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Have you ever seen the words replacement cost or actual cash value on your property coverage and not understood what they meant? If so, I can assure you that you are not alone! These terms are often associated with the extremely popular property coverage. The purpose of this article is to educate you regarding valuation used in property coverage so that the next time you come across this terminology you are familiar. To start with, let’s look at defining what property essentially pertains to. Presumably, property is anything that contains value. Property consists of three categories: buildings, business personal property and personal property of others. Comprising the buildings category are items such as additions, outdoor fixtures and permanently installed machinery and equipment. Business personal property includes items located in or on the building such as furniture, fixtures, stock and all other personal property owned by you and used in your business. Lastly, personal property of others covers property that is in your care, custody or control. However, the property must be located in the building described in the declarations or within 100 feet of the building. Now, what is valuation when it comes to property coverage? This is what we use to properly insure items included in property coverage. While property taxes are based upon the market value of the property in a specific area, insurance is based on replacement cost or actual cash value as this is the promise the insurance company makes to help you rebuild or reconstruct the property. As simple as it sounds, replacement cost is really what is says. It is the estimate of all costs that would reasonably be incurred to repair or replace the property that has been destroyed or damaged. In contrast, actual cash value is the replacement cost of the property less accumulated depreciation. In other words, it is the depreciated values of the property based upon the diminished useful life or the value when the insured does not repair or replace the damage. Since market values fluctuate time after time, insurance companies often rely upon the replacement cost to make their calculations. Using the actual cash value approach can distort the worth of the property as the item immediately loses value once purchased due to depreciation. Specifically, this means you are unable to receive the same amount it would cost to purchase the identical or nearly equal item employing the actual cash value approach. To put it simply, you will receive a smaller pay out using the actual cash value approach compared to replacement cost as replacement cost does not consider depreciation. In all reality, insurance relies on the principal of indemnity which means you will be returned to the point before the loss happened with neither a gain nor loss. Therefore, replacement cost is the best option to choose. References “Property Insurance Valuation Methods.” Insurance Associates Agency Inc. Insurance Associates Agency Inc., 10 Mar. 2016. Web. “Valuation Loss Condition in the Building and Personal Property Coverage Form.” Reference Connect. IRMI, 2011. Web.

The commercial property insurance market has faced rising premiums since 2017. While such rate jumps showed some signs of slowing in 2022 by largely remaining within single digits, this moderation didn’t last in 2023. According to industry data, commercial property insurance premiums surged by an average of 20.4% in the first quarter of 2023 alone. In the latter half of the year, the segment recorded the highest average premium jumps across all lines of commercial coverage at 18.3%. These conditions are primarily the result of another intense season of natural disasters, inflation issues and an increasingly volatile property valuation landscape. Losses stemming from these trends have forced commercial property insurers to continue increasing the majority of policyholders’ premiums and introducing more restrictive coverage terms. Looking ahead, insureds who conduct high-risk operations, have poor property management practices or are located in natural disaster-prone areas will likely remain susceptible to ongoing rate hikes and coverage limitations. Developments and Trends to Watch Natural Disasters Extreme weather events often leave behind severe property damage. As such, the rising frequency and severity of these catastrophes have continued to pose concerns in the commercial property insurance market. Research platform Bloomberg Intelligence reported that 2023 marks the fourth consecutive year in which global insured losses resulting from natural disasters are projected to exceed $100 billion. In addition, convective storms (e.g., thunderstorms, tornadoes and hailstorms) surged this past year, contributing to 68% of all weather-related losses in the first half of 2023, according to industry data. Many climate experts predict that natural disaster trends will continue to exacerbate commercial property losses in the future. Inflation Issues Like other lines of coverage, the commercial property insurance segment has been impacted by inflation issues in recent years, prompting higher premiums and claim expenses when losses occur. These issues have been brought on by a combination of fluctuating material demand, supply chain complications, surging prices for building resources and rising labor costs across the construction sector. Although increased material costs and wage growth trends have certainly softened since their peak in 2021, they continue to exceed pre-COVID-19-pandemic levels, affecting property repair and replacement expenses and related claims. Insurance-to-Value (ITV) Considerations In light of current inflation issues, ensuring accurate property valuations has proven to be a difficult feat. After all, these valuations are tied to the latest building material prices, which have become more volatile over the years. In response, insurance experts are encouraging businesses to be more diligent in performing correct ITV calculations and maintaining ample commercial property coverage; some insurers have even introduced specific ITV standards for their policyholders. An accurate ITV calculation represents as close to an equal ratio as possible between the amount of insurance a business obtains and the estimated value of its commercial building or structure. Reinsurance Capacity Challenges As natural disasters become more severe and inflation sits at elevated levels, commercial property reinsurers are facing a rise in claims and diminished profitability. Consequently, some reinsurers have lowered capacity for catastrophe (CAT) exposures and hiked up primary insurers’ premiums. Certain reinsurers have also introduced sublimits and revised their policy wording to establish more distinct coverage restrictions. Although demand for reinsurance remains high, capacity will likely become further constrained in 2024, therefore impacting overall commercial property insurance limitations and costs. Tips for Insurance Buyers Keep your commercial property in good condition at all times and immediately address building issues that could lead to losses and subsequent claims. Provide all relevant loss control documentation to your insurer. Analyze your organization’s CAT exposures. If your commercial property is located in an area more prone to certain types of natural disasters, implement adequate mitigation and response measures. Ensure accurate ITV valuations. From there, determine whether you need to adjust your organization’s policy limits to avoid underinsuring your commercial property and facing coinsurance penalties.

