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Workers’ compensation coverage pays benefits to workers injured on the job, including medical care, part of lost wages and permanent disability. It also provides death benefits to dependents of employees killed from a work-related accident. Workers’ compensation systems are different in every state, as individual statutes and court decisions have shaped the way they handle claims, evaluate impairments, settle disputes, provide benefits and control costs. Background of Workers’ Compensation Insurance During the 19th century, the number of individuals joining the workforce grew exponentially. As a result, the number of workplace accidents grew as well. At that time, the only way that injured workers could obtain compensation for their injuries was to sue the employer. Many legislative proposals emerged early in the 20th century, focusing on compensating injured workers for their medical care and lost wages. By 1949, all states had a system in place to provide compensation for injured employees. Under these systems, the employer was responsible for providing compensation for the cost of medical care and wages lost, and consequently, the employee gave up his or her right to sue the employer for injuries. Currently, Texas is the only state where workers’ compensation is not mandated for all employers. As part of the insurance package, the injured worker’s medical, rehabilitation and lost wages are paid for by the state or insurance carrier. If the injury leaves the employee disabled, the insurance carrier will pay the claim based on the extent of the injuries and based on its permanence. The disability will fall into one the following categories: temporary total, temporary partial, permanent partial or permanent total disability. Workers’ compensation rates and programs are managed by private insurers, state funds or the National Council on Compensation Insurance (NCCI). Cottingham & Butler can provide more information about how your state handles these programs. The Employer’s Responsibilities Employers are required to do the following to comply with workers’ compensation insurance laws: Provide coverage for their employees and are held liable for all injuries suffered by employees while they are on the job (with the exception of employers residing in the state of Texas) Pay premiums and provide the carrier with audit payroll numbers Provide a safe environment Notify the carrier as soon as possible after an injury Investigate injuries Managing Your Workers’ Compensation Costs Your workers’ compensation insurance premium is based on a rating your company has, which is based on payroll, averages for your industry, and claims experienced over a three-year period. Claims have a direct impact on this experience modification factor (mod), which can significantly drive up premiums. This means many times a company will pay for its own claims in increased premium costs. There are many things that companies can do to lower their workers’ compensation costs, such as the following: Inspect your insurance policy to make sure that all job classifications and payrolls are correct. Invest in workplace safety to avoid accidents and improve claim histories to reduce overall costs. If you modify operating procedures even slightly, you can alleviate unnecessary exposure to injuries. Create a modified duty program at your organization to help injured employees return to work sooner. Under these programs, employees are assigned duties that they can physically complete while they recover. The most successful return-to-work programs incorporate speedy, quality medical care and assistance to reduce emotional stress after an accident. There are other actions that your organization can take to reduce workers’ compensation costs, and we have the tools to show you how. Contact Cottingham & Butler today to learn more. This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact a Cottingham & Butler representative directly for appropriate guidance.

The way project owners evaluate and manage risks on construction projects and make fiscally responsible decisions to ensure timely project completion are crucial to their success. Since private owners cannot afford to gamble on a contractor whose reliability is uncertain or who could end up bankrupt halfway through the job, a surety bond is a great safety net for the investment. What is Suretyship? Suretyship is a very specialized line of insurance that is created whenever one party guarantees the performance of an obligation by another party. A surety bond is a written agreement that includes three parties: The principal is the party that undertakes the obligation. The surety company guarantees the obligation will be performed. The obligee is the party who receives the benefit of the bond. There are two primary types of surety bonds, contract (or corporate) surety bonds and commercial surety bonds. Contract (or Corporate) Surety Bonds Contract (or corporate) surety bonds provide financial security and construction assurance for building and construction projects by assuring the project owner (obligee) that the contractor (principal) will perform the work and compensate certain subcontractors, laborers, and material suppliers, as outlined via their contract. Contract surety bonds include the following: Bid bonds provide financial assurance that the bid has been submitted in good faith and that the contractor intends to enter into the contract at the price bid and provide the required performance and payment bonds. Performance bonds protect the owner from financial loss should the contractor fail to perform the contract per its terms and conditions. Payment bonds guarantee that the contractor will pay certain subcontractors, laborers, and material suppliers associated with the project. Maintenance bonds guarantee against defective workmanship or materials for a specified period. Subdivision bonds make guarantees to cities, counties, or states that the principal will finance and construct certain improvements such as streets, sidewalks, curbs, gutters, sewers, and drainage systems. Commercial Surety Bonds