Insurance Legal Description Text

Aley Moyer

The Californian Q4 – Frustrated With Workers’ Compensation Audits? It Used To Be Much Easier!

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Frustrated With Workers’ Compensation Audits? It Used To Be Much Easier!

Shaun Kelly, Tolman & Wiker, CALSAGA Preferred Broker

Great to see everyone at the CALSAGA Annual Conference, it was truly a great event my hat goes off to CALSAGA for coordinating all the speakers and evening activities! I believe the conference is particularly a good opportunity to network with other Members and vendors. 

Workers’ Compensation audits are becoming more confusing and frustrating to complete! Auditors are requesting more information than they ever have before, including financial statements. Prior to Covid, Workers Compensation audits were required to be in person, now most are remote by email and phone. The Information you have to provide must be submitted in to them in secured files that are difficult to use.  And, if you happen to be late, a Notice of Cancellation is sent out immediately to get your attention. What has changed? 

Here are a few possible explanations for what has changed:

  1. Experienced auditors have retired and the new underwriters are trying to understand the process without limited knowledge and experience.
  2. The new auditors are being trained to request as much information as possible.
  3. The passing of AB 5 (Recognizing Independent Contractors as employees under the new guidelines) has auditors searching for employers who are not following the AB 5 guidelines and charging them additional premium.

ISSUE: Employers have concerns with providing financials that they have not had to provide in the past. However, this is how the auditors find out if there are expenses paid to independent contractors under AB 5. Per each Workers’ Compensation insurance policy in CA, every employer must provide the following for a final premium audit:  

  1. Audit – You will let us examine and audit all your records that relate to this policy. These records include ledgers, journals, registers, vouchers, contracts, tax reports, payroll and disbursement records, and programs for storing and retrieving data. We may conduct the audits during regular business hours during the policy period and within three years after the policy ends. Information developed by audit will be used to determine final premium. Insurance rate service organizations have the same rights we have under this provision. (The rate service organization they are referencing is the Workers’ Compensation Insurance Rating Bureau (WCIRB) that may request an inspection to confirm the employees are classified correctly under the WCIRB rating guidelines).

From the WCIRB, when determining the basis of premium, the following are included as payroll:

  • Gross wages
  • Salaries
  • Commissions
  • All bonuses
  • Most profit sharing
  • Vacation, holiday and sick pay
  • Overtime (“straight time” portion only)
  • The market value of gifts
  • Automobile allowances (less reimbursement for documented expenses)

The following items are excluded from payroll when determining the rating basis:

  • Meals or lodging (unless the classification phraseology specifically includes them or they are provided in lieu of wages)
  • Tips
  • Overtime excess pay (the increase above the regular hourly wage)
  • Severance pay (except for accrued vacation, sick pay, commissions and bonuses)
  • Employer contributions to qualified insurance, stock or retirement plans
  • Stock options
  • The value of an automobile furnished to an employee

In addition, the following are not included as payroll for premium computation:

  • Employee discounts for merchandise
  • Residual payments for commercials
  • A uniform allowance

Note:

Payroll for Workers’ Compensation insurance purposes is not the same as the Internal Revenue Service definition of payroll.

If you have any questions, please do not hesitate to contact me.

Take care

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com.

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Aley Moyer

The Californian Q3 2023 – Cal/OSHA Employer Reporting Requirements for Work-Related Fatalities & Severe Injuries

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Cal/OSHA Employer Reporting Requirements for Work-Related Fatalities & Severe Injuries

Shaun Kelly, Tolman & Wiker, CALSAGA Preferred Broker

Hope everyone is doing well and coping with the extreme heat we are experiencing. (Please remember to educate and train your employees on heat illness and injury prevention).

This article is to inform you about your responsibilities as employers to report Work-Related Fatalities and Severe Injuries to Cal/OSHA. This is a requirement of all employers and must be reported within 8 hours of your knowledge of serious injury or illness. Failure to report within 8 hours of acknowledgement may result in a minimum penalty of $5,000.

Who has jurisdiction over California Employers, Cal/OSHA or OSHA (Fed)?

Cal/OSHA has jurisdiction over almost every workplace in California. This means Cal/OSHA is the main government agency authorized to inspect California workplaces for occupational safety and health violations. Cal/OSHA also issues permits, licenses, certifications and registrations to ensure that work is performed safely.