The freight broker game is becoming more and more competitive. New freight brokers are stepping into the arena to compete for business, while several other divisions of the shipping industry are joining the competition. Emerging technologies drove competition and are changing the way of brokering freight by streamlining the processes. It is more important than ever to vet out each broker and motor carrier before doing business with one another. There are many variables to consider when entering a contract or agreement. Best Practices for Motor Carriers When Engaging with Freight Brokers There are many different practices a motor carrier should consider when working with a broker. Always check and ensure the broker is properly licensed. According to the Federal Motor Carrier Safety Administration (FMCSA), Federal law requires a federal property broker license issued by the FMCSA for anyone arranging transportation for compensation. A motor carrier brokering loads without broker authority will signal the first red flag. Confirm proper authority and licenses are in place. As a motor carrier working with a broker, it is beneficial to research the broker’s history to determine how long the brokerage has been in business. The first year in business in the Transportation industry will often prove to be the most difficult. In the first couple of years, the goal for the broker is to survive. Aligning yourself with a broker who has an established track record and history of successful execution will carry with it less risk than the new comers in the broker space. Lastly, as a motor carrier, it is important to ensure payment can be made by the broker. Verifying freight brokers are financially stable and making timely payments is a good start. A credit check can give the motor carrier the tools to confirm if the broker is profitable or if there are liens and/or legal judgments against them. Doing business with a brokerage dealing with financial and/or legal issues will only cause more hardship in the event there are any claims. Always review the motor carrier and broker contract agreement. Contracts are very specific and it is important to review the document in its entirety before agreeing to any terms. The wording in those agreements can be the difference between having coverage for a claim or taking on the responsibilities of covering a loss out of pocket. A few critical terms to look for in a broker-motor carrier agreement are broker requirements, broker obligations, assignment/modification of the agreement, and non-exclusive agreement. Best Practices for Freight Brokers Screening Motor Carriers Freight brokers working with a motor carrier are responsible for screening each carrier before entrusting them a load. Consider reviewing each motor carrier's COI (Certificate of Insurance) and safety rating before brokering any freight. A Certificate of Insurance review is a consideration that will directly affect the coverage of the load. Validating the certification for adequate coverage is the first step. Also, confirm they have the correct limits and coverage terms in place. Verify the insurance provider is financially solvent, the rating ‘A-‘, or better is recommended. Some claims take time to resolve, and it is important to review the financial strength of the insurance provider to determine if they will be in business in the next 5 years. The DOT and FMCSA utilize SAFER (Safety and Fitness Electronic Records System) to provide a concise electronic record of a company’s identification, size, commodity information, and safety record, including the safety rating. SAFER is a powerful tool for verifying company information and most importantly identifying the motor carrier’s safety rating. The ideal safety rating is “Satisfactory” and often times a “Conditional” rating will show some safety issues. Finally, when entering a contract with a motor carrier, always make sure the Broker Carrier Agreement is signed and completed before brokering any freight. The most important document to collect as a broker is the Bill of Lading. A BOL or Bill of Lading is a document issued by the motor carrier as a receipt of freight for shipment. BOL has many important functions: Evidence of Contract of Carriage, Receipt of Goods, and Documents of Title to the goods. Several considerations should be made as a broker or motor carrier when entering a contract. All contracts and terms must be read and understood before signing an agreement. Spend the time to research the brokerage or motor carrier to understand the history and operations before aligning your businesses.