Commercial surety bonds guarantee performance by the principal of the obligation or undertaking described in the bond. Commercial surety bonds include the following: License and permit bonds are required by state law or local regulations to obtain a license or permit to engage in a particular business (e.g., contractors, motor vehicle dealers, securities dealers, employment agencies, health spas, grain warehouses, liquor, and sales tax). Judicial and probate bonds, also referred to as fiduciary bonds, secure the performance of a fiduciary's duties and compliance with court orders (e.g., administrators, executors, guardians, trustees of a will, liquidators, receivers, and masters). Judicial proceedings court bonds include injunction, appeal, indemnity to sheriff, mechanic's lien, attachment, replevin, and admiralty. Public official bonds guarantee the performance of duty by a public official, (e.g., treasurers, tax collectors, sheriffs, judges, court clerks, and notaries). Federal (non-contract) bonds are required by the federal government (e.g., Medicare and Medicaid providers, customs, immigrants, excise, and alcoholic beverages). Miscellaneous bonds include lost securities, leases, guarantee payment of utility bills, guarantee employer contributions for union fringe benefits, and workers’ compensation for self-insurers. How is Suretyship Similar to Other Forms of Insurance? It’s important to recognize the similarities between suretyship and other forms of insurance: State insurance commissioners regulate both suretyship and other insurance. They both provide a safety net for financial loss. How is Suretyship Different? Key differences exist between suretyship and other insurance: In traditional insurance, the risk is transferred to the insurance company. However, in a suretyship, the risk remains with the principal, and the protection of the bond is designated for the obligee. In traditional insurance, the insurance company assumes that part of the premium for the policy will be paid out in losses. Yet, in true suretyship, the premiums paid are "service fees" charged for the use of the surety company’s financial backing and guarantee. In underwriting traditional insurance products, the goal is to "spread the risk,” while in a suretyship, surety professionals view their underwriting as a form of credit. Therefore, the emphasis is on the pre-qualification and selection process. Government Regulations The current federal law on federal public works is known as the Miller Act, which requires performance and payment bonds for all public work contracts in excess of $100,000 and payment protection, with payment bonds the preferred method, for contracts in excess of $25,000. Almost all 50 states, the District of Columbia, Puerto Rico, and most local jurisdictions have enacted similar legislation requiring surety bonds on public works as well. Protect Yourself With Surety Bonds By obtaining a surety bond, you can transfer the risks associated with completion dates and quality concerns to a surety company. Contact our expert team today to obtain a surety bond and protect your business. This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact a Cottingham & Butler representative directly for appropriate guidance.

Excess liability insurance (ELI), more commonly known as umbrella insurance, is one of the most important types of insurance your company can buy. It protects your business from holes or limits in existing policy coverage as well as from financially draining lawsuits. Just as you carry an umbrella to protect you from a potential downpour, ELI protects your company from the types of claims that could close your business. Umbrella Basics Businesses choose ELI essentially to back up the limits contained in their underlying liability policies (commercial general liability, business auto, employer liability, workers’ compensation and professional liability.) For the most part, it is used to cover exceptionally large events or losses with low probabilities of occurrence. Without ELI, these events – as few and far between as they may be – would be financially devastating to many companies. Who Should Consider ELI? All types of companies would benefit largely from ELI. Because it extends coverage so dramatically at a relatively small additional cost, many choose to pay the extra price. The amount of coverage needed will always depend on the total value of your assets. Here’s how it works: Assume a jury ordered your business to pay $3 million in damages for a liability claim, but your general liability policy has a $2 million limit. Your company would normally be required to cover the additional $1 million. However, with a $4 million ELI policy, the $2 million commercial policy would exhaust, and then the umbrella policy would cover the outstanding $1 million. Other Benefits of ELI Coverage Ultimately, ELI acts as a sort of dual policy, providing coverage in two ways: Paying liabilities in excess of existing policy limits Providing coverage in areas not included with existing policies You have already read how ELI acts with basic coverage to cover costs; however, it also provides extra coverage in other areas by using a self-insured retention (SIR), a dollar amount that functions like a deductible. In umbrella coverage, the SIR will vary by situation and by state, but it starts at $10,000. If ELI is being used in areas without any other basic coverage, it will kick in after you pay the set SIR. ELI is also beneficial because an effective policy can save your business money and cover more assets by using fewer individual policies. However, depending on your policy, some coverage may be excluded under ELI. Common exclusions include employment practices liability, professional liability, and product recall coverage. The umbrella market is often erratic. We can find you competitive quotes addressing your specific risk categories. To learn more about including excess liability/umbrella insurance to protect your company, contact Cottingham & Butler today. This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact a Cottingham & Butler representative directly for appropriate guidance.