Cal/OSHA lacks jurisdiction in only a few limited areas. Some of these areas are listed below. (DISCLAIMER: This list of areas outside Cal/OSHA jurisdiction is not a definitive, exhaustive list. There are exceptions to the list and other areas not listed. If you have a question about Cal/OSHA jurisdiction, please contact the Cal/OSHA Legal Unit at 510-286-7348.)

Federal Occupational Safety and Health Administration (OSHA) jurisdiction

Federal OSHA has jurisdiction with regard to the following:

  • United States Government employees;
  • United States Postal Service (USPS) contractors and contractor-operated facilities engaged in USPS mail operations;
  • Private sector employers within the borders of all U.S. military installations;
  • Private sector employers within the borders of all U.S. national parks, national monuments, national memorials, and national recreation areas;
  • Private sector and tribal employers within the borders of all U.S. Government-recognized Native American reservations and trusts lands;
  • Maritime employment (except marine construction, which Cal/OSHA covers on bridges and on shore) on the navigable3 waters of the United States. Maritime employment includes:
    1. Longshore operations on all vessels from the shore side of the means of access to the vessels.
    2. Shipbuilding, shipbreaking, and ship repair on vessels afloat; shipbuilding, shipbreaking, and ship repair in graving docks or dry docks; ship repair and shipbreaking done on marine railways or similar conveyances used to haul vessels out of the water. This includes ship repair activities from a scaffold or other equipment adjacent to the ship that allows employees direct access to perform work on the vessel.
    3. Floating fuel operations.
    4. Diving from vessels afloat on navigable waters.

Cal/OSHA Definition of Serious Injury or Illness

With regard to reporting to Cal/OSHA, a serious injury or illness is now defined as one involving:

  • inpatient hospitalization, regardless of length of time, for other than medical observation or diagnostic testing;
  • amputation;
  • loss of an eye; or
  • serious degree of permanent disfigurement.

Accidents that result in serious injury or illness, or death that occur in a construction zone on a public street or highway are now included by statute. Work-related injuries, illnesses and deaths caused by the commission of a Penal Code violation are no longer excluded from the definition of “serious injury or illness”.

A serious exposure is now defined as an exposure to a hazardous substance that occurs as a result of an incident, accident, emergency, or exposure over time and is in a degree or amount sufficient to create a realistic possibility that death or serious physical harm in the future could result from the actual hazard created by the exposure.

Reporting Requirements

  • Every employer shall report immediately to the Division of Occupational Safety and Heath any serious injury, illness or death, of an employee occurring in a place of employment or in connection with any employment. The report shall be made by the telephone or through a specified online mechanism established by the Division for this purpose. Until the Division such mechanisms available, the report may be made by telephone or email.
  • Immediately means as soon as practically possible but not longer than 8 hours after the employer knows or with diligent inquiry would have known of the death or serious injury or illness. If the employer can demonstrate that exigent circumstances exist, the time frame for the report may be made no longer than 24 hours after the incident.
  • Whenever a state, county, or local fire or police agency is called to an accident involving an employee covered by this part in which a serious injury, or illness, or death occurs, the nearest office of the Division of Occupational Safety and Health shall be notified by telephone immediately by the responding agency.
  • When making such report, the reporting party shall include the following information, if available:
  1. Time and date of accident.
  2. Employer’s name, address and telephone number.
  3. Name and job title, or badge number of person reporting the accident.
  4. Address of site of accident or event.
  5. Name of person to contact at site of accident.
  6. Name and address of injured employee(s).
  7. Nature of injury.
  8. Location of where injured employee(s) was (were) moved to.
  9. List and identity of other law enforcement agencies present at the site of accident.
  10. Description of accident and whether the accident scene or instrumentality has been altered.
  • The above reporting requirements is in addition to any other reports required by law and may be made by any person authorized by the employers, state, county, or local agencies to make such reports.

The well-being and protection of your employees is a priority. Effective implementation and training on your safety policies and procedures help to prevent workplace injuries and illnesses, however not allaccidents can be prevented. Having the proper procedures in place after an accident is just as important to mitigate the injury or illness for your employee’s well-being.

Take care and please be safe.

