As seen in Property Casualty 360

Tens of thousands of small businesses have changed the way they do business, interacting with customers digitally and adjusting their offerings to provide new consulting services, advice, or training.

However, a relatively small proportion of these businesses are making corresponding changes to their insurance programs, leaving the window of opportunity wide open for experienced agents to provide valued counsel and effective insurance solutions to their clients. Increasingly, the key for many agents is to partner with a carrier that can provide responsive professional liability insurance solutions.

Helping customers assess their risks

Whether your client is a wedding planner, a real estate agent, a software developer or a financial consultant, a wide range of small businesses would benefit from coverage beyond what is offered in a standard general liability policy. But many business owners are not aware of their potential coverage gaps — and the costs they could incur if faced with a lawsuit.

Helping small business owners understand their vulnerabilities is a great first step. Professional liability coverage can be especially important if small businesses have customers allege non-performance of their products or services, or withhold payment due to a contract dispute. Additionally, it can be very beneficial for small businesses that encounter any of the following circumstances:

1. Performing consulting work, training or other services for their customers.
2. Involvement in work requiring special licenses.
3. Designing, recommending, installing or testing products.

What to look for in the right carrier

While it is important to make sure clients have the right miscellaneous professional liability protection, we are seeing top agents also assessing the carriers they use to provide this coverage. With an increasing number of small businesses requiring professional liability protection and more and more agents focusing on this opportunity, agents are being very selective about coverage options and carriers, only working with companies they believe have:

	1. Customer service centers that provide servicing for professional lines business. With many carriers only offering service for standard lines in their customer service centers, it is a good idea to consider if a carrier can manage specialized coverages, as well. Placing professional liability lines in service centers, in addition to standard lines, offers both agents and small business clients the most seamless service experience.
	2. Online solutions. Carriers that have online quoting capabilities, including endorsements that can be packaged with business owner's policies, can offer a seamless solution for clients while improving the ease of doing business for agents.
	3. Experienced underwriters and claims teams. A wide variety of professionals rely on this coverage, so it is not always a one size fits all solution. Partnering with carriers that have experienced underwriters and claims professionals can be an important value-add for agencies, offering expert guidance on nuances of the policies and potential professional services risks for small businesses.
	4. The right coverage options and flexibility. Agents know today's small business could quickly become a big business. Partnering with carriers that offer both endorsement and stand-alone options for professional liability enables agents to offer the level of protection their customers need. Whether a client needs specialized coverages or standard limits, endorsements or standalone options, partnering with the right carriers well positions agents to be able to easily offer long-term solutions for their small business clients as their businesses grow and change.

Helping small business owners understand the tremendous need for miscellaneous professional liability coverage is a win-win for independent agents. By offering important and valued counsel, agents can guide their clients to protection that helps ensure the continuation and sustainability of their businesses, while reinforcing the agency's value.

 

Human services agencies and nonprofits across the country have recognized crucial needs in the communities they serve, and are responding with an expansion of their services that allows them to help these communities in new and different ways. Whether it's a counseling center that offers physicals or an early-intervention program that has added a dental clinic, many nonprofits have expanded their missions to include medical services as a complement to their traditional social, counseling and support focuses. This trend has increased the need for specialized, customized insurance coverage for nonprofit organizations.

These organizations want to provide the best, most comprehensive service possible for the people they serve, and addressing the physical well-being of their populations is a natural next step. The trend of offering medical services is specifically common for organizations like community clinics, community behavioral health organizations and children's programs, like Head Starts or early intervention programs. These new services come with additional exposures for the organizations, meaning medical malpractice coverage is often needed, in addition to traditional professional liability protection. The challenge for these groups is medical and traditional nonprofit coverages often do not come packaged together. This can leave gaps in coverage that can put the organization at risk of potentially costly claims. An insurance carrier that can seamlessly address both needs of a hybrid nonprofit can make a major difference in the level of protection for clients.

Four insurance tips for the hybrid nonprofit

When nonprofits expand their services, there often are changes in reporting, medical requirements, insurance and legal issues. Training and expert advice can go a long way. Hybrid nonprofits should consider these four tips when looking for a comprehensive insurance program:

1. Reporting requirements may change. Reporting requirements will most likely change for nonprofits that expand their missions to include medical service(s) or expand across state lines. A nonprofit staff that is well-trained on the different requirements can help avoid potential issues.
2. The proper risk transfer contract is needed for any medical providers. Limiting the responsibility of nonprofits for the errors committed by specifically-trained clinicians and medical professionals is critical. As a best practice, organizations should be sure the professionals they hire provide proper proof of risk transfer. When using an outside, independent professional, it is recommended that a signed contract outlining duties, deliverables and responsibilities is in place.
3. Medical malpractice coverage is necessary. If clinicians are employed as staff members of the nonprofit, the nonprofit's insurance program should provide medical malpractice coverage. If the clinicians are independent contractors, it's good practice to request a copy of their medical malpractice and professional liability insurance policies to keep on record. Solid contracts that address client service responsibilities, duties and insurance requirements, along with reviewing and documenting license records, can help best protect nonprofits.
4. The funder(s) may have insurance requirements. Insurance programs must meet the needs and requirements of the funder(s). Funder requirements may change when a nonprofit expands its mission. If it's a government-funded program that is adding medical services, the requirements will usually change drastically. It's important to obtain a copy of the contract between the funder and nonprofit to ensure the nonprofit's insurance program is compliant.

The advantage of independent insurance agents

Hybrid nonprofits need an individualized insurance program that can protect their expanded exposures. The best insurance agents understand the nuances between true medical malpractice and traditional professional liability policies, and when each is needed to fully protect their clients.