What changes are coming? In July of this year, the Department of Labor issued a notice of proposed rulemaking with major changes to the overtime exemptions currently in place. As it stands since 2004, employees may be exempt if their salary is at least $23,660 per year while performing executive, administrative, professional, outside sides, or computer duties. Exempt employees are not entitled to overtime pay while nonexempt employees are. Under the proposed rule, the exemption regulations relating to salary and job classifications are both under review. The current estimate is the starting salary point for overtime exemptions will be approximately $48,000 – so employees earning less than that may soon qualify for overtime, depending on their job classification. The Department of Labor estimates 4.6 million workers will be newly qualified for overtime, which is expected to directly affect employers beginning in 2016. How is trucking impacted? An overtime exemption for motor carriers is provided within the Fair Labor Standards Act. The exemption applies to any driver, their helper, loader, or mechanic employed by a motor carrier and whose duties affect the safety and operation of motor vehicles in the transportation on public highways of passengers or property in interstate or foreign commerce. An important note: this exemption does not address intrastate commerce; the assumption would be that drivers operating in intrastate commerce may be subject to overtime pay. In addition, the exemption does not apply to employee’s work affecting the operation of vehicles weighing 10,000lbs or less. One common misconception regarding the overtime exemption relates to who is defined as an employee engaged in “activities affecting safety.” As it stands today, this does not include dispatchers, office personnel, those who unload vehicles and those who load vehicles but are not responsible for the proper loading of it. This leaves employees with these job classifications subject to the new overtime rules if their salary is under the threshold. Action Items for Employers With these changes looking to take place for 2016, employers should carefully review and update their overtime policies as well as review employee job classifications as early as possible to be compliant with the rule. For more information, you can visit the Department of Labor’s Wage and Hour Division website at www.wagehour.dol.gov

Refrigerated coverage, often referred to as “reefer breakdown coverage” is essential coverage for any motor carrier who wishes to transport temperature-sensitive cargo.  Transporting goods across the country is already a risky business, so throwing in the additional risk of transporting perishable commodities can make the job much more challenging.  Whether you’re hauling fresh produce, seafood, dairy products, or any other refrigerated item, there are a variety of things that could potentially open a motor carrier up to unnecessary risk if the proper precautions are not taken. One of the simplest ways to avoid reefer breakdown claims is by making sure all drivers are properly trained to operate refrigeration units.  Making sure each driver checks the temperature gauges periodically throughout transit to ensure that the refrigeration unit is running correctly can help mitigate the risk of commodities spoiling. Drivers should keep a log (electronic or otherwise) of each inspection during the trip. This should include detailed maintenance and re-fueling logs. These logs can be very useful to an insurance company throughout a claim.  Performing an inspection before the trip can also help to point out any issues that could arise during delivery or if maintenance is needed.  Making sure to keep the unit fueled is also a major component that can very easily be overlooked during a time crunch. Motor Carriers along with the drivers should have clear communication with each shipper and/or broker to review and understand their requirements when hauling their goods. Many commodities can tolerate temperature swings of 5 or 10 degrees, but others require a constant temperature to keep from spoiling.  Some shippers might even require a constant temperature to be set for items that can actually tolerate some fluctuation.  Knowing these aspects ahead of time and maintaining detailed logs can keep perfectly acceptable cargo from being deemed spoiled due to the shipper’s requirements not being met. Every policyholder should become familiar with all cargo exclusions that might be listed in their insurance policy.  This is no different for refrigeration breakdown coverage.  Many times, this coverage comes with its own list of exclusions.  Sometimes the insurance carrier will allow you to haul fresh produce but does not allow meat or seafood as these items may spoil more quickly or have a higher risk of theft.  However, not all exclusions are specific to particular commodities. Some cargo forms will also exclude coverage for claims that arise out of operator error or will only cover the actual breakdown of the refrigeration unit.  If a driver sets the refrigeration unit to the wrong temperature and the load is rejected or the driver forgets to refuel during transit, this is an error on the driver’s part and may not be covered by insurance. Other insurance companies might require that a motor carrier keep detailed maintenance logs for reefer breakdown coverage to apply.  So if the reefer unit fails mid-delivery and there is no log to show when it was last inspected or when the last maintenance was performed then the claim may be denied. Policyholders need to communicate with their insurance agents regarding these risks to make sure the motor carrier is covered properly. Hauling refrigerated goods can prove to be very profitable if the right precautions are taken.  