Thursday, December 23, 2010

Changes in Restaurant Operations- Make Sure the Risk is Covered

The Restaurant industry is beginning to recover from the recession faster than some other industries. The National Restaurant Association predicts flat sales through the end of 2010, which is a good sign compared to the last 2 years! Here are a couple of new things that are happening in the restaurant business that need attention for their risk as well:


1) An emerging exposure and coverage need for restaurants is cyber risk insurance. Like other businesses, restaurant owners rely more and more on the Internet for various aspects of their operation. Using the Internet as a tool to push more business also means new exposures such as data/security breach, copyright or trademark infringement, data destruction and/or corruption as a result of a virus, as well as firewall and network security attacks.

Internet use exposes restaurants to risks that may not be covered under many commercial insurance policies. Make sure you are covered properly.

2) Similarly, restaurants use more sophisticated equipment to operate their businesses than in the past. Whether it is computer-based cash registers integrated with point-of-sale management systems, multiple refrigeration systems, commercial-grade sound systems, or inventory scanners, restaurants are using technology to be more efficient and help manage their business. You just need to make sure that you have equipment breakdown coverage for this technology. It is easy to overlook this coverage.

All restaurants are becoming more sophisticated in their approach to running their business. This is absolutely necessary. Just make sure you are also keeping up with the exposures that are inherent in those changes.

Let me know how your restaurant business or any other business is changing. I would be interested to know what changes you are making, and how it has impacted your business.


Bobby Bland PWCA, CIC
Vice President
Commercial Risk Service

Monday, December 20, 2010

What Is Subrogation and How Does It Affect You?

You purchase insurance to transfer risk from your operations to an insurance company. When you have damage to property or injuries to people, you file a claim so that the insurance company pays the claim. What if somebody else caused or is responsible for the damage or injury? How would you feel if an uninsured person drove their boat into one of your docks or rental boats creating severe damage or injuries? I am sure you would want that person held responsible for the damages or injuries. This is where subrogation comes into play.

Subrogation means that your insurance company sues for reimbursement of claim payments when another party or company is responsible for the damages or injury. The lawsuit could be against an individual or company.

Anytime you have a claim, and your insurance company pays for property damages or injuries to your employees or a third party, it is in your interest to examine whether a third party or company is responsible for the damages or injuries. This is because any claims you have are kept on a historical record by the insurance company and if you have a number of claims and/or very expensive claims, you will be impacted in a couple of ways including higher annual insurance premiums and fewer insurance companies willing to insure your business. If there are circumstances that you are aware of that would lead to subrogation opportunity, please bring them to my attention so that we can bring them to your insurance company’s attention. If your insurance company can subrogate and recoup the cost of the claim payment they paid on your behalf, the claim you had will not impact your future insurability. This will help to keep your insurance premium as low as possible and allow you to purchase insurance from the very best companies.

Examples of subrogation opportunities include but are not limited to:

1. Equipment or tool failure causing property damage or injury
2. Any damage to your property caused by a third party
3. Any employee injuries caused by a third party or equipment/tool failure
4. Any auto accident where someone else was at fault or due to mechanical failure
5. Any boat accident causing damage to your boat or injuries to your employee(s)

If any of these things occur, I would want contact info of any person involved, and if a piece of equipment or tool fails, I would need the company name of the manufacturer, the model and serial number of the piece of equipment or tool.

If a claim payment is small, usually under $5,000 or so, an insurance company generally won’t subrogate because it costs them more than it’s worth to go to court. Each company has their own guidelines. However, as claim expenses grow, your insurance company will definitely consider subrogating and that is definitely in your interest so keep your eyes open for any opportunities such as those listed above.

Ask yourself if any other agent has brought this to your attention in the past? Ask yourself if you have had any claims in the past where subrogation would have been possible? I am always interested in hearing about claim stories and how the claim was handled by the insurance company so if you have any good stories, please comment on this blog.



Doug Timmons, CIC, CMIP
Marine and Resort Insurance Specialist
Commercial Risk Service

Friday, December 17, 2010

What makes a business stable and profitable?


In my years in this business, I have seen all ends of the spectrum regarding how people run their business. There’s the hands-on type that is actively involved and calling all the shots. There’s the owner who is basically incognito- he is rarely there or never there, but he has quality people throughout the organization. I’ve seen sloppy work areas as well as back-room floors so clean you could eat on.

Well run companies that are growing and/or prospering don’t all look the same. In addition, poorly run businesses that are either losing market share quickly and/or profits as well aren’t cut out of the same cloth. One of the great strengths about our country is that if you own a business, you can choose to run it any way you want, as long as it is within the boundaries of being legal. Good managers come in all shapes and sizes.

There are, however, a few common threads that I have witnessed among those businesses that I have come across that are stable and profitable over the long haul. In every instance, the management team, including the owner or leader, exhibits the following traits:

1) The key management people in the organization, including the owner, show that they genuinely care about the employees throughout the business. They understand that their people are the reason they have been successful.

2) As a part of that concern for their employees, the management team creates a discipline within the organization of making sure their employees know how important safety is for everyone. When an employee is injured, they do everything they can to take care of that employee. Because of this great working environment, the employees in turn pay attention to safety, and when they are injured, they do everything they can to get back to work as soon as possible. They help to police the safety throughout the organization.

3) Because the employees feel that their employer cares about them individually, there is very little turnover, which creates a much better and more profitable working environment.