There are not many one-stop shops in the insurance marketplace to get the coverage that is necessary for a nonprofit that also offers healthcare services. Often, two separate coverage plans are needed. Independent insurance agents can identify the carriers that offer these two products as one comprehensive plan.

Beyond the proper coverage, independent agents will look for carriers with risk solutions teams that have the experience to advise on both the nonprofit and healthcare areas as one. For claims in this arena, a specialized team that is experienced in handling claims for nonprofits that offer medical services is a major value-add for many nonprofit clients. This team can help them avoid potentially damaging risks.

As a trusted adviser to nonprofit clients, experienced and knowledgeable independent agents are well-positioned to help their clients successfully navigate the sea of exposures that face the hybrid nonprofits of today.

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LC OCT 2018-469

Why do I need home insurance?

Homeowners insurance provides protection in the event of a loss involving your home or an accident on your property. Without homeowners insurance, if you have a loss or damage to your home, you are liable for the cost of rebuilding/fixing your home, replacing belongings, paying for temporary housing and other financial obligations that come as the result of the incident. In addition to providing peace of mind, homeowners insurance is often required by mortgage lenders. Looking for insurance guidance? Find an agent in your area.

What does a typical homeowners insurance policy cover?

A standard homeowners insurance policy insures the structure of your home, your belongings, liability coverage, and sometimes outbuildings such as a shed or garage. Home insurance also provides additional living expenses coverage in the event your home is uninhabitable due to damage from a loss. For more occurrences that are also covered by homeowners insurance, see our article on seven surprising (and practical) things covered by home insurance.

What isn’t covered by my homeowners insurance policy?

Most home insurance policies don’t cover damage to the home caused by poor home maintenance. Additionally, damage from floods and earthquakes require insurance policies that can be purchased separately from a standard homeowners policy.

Additional options for protection are available with endorsements to your homeowners insurance policy, including:

• Equipment breakdown
• Guaranteed replacement cost
• Water back-up and sump overflow
• Siding and/or roof restoration coverage

Does my homeowners insurance cover me if I’m sued or found responsible for a person’s injury on my property?

A typical homeowners policy covers financial damage from lawsuits for bodily injury or property damage caused to other people, up to the limit you selected on the policy. Liability limits generally start at about $100,000, but it’s a good idea to talk to your independent insurance agent to decide if you should purchase a higher level of protection. An umbrella policy can provide broader coverage and higher liability limits than what is available as a part of your homeowners policy.

What is a deductible, and how does it affect my home insurance premium?

A deductible on your homeowners insurance policy is the amount you pay out-of-pocket when you make a claim, before your insurance begins to cover expenses. You decide on the deductible you feel comfortable with when you apply for your insurance policy. A lower deductible means that you pay less in the event of a claim, but as a result, you will most likely pay a little more for your policy. Increasing your deductible will usually lower your premiums, but be sure that your deductible is a manageable amount for you to pay in the event of a claim. Talk to your insurance agent to make sure your policy and deductible best fits your needs.

What’s the difference between your home’s market value and the replacement value?

Replacement cost is the amount it would cost to rebuild a home from scratch. This figure includes factors like similar materials, degree of craftsmanship, roofing costs, exterior features, heating and cooling systems and more. Non-material costs are considered as well, including the costs of permits, fees, debris removal, contractor labor, overhead and profit.

Market value is the amount for which you would sell your home. This is calculated by more factors such as neighborhood, home values around you and the real estate market.

By making sure your home is insured for its replacement cost, you will be getting the coverage you truly need should you ever suffer a total loss and have to rebuild your home.

Why should I complete a home inventory?

A personal home inventory is a great way to keep updated records of your personal possessions as they change over time. If you have to file a claim for lost, damaged or destroyed property, you will already have a list of what you own, when you bought it and what you paid. Trying to recall your belongings during a loss can be stressful and will often result in missed information. Many companies offer a home inventory tool or downloadable spreadsheet that makes it easy to keep track of your belongings.

When should I get homeowners insurance?

Your mortgage lender will likely require you to have homeowners insurance before you will be able to close on the home. Talk to your independent insurance agent when you begin the home-buying process to make sure you’re covered. Your agent can also provide valuable information that can help you with your home-buying decisions.

How much homeowners insurance do I need?

There are a variety of factors that your independent insurance agent will use to determine the amount of coverage you need, including the costs of your home’s structure, your possessions, additional living expenses and how much liability insurance you need. Your agent will be able to work with you to tailor a policy that suits your needs. Plus, it’s always a great idea to have all your insurance with one company, so be sure to ask about your autos and any other coverage you may need.

Should I buy a separate flood and/or earthquake insurance policy?

Flood or earthquake damage is rarely covered under a standard homeowners insurance policy. If you live in an area that is high risk for floods or earthquakes, you should consider buying flood or earthquake insurance in addition to your homeowners policy. Talk to your independent insurance agent about your risks and options.

How much liability protection do I need?

Our umbrella insurance calculator is a useful tool that can show how much you may have at risk in the event of a major accident or liability lawsuit. The difference between your total assets and the liability limits of your home and auto policies represents a potential gap in coverage. If the total value of your assets amounts to more than the maximum limit your homeowners insurance policy allows, consider an umbrella policy for extra protection.

Is there anything in my home that requires separate insurance coverage?

Items like an engagement ring, other jewelry, collections and heirloom pieces, among others, may not be covered with your standard homeowners policy if they are more valuable than the basic limits on your policy.

