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Sydney Connolly, a Dubuque native, had grown up hearing about Cottingham & Butler within the community. In 2019, Sydney decided to apply for the summer internship program, having heard from a number of peers about their positive experiences. “What drew me to C&B were the opportunities. I struggled with choosing a major in college and deciding what I wanted to do after graduating. The insurance industry was the last thing on my mind, but C&B seemed like a place that would let you create your own path forward and would allow for continuous growth.” The internship gave Sydney a crash course in the complex industries of insurance and wellness, as well as an introduction to the unique culture of Cottingham & Butler. In 2020, Sydney interned once again, eager to continue exploring what the company had to offer. Following her graduation, Sydney came on-board full-time as a Benefits Technology Analyst, where she helps implement benefit administration systems for clients, leveraging her innovative sensibility and attention to detail to ensure accurate information is available to employees and employers alike. “The most satisfying thing about this job is getting to develop relationships with our clients and working with them and the rest of the benefits team to come up with creative solutions to solve their problems.” Sydney attributes a good portion of her professional development to the people that have surrounded her from day one. “Starting your first professional job out of school is intimidating, but the team you’re surrounded with gives you an unmatched network of support and mentorship that encourages success and independence,” Sydney said. “It’s great to see the innovative things C&B does to help our clients, but it’s even great that they give you the skills and tools you need to become part of that innovation process where you feel like you’re really making an impact.” >> Ready to join a team that provides you with the flexibility and independence to develop your ideas? Explore our careers page and discover where you belong!

Earlier this year, the Departments of Labor, Health and Human Services, and the Treasury (Departments) issued FAQ guidance on the prohibition of gag clauses under the transparency provisions of the Consolidated Appropriations Act of 2021 (CAA). These FAQs require health plans and health insurance issuers to submit their first attestation of compliance with the CAA’s prohibition of gag clauses by Dec. 31, 2023. Plans and issuers must annually submit an attestation of compliance with these requirements to the Departments. The first attestation is due by Dec. 31, 2023, covering the period beginning Dec. 27, 2020, through the date of attestation. Subsequent attestations, covering the period since the last attestation, are due by Dec. 31 of each following year. Prohibitions on Gag Clauses A gag clause is a contractual term that directly or indirectly restricts specific data and information that a health plan or issuer can make available to another party. Effective Dec. 27, 2020, the CAA generally prohibits group health plans and issuers offering group health insurance from entering into agreements with health care providers, TPAs or other service providers that include certain gag clause language. Specifically, these contracts cannot restrict a plan or issuer from: Providing provider-specific cost or quality-of-care information or data to referring providers, the plan sponsor, participants, beneficiaries or enrollees (or individuals eligible to become participants, beneficiaries or enrollees of the plan or coverage); Electronically accessing de-identified claims and encounter information or data for each participant, beneficiary or enrollee upon request and consistent with privacy rules under the Health Insurance Portability and Accountability Act (HIPAA), the Genetic Information Nondiscrimination Act (GINA), and the Americans with Disabilities Act (ADA); and Sharing information or data described in (1) and (2) above or directing such information to be shared with a business associate, consistent with applicable privacy rules. For example, if a contract between a TPA and a health plan provides that the plan sponsor’s access to provider-specific cost and quality-of-care information is only at the discretion of the TPA, that contractual provision would be considered a prohibited gag clause. Plans and issuers must ensure their agreements with health care providers, networks or associations of providers, TPAs or other service providers offering access to a network of providers do not contain provisions that violate the CAA’s prohibition of gag clauses. Gag Clause Compliance Attestations Health plans and issuers must annually submit an attestation of their compliance with the CAA’s prohibition of gag clauses to the Departments. The first attestation must be submitted no later than Dec. 31, 2023, covering the period beginning Dec. 27, 2020, through the date of the attestation. Subsequent attestations are due by Dec. 31 of each following year, covering the period since the last attestation. According to the Departments’ FAQs, health plans and issuers that do not submit their attestations by the deadline may be subject to enforcement action. Covered Health Plans The attestation requirement applies to fully insured and self-insured group health plans, including ERISA plans, non-federal governmental plans and church plans. Additionally, this requirement applies regardless of whether a plan is considered “grandfathered” under the ACA. However, plans that only provide excepted benefits and account-based plans, such as health reimbursement arrangements (HRAs), are not required to submit an attestation. Relying on Issuers/TPAs to Submit Attestation With respect to fully insured group health plans, the health plan and the issuer are each required to submit a gag clause compliance attestation annually. However, when the issuer of a fully insured group health plan submits a gag clause compliance attestation on behalf of the plan, the Departments will consider the plan and issuer to have satisfied the attestation submission requirement. Employers with self-insured health plans can satisfy the gag clause compliance attestation requirement by entering into a written agreement under which the plan’s service provider, such as a TPA, will provide the attestation on the plan’s behalf. However, even if this type of agreement is in place, the legal requirement to provide a timely attestation remains with the health plan. Fully-insured carriers and self-funded plan TPAs will be taking one of three approaches: Provide and submit the attestation on behalf of the employer plan sponsor (least likely); Provide the attestation, which will require the employer plan sponsor to submit on their own (most likely); Refuse to provide the attestation, which will require the employer plan sponsor to determine whether their plan is compliant with the gag clause prohibition and submit on their own (unfortunately possible). Attestation Website The Departments launched a website through the Centers for Medicare and Medicaid Services for health plans and issuers to submit their gag clause compliance attestations. The Departments have also provided instructions for submitting the attestation, a system user manual, and a reporting entity Excel template for plans and issuers to submit the required attestation, all of which are available here. Action Items Note the approach of your carrier or TPA. These organizations are beginning to publish their response processes and will continue to do over the next few months. If you haven’t heard from your carrier or TPA, be patient and count on us to keep you informed about your compliance attestation obligations. If you must submit the attestation on your own, we will support your efforts to submit to the CMS website, utilizing the instructions published. Unfortunately, we cannot submit on your behalf due to how the website is configured – it must be either the carrier or plan sponsor. If it becomes apparent that you will be required to determine gag clause compliance on your own, we will support those efforts as well. We are in the process of gathering information from carriers and TPAs, evaluating if a tool can be developed or a third-party resource can be utilized. Please stay tuned. As always, if you have any questions about your obligations or your carrier/TPA’s response, please contact your trusted Cottingham and Butler service team member.

