RISK MANAGEMENT STRATEGIES FOR HIRING DOMESTIC WORKERS

More and more homeowners in the United States now employ domestic workers, either on a full-time or part-time basis. In fact, the U.S. Census Bureau estimates that there are at least 1.5 million domestic workers across the country. The services these domestics render are great, but so are the risks for the employer. The following are some ways for you to mitigate the risks of employing domestic workers and for ensuring that these workers have the proper protection as well.

• If hiring a domestic worker directly, run a background check on potential domestics to see if they (a) are U.S. citizens, (b) have a history of filing lawsuits, (c) have credit problems, or (d) have a criminal record. If using an employment agency, verify the above steps are performed. Prospective domestics with major concerns of these types should not be hired.
• Check with your insurance agent to see if you need to procure workers compensation coverage. Your agent will be familiar with your state laws concerning this issue. Of course, you may choose to voluntarily provide workers compensation coverage, which may be a good idea. As discussed below, even if your homeowners policy covers injuries to your domestic employee, the policy limit could be grossly inadequate in the event of serious injury, permanent disability, or death.
  The advantage of workers compensation coverage is that it provides broader protection (e.g., disability payments) than your homeowners policy, including unlimited medical expenses in most states. So, even if not required by law, it is a good idea to consider voluntarily providing this important coverage.
• If an outside firm or agency is used to hire your domestic, verify the worker has workers compensation coverage. Obtain a certificate of insurance from the employment agency on an annual basis showing this coverage.
• Prepare a well-organized and documented human resource file for every domestic employee. In addition, you should have an employment application as well as an employment manual or handbook. This manual will reduce the chances of an employment-related lawsuit because it can include protective provisions detailing your opposition to any employee mistreatment. An employee manual written or revised by an experienced attorney is an even more effective risk control recommendation.
• If there are multiple domestic workers, an employment practices liability (EPL) policy may be needed. This coverage can protect you from a wide variety of lawsuits, including allegations of discrimination, wrongful termination, harassment, and slander. A personal injury endorsement under your homeowners policy is also recommended.
• Discuss with your insurance agent the possibility of increasing the personal liability and medical payments limits under your homeowners policy to the highest available limits, particularly if workers compensation benefits are not required or purchased. A personal umbrella policy is also recommended.
• Consider some type of fidelity bond for these employees, particularly for new employees. This bond will protect you if the domestic worker commits a dishonest act in your employment (e.g., theft of jewelry). If an employment agency or service provides these employees, verify that the employment agency has purchased fidelity bonds on them and ask for a copy of the bond certification form.
• Make sure that your employment practices comply with federal requirements, such as the withholding of payroll taxes and proof of citizenship.

PURCHASE SPECIAL INSURANCE FOR YOUR HOME-BASED BUSINESS

The United States has experienced a rapid growth in home-based businesses in the last decade. The U.S. Census Bureau reports that there are now more than 11 million home-based businesses in the country, a figure that is expected to rise in the coming years.
But if you run a home business, losses associated with that business may not be covered under your homeowners policy unless special coverage endorsements are added. Some insurers sell an endorsement that covers losses associated with a home-based business. We can quickly find out if such an option is available.
What if you are operating a home-based business without your insurer's knowledge? Suppose you had a small fire that damaged your home office and computer and resulted in some lost income. Once your insurer sends an adjuster who, while investigating your claim, discovers your business, your insurer may deny some or all of the claim because of business-related exclusions and restrictions found in many homeowners policies.
Conversely, if you paid the additional premium to add a home-based business endorsement to your homeowners policy or you bought a businessowners policy (BOP), your loss would likely be covered—even the loss of income. (A BOP is a separate policy form designed to insure the property and liability exposures of small businesses.)
And do not forget about liability. If you have business visitors in your home and they get hurt, many insurers' homeowners policies will not cover those injuries because of the business-related loss exclusion found in the personal liability section of the policy. Again, it is necessary to purchase a special endorsement to the homeowners policy or a separate BOP. Also, if your activities give rise to any type of errors and omissions or professional liability exposures, they are not likely to be covered under either your homeowners policy or a BOP. A separate errors and omissions (E&O) policy will need to be arranged for this loss exposure.
Different insurance companies have different criteria for excluding business-related losses from their policies. If your current insurer cannot respond to your coverage needs, we can present several options to you.
But the important thing to remember is this: if you are running a business out of your home, call us. We will work hard to assure you are properly protected.