The Hanover has two types of coverage for your valuable items: Valuable Items Plus (VIP) blanket property or scheduled personal property.

With Valuable Items Plus (VIP) blanket property coverage, any single item is covered up to $10,000 per claim. This is an optional endorsement on your standard homeowner’s coverage.

With more expensive ticket items, such as engagement rings, scheduled personal property coverage may be more suitable. At less than $2.00 a month per $1,000.00, this provides coverage for the full value of the item. Coverage is provided for mysterious disappearance and breakage too. Neither option requires a deductible.

What factors affect my homeowners insurance premium?

Home insurance rates can fluctuate, just like the cost of living fluctuates. There are a variety of factors to keep in mind when it comes to your home insurance costs, but making sure you have the right home and auto protection is essential for your peace of mind.

The following factors, among others, have an effect on home insurance premiums:

• Amount of coverage elected
• Location
• Fire hazards
• Conditions, materials and age of the home
• Frequency of claims
• Credit score

Why are my rates going up?

Homeowners insurance costs are rising across the nation for most insurance carriers. The increase in costs is due to a variety of factors, including:

• More impactful storms
• Increased material and labor costs
• Larger homes
• Previously owned homes with previous claims

How can I lower the cost of my homeowners insurance policy?

Home insurance rates may be on the rise, but there are some ways to save on your insurance policy. Your independent insurance agent can review your policies and make recommendations on ways to reduce your premium, while ensuring you have the right combination of coverage, value and price. For more tips on how to save on your insurance policy, see our article on eight ways to make the most of your insurance dollars.

Discounts offered by The Hanover include:

• New home discount
• Home buyer discount
• Safety and security devices (such as smoke detectors and central station alarms)
• Affinity groups
• Bundled policy discount
• Payment method discount

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LC 2019-044

In today's competitive environment, it's important to think of yourself as your clients' trusted advisor, helping them make the right decisions to fully protect their business. Clients want expert advice, so it's important to find the right balance of touchpoints to enable you to provide expert advice within a busy agency environment.

Any service request or call from a client is an opportunity to build your relationship. After fulfilling the request, offering proactive service can help your client feel confident that you are their trusted advisor.

Examples of proactive service conversations include:

• Asking if you can quote a policy you don't currently write:
  "It may be more efficient for you to have all policies in one place. May I ask why our agency doesn't handle your commercial auto insurance?"
• Suggesting related coverages or increased limits related to the request or that provide more well-rounded protection for the business:
  "Since your business is growing, Mr. Smith, now may be a good time to add employment practices liability coverage to protect your business. May I quote that coverage for you today?" 
  "We're experiencing much larger claims payouts in this area and would recommend you consider enhancing that coverage."
• Leveraging an established strong relationship by asking for referrals:
  "You've been a satisfied client with us for a long time. Do you know of any other businesses that could benefit from our insurance services?"

Keeping these opportunistic touchpoints in mind when working with clients can help you bring even more value to customers while growing your book of business and improving customer retention.

To help you get the conversation started, here are eight insurance risks every business should assess, including coverages to consider.

Although engagement agreements are not required legally, they are strongly encouraged. A properly drafted engagement agreement can serve as a helpful risk management tool by establishing a legal framework for the relationship with a client. An engagement letter can discourage a client from asserting a meritless claim and can be useful in defending such a claim. The service or type of engagement should determine the terms and provisions to be included in the engagement agreement.

Majority of accountants’ professional liability claims involve tax services

The failure to utilize an engagement agreement can become an issue in the event a professional liability claim is made against an accountant. The claims often involve disputes between the accountant and the client or purported client, over what services the accountant was to provide the client, or even if there was a retention at all.

It is common for potential clients to fail to deliver the requisite records to the accountant in enough time to prepare and file a tax return or perform another service. The engagement agreement can properly address this issue when the requisite records are not provided by the client on time. There can also be confusion over whether the accountant is providing any tax planning advice beyond just the preparation of a return and who is responsible to file a completed return. An engagement agreement can address such responsibilities and avoid such issues.

Even with long-term clients, where an accountant provides services for a client every year, disputes can occur without an annually executed engagement agreement that clearly describes the scope of work. For example, a long-term client requests advice from the accountant on the sale of the client’s business that year and any possible tax consequences. Following the sale of the business, the client incurred significant unanticipated tax charges and penalties. While the accountant claimed he was only retained each year for the preparation of tax returns, the client claimed that the accountant failed to provide proper tax advice concerning the sale of the business. The sale of the business agreement in that year went beyond the scope of the usual tax preparation work the accountant completed each year. However, without an engagement agreement, it was unclear if the additional work had been agreed to by the accountant.

Elements of a well-drafted engagement agreement for accountants

To help accountants manage their risks of a professional liability claim, the following are some of the elements that should be addressed and included in a well-drafted engagement agreement to help avoid client confusion and misunderstandings that can lead to claims.