For independent contractors, the world of Auto Liability can be a confusing place with lots of misnomers and interchangeable terms. While an independent contractor is operating under the direction of the motor carrier, their Auto Liability exposure is covered under the motor carrier’s primary Auto Liability policy. For times when the tractor is being operated without direction from any motor carrier, the independent contractor should have some form of liability coverage. Very often, the term bobtailing is used in general terms to refer to an independent contractor when they are not hauling under contract for a motor carrier. Specifically, to bobtail means when you operate a tractor without a trailer attached. There is an insurance coverage form that can be purchased for bobtail exposure. This policy would respond regardless of the nature of the operation of the independent contractor as long as they were not pulling a trailer. Deadheading, however, is when a tractor is pulling an empty trailer. An unladen liability policy would cover losses when the tractor is not transporting cargo. The most common form of liability coverage for the independent contractor is Non-Trucking Auto Liability. The main purpose of the Non-Trucking Auto Liability policy is to respond when the independent contractor is not operating under the discretion of the motor carrier. Due to the broad nature of policy language defining “business operations” and the fact that oftentimes the independent contractor is acting under the terms of their lease or the business operations of the motor carrier; Non-Trucking Auto Liability policies are infamous for not paying out. In terms of liability coverage for the owner-operator, the unladen liability and bobtail policies provide broader coverage because the need to determine what the unit was being used for is not required to trigger coverage. For this reason, these policies are harder to get and more expensive than the commonplace Non-Trucking Auto Liability policy. The best case scenario when placing Non-Trucking Auto Liability coverage is to place the coverage with the same insurance company as the motor carrier. This method will eliminate any coverage gaps that can occur between carriers' policy language. If that is not an option, it is best to consult your trucking insurance professional for their advice on the next best option. Resources “Bobtail Trucking Coverage”  National Underwriter Company FC&S Bulletin 09/04/2010 “Bobtail or Deadheading Liability Coverage”  Rough Notes 09/01/14 Transport Topics:  Opinion:  Liability Coverage: Bobtail policies 09/02/2013

Navigating FMCSA Updates: A Closer Look at the MCSA-1 Implementation The New Year will bring new changes to the biannual updates required by the Federal Motor Carrier Safety Administration (FMCSA). Effective January 14, 2017, all required updates with the FMCSA must be filed electronically via the MCSA-1. This electronic form takes the place of the MCS-150 and is the result of the implementation of the Unified Registration System (URS). This system consolidates four different registration systems–including the U.S. Department of Transportation Identification Number System and the 49 U.S.C Chapter 139 Commercial Registration System. The update in paperwork will streamline the registration of new carriers and will prove to be cost-effective for both the motor carrier as well as the FMCSA. Key Requirements and Submission Process of the MCSA-1 Any motor carrier (exempt, non-exempt, or private), broker, freight forwarder, intermodal equipment provider, cargo tank facility or hazardous materials safety permit applicant must complete the MCSA-1 to obtain a USDOT number. USDOT numbers may remain inactive pending a complete submission and approval of all filing requirements. The MCSA-1 must also be completed and updated to restore a revoked or inactive registration. The MCSA-1 must be completed online and, just as with the MCS-150, current motor carriers must update their MCSA-1 at a minimum of once every twenty-four months. Motor carriers are required to update their MCSA-1 within thirty days of an address change, change to legal name, or form of business operations. The MCSA-1 is an in-depth questionnaire designed to provide the FMCSA a detailed snapshot of the operations of each individual motor carrier. Therefore, all motor carriers, brokers, and freight forwarders must complete the MCSA-1 as completely and as precisely as possible. Legal Name, principal address, and mailing address are key items to be completed and updated correctly. This information is used when verifying a motor carrier’s operating authority and insurance, so accuracy in these fields is crucial. The MCSA-1 is a comprehensive application, so information regarding the company’s operations is also required. Motor carriers should be prepared for questions such as: Who owns the company? What commodities will be hauled? Is this an interstate or intrastate operation? What is your company’s EIN? The answer to these questions determines what additional items are necessary to be granted a USDOT number. Therefore, the application must be completed as accurately as possible to avoid any complications or delays in obtaining a USDOT number. Notable Changes The MCSA-1 does bring a few notable changes, the most pertinent being the discontinuance of the motor carrier number (MC#). Going forward, the USDOT number will be the sole number used to identify motor carriers, freight forwarders and brokers. The prior registration system used four different identification numbers, making updating and consolidating the information tedious. The other major difference to keep in mind is the form can only be completed and submitted online. Previously, motor