Contract bonds play a crucial role in the construction industry, providing financial guarantees and risk mitigation for various projects. However, recent trends and challenges have presented a bumpy path to success for both general contractors and sureties. The Impact of Contract Bonds on Construction Industry Challenges General contractors are paying a higher price for operating lines of credit. Interest rates for such credit lines have been on the rise. This increase in borrowing costs adds to the overall project expenses, impacting profitability and liquidity. Supply chain disruptions have led to material shortages, delays, and increased costs. These issues have necessitated meticulous planning, alternative sourcing strategies, and proactive project management to mitigate the adverse impacts on construction timelines and budgets. Sourcing skilled and reliable labor has been a problem for years and has only worsened in recent times. An aging workforce, declining interest in the trades among younger generations, and increased competition for talent leave contractors facing significant labor shortages. This not only affects project timelines but also puts additional strain on project costs as contractors may need to offer higher wages and benefits to attract and retain talent. Beyond these challenges, general contractors also face mounting soft costs. Expenses related to fuel, maintenance, insurance, and employees have all been driven up by inflation. Navigating the Changing Landscape with Contract Bonds The residential construction sector, which experienced a boom in recent years, is slowing. While the demand for housing remains strong, the ability to deliver projects at competitive prices becomes increasingly difficult for general contractors. This downward trend puts pressure on residential contractors to diversify and explore new avenues for growth. As a result, many are moving into the commercial construction field which will only further disrupt an unstable pricing and competition environment. We’ve seen many jobs in the $2M to $20M range with over 10 bidders and bid spreads running wild. The private commercial construction sector is also experiencing a shift. As the economy adjusts to changing circumstances, banks are adopting a more conservative approach in approving additional project limits, new project types, and projects in new territories. This cautious stance by banks has implications for developers seeking financing and in how sureties evaluate project risks; proof of private project funding is becoming a hard requirement rather than a simple question. Despite the challenges faced in the private sector, public work presents a contrasting picture. Public infrastructure projects, backed by government funding, have seen a surge in activity. Investment in infrastructure development, ranging from transportation to public facilities, has been a priority in many regions. The robust public sector presents opportunities for contractors to secure projects and sustain their operations amid the challenges faced in the private sector. When you combine these factors, the future is very clear. You need an unparalleled, partnership-minded construction insurance and surety team at your side to address this complex and ever-evolving suite of Insurance, Surety, Builder’s Risk, and Wrap-Up and Captive strategies. For more timely updates regarding the Surety, Finance & the Construction Marketplace, contact Ken today. Ken Fontana, Surety Manager Cottingham & Butler’s Risk Management Division 563.587.6341 | kfontana@cottinghambutler.com Ken began his career in the insurance industry in 1996 at the corporate offices of Horace Mann Insurance. After relocating to Wyoming, he spent several years managing corporate safety programs, insurance, and claims as the RMO for a nationally exposed company engaged in numerous state and federal contracts including operations at three military bases, the Denver Federal Center, and HUD program management. He has been a licensed insurance agent for 20 years with the last 10 focused strictly on contract and commercial surety. Ken’s relationships with the nation’s top sureties and his experience give him a uniquely well-rounded approach to your overall surety, bonding, and subcontractor default insurance needs.

Preventing workplace injuries and fatalities is crucial for organizations of all sizes and across sectors. Without safety initiatives in place, organizations could experience increased incident rates, higher workers’ compensation costs, reduced productivity levels, and diminished staff morale. Fortunately, various technological solutions can help organizations mitigate potential hazards and protect their employees from harm. In particular, artificial intelligence (AI) has emerged as a valuable safety tool. This article provides more details on AI technology, outlines how it affects workplace safety, and highlights the ways it can help specific industries identify and minimize occupational hazards. Overview of AI Technology AI technology consists of machines, computer systems, and other devices capable of simulating human intelligence processes. In other words, this technology can perform a variety of cognitive functions typically associated with the human mind, such as observing, learning, reasoning, interacting with its surroundings, problem-solving, and engaging in creative activities. Workplace applications of AI technology are widespread, but some of the most common include the following: Computer Vision Technology: This technology can be paired with surveillance systems, drones, wearable sensors, and smart devices to help monitor images and video footage captured at a worksite. When combined with additional occupational data (e.g., time, location, and operational guidelines), such technology can also detect potential worksite issues, deliver alerts regarding these issues, and provide suggestions to avoid them. Natural Language Processing Systems: Sometimes called chatbots, these systems can analyze both written sources and spoken details to extract key information at a rapid pace, producing in-depth reports and summarizing worksite data in seconds. Predictive and Prescriptive Analytics Engines: Such technology relies on existing research and worksite documentation to help predict future scenarios and offer recommendations for successful outcomes. How AI Technology Affects Workplace Safety Organizations could leverage AI technology in several different ways to help boost their workplace safety efforts. Specifically, such technology can be utilized to accomplish the following initiatives: Hazard recognition—AI technology can help improve overall worksite visibility and call attention to hazardous situations (e.g., fallen objects, clutter, and debris) before they cause injuries. Further, this technology can identify workplace trends or patterns that have the potential to cause incidents going forward and outline steps to correct these concerns. Certain AI technology can even help catch unsafe behaviors or possible medical conditions displayed by employees in real-time and provide immediate guidance. For example, such technology may detect that an employee is showing signs of fatigue while operating heavy machinery and suggest that the worker take a break to rest and recover before continuing the task. Employee training Implementing AI technology within workplace safety training can give employees the opportunity to experience realistic simulations of different hazards they may encounter in their roles and review proper responses in a controlled setting, such as how to wear personal protective equipment (PPE) correctly or react to a chemical spill. Employees can also use AI chatbots on the job to obtain key information from workplace safety manuals or policies and get answers to any other safety-related questions prior to starting a task (e.g., requesting tips for manually lifting a large item). Equipment maintenance AI technology can help assess workplace equipment for wear and tear or other types of damage and deliver notifications when it’s time for periodic maintenance or critical repairs, thus reducing the risk of such equipment malfunctioning and causing serious incidents and injuries. In some cases, this technology could also offer detailed maintenance instructions to help employees take greater ownership in caring for equipment, promoting a safer and more efficient work environment. Incident detection and reporting Besides recognizing hazards, AI technology can quickly identify when workplace incidents and injuries occur (e.g., computer vision technology detecting an employee slipping and falling on the floor), paving the way for timely response measures and potentially improving recovery outcomes. Additionally, AI chatbots could help expedite incident reporting processes through the use of voice transcription features, as well as allow for more advanced data analyses to determine incident causes and prevent similar scenarios in the future. Safety compliance Finally, AI technology can help bolster compliance with applicable workplace safety regulations— whether it’s OSHA or industry-specific standards—by monitoring employees for noncompliant behaviors (e.g., skipping essential safety protocols or neglecting to wear necessary PPE) and ensuring worksite documentation meets all relevant requirements. Ways AI Technology Benefits Specific Industries Here are some examples of how AI technology can help identify and minimize occupational hazards within certain sectors: Construction As it pertains to the construction industry, AI technology can allow for more timely fall detection among employees who work at heights. In addition, such technology can be paired with wearable sensors or smartwatches to monitor employees’ vital signs and detect early indicators of heat-related illnesses while working outdoors, significantly reducing the likelihood of heatstroke and related complications, or—in severe cases—fatalities. Manufacturing In the manufacturing industry, AI technology can perform some of the most difficult and dangerous tasks with ease, removing the need for employees to complete these activities manually and eliminating the risk of related errors and injuries. For instance, such technology can inspect elevated worksites, hazardous structures, and production equipment in areas that are hard for employees to access via drones. Conclusion As a whole, it’s evident that AI technology can make all the difference in helping organizations improve their workplace safety initiatives and minimize potential incidents and injuries. Contact us today for additional risk management solutions.