• Identify client, fees and timing of services. The engagement agreement should identify all clients to the agreement, whether individual or corporate. The fees should be explained and the fee payment schedule should be outlined. In addition, it is important to state when supporting documents need to be provided, who is responsible for filing the return and when signatures are required for both the engagement agreement and the return.
• Clearly describe the scope of the work. The scope of work section of the agreement is critical to spell out exactly what work the accountant has agreed to perform for a client. The agreement should also indicate any limitations of the services, such as not providing any tax planning advice or defense if a return is challenged by a government agency. It is helpful to also address that if additional services are needed, the accountant and the client need to agree to the work and any additional fees in writing.
• Identify client responsibilities. The agreement should identify the client’s responsibilities, such as the required documentation for the anticipated work and when those documents must be provided. The client must agree to the accuracy and completeness of the records provided. If applicable, the agreement should note the client is responsible to identify if they hold any interests or assets in foreign countries and disclose any additional filing requirements in those other jurisdictions.
• Specify use of third party service providers, electronic data communication and storage. The agreement should specify how communications will be made with the client, how electronic data will be stored and for how long and allow for the use of third party vendors for storage and preparation of documents.
• Use engagement agreements that are limited in time. Engagement agreements should be limited in time and be renewed each year. It is not recommended that an accountant use an “evergreen” engagement agreement, which is an agreement without a clear end of services. An engagement agreement should typically have a beginning and an end of the services performed by the accountant. This forces the accountant and the client to review the scope of work at least annually. The client should have time to review the engagement agreement before executing. The accountant should require the client to sign the engagement agreement before any services are performed. The accountant should retain the original of the executed engagement agreement and provide the client a copy.

Accountants can minimize their risks by communicating regularly with clients. Regular communication can help solidify the accountant-client relationship and help the accountant learn if the client’s needs have changed from the previous year. By utilizing well-drafted engagement agreements, accountants can manage the risks and avoid misunderstandings and confusion that can lead to costly professional liability claims.

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This material is provided for informational purposes only and does not provide any coverage or guarantee loss prevention. The examples in this material are provided as hypothetical and for illustration purposes only. The Hanover Insurance Company and its affiliates and subsidiaries (“The Hanover”) specifically disclaim any warranty or representation that acceptance of any recommendations contained herein will make any premises, or operation safe or in compliance with any law or regulation. By providing this information to you. The Hanover does not assume (and specifically disclaims) any duty, undertaking or responsibility to you. The decision to accept or implement any recommendation(s) or advice contained in this material must be made by you.

LC 2018-530 (11/2018)

Ask five key questions to help identify cyber risk

As seen in Insurance Journal

In an increasingly digital world, it’s important that small businesses don’t get left behind when fending off cyber threats. While the U.S. Small Business Administration reports that the cost of cyber crimes in 2020 reached $2.7 billion that year and about 88 percent of surveyed small business owners feel vulnerable to cyber threats, many feel they cannot afford protection or do not know where to start. This “coverage gap” is driven largely by the challenges businesses face when valuing their (or other’s) digital assets and what makes them potential targets of a cyber breach in the first place.

Assessing digital risks

Helping businesses understand they are big enough to be targets and recognize they have ample digital assets of value to a cyber attacker is a critical first step. A second crucial step is for independent agents to guide business owners through the complexities of a cyber risk analysis so they can identify high-risk areas in their operations. Often, business owners conclude they do not have any personally identifiable information in their systems, and their analysis stops there. Unfortunately, when it comes to small commercial insurance, and especially cyber, it is more complex than that.

The following are five key questions agents can ask to determine their customers’ most significant cyber risks:

• Does your client’s business have digital assets? Without knowing what the client is trying to protect, it is difficult to design a risk mitigation program. Small businesses can have many digital assets, including design or manufacturing specs (their own or customers’), personal information, and mergers and acquisitions activity.
• Do they know where those assets are located? Understanding where and how assets are stored is critical in determining what kind of coverage is needed to protect them. This can include on-site systems, cloud back- ups, historical hard copy information, data entrusted to third parties (e.g. employee data managed by an HR suite or compensation management software provider) and more.
• How do they value those assets? Is the client in a “high-trust” field (e.g. doctors, lawyers, etc.) where a cyber attack would reduce consumer confidence? Reputation management is a key consideration in designing cyber insurance coverage plans. For more industrial or manufacturing-based clients, questions related to the importance of the digital assets include: “Would a shutdown cause the client to miss key deliverable dates?” and, “Could the data be easily recreated?”
• Do they have access to a third party’s system? Your clients may not store valuable assets themselves but could be targets due to their access to larger, more data rich organizations with which they have business relationships.
• How long, or in what capacity, could they run their operations if their point-of-sale or other systems were taken off-line? Some attacks are indiscriminate and cast large nets. An unknowing employee could erroneously click on a malware link in an email that results in files or systems being “locked.” Having coverage to mitigate risks associated with human error or employee negligence cannot be overstated for most clients, especially those relying heavily on point-of-sale, manufacturing or other systems.

Customizing coverage

Once digital asset risks are identified, the final step in a cyber risk analysis is determining which cyber insurance fits clients’ needs. Cyber insurance can provide coverage for first- and third-party risks, adding a level of complexity for businesses evaluating their needs. With almost every business relying on computers, optimizing policies for coverages and appropriate limits is challenging. It’s critical to consider coverages and limits that address the exposures specific to each customer’s class of business. Here are three cyber coverage types to consider, based on clients’ needs:

1. Baseline. This coverage often is the best option for clients that do not have substantial exposures and do not require extensive protection. For instance, if a client does not collect extensive amounts of personal information and does not have highly automated and connected manufacturing systems, a “bolt-on” product could be added to their existing package policy, offering added coverage needed to protect against cyber exposures. These bolt-on coverages are generally simpler and easier to purchase, as they may not require an underwriting application.
2. Stand-alone. For larger clients or more complex needs, stand-alone cyber coverages can provide businesses with more comprehensive coverage and greater limits. While these products generally require underwriting applications, the simple process of completing the application is often beneficial to small businesses, as questions typically involve security-related best practices.
3. Coverage continuity. It is also important to be mindful that some cyber risks may be covered under other lines of insurance coverage. For example, false pretense coverage may be covered under a client’s crime insurance policy. However, this client could still benefit from obtaining explicit cyber coverage on a cyber-specific policy, depending on the cyber exposures they would like to cover.