Sometimes the increased reward does not come without increased risk.  Ensuring that a motor carrier has the right training and procedures in place can mean the difference between a claim being covered or coverage being denied. Claims involving refrigerated goods tend to be more costly as there is a higher chance an entire load will be rejected.  Having proper driving training, and knowing the expectations of the shipper, as well as the insurance carrier, can save a motor carrier thousands of dollars in the event of a claim. References https://businessinsuranceusa.com/refrigerated-truck-insurance https://www.commercialtruckinsurancehq.com/refrigerated-truck-insurance https://www.colonialtruckinginsurance.com/programs/reefer-truck-insurance/ https://www.truckinginfo.com/article/story/2010/12/trailer-report-running-reefers-right.aspx

Making sure your drivers have quality trucks to drive can be an expensive task.  For many trucking companies, new equipment is being obtained via bank loan or it’s being leased from one of the many leasing companies available.  In either scenario, there is a potential gap in physical damage coverage between what the lien holder or leasing company values the equipment, versus what the standard insurance policy will cover.  This lease/loan gap in coverage can easily be addressed as long as business owners are reviewing contracts and notifying their insurance professionals of any loan or lease arrangements their company may have. To understand the coverage gap that exists, we first need to cover the standard valuation method used in most physical damage insurance policies.  This valuation method states the most an insurance carrier will pay in the event of a loss is the lesser/least of the ‘actual cash value’ of the damaged or stolen property, the cost of repairing or replacing the damaged or stolen property with other property of like kind or quality, the stated value for the damaged or stolen vehicle as indicated on an equipment schedule maintained with the insurance carrier, or the limit of insurance indicated on the physical damage policy.  “Lesser” or “least of” are keywords used by physical damage insurers in their valuation methods.  So let’s put together an example using the criteria below: Trucking Company ABC has a physical damage insurance policy with Insurer XYZ The policy has a per vehicle max limit of insurance of $150,000 The company has a leased truck (new) covered under the policy and documented on the schedule of insurance with the insurance carrier for $130,000 (what ABC deemed as appropriate) Nine months after ABC leases the new truck, it’s totaled in an accident.  Insurer XYZ uses the standard valuation language in determining how much ABC should be reimbursed for the loss.  Since the truck is totaled, Insurer XYZ will most likely reimburse ABC based on the actual cash value of the equipment……this means they won’t be getting the $150K max per vehicle limit of insurance and they won’t be getting $130K either (due to ‘lesser’ or ‘least of’ wording).  Insurer XYZ will likely obtain a few dealer quotes for the same type of truck and average them.  They’ll then likely take the VIN and all the specs of the truck and use NADA (www.nada.com) to obtain a valuation on the truck.  Using the average of the dealer quotes and valuation from NADA the insurer will then come up with a new average.  Adding in sales tax/title costs will then result in the reimbursement/fair market value they deem appropriate. So what does the scenario above have to do with lease/loan gap coverage?  Let’s assume the lease contract valued the equipment at $140K new with $1,000 of monthly depreciation.  This means that the contractual obligation to the leasing company at the time of loss was still $131,000.  If the actual cash value of the vehicle as deemed by Insurer XYZ turned out to be $110,000, then there would be a $21,000 gap in coverage which ABC trucking company would be responsible for.  To address this gap in coverage and contractual obligation to the leasing company or bank, a lease/loan gap endorsement should’ve been added to the physical damage policy.  Such an endorsement is designed for scenarios in which the valuation provided by an insurance carrier for a loss may differ from the equipment value stipulated in the lease/loan contract. The lease/loan gap endorsement may be configured in a few different ways depending on your company's needs and depending on what the insurance carrier can accommodate.  For instance, some insurance companies may opt to add a lease gap endorsement to your policy that simply requires you to list the vehicle value according to the lease/loan obligation.  In this scenario, the cost of the endorsement is the additional premium that would be paid due to the higher vehicle value(s) on the schedule maintained with the insurer.  Another lease gap scenario may be the addition of the endorsement for an additional charge.  The vehicle would still be listed on the schedule maintained with the insurance carrier for the actual cash value according to the insured; however, the endorsement would stipulate an additional amount of reimbursement available for vehicles under a lease/loan contract. The financial benefit of a lease/loan gap endorsement, when such a loss occurs, outweighs the cost of the endorsement itself.  Your insurance professional can help determine whether or not this exposure exists and what form of lease/loan gap endorsement will best meet your needs.

