly completed.

3. The carrier has noted in the letter that policy language could cause this claim to be denied, but they are still moving forward until that can be fully determined.

Insurance policies are complex contracts. Reading your policy when you receive them is a best practice but is always recommended. At a minimum, read the headings on the exclusion pages. If something concerns you, call your agent for an explanation.

Sean Leigh

Commercial Risk Advisor

405-507-2757

sleigh@pi-ins.com

 

Costs to consider when bidding for jobs

These days everyone wants to know the upfront cost of a project.


When you bid jobs, the General Contractors (GC) look at cost along with what you will do and what material you will use. Let’s look at some costs to consider when bidding for jobs.


Auto Coverage

For ease, let’s assume all your drivers have clean motor vehicle records (MVR). For a one-ton truck, you are roughly looking at a $1,000 annual premium with $1,000,000 liability and a $500 deductible for comp and collision. A variable would be if you have a fleet of ½-ton trucks. 

Now, are you having the employees who drive your trucks provide their MVR’s? Many factors play into you having their records. One example would be the cost of having a driver who has 2 DUI’s vs. a driver with a traffic ticket for rolling a stop sign. But hey, that’s what insurance is for……right? The easy answer is “yes” but you could end up spending your valuable time away from a job site with dealing with these issues. 


Workers Comp Coverage

Again for ease, let’s assume you keep perfect books and split all of your payroll between landscape maintenance and landscaping. As you know, landscape maintenance has a much less expensive rate than landscaping. There is a lot that goes into calculating the workers comp premium, but let’s say your maintenance rate is $4.50 per $100 in payroll and the landscaping rate is $9.00 per $100 or $4,500 per $100,000 and $9,000 per $100,000 in payroll. These figures are based on no workers comp claims within the past 5 years.

What is your protocol when an employee is injured? Do you have a doctor you trust or are you relying on an unknown doctor who keeps your employee in the workers comp system for an unknown length of time, ballooning your claim? Also, do you stay in touch with the injured employee? Do you keep an open line of communication to prevent them from getting bad advice?


Equipment Coverage

Let’s say you have $140,000 worth of equipment and it’s insured for a premium of $1,000 and a $500 deductible. Damage? Destruction? If you have provided the equipment year, make model and serial numbers, we can get you replacement cost as opposed to actual cash value. What is actual cash value? In essence, it’s depreciation. Kind of like a used car value. We have the only company our there that will give replacement cost on equipment. They don’t just write you a check, they’ll find you the equipment just like the one you lost.


General Liability

What types of contracts are you getting yourself into? Are you doing large jobs for larger contractors or sticking with smaller residential companies? Do you hire sub-contractors? If so, is there a written contract? There are certain coverages in an insurance policy that kick in as long as there is an actual contract in place. NO HAND SHAKE DEALS. Friendship goes out the window when large sums of money are involved. Make sure you are protected. Have contacts in place with sub-contractors and let us look at the contracts you are signing.


Did these topics bring more questions to mind? If so, let’s talk. This is what we do. These are the questions we ask. 
 

Understanding co-insurance in today's commercial property market

What is Co-insurance?
Most people associate co-insurance with health insurance; however, it’s not exactly the same thing when dealing with property coverage.  The co-insurance clause was implemented as a tool to ensure property owners were not under insuring their properties.  

How does it work?
Just like car dealers use the NADA Guide for car values, we use the Marshall Swift & Boechk (MSB) guide for commercial building values.  Now, these are not market values but rather rebuild estimates. At the time of a loss, our adjuster enters information in the MSB system to determine the rebuild cost of a property.

An example:
Let’s say your property is insured for $500,000 and the insurance policy has an 80% co-insurance clause, meaning you must insure the property for 80% of the cost to rebuild it.  If the adjuster determines that the cost to rebuild is $1,000,000 then the minimum you can insure the property for is $800,000 (80% of $1,000,000). Since the property is insured for $500,000, the claim check will now show a co-insurance penalty because the property was under insured. his is calculated by dividing what you should have insured the property for into the amount you did insure it ($500,000/$800,000 = .625). The penalty figure is multiplied by the loss amount, which let’s say is $50,000 and that amount is listed on the claim check ($50,000 x .625 = $31,250). A claim check for $31,250 on a $50,000 loss and that’s without even applying the deductible!

I say all this not to confuse you; but rather, to take the burden of calculating the building value of your property off your shoulders.

We know the questions to ask and the information to gather to provide you with the best insurance coverage for your property.

Let’s talk.

Real Cost of Your Property Insurance

What is your TCOR (Total Cost of Risk) for your Property Insurance?

Property Insurance Real Cost

Many Businesses look at their Insurance Premiums as their cost of risks from year to year and do not take into account what their real costs associated with their property exposures are.  You hear a lot of discussions about Workers Comp and Liability when talking about Total Cost of Risk but very little is said about your property exposures. 

