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Business Risk, Earthquakes

Got Earthquake Insurance? Businesses Should AssesS Their Readiness for “The Big One” and Other Natural Disasters

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By Loretta L. Worters, Vice President – Media Relations, Insurance Information Institute

Every year businesses temporarily shut down – or close forever – because of a disaster.  The 6.4- and 7.1-magnitude earthquakes which struck near Ridgecrest, California late last week are stark reminders of a quake’s ability to disrupt a business’ operations. Even though many California businesses are in seismically active areas, only one out of 10 commercial buildings are insured for quakes, according to the California Department of Insurance.

Depending upon a business’ location, the threat to its operations may come from risks other than earthquakes, such as a hurricane, tornado, or wildfire. Forty-plus percent of U.S. small businesses do not reopen after a disaster impacts them, the Federal Emergency Management Agency (FEMA) estimates. But by taking measures to prepare, businesses can increase their chance of recovering financially from a disaster.

Steps businesses can take in the aftermath of this month’s southern California earthquakes:

1) Review Insurance Coverage: It is important businesses have the right amount and types of insurance for their needs and risk profile. There are two types of policies that can be purchased by a business owner.

  • A Businessowners Policy (BOP) is commonly purchased by small businesses. BOP policies combine property, liability, and business interruption coverages in one policy and are usually less comprehensive than a commercial multiple peril (CMP) policy. Business interruption coverage, also known as business income insurance, reimburses a business owner for lost profits and continuing fixed expenses during the time a business stays closed because of a covered event, such as a hurricane, tornado, or wildfire.
  • A Commercial Multiple Peril (CMP) policy combines several coverages—such as property, boiler and machinery, and general liability—into a single policy. It is typically less expensive to buy a CMP policy than to buy these coverages individually. Boiler and machinery insurance, also known as Equipment Breakdown Insurance, also usually extends to air conditioners, heating, electrical, telephone, and computer systems.
  • Commercial Earthquake Insurance Is Sold Separately: Earthquake-caused property damage and business interruption is not covered under either a standard BOP or CMP policy. Businesses in earthquake-prone parts of the U.S. must consider a separate policy or an endorsement to an existing policy which specifically mentions earthquake-caused damage. Earthquake insurance carries a percentage deductible ranging from 10 percent to 15 percent.

There are some areas of a business that automatically include coverage for earthquakes.  Commercial auto provides coverage for loss or damage from temblors.  This can include damage from falling debris, fire, or other events.  Injury to employees at work because of an earthquake is also a covered loss under workers’ compensation insurance.

2) Develop a Business Recovery Plan: Businesses that are forced to close following a disaster run the risk of never being able to open their doors again. But by developing a business disaster recovery plan, they will be able to determine how their operations will be restored after a natural or operational disaster. Moreover, the Insurance Institute for Business & Home Safety (IBHS) offers a free, customizable toolkit to help businesses plan for any type of business interruption.

3) Take a Business Inventory: Creating a business inventory includes listing equipment, supplies, merchandise, and commercial vehicles. An inventory facilitates the filing of a business insurance claim.

Herein lies the fault:  Businessowners, by their very nature, are risk takers; trailblazers in their respective fields.  Risk-taking is a crucial component of launching and building a successful business, be it with capital investment, hiring employees or marketing strategies. But entrepreneurs who don’t purchase the right type and amount of coverage, including earthquake insurance, end up jeopardizing the enterprise they worked so hard to build, leaving themselves, and their business, on shaky ground.

Catastrophes, Earthquakes, Homeowners Insurance

Earthquakes: More links from Insurance Information Instititute

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We posted this look at insurance coverage and earthquakes earlier today. More important links about earthquakes and insurance:

 

Health & Safety

THE FOURTH OF JULY, 2019

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Before you head off to enjoy the barbecues and fireworks, it’s time for our annual Independence Day fact file. Here is this most American of holidays by the numbers, courtesy of the Census Bureau:

  • In July 1776, an estimated 2.5 million people lived in the 13 colonies . According to recent projections, there are 330 million residents as of July 1, 2019.
  • The oldest signer of the Declaration of Independence was Benjamin Franklin of Pennsylvania, age 70.
  • The youngest signer, at age 26, was Edward Rutledge of South Carolina.
  • $368.6 million worth of fireworks were sold in 2012 through establishments classified as NAICS 453998 and all other miscellaneous retailers (except tobacco stores).

 

Have a safe and happy holiday!

Homeowners Insurance

What a Shocker: Florida Tops the List for Lightning Claims

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By Loretta L. Worters, Vice President – Media Relations, Insurance Information Institute

Authorities believe a lightning strike caused a home to go up in flames in the Riverview area of Florida on Friday, June 14, ironically just days before Lightning Safety Awareness Week (June 23-29) commenced.

Often referred to as the lightning capital of the nation, it is no revelation that Florida ranked first for lightning caused homeowners insurance claims in 2018, with 7,108 claims, followed by Georgia (5,539) and California (4,909), a new addition to the line-up. Texas, which had ranked second in 2016, fell to fourth place (4,559).

The number of lightning-caused homeowners insurance claims decreased in 2018—the third straight year it has done so—yet the average cost per claim has soared since 2016.  The I.I.I. findings, based on national insurance claims numbers, determined that more than $900 million in lightning claims were paid out in 2018 to nearly 78,000 policyholders.  The cumulative value of claims caused by lightning rose six percent between 2016-2018.