Many myths exist about captive insurance – and most are simply inaccurate, unhelpful, and holding far too many trucking companies back from achieving their best results. Regardless of the many misconceptions, we’re here to share the truth about member-owned group captives and the advantages they provide to best-in-class trucking companies. Myth 1 – My Company’s Too Small for a Captive One prevalent perception about captives is that they are reserved only for the largest companies. While it’s true that single-parent captives are generally formed by larger organizations, small to midsize companies can also enjoy the benefits of a captive by joining other like-minded companies in a member-owned group captive. Group captives specifically exist to bring together mid-sized businesses so they can gain the insurance negotiating power of their bigger competition. Yes, certain types of companies are stronger candidates for group captive insurance than others– primarily well-performing businesses that actively invest in their safety programs. These best-in-class companies that remain in the standard market can actually end up limiting their growth in the long run by subjecting themselves to the same adverse market as other businesses that might not be of the same caliber. Myth Debunked When it comes to who is best suited for a captive, it’s not only for the largest organizations. The truth is, only the most safety-conscious, financially strong, and best-performing companies are a good fit. Myth 2 – One Catastrophic Loss Will Bankrupt the Captive What happens if you have a million-dollar claim while in a captive? Despite common perception—the captive is not likely to face bankruptcy. Ultimately, this myth stems from a general misunderstanding of how captives truly work. When people hear ‘self-insurance,’ they often assume that means they are on the hook for every potential claim and dollar spent. In reality, part of the members’ premiums are allocated to the group’s loss fund to pay for claims (up to a certain retention), and the remaining goes towards a re-insurance program that protects members from any larger losses. Some companies may hesitate to take higher deductibles or retentions because of perceived uncertainty. However, this is exactly how insurance is designed to work and is most cost-effective when you retain and proactively manage as much risk as possible, and only use insurance for catastrophic losses. Myth Debunked Catastrophic claims are often unpredictable and can happen to even the safest companies. In the captive, part of your investment is always in reinsurance to limit the loss and protect members from larger-than-expected claims and any subsequent issues. Myth 3 – I’ll be Stuck Paying For Everyone Else’s Losses In the traditional insurance market, it’s no secret you are sharing risk with the entire industry – both the good and the bad. Regardless of your loss history, rates are impacted by the collective insurance marketplace, not your individual experience – meaning the best-performing companies are paying for those with poor performance and more claims. So what’s different in the captive? The most crucial differentiator is that you know who your risk-sharing partners are. You choose them. Members are all similarly situated trucking companies who share a commitment to safety and have common financial interests. Yes– by pooling your exposure and risk of loss, you have accepted the possibility of paying for the other’s losses. However, the captive is strategically managed to predict and control losses and members only assume risk in the smaller, more predictable loss layer – the remaining is protected by reinsurance. Myth Debunked In both the traditional market and in a group captive, there is risk-sharing – the difference is simply with whom. The captive is designed to group like-minded, safety-conscious companies that have a positive loss history and continue to manage risk and improve costs. Not to mention, group captives are specifically structured to retain only predictable losses and transfer catastrophic loss through reinsurance coverage to protect the captive. Myth 4 – Captives are More Expensive As covered earlier, in the traditional insurance market, companies transfer risk to a third-party insurer that collects a premium and requires a deductible – if you have a good loss history, the premium you pay subsidizes the other insureds whose losses are not as good. This option gives you little control and your good performance is to the benefit of the insurance carrier. While the upside to the traditional market is simplicity and low start-up costs, the disadvantage is often exorbitant rate hikes, capacity issues, and claim disputes – all meaning more expensive premiums and sunk costs. Captives have proven to be less costly and more efficient because the structure provides a premium rate that reflects the organization’s unique exposures, as opposed to market rates that reflect industry averages and typical exposures. While it’s true that there are upfront costs in a captive, these initial costs should be viewed as an investment. Captive insurance is generally part of a company’s long-term strategy, where the investment into the strategy typically generates a return in the form of dividends. Myth Debunked Captives are a true performance-based insurance solution. It’s an investment that generates an ROI, not an expense like a traditional insurance program. A well-run captive will reduce insurance costs, and improve cash flow and members will share in the underwriting profits that typically would go back 100% to your insurance carrier. Why Join A Captive? Choosing to join a member-owned group captive is a strategic business decision that requires a detailed assessment of your risk exposures, appetite for retaining risk, and long-term commitment to loss control. The key reasons so many Cottingham & Butler clients are choosing the captive over traditional insurance include: Minimize and stabilize the cost of insurance Customized insurance coverage Proactive risk and claims management Direct access to the reinsurance market Improve cash flow and return of underwriting profits Key Takeaways: There are plenty of myths that exist about captives, most of which are designed to make the programs seem scary and risky, but it’s important to remember: You don’t need to be a mega-corporation to qualify for a group captive, but your company should be financially sound and maintain a favorable loss history Reinsurance is built into the captive to protect members from catastrophic claims events Captive members share risk with only the best like-minded, safety-conscious companies who have a favorable loss history and are committed to managing risk and improving costs A captive is a long-term investment that reduces insurance costs, improves cash flow, and rewards great performance by sharing in the underwriting profits To determine if a member-owned group captive is right for your company, contact a member of the Cottingham & Butler transportation team.