In short, I have found that caring about your employees and making sure they are safe and taken care of is directly linked to your long-term profitability. The effort and resources you spend making sure your employees know that you appreciate and care for them will come back to you in the long run.

You don’t necessarily need a huge safety manual or a “safety committee” to have a safely run business. The most important thing you can do for safety is to show you care about it. Many of you business owners that are reading this blog are the very people I am talking about. Your safety program and your business is a success because you have shown you care about your employees!

Thursday, December 9, 2010

Self-Funded Products Re-Emerge in the Benefits Market


There has been a recent push in the benefits market for self-funded (partial self-funded) products. The products are targeted at the 50-200 employee group sizes. These types of products are not new. They have been around for a number of years, being very popular about 20 years ago. The recent re-emergence is caused, in part, by the new healthcare reform act. If you are considering this type of product, please proceed with caution.

Why should you proceed with caution? Most of you are familiar with the fully-insured plans. You pay your monthly premium, and your carrier pays the incurred claims. Self-funded plans are different and they can be both tricky and confusing. The first important component to a successful plan is to find the right Third Party Administrator (TPA). Your TPA actually processes your claims and pays them as well. They negotiate pricing for re-insurance and can also find the best network of providers to fit your company. Where you need to be very careful is regarding the various funding methods that support your plan throughout the year. Does your re-insurance carrier pay for large claims immediately, or do you have to pay them and wait from re-imbursement? As you can imagine, if not done correctly, that could be a huge drain on your cash reserves. What happens if you decide you want get out of the plan and go back to fully-insured? If that happens, you have to consider what is called “run-out exposure”. In other words, you are responsible for any claims that were incurred before you terminated your self-insured plan. These “run-out claims” could continue for 90-180 days. If you contract is not done correctly, you are left with this cost exposure.

Now that I’ve seemingly talked you out of the self-insured product, let me say that there are good, safe products out there. The key is finding a trusted insurance advisor that has adequate knowledge of this market. One that can find you a plan that has all of safe funding mechanisms built in. If that is done, the self-insured market is not something to run from.

Tuesday, December 7, 2010

Attitude is Key Factor in Disaster Preparedness

Corporations and individuals often underestimate their exposure to risk and are consequently unprepared for disaster when it strikes, say experts who study risks. Howard Kunreuther, professor of Decision Sciences at the Wharton School of Business, discussed the failure of many to adequately prepare for catastrophes. “There is a psychology of denial at play, where many believe that a disaster will not happen to them, and it is very difficult to change their perception”, says Dr. Kunreuther.

In my own experience as a risk reduction specialist, what Dr. Kunreuther says is very true. Business owners are geared to deal with whatever situation comes up that day, not necessarily a future problem. Businesses are in a “survival” mode, and that certainly is understandable in this economic environment. However, there is more to being an insurance agent than just selling insurance than just satisfying the creditors for a business. I see it as my responsibility to let you know some of the potential dangers that lie in front of the business owner.

The key question here is this: If a major disaster happens to your business, how are you going to handle it? Just having insurance may not be enough. How are you going to handle several key questions?

---How will you maintain you current customer base if you are shut down for a long period?

---If a disaster occurs, how fast can you get up-and-running again, and how will that happen?
    Who is responsible for what?

---Do I have adequate controls in place to keep us going in case of an emergency?

---What happens if I die tomorrow? Do I have quality people to keep the business going without me?

---Many more important issues

There’s more to a disaster than just the insurance. Reducing your risk and effectively dealing with disasters obviously includes the insurance coverage, but there must be plans in place to keep your business going without any more interruption than necessary as well.

Can you name some major disasters or occurrences that could occur in your business that you aren’t prepared for? I bet I can!

The template for a disaster recovery plan is fairly simple. The process of putting it together is much more complicated. Let us know if we can help you with that process.

Wednesday, December 1, 2010

Maintaining and Documenting Boat Rental Fleet Maintenance is Critical

I have often discussed the importance of using strong boat rental checkout procedures with my marina and resort clients. Strong checkout procedures are critical in any successful boat rental operation. Another equally important issue is proper boat maintenance and documenting the maintenance of each boat in a rental boat fleet.

A marina or resort’s boat rental customers will often be inexperienced in the operation of a watercraft. Strong checkout procedures will help the rental customer in the operation of the boat but a poorly maintained boat can lead to potential injuries related to equipment failure. A poorly maintained motor can lead to engine failure and even fire.

Potential lawsuits related to boat rental operations are usually based on an allegation that the rental company failed to insure that the rental customer was properly checked out on the safe operation of the boat, which led to injuries or property damage. Lawsuits can also allege that the rental company failed to perform proper maintenance of the boat, which then led to injuries or property damage.

To reduce the risk associated with boat rental operations, it is essential that boat rental companies use strong boat rental checkout procedures and it is just as important to perform proper boat maintenance based on the manufacturers maintenance schedule for each boat in the boat rental fleet. It is critical to document that maintenance by using written maintenance records for each boat in the fleet and keeping those on file for at least 3 years. Those records should be kept in a safe and secure location away from the primary rental operation.

If you have a boat rental operation, ask yourself if you are using good checkout procedures as well as performing proper boat maintenance and if you are maintaining those maintenance records. You never know when you might need to pull information from past boat rentals to protect yourself from a lawsuit.

For boat rental operators, have you been sued due to your boat rental operations?  If so, I would like to hear from you.  Please comment on this article.  Thanks!

Doug Timmons, CIC, CMIP
Marina and Resort Insurance Specialist
Commercial Risk Service