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com.

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Kate

The Californian 2023 Q2: Heat Illness Prevention Plan

HEAT ILLNESS PREVENTION PLAN

Shaun Kelly, Tolman & Wiker, CALSAGA Preferred Broker

With the change in seasons comes the warmer weather and it is imperative (and required by Cal/OSHA!) that all employers train their supervisors and employees on heat illness prevention. The safety of employees is the responsibility of the employer and if an unfortunate event does occur, Cal/OSHA may be investigating the event. If so, they will be asking if you have your Heat Illness Prevention Plan (HIPP) implemented. The investigation will include verification that you have provided training to your supervisors and employees and it is documented.

A Cal/OSHA study identified the key role that employers play in preventing worker fatalities due to heat illness. The findings highlighted the value of training supervisors and employees, so that they can make the fullest use of their power to control safety on the job.

Currently, the requirement for a HIPP is required primarily for outdoor exposures. However, in the future, Cal/OSHA may require modifications to your HIPP to include not only outdoor exposures, but also indoor exposures. Buildings, in hot weather conditions, may not have proper ventilation or may have mechanical breakdowns to the air conditional units causing heat exposures to employees. Be on the lookout for changes to the HIPP requirements.

California Code of Regulations, Title 8, Section 3395 Heat Illness Prevention requires all employers to have a Heat Illness Prevention Program which includes the following:
Provide fresh/potable drinking water
Employers must provide employees with fresh, pure, and suitably cool water, free of charge. Enough water must be provided for each employee to drink at least one quart, or four 8-ounce glasses, per hour and the water must be located as close as practicable to the work area. Employers are also required to encourage employees to drink water frequently

Provide access to shade When temperatures exceed 80 degrees, employees must be provided shade at all times in an area that is ventilated, cooled, or open to air and that is as close as practicable to the work area. There must be sufficient space provided in the shade to accommodate all employees taking rest. When temperatures do not exceed 80 degrees, employees must be provided timely access to shade upon request. Employees should be allowed and encouraged to take preventative cool-down rest as needed, for at least 5 minutes per rest needed.

Have high heat procedures in place High heat procedures are required of agricultural employers when temperatures exceed 95 degrees. The procedures must provide for the maintenance of effective communication with supervisors at all times, observance of employees for symptoms of heat illness, procedures for calling for emergency medical services, reminders for employees to drink water, pre-shift meetings to review heat procedures and the encouragement of employees to drink plenty of water and take preventative cool-down rest as needed.
Agricultural employers must additionally ensure employees take, at a minimum, one 10-minute preventative cool-down rest period every two hours in periods of high heat.

Allow for acclimatization New employees or those newly assigned to a high heat area must be closely observed for the first 14 days of their assignment. All employees must be observed for signs of heat illness during heat waves. A “heat wave” is any day where the temperature predicted is at least 80 degrees and/or 10 degrees higher than the average high daily temperature the preceding 5 days.

Train all employees regarding heat illness prevention Employees must be trained regarding the risk factors of heat illness and the employers’ procedures and obligations for complying with the Cal/OSHA requirements for heat illness prevention. Supervisors must additionally be trained regarding their obligations under the heat illness prevention plan and how to monitor weather reports and how to respond to heat warnings.

Have emergency response procedures Employers must have sufficient emergency response procedures to ensure employees exhibiting signs of heat illness are monitored and emergency medical services are called if necessary.

Have a Heat Illness Prevention Plan
Employers must have a written heat illness prevention plan that includes, at a minimum, the procedures for access to shade and water, high heat procedures, emergency response procedures, and acclimatization methods and procedures.

Download a sample Heat Illness Prevention Plan

With all of the constant changes and updates required by Cal/OSHA compliance, if you do not have a dedicated Safety Manager, we highly recommends hiring a Safety Consultant to make it easier on you to stay current. We have worked with EEAP/Got Safety for many years to customize Safety Plans and keep clients compliant. At this time, EEAP/Got Safety has partnered with us to provide CALSAGA Members with a reduced rate which is very reasonable. Please let them know that Tolman & Wiker/AssuredPartners of CA referred you and they will take care of you.