Strategies for Attracting and Retaining Board Members In today’s challenging labor market, it has become increasingly difficult for organizations to attract and retain top talent, especially as it pertains to their board members. Consequently, organizations that lack effective senior leadership teams will be less likely to meet operational demands, accomplish company goals, and ensure overall business success. What’s worse, organizations without experienced and trustworthy board members could also face heightened directors and officers liability (D&O) exposures and be more susceptible to costly workplace litigation. With this in mind, organizations need to take steps to maintain talented senior leadership teams. Here are some valuable board member attraction and retention strategies: Set clear expectations. It’s best for organizations to carefully assess their key initiatives and determine specific skill sets and qualifications their board members should possess to help contribute to these goals. From there, organizations can create written job descriptions that outline clear responsibilities for their senior leadership teams, thus allowing them to identify their ideal candidates. Some organizations may even benefit from establishing a committee of existing board members responsible for recruiting and vetting new senior leaders. Offer support. Organizations can set new board members up for success by leveraging thorough orientation processes, conducting frequent check-ins, and having experienced senior leaders serve as their mentors. Additionally, organizations should ensure their board members receive ongoing career development and personal growth opportunities by providing plenty of educational resources and routine training. Establish a strong culture. Board members are more likely to keep working for a company with a positive culture. As such, organizations should make it a priority to establish workplace policies that promote empathy, encouragement, transparency, accountability, and inclusivity. Give feedback and recognition. As board members adjust to their roles, organizations should provide these individuals with regular feedback on their performance and ways they can continue to improve. When senior leaders display significant growth or achieve major initiatives, organizations can formally recognize them through companywide communications and celebrations. Provide compensation and benefits. If possible, organizations should consider compensating board members for their time and expertise with competitive salaries and benefits packages. Purchase D&O insurance. This coverage can provide senior leaders with financial protection following managerial decisions that negatively impact their organizations. D&O insurance may cover legal fees, settlements, and other costs related to board members’ defense. If organizations don’t have ample D&O insurance programs, it’s unlikely that they will be able to attract and retain senior leaders, given the potential risks involved. Organizations should consult insurance professionals to discuss their particular coverage needs. Best Practices for Navigating EPL Claims Any company that has employees is a potential target for an employment practices liability (EPL) lawsuit. These lawsuits can be financially draining for impacted businesses, even if they’re ultimately found not liable. Responding to and mitigating EPL claims requires company executives to be proactive by establishing consistent practices regarding mediation protocols, recordkeeping, and the utilization of external parties. Mediation and Arbitration Businesses can often minimize EPL litigation costs by having a third party hear claims and mediate resolutions, also called alternative dispute resolution (ADR). Many times, plaintiffs sue for damages that exceed the amounts they would have settled for with ADR. Speedy mediation and arbitration can reduce the lost wages an employee requests, limit how much time a company spends preparing for a case, and spare both sides the costs of going to trial. However, ADR isn’t a one-size-fits-all approach to handling EPL claims. Mediation and arbitration cannot protect a company from charges brought by any regulatory branch. Additionally, mediation and arbitration often end with a company having to pay some kind of award to the claimant, even if the company is not legally at fault. Yet, compared to litigation fees, these awards are typically less than the costs of a successful defense in court. Recordkeeping If ADR isn’t an option and a company must handle an EPL claim in court, workplace documentation can serve as powerful evidence to bolster its case against the claim. Established company policies, such as an employee handbook and records of employee training, set the standard for all company conduct and can be a major advantage in court. An investigator or jury is less likely to find a business guilty if it has records illustrating sound employment practices. Alternatively, the absence of any documentation could be seen as an effort to cover up or avoid evidence. Further, any attempt to intentionally misfile or hide company records could be considered an obstruction of justice. External Parties In addition to relying on workplace documentation, any company facing an EPL lawsuit should seek advice from legal counsel and insurance professionals to properly investigate and handle the incident. Time is essential for attorneys and insurance experts to gather information and formulate effective response measures. Steps businesses can take to assist these external parties may include contacting them as soon as charges are made, obtaining witness statements from any employees who observed or were involved in the incident at hand, compiling any company records associated with the plaintiffs, and establishing a timeline of events. EPL Insurance When an EPL claim goes to court, it is up to the employer’s attorneys, workplace records, and insurance professionals to protect the company from potential damages. Even if an employer is able to avoid punitive damages, the defense fees alone can cause financial strain. An EPL insurance policy can help protect businesses from the costs of such litigation. Contact us today to discuss EPL coverage options. This document is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

The past few years have seen artificial intelligence (AI) surge in popularity among both businesses and individuals. Such technology encompasses machines, computer systems, and other devices that can simulate human intelligence processes. In other words, this technology can perform a variety of cognitive functions typically associated with the human mind, such as observing, learning, reasoning, interacting with its surroundings, problem-solving, and engaging in creative activities. Applications of AI technology are widespread, but some of the most common include computer vision solutions (e.g., drones), natural language processing systems (e.g., chatbots), and predictive and prescriptive analytics engines (e.g., mobile applications). While this technology can certainly offer benefits in the realm of cybersecurity—streamlining threat detection capabilities, analyzing vast amounts of data, and automating incident response protocols—it also has the potential to be weaponized by cybercriminals. In particular, cybercriminals have begun leveraging AI technology to seek out their targets more easily, launch attacks at greater speeds and in larger volumes, and wreak further havoc amid these attacks. As such, businesses must understand the cyber risks associated with this technology and implement strategies to minimize these concerns. This article outlines ways cybercriminals can utilize AI technology and provides best practices to help businesses safeguard themselves against such weaponization. Ways Cybercriminals Can Leverage AI Technology AI technology can help cybercriminals conduct a range of damaging activities, including the following: Creating and distributing malware—In the past, only the most sophisticated cybercriminals were capable of writing harmful code and deploying malware attacks. However, AI chatbots are now able to generate illicit code in a matter of seconds, permitting cybercriminals with varying levels of technical expertise to launch