Business Briefs

• There is good news on the effort to reduce car theft. The new “Hot Wheels” report from the National Insurance Crime Bureau shows that in 2007 car theft was down 8.9 percent. That’s the fourth year of declining auto theft rates. Older cars remain the top targets for thieves with the 1995 Honda Civic and 1991 Honda Accord again topping the list of most stolen vehicles. The report says that cars from the mid-90s are popular among thieves because their parts are in high demand. “The continuing national decrease in vehicle theft is a positive sign that the fight against vehicle theft by law enforcement, the insurance industry and the NICB continues to be effective,” said Robert M. Bryant, NICB’s president.
• A recent decision by the California Supreme Court [S147190, Edwards v. Andersen] limits the ability of businesses to prohibit an employee from going to work for a competitor or contact former clients after leaving their job. The unanimous ruling held that so-called “non-compete” agreements are void except in some narrowly defined circumstances. “[A]n employer cannot by contract restrain a former employee from engaging in his or her profession, trade, or business unless the agreement falls within one of the exceptions to the rule,” the ruling reads [California Business and Professions Code section 16600]. In the same decision, the California Supreme Court reaffirmed the non-waiverable right of the employee to secure indemnity from the employer for liability incurred in the course of employment [California Labor Code section 2802.] The ruling has no affect on businesses outside of the state, but any company that uses such agreements in California probably should get legal advice on what their options might be.
• If you’re willing to let your auto insurance company monitor your car, there are new programs that could save you money. One insurer is offering to install a wireless device in customers’ cars to monitor their driving habits. Drivers who can refrain from putting the pedal to the metal, drive during off hours or don’t drive often can get discounts on their premiums. But lead foots can also see premium increases if they get caught driving dangerously. Progressive now offers the program in just a handful of states, but as the monitors become less expensive other companies are sure to begin offering similar services.
• The hurricane season recently took a more ominous turn as one of the country’s leading storm researchers increased his prediction for the current season. William Gray and his colleagues at Colorado State University are now predicting 17 named storms, including nine hurricanes, this season and “anticipate an above-average probability of United States major hurricane landfall.” The scientists say they increased their prediction for the number of storms because of “a combination of a very active early tropical cyclone season in the deep tropics and more favorable hurricane-enhancing sea surface temperature and sea level pressure patterns in the tropical Atlantic.”
• Workers compensation injury claims are down again in 2007, although the drop is less dramatic than in recent years, according to the National Council on Compensation Insurance’s annual report. Claim frequency was down 2.5 percent in 2007 after dropping by nearly 7 percent in the previous two years. That’s the good news. That bad news is that while claims frequency drop indemnity and medical severities continue to rise. The report also noted that permanent total disability claims have increased significantly over the last three years. The reports findings were relatively consistent across all regions, industries and company sizes.

A review of liability

If you own a privately held company there is a good chance you don’t carry any management liability insurance. The most recent Chubb Private Company Risk Survey shows there is a better than even chance that you don’t have employment practices liability, crime, directors and officers liability and cyber liability insurance. It also shows that many companies might be skimping on this type of coverage because they think they don’t need it. And while many of them might not, the survey suggests that some companies might be wrong.

According to Chubb, two out of three private companies in the United States have experienced some type of event related to management/professional liability in the past five years, including workplace crime, employment practices liability and directors and officers liability.

“Despite a down economy and an increase in risks, private companies may not be purchasing sufficient management liability insurance to help protect their bottom line from a costly liability lawsuit,” said Lisa Jones, vice president of Chubb & Son, and private commercial product manager for Chubb Specialty Insurance. “In addition, companies that are uninsured and experience workplace crimes or an employment practices liability lawsuit, for example, may find that a tight credit market makes it difficult to obtain credit to pay for such a loss or to continue their business operations.”

Here is a quick primer on some types of management and professional liability insurance:

• Directors and officers: This covers lawsuits that may be filed against a company for negligent acts or omissions carried out by directors and officers of the company. D&O coverage comes in many varieties and can be tailored to a particular company’s needs.
• Employment practices liability: This covers businesses against lawsuits and claims brought against a company by an employee. This can include discrimination, wrongful termination and sexual harassment.
• Employee dishonesty insurance: This protects a company against the dishonest conduct of its employees. This can include fraud and theft.
• Cyber liability: The Internet age has brought its own problems to businesses. Simply having a company Web site or conducting business over the Internet can expose a company to liability. Cyber insurance can help provide coverage in this area.