carriers could submit the MCS-150 by mail if they preferred. This process often causes delays in processing, which then leads to delays in reinstatement, updates, etc. Completing the MCSA-1 online will help deter such delays and prove more efficient for the motor carrier. Taken as a whole, current motor carriers will not see a drastic difference in requirements under the MCSA-1 when compared to the MCS-150. The information required for registration is similar and the mandatory window for updates did not change. As mentioned above, the most evident change is that there will no longer be motor carrier numbers issued to new motor carriers, brokers, or freight forwarders. The sole use of the USDOT number for identification will streamline registration and will allow for quick and accurate updates with the FMCSA. Overall, the update to the MCSA-1 will be both time-efficient and cost-effective for all parties involved. References https://www.fmcsa.dot.gov/registration https://www.federalregister.gov/documents/2013/08/23/2013-20446/unified-registration-system

The transportation and logistics industry is ever-changing, and lately, warehousing services seem to be more prevalent. As a warehouse operator, it is important to fully understand the legalities of the warehousing business and ensure the necessary coverage is in force. Warehouse operators are subject to the United States Uniform Commercial Code (UCC). Under UCC, a warehouse operator is liable for the goods of others being stored for a fee. If the warehouse were to experience a loss in which customers’ goods were damaged, the warehouse operator could be liable for the failure to exercise reasonable care over those goods. Warehouse operations are exposed to many risks including theft, flood, fire, and damage to others’ goods being stored in their facility. Warehouse Legal Liability coverage is intended to respond when the warehouse operator’s negligence, or failure to exercise due care in handling or storing customers’ goods, results in loss or damage to the goods being stored. Warehouse Legal Liability is carried by the warehouse operator and coverage is triggered by a warehouse receipt. A warehouse receipt is a document, mandated by law, which includes the transactions of the parties involved and is essential in warehouse operations. Under Section 7 of the UCC, in order to be valid, a warehouse receipt must contain several pieces of key information, including but not limited to the location of the warehouse, the issue date of the receipt, a description of the goods being stored, and the rate of storage. Warehouse Legal Liability coverage does not apply if a warehouse receipt has not been issued, as there would be no way to determine the property that was to be covered and its value. It is imperative to understand the contracts and agreements that are in place when providing warehousing services. Enlisting the expertise of an attorney to review the warehouse receipt, bill of lading and any other client contracts will help determine if any contracts expand the warehouse operator’s liability beyond the warehouse receipt. It is also important to note that a warehouse operator cannot waive the obligation of legal liability, as it is mandated by the UCC. When pursuing a quote for Warehouse Legal Liability, underwriters will likely ask many detailed questions and may perform a physical inspection in order to fully understand the operation and related exposures. The construction type of the building, nature of occupancy, and forms of protection such as sprinklers, alarms, and guards are all important information for underwriters. They will also likely require a copy of the warehouse receipt issued by the operation. One should consider the scope of coverage when purchasing a Warehouse Legal Liability policy. Defense costs are often a large expense included in a warehouse claim. However, not all Warehouse Legal Liability insurance policies include defense costs. Debris removal is another cost that may be incurred by a warehouse operator. These are the costs to have damaged property contained, removed, and disposed of after a loss. Also, some losses may not be covered by a Warehouse Legal Liability policy. These typically include wear and tear, deterioration, corrosion, rust, dampness, defects in the property, unexplained loss, or employee dishonesty, just to name a few. Warehouse Legal Liability can be an excellent coverage to protect a warehouse operator. However, warehouse operations are often complex and should involve legal counsel and the expertise of an insurance professional to ensure these operations are properly covered. Resources https://www.roanoketrade.com/importance_warehouse_legal_liability/ https://www.thehartford.com/marine-insurance/warehouse-logistics https://www.silverplume.com/SPOnline/SPSage.aspx?cmd=search&tpc=Ins%2FAll%20Content&etfs=DgPlad3FsgrpS2TbDulojA&ac=on&isCompany=False&qry=warehouse%20legal https://www.law.cornell.edu/ucc