malware attacks with ease. Although current AI technology writes more basic (and often bug-ridden) code, its capabilities will likely continue to advance over time, thus posing more substantial cyberthreats. In addition to writing harmful code, some AI tools can also generate deceptive YouTube videos claiming to be tutorials on how to download certain versions of popular software (e.g., Adobe and Autodesk products) and distribute malware to targets’ devices when they view this content. Cybercriminals may create their own YouTube accounts to disperse these malicious videos or hack into other popular accounts to post such content. To convince targets of these videos’ authenticity, cybercriminals may further utilize AI technology to add fake likes and comments. Cracking Credentials Many cybercriminals rely on brute-force techniques to reveal targets’ passwords and steal their credentials to then utilize their accounts for fraudulent purposes. Yet, these techniques may vary in effectiveness and efficiency. By leveraging AI technology, cybercriminals can bolster their password-cracking success rates, uncovering targets’ credentials at record speeds. A recent cybersecurity report found that some AI tools are capable of cracking more than half (51%) of common passwords in under a minute and over two-thirds (71%) of such credentials in less than a day. Deploying Social Engineering Scams Social engineering consists of cybercriminals using fraudulent forms of communication (e.g., emails, texts and phone calls) to trick targets into unknowingly sharing sensitive information or downloading harmful software. It repeatedly reigns as one of the most prevalent cyberattack methods. Unfortunately, AI technology could cause these scams to become increasingly common by giving cybercriminals the ability to formulate persuasive phishing messages with minimal effort. It could also clean up grammar and spelling errors in human-produced copy to make it appear more convincing. According to the latest research from international cybersecurity company Darktrace, social engineering scams involving sophisticated linguistic techniques have already risen by 135%, suggesting an increase in AI-generated communications. Identifying Digital Vulnerabilities When hacking into targets’ networks or systems, cybercriminals usually look for software vulnerabilities they can exploit, such as unpatched code or outdated security programs. While various tools can help identify these vulnerabilities, AI technology could permit cybercriminals to detect a wider range of software flaws, therefore providing additional avenues and entry points for launching attacks. Reviewing Stolen Data Upon stealing sensitive information and confidential records from targets, cybercriminals generally have to sift through this data to determine their next steps—whether it’s selling this information on the dark web, posting it publicly or demanding a ransom payment in exchange for restoration. This can be a tedious process, especially with larger databases. With AI technology, cybercriminals can analyze this data much faster, allowing them to make quick decisions and speed up the total time it takes to execute their attacks. In turn, targets will have less time to identify and defend against such attacks. Tips to Protect Against Weaponized AI Technology Businesses should consider the following measures to mitigate their risk of experiencing cyberattacks and related losses from weaponized AI technology. Uphold proper cyber hygiene. Such hygiene refers to habitual practices that promote the safe handling of critical workplace information and connected devices. These practices can help keep networks and data protected from various AI-driven cyberthreats. Here are some key components of cyber hygiene for businesses to keep in mind: Requiring employees to use strong passwords (those containing at least 12 characters and a mix of uppercase and lowercase letters, symbols and numbers) and leverage multifactor authentication across workplace accounts Backing up essential business data in a separate and secure location (e.g., an external hard drive or the cloud) on a regular basis Equipping workplace networks and systems with firewalls, antivirus programs and other security software Providing employees with routine cybersecurity training to educate them on the latest digital exposures, attack prevention measures and response protocols Engage in network monitoring. This form of monitoring pertains to businesses utilizing automated threat detection technology to continuously scan their digital ecosystems for possible weaknesses or suspicious activities. Such technology typically sends alerts when security issues arise, allowing businesses to detect and respond to incidents as quickly as possible. Since time is of the essence when it comes to handling AI-related threats, network monitoring is a vital practice. Have a plan. Creating cyber incident response plans can help businesses ensure they have necessary protocols in place when cyberattacks occur, thus keeping related damages at a minimum. These plans should be well-documented and practiced regularly and should address multiple cyberattack scenarios (including those stemming from AI technology). Purchase coverage. Lastly, it’s imperative for businesses to secure adequate insurance and financially safeguard themselves from losses that may arise from the weaponization of AI technology. It’s best for businesses to consult trusted insurance professionals to discuss specific coverage needs. Conclusion Looking forward, AI technology is likely to contribute to rising cyberattack frequency and severity. By staying informed on the latest AI-related developments and taking steps to protect against its weaponization, businesses can maintain secure operations and minimize associated cyberthreats. Contact us today for more risk management guidance. This Cyber Risks & Liabilities document is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

PFAS Regulations and Their Impact on Drinking Water Standards The Environmental Protection Agency’s (EPA) new proposed drinking water standard, announced on Tuesday, is one of the many PFAS-related actions that legal experts anticipate from state, federal and international regulators this year. EPA's Proposed Drinking Water Standard and Its Significance Short for per- and poly-fluoroalkyl substances, PFAS are synthetic chemicals found in nonstick cookware, firefighting foam, and food packaging, among other products. Also called “forever chemicals,” PFAS do not naturally degrade and are difficult to remediate. Researchers have linked PFAS exposure to harmful health effects in both humans and animals. If finalized, the EPA’s regulation would require public water systems to monitor for six types of PFAS and to notify the public if levels exceed regulatory standards. In the announcement, EPA predicted the proposed rule could, “over time, prevent thousands of deaths and reduce tens of thousands of serious PFAS-attributable illnesses.” “Communities across this country have suffered far too long from the ever-present threat of PFAS pollution,” EPA Administrator Michael Regan said in a statement. “That’s why President Biden launched a whole-of-government approach to aggressively confront these harmful chemicals, and the EPA is leading the way forward.” Challenges and Legal Implications of PFAS Regulation More than 20 states have already passed their own drinking water standards, resulting in a patchwork of varying acceptable levels, according to a report from law firm Bryan Cave Leighton Paisner (BCLP). Meanwhile, the European Union is considering a ban on the production and use of PFAS, including on imported products, various media outlets reported. Following a review that’s currently underway, the European Commission and member states will vote on the proposed ban, according to Clyde & Co. Beyond regulation, companies that have PFAS in their finished product are at risk of litigation, Clyde & Co. partners Alex Potente and Kevin Haas and senior counsel Yvonne Schulte wrote. Between July 2005 and March 2022, more than 6,400 PFAS-related lawsuits were filed in federal courts, according to Bloomberg Law. “Clients should track regulatory developments regarding PFAs, enforcement actions at the state and