As cyber attacks continue to rise at a staggering pace within the transportation sector– increasing 186% between June of 2020 and June of 2021– it’s become crucial to take advantage of the tools available to defer criminals from targeting your business. Multi-factor authentication (also commonly called MFA, 2FA or two-factor authentication) is a critical component of your ability to avoid becoming a victim of a cyber-attack.  If your organization completes electronic payments to and from clients, shares valuable client or employee data via email, or simply stores its financial data on devices, it is extremely important that, along with additional cyber-safety training, you consider a MFA solution. While no cyber security method is foolproof, using multi-factor authentication can add an extra layer of security to your online accounts. So how exactly does multi-factor authentication work? What Is Multi-Factor Authentication? While complex passwords can help deter cyber criminals, they can still be cracked. To further prevent cybercriminals from gaining access to employee accounts, MFA is key. Multi-factor authentication adds a layer of security that allows companies to protect against compromised credentials. Through this method, users must confirm their identity by providing extra information (e.g., a phone number or unique security code) when attempting to access corporate applications, networks and servers. With multi-factor authentication, it’s not enough to just have your username and password. To log in to an online account, you’ll need another “factor” to verify your identity. This additional login hurdle means that would-be cyber criminals won’t easily unlock an account, even if they have the password in hand. A more secure way to complete multi-factor authentication is to use a time-based one-time password (TOTP). A TOTP is a temporary passcode that is generated by an algorithm (meaning it’ll expire if you don’t use it after a certain period of time). With this method, users download an authenticator app, such as those available through Google or Microsoft, onto a trusted device. Those apps will then generate a TOTP, which users will manually enter to complete login. Why Multi-factor Authentication and Password Management Is Important Due to the increasing number and severity of cyber-attacks, and the ballooning costs associated, it has forced most insurers to more closely examine the security policies and procedures insureds have in place. History has shown that implementing MFA is incredibly effective at combating cyber-attacks, and as such, cyber insurers have begun requiring organizations to implement MFA in order to receive coverage. Obtaining cyber coverage without MFA in place is very difficult and without it, your business will most likely encounter less coverage options. Having become a standard part of the cyber insurance application, many underwriting partners will not even consider applicants who have not implemented some form of MFA on their devices. Proactively preparing for this is key to obtaining the best coverage on the market. Furthermore, ongoing password management can help prevent unauthorized attackers from compromising your organization’s password-protected information. Effective password management protects the integrity, availability and confidentiality of an organization’s passwords. Above all, you’ll want to create a password policy that specifies all of the organization’s requirements related to password management. This policy should require employees to change their password on a regular basis, avoid using the same password for multiple accounts and use special characters in their password. As a client of Cottingham & Butler, we want to work with you to understand why implementing MFA into your IT practices is so critically important and provide you with solutions to make the process as seamless as possible. Some solutions we provide include: Vulnerability scans of your network to identify potential opportunities to protect your business. Consulting services to help develop a cyber strategy. Implementation services that are designed to help you select, design, and implement a MFA solution as well as other key network security components. As a business owner, you can choose to improve security and protect your business proactively, or sit back and take a reactive approach. Here at Cottingham & Butler, we firmly believe it’s not if, but when and how severe, which is why we recommend completing our free cyber insurance risk assessment to know your gaps and build a plan to protect your operations from the inevitable. Contact your Cottingham & Butler representative to learn more.