Some of the biggest issues currently facing motor carriers include driver shortage, CSA, fuel costs, and soft freight. However, an overlooked rising issue for motor carriers is the way that they are classifying their drivers as either employees or independent contractors. Over 30% of companies misclassify employees as independent contractors; whether accidentally or intentionally. In July 2015, the Department of Labor (DOL) issued an Administrator’s Interpretation on employee and independent contractor classification.  In addition to the DOL, the Internal Revenue Service (IRS) has also agreed to work together with the DOL to coordinate and enforce the Fair Labor Standards Act (FLSA). Several states have also followed suit and responded with misclassification task forces. Ramifications of Employee Misclassification Correctly classifying a driver as an independent contractor or an employee is crucial. When employers improperly classify employees as independent contractors, the individuals may not receive important workplace protections governed by the FLSA.  These workplace protections include minimum wage, overtime compensation, unemployment insurance, and workers’ compensation. If a driver believes he or she has been misclassified, the driver can file a complaint with the DOL. In turn, employers can be audited by the DOL, IRS, the state and/or their workers’ compensation insurance carrier; thus resulting in hefty payment penalties and back premiums. The ramifications for an employer can vary depending on if the DOL and the IRS determine the misclassification as unintentional, intentional, or even fraudulent. Fees and penalties can range depending on whether the misclassification was inadvertent or not, and can include any of the following: $50 per W-2 form not filed, 1.5% of wages the employer should have paid, 40 percent of FICA taxes, unpaid premiums, overtime, work-related expenses, and unpaid sick/vacation pay. In addition to these penalties, there is additional liability for intentional misclassification including criminal fines up to $1,000 per misclassified worker and prosecution with prison sentences up to one year. Prevention and Compliance Strategies When looking through the insurance lens, the employer can be audited by their workers’ compensation carrier when they have company drivers, as well as, independent contractors. This may be the case if an employer doesn’t require their independent contractors to provide proof of work accident coverage (either Workers’ Compensation or Occupational Accident). The employer could be putting themselves at risk if an independent contractor files a workers’ compensation claim against the employer. If the insurance carrier pays the claim, in turn, they will likely want to audit for 1099 payroll for any uncollected premiums. For example, in TRAVELERS INDEMNITY COMPANY, v. D.J. FRANZEN, INC. (IA-2010): Travelers won a $550,661 audit (on top of the $1,775 original premium) because Franzen failed to appeal the audit to NCCI.  Court determined Franzen couldn’t contest either Travelers determination that the drivers were employees or the premium charged. It is in the employer’s best interest to require their independent contractors to purchase occupational accident or workers’ compensation coverage. How can all of this be prevented? As an employer, you can protect yourself with proper documentation and understanding of how the IRS and DOL will determine, or “test”, the difference between whether an employer and worker have an employer-employee relationship or the worker is an independent contractor. It is always a good precaution to obtain documentation that states the IC’s self-employed status, requires the IC to sign an Independent Contractor Agreement, as well as, request a certificate of work comp or occupational accident insurance. IRS Test According to the IRS, “The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” The IRS considers three factors categorized into behavioral, financial, and the type of relationship. Behavioral: Does the company control or have the right to control how the worker does his or her job? Financial: Are the business aspects of the worker’s job controlled by the payer? (These include things like how a worker is paid, whether expenses are reimbursed, who provides tools, supplies, etc.). Type of Relationship: Are there written contracts or employee-type benefits (i.e. pension plan, insurance, vacation pay, etc.)? DOL’s Economic Reality Test According to the DOL, “An employee, as distinguished from a person who is engaged in a business of his or her own, is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business which he or she serves.” There are six factors the DOL relies on: “The extent to which the work performed is an integral part of the employer’s business.” “Whether the worker’s managerial skills affect his or her opportunity for profit and loss.” “The relative investments in facilities and equipment by the worker and the employer.” “The worker’s skill and initiative.” “The permanency of the worker’s relationship with the employer.” “The nature and degree of the employer’s control.” Independent Contractors can be a low-cost alternative to regularly employed employees; however, it is important to understand the risks associated with the monetary benefits. Employers should make sure they are communicating with their legal counsel, tax advisor, and insurance agent to help them properly classify their workers, always keep documentation on file, and understand the IRS and DOL tests. It is crucial to perform due diligence and make certain the contractors are truly independent of the employer. Resources https://www.dol.gov/whd/workers/misclassification/ https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-defined https://www.chubbworks.com/article.cfm?id=7026 https://www.chubbworks.com/article.htm?id=7036 https://www.chubbworks.com/article.cfm?id=6993