federal levels, results of state and federal PFA litigation, and evaluate their insurance coverage for pollution policy language governing or excluding PFAs,” the Clyde & Co. team stated. Governments and private parties have sued manufacturers that make or use PFAS in their operations for personal injury claims, statutory violations, or to recover costs of remedial or filtration equipment. Organizations that make, buy, or sell products containing PFAS are vulnerable to product liability and toxic tort litigation. Organizations deemed responsible parties at PFAS-contaminated sites could be liable for cleanup costs. And new regulations will likely result in facility-specific air and wastewater discharge limits. As a pollution issue, PFAS are comparable to asbestos, Kellie Vazquez, a claims adjuster and remediation expert with insurance services firm Charles Taylor, wrote. “Many governments across the globe are seeking to address the use of PFAS in products but also where land or rivers have historically been contaminated,” said Vazquez. “The costs to remove the contamination can be huge, such that many insurers do not wish to have to meet these costs.” Two additional EPA actions will pave the way for PFAS remediation requirements. In August, the agency put forward a “landmark” proposed rule designation two PFAS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), said Potente. And in October 2021, it proposed four PFAS substances be deemed hazardous under the Resource Conservation and Recovery Act (RCRA). RCRA regulates how waste should be managed. CERCLA, also known as Superfund, involves the remediation of hazardous materials at historically contaminated sites. The changes would give the EPA regulatory oversight of PFAS in a few ways, noted BCLP. The agency could order the investigation and remediation of sites suspected of containing those chemicals, it could seek to recover costs associated with remediating sites from responsible parties, and it could reopen sites that had already been remediated for additional investigation of PFAS. “This regulatory direction provides industries an opportunity to plan ahead and make strategic decisions regarding their management of PFAS, including consideration of remedial strategies and solutions in anticipation of future regulatory action,” BCLP wrote. “Businesses that take a proactive approach are likely to be better positioned to react to requirements resulting from these forthcoming regulations.” State Approaches to PFAS Regulations Eleven states now regulate food packaging containing “intentionally added PFAS,” though some states go beyond food packaging to include other consumer products, noted Pillsbury Winthrop Shaw Pittman in an online post. California bans the sale of cookware containing PFAS unless the seller discloses the presence of these chemicals on the product label. At the end of this year, New York will start prohibiting PFAS in apparel. Maine’s PFAS law is the broadest, Pillsbury noted. The state prohibits the sale of PFAS-containing products unless the seller notifies it of the “presence, amount, and purpose” of the PFAS in the product. “The current slate of state laws may be the tip of the iceberg, as the possibility exists for additional states to follow suit,” wrote Pillsbury. The law firm added, “Non-compliance with these new laws could subject companies to regulatory enforcement and penalties. All the states in question have codified penalty provisions that would apply to violations of the pertinent laws.”

The construction industry has quickly become the fastest-growing commercial adopter of drones, taking advantage of the technology’s vast aerial vantage point, data-collecting abilities, and more. As projects become more complex and demand increases, operators are utilizing drones to not only survey land and generate topographic maps but to track equipment, provide clients with progress reports of projects, survey job sites, ensure personnel safety, and more. Read on to learn about important regulations surrounding drone use on construction sites and how your operation can protect itself when utilizing drone technology. The Regulation of Drones Drones are still considered aircraft and must be registered with the FAA unless a recreational drone meets all of the FAA’s requirements to fall under the agency’s special rule for model aircraft. Here are the basic guidelines for registering drones: Drones that don’t fall under the FAA’s special rule for model aircraft and weigh between 0.55 pounds and 55 pounds must be registered online. Commercial drones that weigh more than 55 pounds must be registered by paper. Once registered, the drone operator will receive a registration number that must be placed on all applicable drones. Registration is valid for three years. Failing to register may result in regulatory and criminal sanctions. The FAA has separate regulations for recreational and commercial drones, although some of the regulations are similar. The following is a list of key FAA requirements for recreational drones: Operators must maintain a visual line of sight with their drones, and keep them below a height of 400 feet above ground level. Drones cannot fly within 5 miles of an airport without the operator first notifying the airport and air traffic control tower. Operators must always yield the right of way to manned aircraft. Drones cannot be flown over stadiums, sporting events, or people who aren’t directly participating in the flight’s operation. Operators must follow all local drone safety guidelines and keep their drones away from emergency response efforts at all times. Here is a partial list of key FAA requirements for commercial drones: Commercial drone operators need a remote pilot airman certificate with a small drone rating or be under the direct supervision of a person who holds such a certificate. The remote pilot must inspect drones before every flight. Operators must maintain a visual line of sight with their drones, and keep them below a height of 400 feet above ground level. Operators cannot fly the drone over anyone who is not directly participating in the drone’s operation. Drones may carry an external load if it’s securely attached and doesn’t adversely affect the controllability of the aircraft. For more details on the FAA rules regarding the commercial use of drones, visit the FAA’s website. Looking Beyond Casualty & Liability As with conventional aircraft, a drone crash could mean a hefty casualty claim. While the crash rate is actually relatively low with conventional aircraft, drones are not subject to the tight maintenance requirements or the stringent operator regulations that make conventional commercial aircraft crashes so rare. Eventually, mechanical failures and operator errors will likely result in crashes. Businesses, especially those that operate drones in populated areas, should make sure they are adequately covered in the event of property damage or injury to a third party. According to the International Risk Management Institute, Inc., drones present most of the same risks as other forms of aircraft, but on a smaller scale. For most commercial drone users, the most likely losses include: Injury or damage due to collision or interference with another aircraft Injury or damage to people or property on the ground Damage to the unmanned aircraft Violation of another’s rights when flying over private property Unauthorized collection, use, or storage of data Standard commercial property and liability policies do not cover most of the events noted above, so unless other coverage has been purchased, companies that use drones to conduct business likely have uninsured exposures. To address this issue, endorsements can be added to an existing property policy to provide coverage for first-party property damage (damage to the drone itself) and to an existing general liability policy to provide third-party coverage (bodily injury or property damage suffered by another person). Alternatively, a standalone aviation policy can provide both first-party and third-party coverage. Oftentimes, a specific endorsement is required to provide coverage for privacy and data violation claims. Questions? Reach out to a Cottingham & Butler representative today to get more information on how you can protect your business.

