KEEP YOUR DIRECTORS & OFFICERS COVERED

A recent increase in corporate bankruptcies has brought a new awareness to the quality of Directors & Officers (D&O) Insurance coverage.  D&O insurance was created to provide coverage for individual directors and officers to help companies attract and retain talented board members.  However, over time it has evolved to include coverage for the entity itself.  D&O coverage is now purchased by non-profit and for-profit corporations alike and typically provides three basic types of coverage:

• Side A -   This coverage provides protection for board members and executives where the underlying claim is non-indemnifiable.
• Side B - Provides coverage for the company as it indemnifies named directors and officers.
• Side C - Grants coverage for the company for claims brought directly against it, such as securities law claims.

Unfortunately, many D&O policies do not provide separate limits of coverage for the different sides, so all claims are paid from the same limit.  Who does this leave without coverage, all too frequently, it is the actual directors and officers on the board of directors who are left over once the limits of coverage have been exhausted.

How can this be prevented? Among other solutions, always make sure that Side A coverage has its own separate limit.  This way, once the entity has exhausted its own limits, Side B and/or Side C,  it cannot reach across and take the limits from the directors and officers.  Another plus is that the the deductible or retention can usually be much lower on Side A coverage too!

For a great article on how bankruptcies can hijack your D&O coverage and other ways to protect yourself, check out this article from American Agent & Broker magazine.  http://bit.ly/acj5T1

DON'T MIX ALCOHOL AND DRIVING, "WELL DUH!"

When I think of the risks of drinking and driving, the thought, "Well duh!" goes through my head.  Everyone knows how stupid it is to mix alcohol and car keys.  Unfortunately, some still haven't got the message, so if you are one of them, here is a "Well Duh!" message for you!

A National Highway Traffic Safety Administration study indicates that nearly 12,000 people died in automobile crashes involving alcohol consumption in the United States in 2008. This tragic statistic represents an average of one alcohol-related auto accident death every 45 minutes. Tougher DWI laws are one answer to reduce these losses. Educating drivers on alcohol awareness is another important step. The following educational tips about drinking and driving are important to remember and to pass on to young drivers.

• Never drink and drive. Be aware that neither coffee, exercise, nor a cold shower will sober up a drinker. Only the passage of time will do so. If a person does drink, a nondrinking driver should be designated.
• Apply a zero-tolerance policy to alcohol and young drivers. Young drivers are particularly at risk to be involved in alcohol-related crashes.
• Steer clear of impaired persons on the road and report these incidents to the police as soon as safely possible. Drivers under the influence of alcohol display certain driving characteristics, such as weaving or swerving, driving very slow or very fast, braking erratically, and driving after dark without headlights.
• Wear a seat belt and utilize defensive driving techniques, as these are the best defenses against an alcohol-impaired driver.
• Try to avoid driving in the early morning hours of the day, particularly on weekends due to a heightened exposure to impaired drivers. 

TAKE ACTIVE STEPS TO REDUCE YOUR WATER DAMAGE LOSSES

Living in Northern Idaho, flash flooding never crossed my mind.  ...not until January 2010.  We had endured many days of sub zero temperatures followed by heavy snowfall.  A sudden warm front moved through, bringing with it heavy rains.  The combination of warm air and rain turned all the snow to water, water that couldn't seep into the still-frozen ground!  I worked till late into the night helping my friends sandbag to protect their properties.  This picture was shot the next day after much of the water had receded and is a great example of the wicking properties of T-111 siding.  As far as I know, this was the only home to sustain significant damage. 

Water damage from naturally occurring floods and mechanical breakdowns cause extensive and catastrophic losses to homes every year. But there are numerous ways you can safeguard your home from these losses, including the following.

• Your home's drainage system should be checked to verify that proper water drainage occurs. For example, gutter downspouts should extend the proper distance from the foundation.
• Your yard should be properly graded to slope away from your home to allow surface water to adequately drain. French drains can also assist in this process.
• A sump pump system should be considered in your basement to keep unwanted water out of this vulnerable part of your home.
• Periodically check your washing machine hoses since these hose failures cause millions of dollars of water losses each year. Hoses should be replaced at the first sign of wear. Consider upgrading to the heavy-duty wire mesh hoses or stainless steel hoses during this replacement.
• Ascertain the location of your main water shutoff valve. Water shut-off valves should be installed on water lines under toilets and sinks and water lines leading to outside faucets.

Get more personal lines insurance and risk management tips and ideas from IRMI.