When helping small business owners evaluate cyber insurance exposures and needs, agents can look at all available lines (cyber, package, crime, management liability and more) to ensure small businesses’ needs are addressed.

By placing all coverages with a single carrier, the potential for coverage friction is reduced, resulting in a better and more seamless customer experience for the insured.

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About the author
Eric Cernak is head of cyber insurance at The Hanover Insurance Group. In this role, he is responsible for overseeing The Hanover's corporate cyber strategy across all of its commercial lines and specialty businesses, to ensure a cohesive offering of products and services for The Hanover’s independent insurance agent partners.

 

 

 

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All products are underwritten by The Hanover Insurance Company or one of its insurance company subsidiaries or affiliates (“The Hanover”). Coverage may not be available in all jurisdictions and is subject to the company underwriting guidelines and the issued policy. This material is provided for informational purposes only and does not provide any coverage.

Visit the website of the United States Consumer Product Safety Commission and you’ll find a recall list that includes nightlights, plastic toys, fleece sweaters and furniture. Even products as innocuous as pillows and chocolate have been included on the recall list.

No manufacturer, large or small, is immune from product recalls and the business disruption and considerable expense that may result. History’s most famous product recall cases feature well-known brands, and have involved hundreds of millions of dollars in associated costs.

However, one third of product recalls are from companies with five or fewer employees. And, the average cost of a recall is approximately $550,000. For a small manufacturer, such a loss could spell financial ruin.

The good news for manufacturers: Independent agents are in a great position to help protect their manufacturing clients from the stress and potential financial impacts of a product recall.

Recall basics

Whether required by law or voluntary, a product recall is typically in a business’ best interest. It can protect their customers, their reputation and their business.

A recall means expenses for a company, including the cost to remove defective or dangerous products from the market, and dispose of them safely. Companies often have to pay for product testing to see if, in fact, a recall is necessary. They also can be left responsible for the cost to notify customers and users of the product, costs for transporting, storing, and disposing of the defective product, and the inevitable extra expenses including overtime, contractor’s costs, computer time, etc.

The list could go on. Most manufacturers know a recall can place them at financial risk. As risk advisers to manufacturing clients, independent agents understand the benefits that product recall insurance can provide. The right insurance protection can offer peace of mind and help protect a business for years to come. We are seeing agents look for coverages that go above and beyond baseline protection to offer more of a comprehensive approach to product recall. Product recall insurance is usually not included with general liability coverage, and must be added as an endorsement. With the considerable financial risk for manufacturers, we’re seeing agents with the most experience in product recall also recommending optional coverages, particularly for the following:

• Repair, replacement or repurchasing costs:
  This covers costs incurred to repair a defective product, replace a product with a similar one, and repurchase a product or reimburse customers for payments. It can also cover costs to redistribute and install replacement products or parts sold to customers.
• Customer’s lost profit:
  This coverage protects manufacturers when a product recall affects customers’ abilities to deliver their goods. For example, a customer may lose profits from the sale of a manufacturer’s products when they are returned, or due to the additional costs of processing the recall.
• Good faith advertising:
  After a product recall, there may be costs incurred to help repair the manufacturer’s damaged reputation in the marketplace. Often, paid advertising, social media and public relations services are covered for a period of time after a recall.

Covering legal costs of a recall

Agents with knowledge of product recall say that companies that have not been through the experience are often stunned by its far-reaching impact. And because a quick response can help to minimize damages to finances and a company’s reputation, agents often recommend product recall liability insurance as another highly-desirable optional endorsement.

Different from general liability insurance, product recall liability coverage addresses lawsuits brought by a customer over costs associated with a recall. If a manufacturer and a customer can’t agree on the amount to be paid, the customer may sue the manufacturer for recovery. In this case, the recall liability coverage may cover the manufacturer’s defense costs and any sums they are found liable to pay their customer. This also may provide coverage for damages the insured may be legally obligated to pay to a third party as the result of a covered recall.

Beyond financial implications

A product recall can cause serious damage to a company’s reputation. However, when a detailed plan is promptly put into action, a product recall will demonstrate a commitment to customer safety, and may ultimately enhance reputation and customer loyalty.

Independent agents can help serve as risk managers for their manufacturing clients. Inquiring about a client’s product recall plan can help ensure there is an action plan ready to go in the event of a recall. There are three keys to an effective product recall plan. First, have a written plan in place. Operating under the stress and time constraints of product recall is not the time to ask, “How are we going to handle this?”

Second, designate a team of employees who will be charged with coordinating all aspects of the product recall team. Think of them as a rapid response team, who will help the company get out in front of a potentially very disruptive situation.

Third, have a strategy in place for dealing with media; both outgoing news releases and incoming media inquiries.

"Independent agents can help serve as risk managers for their manufacturing clients."

As top agents know, the best way to protect against the costs and broad impact of a product recall is to avoid it in the first place. For this reason, it’s wise to deal with an insurance carrier that provides robust risk solutions services; that works closely with insureds to identify potential risks, and helps implement focused solutions and best practices to reduce the likelihood of a product recall. These value-add services can make a major difference in the success of a manufacturer.

Finally, partnering with the right carrier can also help provide peace of mind for manufacturing clients and agents alike. Look for carrier partners that have a dedicated claims team, ready to deliver when your client experiences a product recall.

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About the author
Scott Grieco has served as senior vice president of Middle Market at The Hanover since 2012. As an experienced insurance professional, he is responsible for the profit and loss for Middle Market business, which includes accounts with premiums greater than $50,000 in specialized industries relevant to our distributors.

The increasing number of health clinics across the nation constitutes a new trend in today’s healthcare system. According to Statista, there are 9,616 urgent care centers in the country that make up a multi-billion-dollar industry that is only growing. As a result, some of the best independent agents in the country are capitalizing on this emerging market and growing their books of business.

Expansion of health clinics

Walk-in clinics are a relatively new addition to the American healthcare landscape, only dating back about 20 years. Given the success, however, they’re expected to continue to multiply for years to come. This recent growth is driven by quality care at lower prices and the shortage of primary care physicians nationwide.

Today, consumers can get much of the same medical attention in a clinic setting that previously required treatment in an emergency room, usually faster and at a lower cost. Consumers are heading to health clinics for treatment of more common ailments, like sore throats or respiratory infections. Often, the cost of treatment at a clinic is significantly lower than treatment for the same ailment at a hospital. With many consumers paying a larger share of healthcare costs than in the past, they’re looking to compare and select options that best fit their budgets.

The other reason health clinics have increased in popularity is the significant shortage of primary care physicians; a deficit that is expected to hit record numbers in less than five years. This growing shortage is making it increasingly challenging for consumers to find primary care doctors, leading many patients to turn to walk-in clinics instead. Fortunately, this is something that is comforting for many patients. Research shows the majority of consumers are more comfortable at clinics than at hospitals and traditional doctors’ offices. This especially rings true for millennials, who are leading the trend in turning to clinics.

Benefits for agents

The increase in health clinics has some interesting implications for independent insurance agents. While larger hospital facilities are typically self-insured, health clinics very often depend on the expertise of independent agents to set up individualized and comprehensive insurance programs. For agents looking to improve their agency’s economics, it’s a great time to capitalize on the opportunity to provide expert advice.

Today’s clinics are designed to perform a variety of medical tests and procedures, and their insurance programs should reflect these exposures. Agents in this market are ensuring health clinic clients are protected against an array of potential professional liability exposures, including scope of practice and credentialing, two main areas of concern.

Specialized independent agents understand the importance of defining the scope of practice for a clinic. Providing medical care to patients is no longer limited to doctors and nurses alone. Clinics hire a variety of healthcare professionals to administer patient care, meaning some patients may not need to meet with a doctor. As a result, agents in this marketplace are arranging for coverage that is broad enough to cover the many healthcare professionals providing services, including any nurse practitioners, physician assistants and primary care physicians on the policy.

Credentialing is another area of concern for clinics. Any medical professional who is hired by a clinic and administers patient care should be credentialed. Many of the most successful independent insurance agents in this space are teaming up with insurance carriers that can help them add value. It is important that a clinic’s professional liability policy is broad enough to cover its administrative services, which includes the credentialing of healthcare professionals.

Similarly, carrier partnerships can make all the difference when independent agents look to provide health clinic clients with a specialized approach to claims and risk management. When selecting comprehensive insurance protection for health clinic clients, the most successful agents are assessing each carrier’s capabilities, looking at the:

1. Quality and tenure of the claims team:
   Healthcare organizations are often targets of litigation and many claimants in this arena will have multiple ailments, which can complicate any potential claims. Carriers that have a specialized claims team, staffed with experienced medical malpractice attorneys and adjusters with clinical capabilities, can help agents offer better protection to their clients. The top carriers will also have a strong network of outside attorneys who specialize in medical malpractice, providing enhanced protection for clinic clients.
    
2. Clinical risk management services:
   Today’s agents know insurance protection should not be limited to handling claims as they happen, but should also offer support to healthcare organizations in the area of prevention. An insurance carrier that provides education around risk management and assessment can help lessen the likelihood of a malpractice claim for a healthcare client. For example, specialized carriers in this field may offer free online risk management training courses for clinics to share with their staff.

Winning independent agents are embracing this growing trend in health clinics and are taking advantage of the opportunity to provide expert advice and consultation to help protect their clients’ employees and businesses. By partnering with experienced, specialized carriers, independent agents can better serve their healthcare clientele, while improving their agencies’ economics.

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About the author
Eric Paynter, head of professional account, has more than 25 years' experience underwriting professional liability, and is dedicated to serving the healthcare liability space — underwriting hospitals, allied healthcare facilities, senior living facilities and physicians. 

Digital and physical worlds are colliding at an ever-increasing pace. The rapid and widespread adoption of the Internet of Things/Industry 4.0 is creating an increased awareness and willingness of insurers to cover exposures beyond traditional data breach losses.

As operational and information technology become more intertwined on a scale not before seen, customers are well advised to carefully consider their exposures and talk with their independent insurance agents to understand if they are properly covered for potential risks. Even those without personally identifiable information on hand can now be exposed to data breach risks, increasing their need for cyber insurance.

For example, changes to computer code can stop computer equipment from operating without any visible physical damage. This often means the only cost-effective way to fix the equipment is to replace the damaged hardware. Additionally, a malicious cyber-attack can cause valves to unexpectedly open. For organizations using toxic materials in their operations, they may suffer an accidental spill, resulting in added costs to clean up.

The nature of cyber-attacks continues to evolve. The AIC (availability, integrity, confidentiality) security model provides insights as to what might be next for cyber-attacks. Attacks that disrupt access to critical data and systems (e.g., ransomware), as well as compromise the confidentiality of personal information (e.g. large retailer breaches), are well documented in both the private and public sectors. Less commonly seen in the private sector, or at least publicly acknowledged, are attacks that modify the integrity of data in a system. While viruses often consist of attacks on data access, it is not hard to envision a scenario where critical design specs fed to a computer numerical control (CNC) machine may be unknowingly altered, resulting in defective products, and subsequent property or product recall losses.

In addition to the explicit costs incurred by operations to remedy issues like these, they also face loss of business income while they replace hardware and cleanup spills, thus demonstrating that cyber risks reach far beyond the “traditional” breaches of personally identifiable information.

This expansion and interconnection will cause organizations and independent agents to guide manufacturers to consider whether cyber is a peril that can impact other, more traditional insurance policies (such as property) or if it is more of a coverage that fills the “gaps” not typically covered under more traditional policies.

Additionally, more emphasis is being placed on removing ambiguity from more traditional lines. Some traditional policies now have explicit exclusions for losses originating from a cyber incident (e.g. non-affirmative cyber). This will aid in providing a clearer expectation of coverage for insureds, agents and carriers, and will provide additional contract certainty. As the digital world continues to meld with the physical world, this becomes even more important as previously unimagined loss scenarios emerge.

Agents with significant cyber experience are going above and beyond, asking much more than whether a client collects personally identifiable information. These agents understand that additional questions are needed to evaluate their clients’ cyber risks. It’s important for agents to probe the ways in which their clients depend on computer systems. These coverage interdependencies and increasing interactions only emphasize the importance of the independent insurance agent as a trusted adviser.

At The Hanover, we recognize the important role agents can play in helping their customers effectively mitigate cyber risks, and we have invested in the capabilities our partners need to do just that. Today, we are uniquely positioned to help our valued agents address these non-traditional, evolving exposures. We are able to combine our extensive understanding of traditional manufacturing risks, such as property, workers’ compensation and products liability, with our decade of cyber-related experience. We have the capability to provide contingent business interruption for manufactures that can help reduce their overall supply chain risk. Whether providing easy access to cyber coverage or satisfying contractual obligations, The Hanover’s suite of cyber offerings can help agents match the appropriate level of insurance coverage for their manufacturing clients’ evolving risks.

With cyber risks increasing for more and more clients, agents who focus on this evolving risk will provide a highly valued service while building their own businesses for the future.

 

About the author
Eric Cernak is head of cyber insurance at The Hanover Insurance Group. In this role, he is responsible for overseeing The Hanover’s corporate cyber strategy across all of its commercial lines and specialty businesses, to ensure a cohesive offering of products and services for The Hanover’s independent insurance agent partners.

 

 

 

Lawyers who wire money to or on behalf of clients should be aware of a fraud scheme that could potentially cost the lawyer and/or client hundreds of thousands of dollars. In the United States alone, the Federal Bureau of Investigation (FBI) reports that as much as $1.33 billion have been lost to fraudstersⁱ.

While wire fraud scams affect many different types of professionals, lawyers who work with real estate clients and/or wire funds as part of their practice are particularly vulnerable. To help lawyers manage their risk, we have highlighted the typical scenario and provided risk management guidance to avoid becoming a victim of a fraud scheme.

A. Typical wire fraud scam scenario faced by lawyers

The scam typically involves a compromised email account from one or more parties to a real estate or commercial transactionⁱⁱ. The FBI refers to this scam as the "man-in-the-email-scam.ⁱⁱⁱ" The scammer assumes the identity of a party to the transaction and uses an email address that appears to be from the legitimate sender. It could be an email from the "purported" real estate agent, mortgage broker, seller's attorney, etc. The scammer may even have control over the person's real email address or the email may use a similar, but slightly altered domain name (e.g., john@attorney.us (changing domain name suffix) or John@att0rney.com (changing a letter "o" to a number "0" in the domain name) instead of john@attorney.com)^iv. With control over a person's real email address, the scammer can obtain knowledge specific to the transaction, information about all the parties to the transaction, various timetables, etc.

The scammer has usually already had enough access to previously exchanged emails in the transaction to seem convincing to the attorney receiving the email (e.g., "I hope the home inspection went well yesterday"). The scammer will typically provide wire instructions or make some change to a previous wire transfer request. Sometimes, the scammer may even change the transaction details, such as account numbers or changing the original plan of having payment made by check to requiring payment via a wire transfer.

To circumvent normal channels that might uncover a fraud, the scammer will emphasize that "time is of the essence," and that this matter is "urgent." Typically, the scammer will use common business phrases such as "this needs to go out today," "I need you to take care of this ASAP," "client is impatient" and/or the "seller may pull out if action not taken care of immediately," etc.

The attorney will then wire out the money for the closing which can be hundreds of thousands of dollars to the scammer's account. The money is quickly transferred by the scammer to an overseas bank before the scam can be uncovered and stopped. The real party often calls late in the day or early the next morning asking the attorney what happened to the anticipated wired funds.

B. Potential damages

At that point, the attorney realizes that he or she has been scammed. The closing cannot take place and various claims for damages can accrue as a result of the failed sale of property (other party to the transaction) as well as a claim for the loss of the client's funds. Thus, there are usually at least one or more aggrieved parties looking to the attorney for their actual damages, plus any additional attorney's fees and costs incurred by all the aggrieved parties in trying to rectify the situation.

Other potential damages from the fraud. In addition, depending on the nature of the scam, the funds placed into an attorney's client trust account can be fraudulent as in the case of the check fraud scam^v. If the funds wired from the attorney's client trust account turn out to be fraudulent, the attorney also faces the problem of having withdrawn other client's or clients' funds from the trust account. The attorney may be exposed to professional liability claims by those clients for the missing funds. Worse, the attorney may also face potential disciplinary action for the misuse or misappropriation of client funds.

C. What to do if faced with a wire fraud scam

When an attorney realizes he or she has been the potential victim of a wire fraud scheme, the attorney must act immediately since time is of the essence when trying to identify the fraudulent parties (scammers) and/or recover any of the funds. The attorney should immediately call all affected clients, parties and financial institutions involved in the transaction. The bank entities have been occasionally successful in blocking or recovering some or all of the wired funds. Additionally, the attorney should contact both the local police and the FBI and follow any reporting requirements and suggestions required. Attorneys can submit all relevant info to the Internet Crime Complaint Center (IC3).^vi While coverage is not a given, attorneys should report all claims or potential claims to their insurance carriers who issued insurance policies that may provide coverage.

D. Avoiding and managing the risk of wire fraud scams^vii

i. Be skeptical
First, attorneys need to be on the lookout for wire fraud scams and exercise a healthy dose of skepticism whenever money is being wired to complete a transaction of any kind. Wire fraud scams utilizing emails can involve anyone in a transaction, from someone the attorney has known professionally for 40 years to someone they have only known for a short time through one transaction. The nature of email practice can shield the true identity of the individual much more easily than through a transaction involving the exchanging of information via the telephone or in person.

ii. Employ second-factor authentication via telephone calls prior to wiring funds
Before any money is ever wired out of the law firm for a transaction, an attorney can uncover most potential fraud scams by merely calling the person who is purportedly sending the email. Attorneys should always use the previous contact info they have for the person rather than contact info contained in the potentially fraudulent email. Attorneys can also call someone else at the company. The main point is to take action outside of the potentially hacked email chain.

iii. Be wary of last minute changes in business practices
Be wary when a party in a transaction suddenly changes their normal procedures. This could include wiring money to a different account, using a personal instead of a work email address, or contacting a different person at the company. All of these could be red flags to a potential scam. The best method to be careful is to use second-factor authentication described above to confirm the proposed change.

iv. Utilize email security measures
Attorneys can minimize their risk by using simple email security measures. First, to the extent possible, attorneys should use digital signatures or other encrypted email tools. Do not open spam email (unsolicited) or click on any links or open attachments in spam email. Delete spam email immediately.

For business purposes, attorneys should avoid the use of free, web-based email programs such as Gmail and/or Yahoo. It is safer to establish a company website domain and use it to establish company email accounts. To the extent financially possible, attorneys and firms should purchase near-identical spellings and versions of the firm domain name to prevent fraudsters from using those similar domain names to further their fraud scams (e.g., purchase lawfirm.com as well as lawfirm.org, lawfirms.com, lawfirms.org, etc.)

Attorneys should not use the "Reply" option to respond to any business emails. It is better to use the "Forward" option and either type in the correct email-address manually or select it from the attorney's previously stored contact info for the recipient. This technique ensures that the correct email address is used although it may not frustrate a fraudster who has taken over a recipient's email account.

v. Use computer security experts
Attorneys should consult with computer safety and information technology experts and make sure that their firm is up to date on all virus and hacking protection software.

vi. Train all employees including firm administrators
Attorneys need to train all employees at the firm, including firm administrators, paralegals, and assistants on the potential for fraud scams and discuss the risk management techniques available to best manage the risk. Require all employees to utilize second-factor authentication.

vii. Other risk management techniques
Fraud scams perpetrated on attorneys are constantly evolving and changing. Be ready for a potential fraud to reveal itself in a different scenario or format than discussed in this article. Stay aware of current Internet scams.

E. Conduct coverage check

Last, insurance coverage for such wire fraud scams is not a given under a variety of potential insurance policies and endorsements, including but not limited to, professional liability, general liability, fidelity, privacy breach, directors & officers, employment practices and cyber policies. There may also be partially uncovered or excluded claims and/or damages even if there is coverage for other aspects of the fraud scheme. Attorneys should discuss their coverage for these types of scenarios carefully with their agents as to what their policies may cover or exclude.

F. Conclusion

By making themselves aware of potential scams in any scenario where funds are being wired, attorneys can go a long way to avoid becoming the victim of a costly and professionally troublesome fraud scheme.

i. 2016 Internet Crime Report
ii. Note there have been earlier versions of the wire fraud scam affecting lawyers since at least 2006 typically involving hard copies of cashier's checks that take advantage of an attorney's lack of knowledge with UCC Codes and bank regulations involving when funds are available and when a check has been fully cleared.
iii. Dietrich-Williams, Ayn, "'Man-in-the-E-Mail' Fraud Could Victimize Area Businesses," FBI Seattle, December 2, 2013.
iv. Scammers can also change the name in the email address without changing the domain name (e.g. j0hn@attorney.com (changing letter "o" to numeral "0" instead of john@attorney.com.
v. See infra note ii.
vi. See infra note iii.
vii. Ibid.

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This material is provided for informational purposes only and does not provide any coverage or guarantee loss prevention. The examples in this material are provided as hypothetical and for illustration purposes only. The Hanover Insurance Company and its affiliates and subsidiaries (“The Hanover”) specifically disclaim any warranty or representation that acceptance of any recommendations contained herein will make any premises, or operation safe or in compliance with any law or regulation.  By providing this information to you, The Hanover does not assume (and specifically disclaims) any duty, undertaking or responsibility to you.  The decision to accept or implement any recommendation(s) or advice contained in this material must be made by you.

May 2018 LC 2015-399