With today’s tight labor market, employers are looking to strengthen their attraction and retention efforts as much as possible. One way to aid this is by creating accurate job titles. However, some employers focus excessively on making the titles unnecessarily attractive for potential candidates with a practice called title inflation. This article explores what job title inflation is, explains standard job titles, and offers considerations for creating effective titles. Job Title Inflation Job title inflation is where the title of an employee’s job does not match their duties. Many start-ups popularized the use of inflated or less accurate titles, such as referring to a website manager as a “digital overlord” or calling a receptionist a “director of first impressions.” Likewise, some businesses have added designations such as “vice president” for roles that don’t have implied executive responsibilities. Internally, inaccurate or inflated titles can cause more senior employees to be upset by less experienced workers having more advanced titles. Further, employers could be at risk of having employees quit if their titles are adjusted to ones that more accurately reflect their roles. Externally, these inflated titles have caused less experienced workers to avoid applying because they feel they are underqualified for a senior role. It has also led to more experienced workers being discouraged from accepting these positions because they would not be compensated equally to other actual senior roles. Title inflation can also cause new hires to be disappointed when they learn their job responsibilities are not what they expected when they first applied. The solution is to accurately title jobs from the start so that the necessary candidates apply for the job, accept it, and stay with the organization with a clear understanding of their roles and responsibilities. Types of Job Titles Companies generally have an organizational chart showing the positions within the organization listed by job title and reporting structure. Usually, these titles have a clear progression. The following are common titles that correspond with different experience and education levels. It’s important to remember that while this list provides examples of what certain titles are commonly intended to mean, thousands of accurate job titles are possible. Entry-level—“Staff member,” “representative” and “associate” are common entry-level titles. These positions often have responsibilities such as completing routine tasks, providing customer service and supporting higher-level employees. Intermediate or experienced—“Coordinator,” “analyst” and “specialist” are common titles for intermediate or experienced roles. These positions usually require more expertise and may involve more problem-solving, decision-making, and management of projects or teams. First-level management—“Manager,” “supervisor,” “project manager,” “team leader” and “office manager” are frequently used for first-level management. These roles are usually responsible for overseeing the work of others, setting goals, ensuring work is completed efficiently and communicating with higher-level management. Middle management—“Senior manager,” “director,” “associate director,” “regional manager” and “adviser” are common titles for middle management. These roles are often responsible for developing strategies, making important decisions, managing budgets, leading departments and ensuring the success of the company or a specific department. Vice president—“Vice president,” “assistant vice president,” “senior vice president” and “director” are common titles for executive professionals at the vice president level. These roles are usually responsible for managing staff, supervising departmental operations and reporting to executives or senior management. Executive or senior management—“Chief officers,” “president,” “vice president,” “senior executive” and “executive” are popular titles for executive or senior management. These roles are usually responsible for making major decisions about the direction and overall strategy of the company, managing the performance of other leaders and employees, and representing the organization to external stakeholders. Considerations When Selecting Job Titles Many factors go into selecting the best job title for any given position. Employers should consider the following tips when creating job titles: Match the title to salary expectations. Common titles should match the amount of compensation the position will receive. For example, if an employer is searching for an entry-level applicant, making the title something like “vice president” would not be a good idea because senior-level workers will apply and likely end up rejecting the role once they realize the salary is for an entry-level position. Employers should also be aware of pay transparency laws that may require employers to disclose pay ranges in job postings. Even when it’s not legally required, disclosing pay ranges in job postings can be beneficial because employers who provide pay transparency information tend to receive more applicants and save time and money in recruitment efforts. Appeal to the right candidates. Titles should be created to reflect the amount of experience the position requires. Using senior titles for entry-level roles can deter suitable workers from applying because they feel underqualified. On the other hand, using titles that reflect the experience of the employees an organization desires is a more effective titling strategy. Create short titles. The job title should be kept short. According to research from recruitment service Appcast, the most-clicked job titles have between 50 to 60 characters, while job titles with 1 to 3 words receive the highest application rates. Keep the title short and use the description to provide other key details about the role. Use keywords. The title should include keywords. Depending on the position, an employer may use keywords related to the job’s function, level of seniority, or both. Doing this helps job seekers find the organization’s job listing more readily when they narrow their search based on key terms. Takeaways The current job market remains tight, making attraction even more important to employers. However, they should be cautious with their titling conventions for open positions. By thinking more deeply about the job titles they choose and focusing on accuracy, employers can mitigate job title inflation and likely increase attraction and retention outcomes.

The commercial insurance market is cyclical in nature, fluctuating between hard and soft markets. These cycles affect the availability, terms and price of commercial insurance, so it’s helpful to know what to expect in both a hard and soft insurance market. A soft market, which is sometimes called a buyer’s market, is characterized by stable or even lowering premiums, broader terms of coverage, increased capacity, higher available limits of liability, easier access to excess layers of liability and competition among insurance carriers for new business. On the other hand, a hard market, sometimes called a seller’s market, is characterized by increased premium costs for insureds, stricter underwriting criteria, less capacity, restricted terms of coverage and less competition among insurance carriers for new business. During a hard market, some businesses may receive conditional or nonrenewal notices from their insurance carrier. What’s more, during hard market cycles, insurance carriers are more likely to exit certain unprofitable lines of insurance. In what was one of the longest soft markets in recent years, businesses across most lines of insurance enjoyed stable premiums and expanded terms of coverage for decades. While the commercial insurance market hardened for a short period of time after the terrorist attacks of Sept. 11, 2001, the last sustained hard market occurred in the 1980s. However, after years of gradual changes, the market has largely firmed since 2019, leading to increased premiums and reduced capacity. Many factors affect insurance pricing, but the following are some of the most common contributors to the hard market: Catastrophic (CAT) losses—Floods, hurricanes, wildfires and other natural disasters are increasingly common and devastating. Years of costly disasters like these have compounded losses for insurers, driving up the cost of coverage overall, especially when it comes to commercial property policies. Inconsistent underwriting profits—Underwriting profits refer to the difference between the premiums an insurer collects and the money it pays out in claims and expenses. When an insurance company collects more in premiums than it pays out in claims and expenses, it will earn an underwriting profit. Conversely, an insurance company that pays more in claims and expenses than it collects in premiums will sustain an underwriting loss. The company’s combined ratio after dividends is a measure of underwriting profitability. This ratio reflects the percentage of each premium dollar an insurance company puts toward spending on claims and expenses. A combined ratio above 100 indicates an underwriting loss. Mixed investment returns—Insurance companies also generate income through investments. Commercial insurance companies typically invest in various stocks, bonds, mortgages and real estate investments. Due to regulations, insurance companies invest significantly in bonds. These provide stability against underwriting results, which can vary from year to year. When interest rates are high and returns from other investments are solid, insurance companies can make up underwriting losses through their investment income. But when interest rates are low, insurers must pay close attention to their underwriting standards and other investment returns. The economy—The economy as a whole also affects an insurance company’s ability to write new policies. During periods of economic downturn and uncertainty, some businesses may purchase less coverage or forgo insurance altogether. A business’s revenue and payroll, which factor into how premiums are set, may decline. This creates an environment where there is less premium income for insurers. The inflation factor—Prolonged periods of inflation can make it challenging for insurance carriers to maintain coverage pricing and subsequently keep pace with more volatile loss trends. Unanticipated increases in loss expenses can result in higher incurred loss ratios for insurance carriers, particularly as inflation affects key cost factors (e.g., medical care, litigation and construction expenses). The cost of reinsurance—Generally speaking, reinsurance is insurance for insurance companies. Carriers often buy reinsurance for risks they can’t or don’t wish to retain fully. It’s a way for insurers to protect against extraordinary losses. As a result, reinsurance helps stabilize premiums for regular businesses by making it less of a risk for insurance carriers to write a policy. However, reinsurers are exposed to many of the same events and trends affecting insurance companies and make pricing adjustments of their own. Additional Factors Influencing Insurance Rates In addition to the above, here are other key factors that may influence your insurance rates: The coverage you’re seeking— The forms of insurance you’re seeking, as well as the details of such coverage (e.g. limits of liability and value of the insured property), will affect your insurance pricing. The size of your business— As a general rule, the more employees your business has and the larger your revenue is, the more you will pay for your insurance. The industry in which you operate— Certain industries carry more risk than others. In general, businesses in these sectors are more likely to file insurance claims. As a result, businesses involved in risky industries tend to, on average, pay more in insurance premiums. The location of your business— The location of your business will also influence your insurance rates. If your business is located in an area prone to certain natural disasters, insurers may determine that your facility is more at risk for property damage. This increased risk will translate to higher premiums. Your claims history— Your business’s claims history, often referred to as loss history, will also have an impact on insurance rates. If your business has an extensive claims history, then insurance carriers will tend to consider your company more likely to file future claims. In turn, this means that your business will be viewed as risky to insure, subjecting you to higher commercial insurance premiums. Your risk management practices— Now more than ever, conducting a careful assessment of your business’s unique exposures and establishing effective, well-documented risk management practices can make your establishment more attractive to insurance carriers. After all, having a robust risk management program in place reduces the likelihood of costly claims occurring and minimizes the potential losses your business could experience from an unexpected event. As a whole, during a hard market, insurance buyers may face complex considerations regarding their coverage. Thankfully, businesses are not without recourse in the face of a hard market. Business owners who proactively address risk losses and manage exposures will be better prepared for a hardening market than those who do not. Furthermore, those who educate themselves on the trends that influence their insurance will better understand what can be done to manage their associated costs. For additional information or questions, please reach out to your Cottingham & Butler representative.