The past year has seen labor shortages across industry lines. According to a recent study from the Society for Human Resource Management, nearly 90% of businesses are having a hard time filling open positions. These shortages are a result of various factors, many of which are related to individuals reevaluating their employment priorities due to the COVID-19 pandemic. Such shortages can carry numerous consequences for businesses. Specifically, a depleted workforce increases the likelihood of current employees being overworked and employers having to hire inexperienced or less qualified workers to fill available positions. Together, these issues can cause employees to become prone to making mistakes or getting involved in accidents on the job—thus creating elevated business liability risks. With this in mind, employers must do what they can to mitigate labor shortages and related liability concerns. Steps Businesses Can Take To combat labor shortages, employers should consider the following guidance: Increase pay. Providing more competitive wages can help employers retain existing workers and attract new employees within their respective industries. Offering sign-on bonuses may also improve employers’ hiring capabilities. Offer additional benefits. A range of employment benefits can assist employers in maintaining an ample workforce. These benefits may include remote work capabilities, flexible scheduling, additional paid time off and well-being stipends. Reward existing employees. Employers can also use rewards and incentives to help retain current workers. These incentives may include monthly bonuses for top performers or extra discounts on business merchandise (if applicable). Limit business hours. To ensure existing employees feel properly supported in their roles, employers may need to adjust their business hours. Doing so can prevent employees from being overworked amid understaffed shifts. To minimize potential liability risks caused by labor shortages, businesses should consider these measures: Ensure effective onboarding processes. Especially if labor shortages require employers to hire inexperienced workers, it’s critical to have proper onboarding protocols in place. These protocols can equip new employees with the knowledge and resources they need to succeed in their roles. Provide routine training. Employers should have all of workers—regardless of experience—engage in regular, job-specific safety training. This training will help promote a safety culture and minimize the risk of workplace accidents and injuries (as well as related liability concerns). Schedule regular check-ins. Finally, it’s vital for employers to check in with their workers on a frequent basis. Keeping such consistent communication will motivate employees to share any safety concerns or other work-related issues that arise, allowing employers to remedy these problems before they cause liability incidents. For more information, contact us or reach out to your Cottingham & Butler representative today.

On April 29, 2022, the IRS released Revenue Procedure 2022-24 to provide the inflation-adjusted limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2023. The IRS is required to publish these limits by June 1 of each year. These limits include: The maximum HSA contribution limit; The minimum deductible amount for HDHPs; and The maximum out-of-pocket expense limit for HDHPs. These limits vary based on whether an individual has self-only or family coverage under an HDHP. Eligible individuals with self-only HDHP coverage will be able to contribute $3,850 to their HSAs for 2023, up from $3,650 for 2022. Eligible individuals with family HDHP coverage will be able to contribute $7,750 to their HSAs for 2023, up from $7,300 for 2022. Individuals age 55 or older may make an additional $1,000 “catch-up” contribution to their HSAs. The minimum deductible amount for HDHPs increases to $1,500 for self-only coverage and $3,000 for family coverage for 2023 (up from $1,400 for self-only coverage and $2,800 for family coverage for 2022). The HDHP maximum out-of-pocket expense limit increases to $7,500 for self-only coverage and $15,000 for family coverage for 2023 (up from $7,050 for self-only coverage and $14,100 for family coverage for 2022). Action Steps Employers that sponsor HDHPs should review their plan’s cost-sharing limits (minimum deductibles and maximum out-of-pocket expense limit) when preparing for the plan year beginning in 2023. Also, employers that allow employees to make pre-tax HSA contributions should update their plan communications for the increased contribution limits. This Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

The proliferation of benefits administration systems has changed the landscape of employee benefits, enabling employers to offer more benefits to employees with significant efficiency gains in enrollment, billing, and communicating eligibility to insurance companies and claims payors. Technology has significantly reduced human error with paper forms and keying in incorrect data. However, benefits administration systems have their own challenges and require correct building/programming of plan rules to ensure accurate enrollments. There is one way to get it right and many ways for systems to be wrong. The benefit plan feature with the greatest opportunity for incorrect administration is Voluntary Life Evidence of Insurability rules (EOI). These are the rules specifying when employees can elect Life insurance without requiring medical underwriting and how much benefit they can obtain. Not all benefits administration systems can manage the complexity of these rules (age, timing, and income rules all at the same time) or can manage the rules completely without regular human intervention. If the system does correctly limit election amounts or the human intervention step to approve or pend elections does not happen, the full election will show as active, and the corresponding payroll deduction will be taken from the employee’s paycheck. However, in the event of a claim, the insurance company is only responsible to pay the benefit amount the employee qualified for under the written rules of the policy. There have been numerous lawsuits over the past few years on this exact situation. The rulings vary by district court as to IF anyone