The Total Cost of Risk (TCOR) is defined as the overall costs associated with running corporate risk management program.  These include such items as:

  • Insurance Premiums
  • Deductibles
  • Uninsured Losses or Losses exceeding Insurance Limits
  • Risk Control or Safety Expenses
  • Management's time in dealing with issues (claims, contractors, moving tenants)
  • Reputation with Insurance Companies (future premium increases)
  • Loss of Reputation in Community
  • Fines (City, State, Federal)
  • City or State Mandates (ordinances) that force upgrades after a loss

When looking at these issues, most would have to agree that avoiding the loss is by far the best way to lower your TCOR and a key component of risk management.  Even though many say that there is not much they can do to lower their risk cost or, “it is just luck” that could not be further from the truth. 

Here are some items that can lower your TCOR for your property exposures:

  • Inspections of Property to identify problems to prevent losses
  • Fire safety equipment such as extinguishers, alarms, & sprinklers
  • Properly Value Properties before loss
  • Contractor Hiring & Risk Management Transfer
  • Proactive improvements to property such as electric, roofs, plumbing, etc.
  • Disaster Recovery Plan
  • Tenant Screening where applicable

We will explore these in future articles.

Chris Moxley, CIC, CRIS

My Property Insurance Deductible

Risk Management for Oklahoma business insurance clients provided by Professional Insurors Business Insurance OKC.

What does your deductible mean to you?

We are all familiar with our insurance policies having deductibles whether it’s for health insurance, auto and home insurance or commercial insurance.  In the past our standard deductibles (what we are most familiar to selecting) would range anywhere from $0-$2,500 for auto and home insurance, $250-$1,000 for health insurance and $1,000-$5,000 for commercial insurance.  Have you looked at your deductible in the last year?  Did you notice any changes to the deductible?

Right now in Oklahoma our deductibles vary greatly due to the catastrophic wind and hail losses we have sustained.  The loss amounts are in the billions of dollars for our state alone.  You might still see the above mentioned deductibles in your policy listed under “All Other Perils except Wind and Hail” and then you will see another deductible listed that states 1%-5% W/H (Wind and Hail) deductible.  What does that mean exactly?  That means that for a loss that is classified as a Wind and Hail loss, your deductible amount will be 1%-5% of the dwelling or building value listed on your declarations page.  For example, if the dwelling (house) is insured for $150,000 with a Wind/Hail deductible of 2% and you suffer a hail loss to your roof, your out of pocket portion for the claim would be $3,000.00.  Imagine what that figure would look like if your business was insured for $1.5 million and you had a deductible of 3% on wind and hail.  That’s a $45,000.00 deductible that you would be responsible for!  If you are a business owner that owns multiple locations, that deductible could apply to each location as well.  That is an amount that none of us would be happy about in the event of a loss.

As we get closer to 2013, we are seeing insurance rates and deductibles rise because of the catastrophic weather we have suffered across the nation and especially in Oklahoma.  Now is the time to really inform yourself on your coverage’s and deductibles and what they mean to your bottom line.  Taking a proactive role in risk management for your business and/or home insurance is imperative now more than ever.  There are many ways you can help reduce your hazards, and control your own premiums and coverage’s.  Talk to your agent and reach out to companies such as TCOR, Total Cost of Risk, for advice and direction for your upcoming renewal.  Even though we cannot prevent Mother Nature and across the board rate increases within the insurance companies, does not mean you can’t help control your own risks, coverage’s and deductibles.  Stay proactive and informed about your policy!   

Understanding the "Get me a Quote" Process

Professional Insurors Business Insurance provided this Oklahoma commercial insurance quote.

While many insurance agents may seem to provide quotes to customers with minimal information, there is high likelihood they are missing key coverage's.  Insurance companies are all different, however the one thing they have in common is they all like good information.  As an insurance agent it is my job to ask the questions that my insurance companies want to know.  Providing the insurance company with complete and accurate information will help tremendously in getting good pricing and good coverage.  Why would you want to pay for a policy that may not have the coverage you need?

Good information equals a good quote.  Take for instance a landscape company and a work comp quote.  There are different rates for lawn maintenance, landscape gardening and clerical.  It is important as a company to break these down by payroll in order to get the best overall pricing and coverage.  And for general liability purposes, it's important for the insurance company to know exactly what work you perform.  If you are simply doing lawn maintenance that's pretty easy.  However, if you install waterfalls, pools, outdoor kitchens, etc, your liability increases.  The reason for this is you have more exposure for something going wrong.  Now, if you as a business owner subcontracts these bigger jobs out, the insurance company wants to know if your subcontractors have their own insurance.  The reason for this is because if they don't have insurance, your general liability would be the one paying in the event of a claim. 

Insurance is transferring risk.  You as a business owner buy insurance to transfer your risk to an insurance company.  The insurance company wants to transfer the risk to your subcontractors insurance if possible.  For more information, contact Sean Leigh.