When a plan participant or beneficiary has Medicare and other health insurance, such as group health plan insurance, retiree coverage, or Medicaid, there can often be confusion as to which insurance pays first on claims. Coordination of benefits (COB) rules, which are specified in plan documents or insurance policies, decide which insurance pays first. One plan is considered the primary payer that covers most expenses, while the secondary plan covers any remaining allowable expenses not covered by the primary plan. The COB allows health plans to provide health or prescription drug coverage to individuals receiving Medicare to determine their payment responsibilities. This helps ensure that the total amount paid by all insurance plans does not exceed the total costs of the health care expenses for Medicare-covered services and items. This article provides a general overview of COB rules under Medicare. How does Medicare coordinate with other insurance? There are many important facts to remember regarding how other insurance works with Medicare-covered services and items, such as the following: The primary payer pays first and up to its coverage limits. The secondary payer only pays if there are costs the primary payer doesn’t cover. The secondary payer, which may be Medicare in certain situations, might not pay all the uncovered costs from the primary payer. If a group health plan or retiree coverage is the secondary payer, the individual may need to enroll in Medicare Part B before that insurance would pay. If a Medicare-covered individual’s other health insurance is the primary payer and fails to promptly pay a claim, typically within 120 days, that individual’s doctor or service provider may bill Medicare. Medicare can make a conditional payment for the individual’s claim, recovering any payments the primary payer should have paid at a later date. What's a conditional payment? A conditional payment is a payment Medicare makes for services for which another payer may be responsible. Medicare makes this payment, so the plan participant or beneficiary won’t have to pay the claim. The payment is conditional because it must be repaid to Medicare if the Medicare-covered individual receives a settlement, judgment, award or other payment later. Who pays first? When an individual has Medicare and other insurance, there are rules for whether Medicare or the other insurance is the primary payer for Medicare-covered services and items. Medicare is typically the primary payer for Medicare-covered services and items in the following circumstances: An individual is covered by only Medicare and Medicaid. An individual covered by Medicare refuses group health coverage. Medical services or supplies are not covered under a group health plan but are covered under Medicare. A Medicare-covered individual is covered by a group health plan but has exhausted their coverage under the group health plan. A Medicare-covered individual is 65 or older and covered by a group health plan (because the individual or their spouse is still working) offered by an employer with fewer than 20 employees. A Medicare-covered individual is 65 or older and covered by an employer group health plan after retirement. A Medicare-covered individual is 65 or older (or disabled) and covered by Medicare and the Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage. A Medicare-covered individual is disabled and covered by a large group health plan offered by an employer with fewer than 100 employees. A Medicare-covered individual has end-stage renal disease and is enrolled in a group health plan or COBRA (after 30 months of eligibility or entitlement to Medicare). A Medicare-covered individual has only Medicare and TRICARE coverage unless the individual is on active duty and receives services and items from a military hospital, clinic or other federal health care provider. For a complete list of situations where Medicare is the primary payer, visit Medicare.gov or review the Centers for Medicare and Medicaid Services’ guide, Medicare & Other Health Benefits: Your Guide to Who Pays First. How does Medicare know if an individual has other coverage? COB permits an individual’s Medicare eligibility information to be shared with other payers and sends Medicare-paid claims to secondary payers for payment. The Benefits Coordination and Recovery Center (BCRC) does the following on Medicare’s behalf: Collect and manage information on other types of coverage an individual with Medicare may have. Determine whether an individual’s other coverage pays before or after Medicare. Pursue repayment when Medicare makes a conditional payment. Medicare doesn’t automatically know if a Medicare-covered individual has other health insurance; however, insurers are required to notify Medicare when they’re responsible for paying first for Medicare-covered services and items. In some instances, the individual’s healthcare provider, employer or insurer may ask them about their current coverage so they can report that information to Medicare. Additionally, insurers must report coverage changes to Medicare. Summary Understanding COB rules is vital to ensuring that a Medicare-covered individual’s claims are paid correctly. While COB rules can be complex, they can help Medicare plan participants and beneficiaries make the best use of their healthcare coverage. For more healthcare resources, contact Cottingham & Butler today.