is liable to pay the claim (usually, yes someone is) and WHO is liable – the employer, the insurance company, or both. Is only the employer liable as their system did not manage the rules correctly? Does the insurance company infer liability as they passed the responsibility of eligibility management back to the employer but collected premiums without eligibility verification? You may wonder why the technology vendor providing the benefits administration system is not mentioned. Read your vendor contract. Regardless, the situation is a bit of a mess to the extent that Prudential recently entered into an agreement with the DOL stipulating how they would manage these claims situations without going to court. The short answer to that agreement is Prudential will pay the claim, but the employer will compensate Prudential, and everyone will make sure the plan rules are correct in the employer’s benefits administration system. No, we do not expect every insurance company to enter into an agreement with the DOL, but they are all watching the courts and DOL very carefully. Depending on the circumstances, some insurance companies are still in the deny first phase of strategy. Others will pay the claim with documentation of what happened and confirmation of system audit and correction – sometimes requiring a financial agreement with the employer. Other companies have stated they will agree to pay the first claim error of an employer’s plan with written agreement confirmation the employer system rules have been corrected, and further incorrect enrollment claims will not be paid. The purpose of this article is not to scare anyone away from benefits administration systems or from offering Voluntary Life or other voluntary plans. The advantages of technology and the evolution in the value of voluntary plans far outweigh the negatives. The purpose is to make you aware and provide tips to help avoid evidence of insurability (EOI) claims challenges. Confirm the Evidence of Insurability rules of every plan, every year. Contact your insurance companies and ask them to confirm the rules of your plans for the year. Confirm the system rules are correct for annual enrollment and ongoing enrollments, every year. Some tech vendors may try to take shortcuts in programming rules for “full open enrollment” and not take steps to verify transition to ongoing enrollment rules or they may not understand the difference between a “one time” open enrollment offer vs the ongoing plan rules. Test EOI rules in your system with actual employee scenarios before beginning annual enrollment. Specifically, test situations of employees increasing elections or adding coverage for the first time as a late entrant. Trust, but verify. Confirm the benefit deduction data flowing to payroll is based on approved elections and not pended elections. It is critical the payroll deduction matches the approved amount based on plan rules. If an employee completes EOI and is approved for additional benefits, the benefits and deduction amount will start at a future date communicated by the insurance company, retro deductions will not be required. Review what you are communicating to employees at new hire or annual enrollment and be sure your materials include disclaimers regarding eligibility. If necessary, seek guidance from the insurance company on appropriate disclaimers.

The Situation A leading Milk Cooperative in the U.S., responsible for marketing over 5 billion pounds of milk annually, faced a daunting predicament. Their insurance program was subject to an unprecedented triple-digit rate increase, accompanied by a drastic reduction in coverage limits. The stakes were high, and decisive action was imperative to safeguard the cooperative's interests. Our Results In response to the pressing challenges, Cottingham & Butler swiftly mobilized its specialized Food & Agribusiness platform. With a keen understanding of the industry's intricacies, we embarked on a strategic intervention aimed at optimizing coverage and containing costs without compromising on protection. Rate and Premium Savings Mid-term Cancel Re-write: Through adept restructuring of the property program, we orchestrated a mid-term cancel re-write that yielded substantial savings. The property premium was slashed by an impressive $675,000, resulting in a remarkable 28% reduction. Coverage Enhancements Expanded Property Limits: By augmenting the total property limit by $50 million, we bolstered the cooperative's resilience against unforeseen contingencies. Elevated Flood & Quake Protection: Recognizing the significance of comprehensive coverage, we substantially raised the Flood & Quake limits from $10 million to $150 million. Removal of Detrimental Coverages: Several restrictive coverages, including the burdensome 1/12th limit of indemnity attached to the business, were judiciously eliminated to streamline the insurance framework. “After a painful insurance renewal, we embarked on a quest to find a new broker who could partner with us, to not only right the program in the short-term, but provide creative and long-term solutions into the future. After meeting with Cottingham & Butler, the choice was clear. They stood above the rest due to their partnership philosophy, strong focus on safety and risk management, and extensive knowledge and expertise from their passionate team.” Safety Management Innovative Technological Integration: Introducing our proprietary fire and risk technology platform, we revolutionized safety management protocols. This cutting-edge solution proved instrumental in mitigating the frequency and severity of unique operational risks. Streamlined Safety Processes: Leveraging the expertise of Cottingham & Butler's in-house safety team, we optimized safety protocols and eliminated the dependency on a third-party safety company. This strategic realignment resulted in annual savings of $60,000, enhancing operational efficiency. Through meticulous analysis and strategic interventions, Cottingham & Butler successfully navigated the complex landscape of insurance challenges faced by the Milk Cooperative. Our tailored solutions not only delivered substantial cost savings but also fortified the cooperative's risk management framework, ensuring long-term sustainability and resilience in an ever-evolving industry landscape.