Certificates In Trucking Certificates of insurance are such simple documents, and yet so important to the trucking industry.  They are issued every day in order to provide proof of insurance to shippers, brokers, banks, truck rental companies, and countless other entities involved in the business of trucking. So what is a certificate of insurance and why is it so important for trucking companies to understand how they work? What is a certificate? First and foremost, it’s important to note what a certificate is not. A certificate is not a legal document. A certificate is also not an amendment to the insurance policy. It is simply a piece of paper that provides evidence of basic policy information to an interested customer or 3rd party. A certificate will include information such as coverage type, policy number, effective and expiration dates, and the name of the insurance company affording the coverage. They are also commonly issued upon policy renewal to provide updated information to third parties, the certificate holders. Special Requests There are many misconceptions about certificates of insurance. Many believe that limits can easily be altered or added to a certificate. Some third parties also have very specific wording that they believe can be typed on the certificate upon request. However, it’s important to remember again that the certificate is simply a summary of the current policy information. Any adjustments to the limits or the addition of special wording must be endorsed to the policy first, before it can be evidenced on the certificate. This may require getting the insurance company’s approval in order to proceed. Requests such as this may take some time to address and could also result in additional premium. In addition, it’s important to understand what the special wording means and what rights it may be extending to your customers. Let your agent know of any new contracts or customers as soon as possible so they can get to work on any insurance needs for you. The Agent’s Role in Certificates Most customers and third parties require certificates to come directly from the insurance agency in order to validate the information being presented. This means that the agent’s role in managing certificates is very important to a trucking company’s business. The agency must understand the need to get certificates out to customers quickly so that there are no delays or problems with obtaining loads. Look for an agent that invests in the latest technology in order to do this for you. Certificates should be faxed or emailed to your customers quickly. This is especially important when coverages renew and updated certificates must get sent out to all certificate holders. You should also have the ability to view and print certificates through an online portal. The agency must be very diligent about presenting current and accurate information and staying up to date on the latest laws and requirements on behalf of their clients. You want an agent that cares about handling certificates correctly, as opposed to simply agreeing to terms you don’t have, in order to get certificates out the door. Working with an agency that specializes in the transportation industry is extremely valuable when it comes to certificates, as they will understand the importance of the above items. A transportation agent may also have experience with the insurance requirements of some of the more common or complicated contracts that are out there, which gives you an added benefit.

There are two types of companies: Those that have been hacked, and those that will be.  And extending that thought further: Those that have been hacked, and will be again.  With more and more companies going digital, the risk of a cyber attack increases. Every system upgrade, remote device, and incoming email exposes a company.  With the average cost per cyber attack in 2013 at $5.4 million, companies can’t afford to leave themselves unprotected. Building a Robust Defense: Preventative Measures and Employee Education There are several preventative measures companies can take to protect themselves from cyber-attacks.  Having a plan in place to combat these attacks is the first key. A digital security assessment will give the complete picture of an organization’s security posture that focuses on policy, controls, procedures, and effectiveness of the plan implementation. Once an assessment is done and a plan is in place, continuous testing and improvements are necessary. One of the biggest exposures to cyber attacks is a company’s own employees. Making sure employees are educated and know what to look for when an attack may be happening is crucial.  This includes suspicious emails and requests for information.  If a company’s employees know what to watch for, this will decrease the chances of a successful cyber attack. Other than the human element, companies should also look into other attack areas.  Some of these areas include providing IT with information on security measures and software updates limiting employee access to sensitive information, recognizing the risks of employees’ personal devices for company data, and limiting the number of third-party vendors that have access to company information. Data backups of company information are important and developing a secure culture within an organization is a good plan to have in place.  However, a company can take all of the steps possible and still have a data breach and lose all company information.  What protects them when the preventative measures don’t?  Cyber Liability Insurance. Cyber Liability Insurance: The Ultimate Safeguard for Businesses Cyber Liability Insurance protects a business when all preventative measures have been taken and a cyber attacker still gets through.  The cyber risk can then be transferred to an insurance policy.    There are three basic elements to a good cyber insurance program: legal liability, business interruption, and coverage for breach notification costs.  The legal liability component will protect the insured from lawsuits that arise out of a data breach. Business Interruption Coverage will replace lost revenue from downtime while a breach is being looked into, which could take months to complete.  Breach of notification costs is the cost to notify the public that a breach has happened.  While a cyber liability policy can be tailored to each company’s needs, a cyber liability policy must encompass all three elements to provide adequate coverage to the insured. With an average of 10% of companies buying cyber liability insurance, and nearly 90% of businesses having a cyber attack within the last 12 months, it is obvious cyber liability insurance is an important coverage to purchase.  Not only are there substantial financial costs associated with a cyber attack, but a company can also suffer considerable damage to its reputation.  Cyber Liability Insurance is the perfect way to remedy those damages. References Travelers Current Ransomware Landscape Findings from the Chubb 2013 Private Company Risk Survey The Risk Report, Cyber and Privacy Insurance Coverage, Volume XXXVII No 11, July 2015 The Risk Report, Plan to Protect Digital Assets, Volume XXXVIII No. 2 October 2015

“Does this driver meet our insurance carrier’s guidelines?” This common question has been brought up at one time or another by most motor carriers.  When motor carriers ask this question, they should also be asking, “Does this driver meet our guidelines?” It is becoming increasingly important for each motor carrier to have set guidelines that they follow prior to requesting approval from their insurance carriers. Establishing Robust Driver Guidelines: A Crucial Step for Motor Carriers Some insurance carriers do not have an established set of guidelines for who is and isn’t insurable, and will often defer to the motor carrier’s guidelines. These carriers may request a copy of the motor carrier’s guidelines, usually during the quoting process. This is a way for the insurance carrier to monitor and know that the motor carrier is responsibly managing their hiring process. Motor carrier guidelines help paint a picture for the insurance carrier as to the type of driver the motor carrier is seeking to hire. It also allows the insurance carrier to see how strictly the motor carrier adheres to their policy. Almost all insurance carriers require a copy of a drivers’ motor vehicle record for quoting purposes and additions midterm to a policy and they can quickly see which drivers fall outside of the established guidelines. This will prompt the carrier to ask about corrective actions and information on how the motor carrier continues to manage the process. Drivers can adversely impact insurance pricing if motor vehicle records fall outside of driver guidelines established by the insurance carrier. Legal Implications and Federal Compliance: FMCSA's Role in Driver Qualifications In addition to insurance carriers referencing a motor carrier’s guidelines, another reason to have an established set of qualifications is to make sure the motor carrier is adhering to the Federal Motor Carrier Safety Administration qualifications.  Part 383 of the FMCSA’s regulations address commercial driver’s license standards which includes requirements and penalties. This regulation specifically states, among other things, that “an employer must not knowingly allow, require, permit, or authorize a driver who is disqualified to drive a commercial motor vehicle.”  In part 383.51 of the regulation, the FMCSA lays out specifically what disqualifies a driver and for what period of time the driver is disqualified. These disqualifications can be found on FMCSA’s website. Should a driver fall outside of the FMCSA’s qualifications, and the motor carrier knowingly allowed them to drive, they could be subject to penalties or fines ranging anywhere from $2,750 to $25,000. There are many reasons for the motor carrier to have their own established set of guidelines for drivers.  Two reasons being for the insurance carrier to reference if needed as well as adherence to federal regulations. It is a best practice followed by many motor carriers currently as it allows the motor carrier to effectively manage their hiring process. Resources https://www.fmcsa.dot.gov/regulations/title49/part/383 https://www.fmcsa.dot.gov/regulations/title49/section/383.37 https://www.fmcsa.dot.gov/regulations/title49/section/383.51 https://www.fmcsa.dot.gov/regulations/title49/section/383.53 https://www.silverplume.com/SPOnline/SPSage.aspx?cmd=search&tpc=Ins%2FAll%20Content&lvl=1&etfs=tHvk6pX5XnEGypSE64Dn8g&ac=on&isCompany=False&qry=Driver%20Guidelines

Most of us are aware of the push the Department of Labor (DOL) has made to thoroughly examine the working relation of “Independent Contractors” and employees in our world of trucking.  A lot of trucking companies (carriers) hire “Owner Operators” and come to terms of employment through an Independent Contractor Agreement. Most carriers think that alone is enough, but the DOL and the courts will look far beyond any contract, and drill down to the day-to-day relationship between carrier and contractor. Most of us have an idea of what an employee is and what it is not, so this article will focus on the consequences of misclassifying employees and contractors as well the “rules” for who is and who isn’t. When carriers add up payroll taxes, workers compensation insurance, benefits, paid time off on top of wages, they will find the true cost of employment to be well above base wages forcing them to determine if they should hire a prospective driver or lease an independent contractor.  The relationship the company has over the driver is often what is overlooked in the test to determine status of employment but also the most important because it is illegal. Some of the tests and factors used to determine employment status: Level of Control -The more control a company has over an independent contractor, the more likely that the driver will be deemed an employee. Ownership of Equipment/Vehicles – If the company owns the truck, more times than not that driver will be deemed an employee Who dictates pickup/delivery? Who can change routes? If the company sets work schedule, pick up times and routes to travel, the driver will likely be deemed an employee. Now that we have an idea of who is an employee and who is not, let’s look at some of the penalties for misclassification.  