The Chubb report doesn’t indicate that every company needs more liability coverage, but the survey does show that some companies out there should at least look into it. Talk to your insurance provider if you have any questions about potential liabilities.

Why some buildings avoid disaster

You’ve probably seen the pictures: one building burned to the ground, little remaining except a foundation and a pile of debris, right next to another that has nary a scorch mark. They both endured the ravages of a wildfire but only one of them survived. The obvious question is, why? An examination of a devastating fire from late last year provides some insight as to why some buildings and neighborhoods survive and others are reduced to ashes.

The Witch Creek Fire caused about $1 billion in damage last October in San Diego County and is the subject of a study by the Institute for Business & Home Safety. The institute looked at 3,000 buildings to find out why some of them survived and some did not, despite facing nearly identical fire conditions. Some of the conclusions confirm long-used methods of protecting buildings, while others point to new ways of combating fire losses. Some of the major findings include:

• Homes situated less than 15 fee apart are at high risk: Many buildings that were this close together burned in clusters.
• Wind-blown embers caused the most damage: There were few, if any, reports of homes burned as a result of direct contact with flames.
• None of the homes in communities built using "Shelter-in-Place" standards burned: These were neighborhoods that were built with fire safety in mind. They keep vegetation around buildings and the community itself to a minimum. They were built with adequate roads and water for firefighters. And they also have enhanced building requirements.

These findings point to the importance of three things:

• Have a fire-resistant roof: “Without a fire-resistant roof, other approaches toward mitigation will fall short,” the report says. The number of buildings that caught fire from wind-blown embers only drives home this point further.
• Create a defensible space: This is something that most home and business owners are tired of hearing, but it is extremely important. Two homes built to “Shelter-in-Place” standards almost burned down because wood was left leaning against the houses. It doesn’t take much flammable material nearby to cause disaster.
• Work with your neighbors: The fact that so many buildings burned in clusters shows that doing everything right might not be enough if your neighbors have an old roof and a yard full of dry timber. Community-wide efforts to prevent fire damage are the most effective. That means maintaining properties and might also mean tightening fire codes.

The massive blazes that ripped through California this summer are a stark reminder of the danger wildfires pose to homes and businesses. The dozens of fires caused billions of dollars in damage and are a growing concern, especially in the west where dry winters and hot summers are adding to the danger.

As the fire season winds down you should use the winter months to make sure your business is ready for a wildfire. Following these tips will help, but nothing is full-proof and you should also use this time to make sure your fire insurance is adequate in case the worst happens.

An eye on pollution

There are many things that are excluded in standard liability insurance policies. Most business owners know that they have to buy separate vehicle and workers compensation policies. But some might not be aware that losses from pollution problems are not covered in a standard liability policy.

This kind of exposure is most acute for those industries that use, manufacture or emit potentially hazardous materials. Developers, manufacturers, mining companies and others involved in heavy industry have the most obvious need for this kind of coverage. But the risk of environmental damage has the potential to affect almost any sort of business. Warehouse owners or anyone who owns vacant property could face pollution problems.

“While environmental incidents tend to be low frequency events for businesses, when they do occur they can be high cost events that can severely impact a company's profitability,” said Rich Corbett, head of XL Insurance's Global Environmental Insurance unit, which recently began offering environmental coverage specifically geared toward warehouse operators and distributors.

The kind of coverage offered can vary. Some plans protect companies from third-party damage or injury. Other plans can help offset the cost of cleanup and business interruption.

Pollution and environmental coverage is not for every business. It can be expensive and carry large deductibles. But just as with floods and earthquakes, it’s important for business owners to understand what isn’t covered and how to cover those gaps in coverage if they decide it is necessary.

The silver lining of high gas prices

High gas prices seem to be universally bad for business. Not only do they drive up shipping and transportation costs, but they also drive up the cost of nearly everything else a company has to buy. But there may be at least one business expense that could become more affordable as oil prices continue to creep into the stratosphere: auto insurance.

A recent report at MarketWatch quoted insurance industry insiders as saying that as gas prices go up, people are driving less. And as they drive less, they get into fewer accidents. And fewer accidents has the potential to drive down the cost of insurance. The Federal Highway Administration reported that Americans drove 9.6 billion miles fewer in May 2008 than in May 2007. This is the third largest monthly drop in 66 years. Three of the largest drops on record have occurred since December.

This drop in miles traveled won’t automatically translate into a drop in premiums -- auto insurance rates are determined by many factors outside of the number of accidents -- but it does provide one ray of sunshine in an otherwise gloomy oil-price climate.