With increased labor and construction costs as well as a consumer appetite for smart home products, it’s not surprising that lightning-related homeowners insurance claims costs have risen.  The average cost per claim rose eight percent from 2017 to 2018. However, the average cost per claim between 2016 and 2018 increased 21 percent – a veritable bolt from the blue!

 

Legal Environment, Workers Compensation

I.I.I. Report: Patchwork of state marijuana laws causing headaches for employers, insurers

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Today Illinois Governor J. B. Pritzker is reportedly going to sign into law a bill that legalizes recreational marijuana in the state. That makes Illinois the eleventh state (plus D.C.) to legalize marijuana for adult use.

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But as medical and recreational marijuana legalization spreads, concerns about what this means for workplace safety and workers compensation continue to grow. What is the impact of legal marijuana on workplace safety, employer duties and obligations and workers compensation insurance?

Today, the I.I.I. published a report that examines the current state of the issue. (Download the report here.)

“Haze of confusion: How employers and insurers are affected by a patchwork of state marijuana laws” dives into the following questions:

  • How does marijuana intoxication work and how might it impact workplace safety?
  • What accommodations, if any, are employers expected to provide for workers that use marijuana?
  • Does workers compensation insurance provide benefits to injured employees testing positive for marijuana? What about reimbursement to injured workers for medical marijuana?

Unfortunately, none of these questions have straightforward answers. Every state’s laws and regulations governing these issues are different, not to mention that federal law prohibits marijuana outright. To complicate matters further, state laws and regulations are constantly changing. Employment and insurance activities once prohibited are often now permitted – or required.

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Legal marijuana isn’t going away. Employers and insurers will continue to grapple with a rapidly changing environment, perhaps for years to come.

To learn more, download the report here.

Insurance Industry

From the I.I.I. Daily: Our most popular content, June 14 to June 20

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Here are the 5 most clicked on articles from this week’s I.I.I. Daily newsletter.

To subscribe to the I.I.I. Daily email daily@iii.org.

 

 

 

 

Homeowners Insurance

Are impact-resistant roof shingles all they’re cracked up to be? The IBHS is on the case

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By Jennifer Ha, Head of Editorial and Publications, Insurance Information Institute 

Hail damage is a growing problem in large regions of the United States and causes about $1 billion in damage to crops and property each year, according to the National Oceanic Atmospheric Administration (NOAA). As such, after years of field and lab research, the Insurance Institute for Business Home and Safety (IBHS) has recently released the results of its first hail impact performance program—the IBHS Impact Resistance Test Protocol for Asphalt Shingles—designed to track impact-resistant roofing products and to demonstrate the IBHS performance standard for impact-resistant shingles.

To test its standard, IBHS bought the most widely purchased impact-resistant shingles available to consumers and tested them in its lab under simulated real-world conditions, which it has now published on its website. The site includes disclosures, test standards and Member-only data.

Disaster Preparedness

Have a disaster plan for your small business

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Owning a small business has many rewards, like freedom, independence and the chance to financially benefit from your own hard work.  But there are also major challenges, like long hours, hungry competitors, and cash-flow problems.

One of the challenges that lands squarely on the shoulders of the small business owner is risk management. Whereas larger firms have the funds to hire specialists whose sole concern is identifying and preparing for threats to the business, Arthur the accountant and Mia the mover must take on that role themselves.

Natural disasters are a type of risk that can strike a business at any time. Luckily for Arthur and Mia, business insurance often comes with loss prevention expertise offered by many insurance carriers to their clients. An agent or broker can create a disaster and recovery plan customized for any business.

Here is a list of disaster planning tips State Farm® offers for small businesses, they include:

Safety first

  • Take time to plan evacuation routes and exits from your facility and mark them.
  • Install proper emergency lighting and exit signs to help show the way in case of power failure.
  • Designate staff “safety wardens” to guide and assist any emergency efforts, including regular drills.
  • Businesses should conduct emergency training exercises with all employees as frequently as needed to reinforce proper reaction times and responses.
  • Identify appropriate shelter spaces, such as a basement or storm cellar, in your facility for emergencies that may require them. If there is no basement in your building, go to the center of a small interior room on the lowest level away from windows or outside walls, such as a closet or interior hallway. Make sure spaces are kept clear of items that would limit their capacity or safety.
  • For more information about emergency safety procedures, visit the Federal Emergency Management Agency (FEMA).

Secure your assets

  • Contact a qualified contractor to discuss risk mitigation construction techniques for your building or office.
  • As an added precaution, you may also want to research places where you could temporarily relocate your operations if disaster strikes.
  • Maintain a comprehensive, up-to-date inventory of the items and equipment used in your business. Consider capturing these assets in photographs or video and securing the images and inventory files offsite.
  • Institute regular backup procedures for critical software and data to help ensure your business maintains access to the digital infrastructure it needs.
  • A business natural disaster plan will help get you up and running.

Following a disaster, you’ll want to resume business as quickly as possible:

  • Keep a name and telephone number list of contractors or repair firms who could make emergency temporary repairs or board up windows should some of your buildings be damaged.
  • Maintain a list of key suppliers, creditors, customers, and employees you need to contact about the state of your operation.
  • Construct a financial plan to cover continuing payroll expenses and debt obligations.

 

 

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