Under the Fair Labors Standards Act, any employer who violates the act is liable for back pay from when the courts deem the driver an “employee”, plus an additional equal amount as liquidated damages. Employers will also be exposed to back pay of mandatory payroll taxes, Social Security and Medicare (FICA), unemployment insurance and workers compensation insurance. The lost revenue from those businesses that misclassify can add up to billions of dollars as well as lost tax revenue and the added costs of providing social services to uninsured workers. Employers who misclassify are not responsible for providing health insurance and are able to bypass requirements of the Fair Labor Standards Act, as well as the 1986 Immigration Reform and Control Act. Employers who play by the rules are disadvantaged by higher labor and administration costs relative to employers who misclassify. Misclassified workers are ineligible for unemployment insurance, workers’ compensation, minimum wage, and overtime, and are forced to pay the full FICA tax and purchase their own health insurance. It is important to understand that there is more to determining the classification of independent contractor than just having a signed Independent Contractor Agreement between a company and an individual.  If an individual is misclassified as an independent contractor, but is determined to be an employee, there is a potential for significant fines to a carrier along with paying potential back taxes and further scrutiny of how your other independent contractors are classified. References https://www.transforce.com/truck-drivers-employees-or-independent-contractors/ https://www.palaylaw.com/owner-operators/independent-contractor-or-employee-test/ https://www.epi.org/publication/independent-contractor-misclassification/ https://www.thebalancesmb.com/independent-contractors-4161418 (Tax Court Case 2: The Case of the Trucking Company)

Often times questions come up about the differences between Umbrella and Excess Liability policies.  Too often we are using the words interchangeably and there are notable differences between the two.  There are a few things to note right away.  First – a true Umbrella policy will typically include a deductible in the coverage form, typically called a Self Insured Retention (SIR).  Second – just because a policy covers more than one coverage does not make it an Umbrella policy. Lastly – Umbrella policy forms are broader than Excess Liability policies. Umbrella and Excess Liability policies are used to increase the underlying policy limits.  Even if you carry the standard limits for General Liability or Auto Liability, there might come a time where a settlement in a claim is more than your policy limit. Therefore anything above that policy limit would have to be paid out of pocket by the company if an Umbrella or Excess Liability policy did not otherwise exist. What are the differences between the two? Umbrella liability is a type of liability that provides additional limits over the underlying liability.  The biggest advantage of an Umbrella policy is that it may provide additional coverages not otherwise included in the underlying liability policy. They also help broaden the business insurance liability so that the gaps in coverage are closed and eliminated.  It offers first-dollar liability coverage which is above any deductible or retained limit. Excess Liability also provides additional limits over the underlying liability policies but in a more restrictive manner.  There may be more restrictions in the Excess Liability policy than the underlying liability policy has.  It incorporates and follows all the definitions and limits of the underlying policies, but does not provide any additional coverages that the underlying policy may be lacking. Why is it a good idea to have an Umbrella or Excess Liability policy? Either of these policies, no matter which fits your company's needs better, provide extra protection against claims by others, including personal injury or property damage for which you are legally liable, non-business related liabilities including slander, false arrest, and libel, and even defense costs for attorneys.  The limits provided in Umbrella and Excess Liability policies can range from $1,000,000 to $5,000,000 and above.  The right amount is dependent on the value of the assets you need to protect and also those assets that may be acquired in the future. Umbrella policies can arguably be the better decision if extra coverage is needed.  An umbrella policy has a broader form and does not simply follow the underlying policy forms.  The insurance it provides is based on the coverage form found in that Umbrella policy, not just in the underlying policies.  It can provide extra insurance for the gaps missed in the underlying policies.   It can however be the more expensive option of the two.  Excess Liability policies follow the forms of the underlying policies and nothing more.  There is no excitement in an Excess Liability policy; all coverage disputes arise from the underlying coverage. As claim costs start to rise it is always helpful to check into both of these options to help provide extra protection for your company.  The typical $1,000,000 limit isn’t what it used to be and you definitely don’t want to find that out when that large claim happens. References Difference Between Business Insurance Now Travelers SilverPlume