The manufacturing sector consists of businesses that utilize raw materials to generate finished products. Due to the range of items this industry plays a role in producing (e.g., food and beverages, textiles, apparel, wood products, chemicals, plastics, metals, electronics, machinery, and furniture), it contributes significantly to the overall economy. Further, this sector has experienced considerable growth in recent years, largely brought on by rising production demand for various items amid the COVID-19 pandemic. Looking ahead, certain factors indicate the manufacturing industry is poised for continued growth in the future. Professional services firm Deloitte projects the sector’s gross domestic product (a monetary calculation of the market value of goods and services generated and sold during a set period) will increase by 2.5% in 2023. Additionally, several federal initiatives that debuted in 2022—namely, the CHIPS and Science Act and the Inflation Reduction Act—have the potential to help keep costs under control and boost resiliency across the manufacturing sector, therefore fueling long-term industry growth. Yet, some sector developments could pose challenges in the coming months and years, including labor shortages, supply chain struggles, economic issues, technology shifts, and environmental concerns. This article provides more details on manufacturing industry trends to watch. Labor Shortages The past few years have been met with labor shortages across industry lines. Furthermore, the pandemic motivated many employees to reevaluate their job expectations and priorities, thus prompting additional workforce shifts and compounding such shortages. The manufacturing sector is no exception to this trend. According to the U.S. Bureau of Labor Statistics (BLS), job openings in the industry remained near record highs in 2022, fluctuating between 750,000 and 850,000. In light of these labor shortages, businesses within the manufacturing sector have implemented various strategies to help attract and retain talent, such as: Promoting a diverse workforce—The latest BLS data shows women make up less than one-third of the manufacturing workforce, whereas Black, Asian, and Latinx employees account for an even smaller proportion. As such, some manufacturing businesses have made an effort to attract these untapped demographics and expand their available talent pools by bolstering their diversity, equity, and inclusion (DEI) measures. Common DEI measures include creating workplace policies that foster an inclusive culture and offering mentorship and career-advancing programs for diverse employees. Leveraging upskilling initiatives—Upskilling refers to the process of enhancing employees’ skills and promoting continuous learning by providing ongoing education, training and professional development opportunities. Especially as manufacturing businesses hire a greater proportion of new or inexperienced employees to fill labor gaps, upskilling can make all the difference in motivating these employees to keep improving upon their abilities. Offering greater flexibility, pay, and benefits—In response to employees’ shifting job expectations, some manufacturing businesses have adopted more competitive workplace offerings. These offerings may include flexible hours, remote or hybrid arrangements (if possible), higher pay, improved benefits and additional well-being resources. Supply Chain Struggles Apart from exacerbating labor shortages, the pandemic has also contributed to supply chain struggles over the last few years. This trend has made it increasingly difficult for manufacturing businesses to secure the raw materials necessary to conduct their operations, often resulting in production delays. To combat these concerns and ensure supply chain resiliency, manufacturing businesses have utilized several tactics, including: Strengthening relationships— By building strong connections with their suppliers, manufacturing businesses are more likely to receive additional support when navigating supply chain issues. Specifically, businesses with solid supplier relationships may benefit from solutions such as modified shipment routes and prioritized access to high-demand materials as they become available. Diversifying suppliers— Instead of relying on a small selection of primary suppliers, some manufacturing businesses have added redundancies to their supply chains by investing in multiple suppliers for the same materials. With these diversifying strategies in place, businesses can increase the likelihood of maintaining access to essential production materials even if their primary suppliers are experiencing disruptions. Forming local partnerships— In addition to diversifying their supply chains, some manufacturing businesses have also begun engaging in nearshoring, which entails selecting local or domestic suppliers rather than international alternatives. This way, businesses can minimize their risk of being impacted by global shipment delays and associated supply chain disruptions. Leveraging technology— To enhance supply chain visibility, some manufacturing businesses have implemented additional workplace technology. Examples of this technology include work instruction software and digital ecosystems, which are capable of actions such as streamlining supply chain workflows, ensuring frequent communication with suppliers, providing status updates on material shipment processes, and delivering notifications regarding possible disruptions. Economic Issues The combination of labor shortages and supply chain struggles has significantly driven up the cost of goods and services in recent years, posing widespread inflation issues across all sectors of the economy. As it pertains to the manufacturing industry, inflation issues have resulted in rising costs for many raw materials, as well as their associated shipment expenses (e.g., labor and transportation costs). Consequently, most manufacturing businesses have encountered price hikes throughout their supply chains, thus exacerbating overall production expenses and forcing them to raise the costs of their finished products to ensure profitability. As inflation issues press on within the sector, it’s important for manufacturing businesses to curb consumer frustration regarding rising product costs by being transparent about the reasons behind these price hikes. Maintaining open communication about the impact of inflation on production expenses and providing frequent updates on how their price tags will continue to fluctuate can help businesses maintain customer trust and loyalty during these difficult times. To help minimize overall inflation concerns, the Federal Reserve (Fed) has steadily been hiking up interest rates. Economic analysts predict that the Fed’s efforts will eventually pay off during 2023, with inflation slowly subsiding throughout the year. However, some economic experts have forecasted that rising interest rates and prolonged labor market challenges could lead to a potential recession—a prolonged and pervasive reduction in economic activity—throughout the United States in the near future. To prepare for a potential recession, it’s best for manufacturing businesses to consider practices such as establishing concrete financial plans, scaling back certain operations, promoting steady cash flow, ensuring proper debt management, fostering strong connections with stakeholders and leveraging effective marketing strategies. Above all, businesses must maintain ample insurance in a recession and secure financial protection against possible losses. Technology Shifts To help offset increased expenses and productivity concerns brought on by current sector trends, a growing number of manufacturing businesses have begun utilizing smart factory initiatives. These initiatives focus on improving operational efficiencies and mitigating production costs with various technology solutions. Common technology solutions introduced by smart factory initiatives include 5G, the cloud and edge computing systems. These solutions are intended to help increase network capacity, reduce delays in network communication and enable greater volumes of data to be processed at higher speeds. Such solutions often permit manufacturing businesses to minimize downtime on the production floor and elevate operational performance. In addition to implementing smart factory initiatives, some manufacturing businesses have also started leveraging disruptive technology offerings, such as augmented reality (AR), artificial intelligence (AI), the Internet of Things (IoT) and blockchain. Both AR and AI can be used to automate production processes, enhance customer service capabilities and make data-driven decisions. On the other hand, IoT and blockchain can help manufacturing businesses closely monitor their supply chains, record essential transactions, conduct predictive maintenance on production equipment, utilize advanced analytics, track inventory and assets, and detect potential safety concerns. In any case, both smart factory initiatives and disruptive technology can pose additional cybersecurity risks. With this in mind, manufacturing businesses that leverage such technology should review their digital exposures and make adjustments as needed to mitigate possible cyber losses. Environmental Concerns The environmental, social and governance (ESG) landscape continues to evolve, with both consumers and regulators placing additional pressure on manufacturing businesses to ensure eco-friendly and sustainable practices. Specifically, current ESG trends in the manufacturing industry center around: Decreasing carbon emissions—According to the latest industry research, the manufacturing sector accounts for nearly one-third of total greenhouse gas emissions. As such, it has become increasingly important for manufacturing businesses to aim for carbon neutrality. Some government agencies have even started requiring businesses to disclose information regarding their carbon emissions. Common emission-reducing measures include electrifying fleets, using clean power sources (e.g., wind and solar) and implementing energy-efficient smart devices on the production floor. Reducing operational waste—Many manufacturing processes generate substantial waste, thus damaging the environment. Fortunately, proper waste management practices and certain types of production technology can help mitigate these concerns, promoting eco-friendly operations. Conclusion Overall, there are several trends currently impacting the manufacturing sector. By staying on top of these developments and taking steps to mitigate their associated exposures, manufacturing businesses can effectively position themselves to maintain long-term growth and operational success. Contact us today for additional risk management guidance. This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice.