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Contractors – Another Liability Exposure

By:  Dan Reith  BA(Hons) CAIB

        Principal Broker

        Reith & Associates Insurance and Financial Services Limited

As a contractor, you work hard to create a quality product and satisfy customer expectations while building a profitable business. However, no matter how careful you and your employees are during the course of business, mistakes can happen it’s a fact.  In today’s business environment, small disputes with customers over projects can quickly escalate into costly legal disputes.

Almost every contractor carries some form of general liability coverage. While these policies provide much-needed protection for bodily injury and property damage claims that occur as the result of a contractor’s work, they typically don’t account for all forms of negligence.

That’s where errors and omissions (E&O) insurance designed for contractors comes into play. Below, we provide a brief overview of E&O insurance and why it is a critical component to a contractor’s overall risk management program.

Why E&O?

Simply put, general liability policies are not adequate to protect against E&O claims, necessitating additional coverage. In fact, most general liability policies exclude claims related your work, your products and impaired property, creating significant insurance gaps.

Making E&O insurance even more crucial, contractors are particularly vulnerable to claims of negligence following unintentional damage to an insured party, impairment of property, damage to products or similar incidents that can occur without warning during a project. Even simple complaints have the potential to escalate into costly legal disputes.

What’s more, courts often rule against contractors in claims related to errors and omissions and, without the proper protection, general contractors would have to cover the damages out of pocket.

E&O policies can help contractors close gaps in their insurance coverages, providing coverage for claims related to the following:

  • Failing to complete projects according to specifications
  • Negligence in providing professional services
  • Poor, incorrect or incomplete work
  • Errors and oversights

Strong E&O policies can protect you and your business following a claim, helping you cover expenses related to court costs, lawyer fees and settlements. It should be noted that E&O insurance may not extend to your subcontractors, and you should encourage them to secure their own policies.

Sample Claim

To further understand the benefits of E&O insurance consider the following example. A window and doors contractor was hired by a developer to install all of the windows on a new apartment complex. While most of the work was completed to specification, the contractor incorrectly measured some of the windows. Accordingly, the windows in many of the units did not lock properly. The windows in these units had to be removed and reinstalled.

With E&O coverage, the contractor would not have to pay for those expenses out of pocket. What’s more, had the client sued the contractor over this work, the contractor’s E&O insurance would have covered awarded damages and defense costs within the limit of the policy.

Securing the Policy That’s Right for You

As a contractor, there are a variety of insurance products to consider. To ensure you are accounting for all of your unique risks—and to secure a policy that is tailored to meet your specific business needs—it’s important to work with a qualified insurance broker.

Contact Reith & Associates Insurance and Financial Services Limited today to learn more.

Nikki Johnson No Comments

Contractors & Pollution Liability – The Risk Is Real

By:  Dan Reith  BA(Hons) CAIB

        Principal Broker

        Reith & Associates Insurance and Financial Services Limited

Contractors, no matter what industry they work in, face environmental risks stemming from operations on a daily basis. For most contractors, a single pollution incident or loss can seriously damage their operations, balance sheet and even reputation. Making matters worse, pollution incidents can be sudden or occur gradually over time. The reality, however, is most contractors do not appreciate the reality of the risk and chose not to protect themselves or their customers.

While many contractors assume that environmental claims will be covered under their commercial general liability (CGL) policy, the unfortunate reality is the most CGLs contain pollution exclusions that leave contractors uninsured in the event of a pollution incident.

The solution: contractors pollution liability (CPL) insurance to ensure they have the right coverage in place to remain secure and profitable.

CPL Coverage Basics

CPL policies provide contractor-based insurance for third-party coverage for bodily injury, property damage, defence, and cleanup as a result of sudden and gradual pollution incidents arising from contracting operations performed by or on behalf of the contractor. CPL insurance is intended to provide coverage to all types of contracting operations, including contractors who are involved in building construction and environmental firms that remediate polluted sites.

CPL policies are offered on either a claims-made or occurrence basis. What’s more, CPL policies are non-standard, meaning each policy is different and can be modified to cover the various needs of the contractor purchasing the policy. Policies can be offered on a project or blanket program basis.

In some instances, CPL policies can also be used to cover losses from civil fines, penalties and punitive damages.

Covered Pollution Incidents

Contractors should keep in mind that CPL insurance policies differ in regard to the types of pollution incidents that are covered. Two important considerations when evaluating CPL insurance policies are:

  • Whether or not the policy will respond to gradual releases of pollutants, as opposed to sudden and accidental releases; and
  • The types of substances that are considered “pollutants” under the terms of the policy.

Generally, policies that cover both gradual and sudden releases of pollutants provide contractors with a broader scope of coverage. In addition, policies that provide a broad definition of pollutants are considered superior to those that contain a narrow definition. Accordingly, it is important that contractors work with their broker to find a CPL policy that is tailored to their needs.

CGL Pollution Exclusions

A primary reason why contractors obtain a CPL policy is due to the various pollution exclusions contained in most CGL policies. The pollution exclusions found in most CGL policies take one of two forms, either “absolute” or “total.”

CGL policies with an absolute pollution exclusion remove coverage for most pollution events that would occur in the course of an insured’s business operations. However, despite its name, an absolute pollution exclusion may preserve coverage for certain incidental pollution damages, products and completed operations liability, and certain off-premises work.

However, more commonly, CGL policies include a more restrictive “total pollution exclusion.” This type of exclusion effectively removes coverage for any event the insurer characterizes as a pollution incident.

Contractual Requirements

Contractual requirements serve as another motivating factor that lead many contractors to obtain a CPL policy. In many instances, project owners and general contractors will require contractors to obtain pollution insurance that meets certain, predetermined standards. From this perspective, having a CPL insurance policy in place can serve as an upfront sales tool during the bidding process that enables contractors to qualify for opportunities when such coverage is required.

Finding the Right Policy

Regardless of specialty, all contractors should be mindful of the pollution risks associated with their work. A CPL insurance policy can provide much-needed security in the event of a pollution incident, even in the most unlikely of circumstances.

CPL insurance is not only good for business, but it also provides peace of mind in industries that are full of surprises and risks. Reith & Associates is available to work with your organization to find the CPL coverage that is right for you.

Nikki Johnson No Comments

Social Media Security

By:  Dan Reith  BA(Hons) CAIB

        Principal Broker

        Reith & Associates Insurance and Financial Services Limited

While social media can help organizations engage with customers and expand their reach, using it comes with potential risks. These risks can range from minor damages to your brand image to major cyber attacks that target sensitive information, resulting in costly recovery and lawsuits. The following are some of the biggest risks associated with using social media as well as tips to avoid them.

EMPLOYEES

One of the biggest risks to any organization’s social media security is its employees themselves. User error, a lack of education and carelessness can all become incredibly costly when dealing with social media.

As such, it’s important to invest time in developing a social media policy that clearly outlines the purpose, procedures and expectations of appropriate social media use. Additionally, employees need to be educated on the importance of this policy, as well as the threats that social media poses and how to identify them. Regulate the number of people with access to official social media accounts to only those who are educated, trusted and absolutely necessary for daily operations.

SCAMS AND PHISHING ATTACKS

Like with any other form of internet use, scams and phishing attacks are a constant risk when dealing with social media. Malicious links disguised as news reports, videos or familiar social media accounts could be used to trick users into sharing secure information.

Be wary of any links that appear suspicious, and never disseminate secure information in a way other than it is intended to be shared by policy. Knowing how to identify suspicious links or web pages can be the difference between an incredibly costly mistake and a near miss. For example, shortened URLs found on Twitter may link to webpages built to look identical to familiar websites, and third-party applications may be designed to reveal the user’s private information to a third party.

UNSECURED MOBILE DEVICES

Most social network access is through mobile devices, and, while some organizations may issue company-owned devices for this purpose, the organization’s social media accounts are most often accessed by the employees’ devices themselves. The fact that these devices travel everywhere with the employees makes them especially vulnerable to potentially unwanted or inappropriate access.

All mobile devices with social media access should be locked with a password when not in use. Doing so can protect private information from falling into the wrong hands in the event that an employee with social media access loses their device.

INATTENTIVE USE

Not paying attention to an organization’s social media accounts may seem harmless at first, or even preferable compared to engaging in use that might seem risky. However, being inattentive to social media can bring its own risks. For example, a social media account that becomes hacked could start spreading harmful fraudulent messages or viruses, causing much more harm if it is not caught immediately.

Keep a close eye on all social media accounts—even if you only created them to reserve your brand’s handle and don’t intend to use them in the near future—and be ready to act if one of them becomes compromised.

MALWARE ATTACKS AND HACKING

Even when exercising proper social media security tactics, there is always the possibility that your accounts will become compromised through sophisticated malware attacks and hacking. After all, unlike your organization and employees, hackers are not limited to the five-day workweek to carry out their plans and could strike at any time.

Invest in security technology to watch your social media accounts 24 hours a day, and have a person in charge who will be able to receive alerts and respond to them as soon as a problem is detected.

Contact Reith & Associates Insurance and Financial Services Limited today at 519-631-3862 to learn more about social media security.

Nikki Johnson No Comments

Cyber Risks & Liabilities

By:  Dan Reith  BA(Hons) CAIB
       Principal Broker
       Reith & Associates Insurance and Financial Services Limited

Do You Have Adequate Cyber Insurance?

Given the number of variables, picking a cyber insurance policy can be a difficult task. Furthermore, while an organization may think it is protected by its current policy, new developments in cyber security and ventures by the organization itself may make those policies inadequate. Worst still, most, over 80% of Canadian small-medium enterprises fail to carry cyber insurance. Consider the following when creating or reviewing your existing cyber insurance plan.

Assess Your Unique Cyber Risks

Such as with any other liability policy, it’s important to understand the specifics of your cyber risks before picking a cyber liability policy. There is no one-size-fits-all, so asses your business needs to understand the best cyber insurance for you.

The following factors are some examples of what defines your organization’s distinct cyber risks:

  • The type of data your organization stores
  • How and what type of data is shared with business partners
  • Types of communication systems used and their level of security

Know What Policies Are Available and What They Cover

Cyber insurance policies may vary significantly due to the absence of market standardization. While most policies provide first-party and third-party coverage, the details of what is covered can vary across policies. First-party coverage typically includes data breach response costs and business interruption costs that result from network failures, data breaches or ransomware attacks. Third-party coverage typically includes coverage for the costs associated with responding to regulatory investigations and indemnification for regulatory fines or penalties. Take a close look at the terms and coverage offered in each policy for what most closely aligns with your unique cyber risks.

Know Your Responsibilities

Closely examine your selected plan to know your responsibilities, such as who to notify if there has been a breach. For example, a data breach that has been recently discovered might have, in fact, been compromised for years, requiring a retroactive cyber insurance plan. Understanding these requirements and what needs to be reported can be the difference between being covered and not being covered at all. Work these requirements into your organization’s incident response plan to ensure they are followed.

The Atypical Devices That May Be Vulnerable to Cyber Attacks

Increasingly more non-computing devices, such as equipment sensors, industrial control systems and teleconferencing equipment are being connected to global computer networks. Unfortunately, many of these devices are typically not held up to the same cyber security standards, therefore adding an additional vulnerability through which cyber criminals may be able to gain access to your organization’s valuable data or manipulate critical systems.

The Internet of Things

The internet of things (IoT) refers to the connection of web-enabled devices that are connected to each other in a network to exchange information. While this provides many benefits, such as reducing the need to input the same data into multiple systems and gathering data from different sources to be analyzed and used in a centralized location, there are risks associated with it.

For example, if a single device is compromised in a cyber attack, the data from all connected devices and even the devices themselves could be compromised. As such, all it takes for an outsider to gain access to sensitive information is to identify the device with the weakest cyber security that also has access to the network.

Securing IoT Devices

When looking to purchase and connect new devices to the IoT, ensure that there are plans and policies in place to minimize the chances of a cyber threat against those devices. Conduct a sweep of your organization to identify electronic devices and determine if each one is connected to a network that could be exposed to a cyber event, as well as what kind of data those devices are sending and receiving. Keep in mind that even seemingly mundane systems or devices such as heating, ventilation and air conditioning units could be running basic computer operating systems with the potential to connect to the internet. Track these devices by creating an asset map that lists the connected devices.

From here, you can start planning how to secure the devices that pose the largest threat of cyber exposure. Segment the network so that not every device provides access to the entire system, check for security updates or patches where possible and reach out to the device’s manufacturer for information if necessary. Restrict personal IoT devices to a separate network (like a guest Wi-Fi), update all default passwords on connected devices, use two-factor authentication and ensure that data generated by IoT devices is encrypted.

When looing for a provider of cyber insurance, don’t settle for just any provider.  Interview them, and ensure their knowledge of the product and of your unique exposure is sufficient to ensure you the protection your business requires.

Nikki Johnson No Comments

Crime Prevention Tips During COVID-19 Shutdown – Making your business less of a target

If it isn’t bad enough, that the Covid-19 pandemic has caused many small businesses to close their doors, our local police services report of a significant spike in calls for break and enters, property theft and vandalism to business properties. 
If your business has been forced to close, here are some key crime prevention steps you can take to be less of a target:

  • Remove all valuables from storefront displays to reduce smash-and-grab thefts
  • Remove all valuables such as cash from the till and leave it open. Place the empty cash tray in plain view on the counter to signal there’s no money in the till
  • Remove signage from front windows so police can see the inside unobstructed during patrols
  • Remove any items of value away from window displays, place in the back of the store so they are not visible 
  • Consider installing an alarm monitoring system. If you already have one, ensure the contact list is up-to-date, responders are aware of their duties and process should they get a call, and it is activated when the building is not occupied
  • Consider installing a surveillance camera system that can be monitored online by owner/management
  • Clearly post signage on the door/window to indicate that the premises are monitored by an alarm company; that no money is kept on the premises and contact information for police and the business owner in case a member of the public sees damage to the property or suspicious activity
  • If the premises are closed for an extended period of time clean all glass surfaces and create a tracking log of when cleaning was completed. This may help investigators with suspect fingerprints in the event of a break-in
  • Consider applying a laminate on all windows and glass doors to prevent the glass from being broken from blunt force thereby preventing entry during attempted break-in
  • Install latch guards on doors to protect against prying including on secondary doors such as employee and loading entrances
  • Keep some lighting on inside for surveillance opportunities during the evening
  • Ensure all doors are properly secured and regularly check all exterior lighting is functioning
  • Remove material around the exterior of the property that may be used to gain entry
  • Check on your business daily, both in and out, at different times each day and report any suspicious activity to your local police as soon as possible 
  • Prevent and reduce the opportunity for crime to occur.  Be a good business neighbour, when checking on your property, check on neighbours’ property too
  • For more info http://www.stps.on.ca/crime-prevention-tips-for-business-owners/

Taking these steps will make your business less of a target and will ensure you meet the requirements of your insurance policy.  Our team is available to assist with any questions or concerns you may have about your coverage during a shut-down. We welcome your call or email inquiry. Stay safe, stay healthy.

Nikki Johnson No Comments

Your Insurance and the Covid-19 Pandemic

By:  Dan Reith BA(Hons) CAIB
President/Principal Broker
Reith & Associates Insurance and Financial Services Limited

We are in the midst of an unprecedented situation in Canada and around the world.  COVID-19 is impacting all segments of our economy creating challenges never, before experienced.  Let us help you better understand the reality of your insurance and the Covid-19 pandemic.

Personal Insurance

There is no coverage under any personal insurance, home, auto or critical illness, that provides protection or indemnification against any financial loss as a result of a viral pandemic–Covid-19. 

Business Insurance

There is no coverage, under the standard commercial property policy, for any loss or cessation of business income as a result of a temporary business shutdown and/or closure caused by a viral pandemic. Simply because a viral pandemic is not an insured peril.  A property and liability policy insures the physical premises and therefore the insured peril must damage the premise preventing the business from operating. Pandemics do not negatively impact the premise.  It is important to understand that:

  1. Not all standard commercial insurance policies carry business interruption or income replacement.
  2. Policies that do carry business interruption, have a standard language in the contract that requires a “trigger” being an insured peril to cause damage to the premises of the business and/or a contributing or recipient property, in order to render the premises unusable and therefore the business unable to generate revenue.  This causes the policy to respond and the quantifiable loss is insured and replaced in accordance with the settlement option of the policy.  In the case of a viral pandemic, Covid-19, there is no damage to the business premise, by an insured peril, therefore, there is no physical reason for the business to cease operations or stop generating revenue and therefore, the coverage is not triggered.
  3. Where a policy contains business interruption, it typically carries an extension that provides for cases where a business is shut down by what is termed “civil authority”—an order, by a government body, not to access a property.  Again, however, the trigger is a physical loss to the premise and/or adjoining or neighbouring premise by an insured peril. In the case of Covid-19, the government order to close one’s business is effectively an arbitrary decision based on public health policy, not the cause of a real physical loss or damage to the business premises making it unsafe to access or occupy. Thus, the civil authority extension does not apply.

There are certain exceptions, to the norm, where certain industries can purchase secondary pandemic coverage; but this is restricted to niche industry classes such as healthcare and food processing because in these limited classes the loss can be isolated and quantified.  In the broad sense, as we are encountering today, such business interruption losses are not isolated, limited or controllable with reasonable certainty; therefore, not quantifiable.

Here are some common Q & A’s we have been fielding:

I pay my premiums monthly, what happens if I don’t have the money to pay my premium.

If your income, business and/or personal, is compromised in any way, and there is a likelihood you will not be able to make your premium payment call us immediately!  Generally speaking; most insurers are waiving NSF charges and not cancelling policies for non-payment in the first month.  Beyond that, insurers are willing to review and negotiate on a case by case basis.  Be proactive we are here to a find a solution that works best for you. Note, that while your insurer may be waiving NSF fees, that does not mean your bank is.  That is a conversation you need to have with your bank. 

What happens to my coverage if my business is shut down?

There is no change in coverage during the government mandated shut down.  That said, you must continue to maintain any warranty’s and or requirements your policy may have, i.e. alarms activated when building not occupied, heating on during heating season, building attended at least once every 72 hours.  Contact us so we can review your specific requirements to ensure compliance, we don’t want any surprises should you have a claim during this period of uncertainty.

Can I reduce coverage during shutdown?

Ultimately, you can make a change to coverage at any time.  In practical terms, any changes made need reflect the actual circumstances of your operational changes during the pandemic.  It is best to speak directly with your insurance provider to review operations to best determine what is right for you.

I/we are not working, currently laid off, what can we do to reduce our insurance costs?

That depends on your personal circumstances, needs and expectations in the event of a loss.  Call us, we will review your current coverage and find a solution to bring down your premium as best we can without placing you in jeopardy.  Note, changing insurance companies for a lower premium will STILL cause an early policy cancellation penalty if we make the change before renewal.  Insurance companies, at present, are not waiving early cancellation penalties, rather working with policyholders to make premium payment manageable.    

 I am laid off, I can get a job doing food delivery, am I insured?

No, if your current policy provides coverage for you to drive to and from work you are NOT insured to be a delivery service.  If you do this, call our office, to learn what the additional premium cost will be, it may not make sense.  If you do not, and you are in an accident while in the course of delivering food and/or other goods your insurer can deny the claim, both the repair/replacement of your car and/or liability if you are sued for injury to a third party.*

*some statutory coverage may apply speak to your broker for full details.   

To assist our customers and to keep our business going, we are now offering delivery service.  Are we insured?

Offering delivery is a great way to respond to customer demand; for some a great business decision, however, if you are using vehicles NOT insured as delivery vehicles, then there may not be coverage if a claim is filed as a result of a loss from delivering goods to a customer.  If your employees are using their personal vehicles to deliver to customers there is NO coverage for them unless their vehicle is rated, and a premium is paid for delivery purpose.  Speak to us before you make this operational change and/or offer a new delivery service to your customers; and do not require your employees to use their personal vehicles.  Reduce your liability exposure, partner with a professional delivery service instead.          

Will insurance companies honour claims during this period?

All insurers claim departments remain ready to respond.  Their claims representatives will be working in accordance with current protocols for personal and community safety and that may mean a delay in the settlement process, but it is business at usual at the present time.

We trust this information will assist to help you work through the current pandemic.  If you have any questions, or concerns about coverage during this uncertain period, we are here for you, we want to provide the right solutions for where you are today.  Let’s work through this together.  That is what we are here for. 

We look forward to hearing from you.