PROPERTY INSURANCE AND THE BLACK HOLE OF HYPERINFLATION

Image by The Lakelander via Flickr

Listening to the experts, it sounds like most financial analysts agree that when the economy does begin to recover, inflation will probably be significantly higher than what we’ve seen in the past.  This hyperinflation can have a tremendous impact on insurance claims.  In the event of a property loss, depending on how the policy is written, if a property is significantly underinsured, the insured party will not receive replacement cost value, rather the depreciated value of the property minus the underinsured portion.  This could result in people only receiving pennies on the dollar at the time of loss.

Although you can schedule an annual increase in property insurance coverage (I see most at 4%), this solution is inadequate for periods of exponential inflation.  So what can you do?  Write letters to you insurance carriers suggesting that they develop a solution.  

Although there is currently no great solution, I thought this worth mentioning so that you can draw upon it if the future brings a period of hyperinflation.

$$$ WHERE DO HEALTH CARE DOLLARS GO? $$$

I attended a luncheon last week with a fantastic guest speaker, Scott Kreiling, President of Regence Blue Shield of Idaho.  He shared some fantastic information regarding healthcare costs.  I will try to disseminate it here and share some links to their web site where additional information can be obtained.

...and here is another chart from their website:

Although this information is interesting, it gets even better.  The folks at Regence have established an education plan to help us realize where the real cost of insurance comes from, http://www.whatstherealcost.org/ and they share steps that we can take to personally reduce the overall cost of health insurance.  www.regence.com/industry/what-drives-up-health-care-costs.jsp#

Regence also provides a website for their customers to help them set healthy goals and accomplish them.  www.MyRegence.com

Purchase Proper Watercraft Coverage for Your New Boat

Spring is often the time of year when boat lovers start to consider purchasing a sailboat or powerboat. Many people, however, are unaware of the significant loss exposures associated with boat ownership, and some people mistakenly believe that there is coverage available under their personal auto policy (PAP). Virtually all PAPs, though, do not provide any liability or physical damage coverage for boats. Other people may look to their homeowners policy for coverage. But most homeowners policies only cover losses arising from certain low-valued or low-powered boats. You should thus contact us before buying a boat to discuss the proper insurance protection for it. Consider the following tips to assist you in this process.

• If you purchase a boat valued over $1,500, you probably lack proper coverage under your homeowners policy for physical damage losses to the boat itself. A separate watercraft or boatowners policy is necessary to cover the physical damage to boats over this value. 
• If you are considering the purchase of a sailboat, inquire about its length. If the length is 26 feet or more, there is no liability coverage under your homeowners policy. For motorboats, there are severe horsepower restrictions under the homeowners policy for liability coverage. For example, only insureds who own or lease boats with outboard motors of 25 horsepower or less have liability coverage under most homeowners policies. Yet most powerboats have motors with horsepower far exceeding this amount. This liability coverage restriction also necessitates the purchase of separate watercraft insurance. 
• Ask us about the types of boats you are considering. Some insurance companies, for example, decline to insure personal watercraft such as jet skis and wave runners, since some of these crafts can reach speeds of 60 mph. According to the U.S. Coast Guard, personal watercraft account for a disproportionately high number of accidents. Many insurance companies also refuse to cover houseboats, homemade or kit boats, competition bass boats, and speedboats. You may have to pay a steep premium through a specialty insurance company to insure these types of craft. 
• Be wary of purchasing older watercraft. Many insurance companies reject boats over 15 or 20 years of age because they experience a higher loss frequency than newer boats. You may have trouble finding insurance coverage for older boats or end up paying an extremely high premium. 
• If you do purchase an older boat, consider ordering a marine survey or inspection of it prior to the sale. Marine surveys point out deficiencies in watercraft that may cause you to reconsider the purchase or renegotiate its price. 
• If you don't already have one, procure a personal umbrella policy in addition to a watercraft policy, particularly if you purchase a speedboat, a boat designed for water skiing, or some other craft with a higher potential to cause damage or loss of life. Umbrella policies are relatively inexpensive, and since most forms do not have limitations with respect to watercraft, they will provide excess limits above the liability coverage in the watercraft policy. In addition, the watercraft liability limits should meet the underlying limits requirements of any applicable personal umbrella policy. Lastly, you should use the same insurance company that writes your homeowners and personal auto policies for your personal umbrella policy. 

DECREASING HOME VALUES - I CAN INSURE MY HOME FOR LESS, RIGHT? -WRONG!

Image via Wikipedia

Economies are always changing and home values fluctuate with them.  During the past couple of years, many homes have decreased in value.  Looking for the bright side, I am now asked by optimists if they can insure their homes for less.  After all, this makes sense, right?

No way!

Remember that most home insurance pays for your home to be rebuilt just as it was.  While home values have been decreasing, the cost of construction has continued to rise.  (Could this be due to continued low interest rates?)

The key thing to remember here is: Your limit of property insurance should be based on the cost to replace it, not the current resale value.

To read a great article on this topic, click  here.