EEAP/Got Safety
Rick Rohmann, Operations Manager
Cell: 661-433-7063 – (Preferred Contact Method)
Office: 800-734-3574 Ext #102
Direct & Fax: 435-708-0014
www.gotsafety.com

Be safe and call us if you need assistance!

Shaun Kelly, Sr. VP, Risk Advisor
Tolman & Wiker Insurance Services/AssuredPartners of CA
(661) 616-4712

 

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com.

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Aley Moyer

The Californian Q1 2023 – Insurance Market Update

Insurance Market Update

Shaun Kelly, Tolman & Wiker, CALSAGA Preferred Broker

Happy New Year! I cannot believe we are already one month into 2023.

Honestly, I think I have discussed the changes in the insurance marketplace several times over the past few months and have almost beaten the topic to death. However, even more changes have arose and I feel it is good information for you to know. Insurance is a large budget expense and you cannot operate without it. 

The start of the year has brought on many surprises and I want to share some of the changes we are experiencing. There is some good news and, of course, some not so good news. Here is a brief update on status of the insurance market:

Workers Compensation: The Workers Compensation market is still competitive, Good News! There are new carriers entering this space and we expect that this will last at least throughout the year. The competitiveness of the market is primarily due to the increases in the minimum wage, increase in payroll and the growth of the Security Industry. Insurance carriers are receiving enough premium and controlling the claims/losses to remain profitable. There is no indication that this will change soon. 

General Liability: How do I start? Almost all insurance carriers are increasing premium rates to offset the claims over the past years. The frequency and severity of claims have caused the underwriting guidelines to change, and not in a good way. This results in the insurance carriers adding “Exclusions” to limit their exposure to potential high hazard claims/losses. The “Exclusions” are different for every insurance carrier and in some cases very restrictive, to a point that you wonder if you have any coverage at all.  In some instances, the new underwriting guidelines have made it very difficult to place coverage at a competitive premium. Some PPO’s have had to evaluate their client mix to meet the underwriting guidelines and keep premium increases at a minimum. We can almost always obtain coverage for any PPO, regardless of contract mix, however the premiums may be too expensive and then we have to determine if maintaining those particular clients makes financial sense.  

Business Auto: The Business Auto insurance has not been profitable for insurance carriers over the years. They have indicated that they are not receiving enough premium to cover their losses. Some carriers have left the market for Business Auto (Specifically CA), leaving fewer carriers that will entertain quoting auto insurance. The cause of their departure is the result of increases in repair costs, higher liability settlements, combined with an increase in the number of claims. With fewer insurance carriers and increasing premium rates, expect your Business Auto renewal premiums to be much higher. To minimize the increase in premiums, always ask if the Business Auto can be written in conjunction with the same insurance carrier that writes the General Liability or Workers Compensation.

Umbrella: Same as above, settlements for large losses are significantly increasing. If General Liability and Auto Liability premiums are increasing, the Umbrella premiums will react the same. Due to the claims triggering the Umbrella, it is to a point that the Umbrella market is reducing the amount of Umbrella limits they will offer. It was standard to obtain quotes for $10M with no problem at all. Now, we may be able to obtain limits of $5M and then the premiums for limits over $5M are expensive and may not provide the same coverage as the underlying General Liability policy. Then there would be “Gaps” in coverage for the additional Umbrella policy. 

Employment Practices Liability: Remains stable, as long as there are no losses. 

At the end of the day, please be proactive and complete applications early. And, review them with your Broker before allowing them to be submitted to the insurance carriers for quotes. If you can negotiate favorable terms early, that will eliminate a lot of stress as the renewal date approaches. We are receiving calls from PPO’s at the last minute asking for help to place insurance coverage, because their current carriers have either non-renewed and/or they cannot find replacement coverage to include all of their operations. This could be due to several reasons: losses over the past 5 years, types of client mix (Schools, retail, executive protection, crowd control, residential….), additional exclusions added to the General Liability policy and significant increase in premiums. 

We wish you the best in 2023 and take care.

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com.

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Aley Moyer

The Californian 2022 Q4 – Insurance Renewal Tips for 2023

INSURANCE RENEWAL TIPS FOR 2023

Shaun Kelly, Tolman & Wiker, CALSAGA Preferred Broker

Greetings to All,

What a great pleasure it was to have the CALSAGA Annual Conference in person again! Being together brought back many memories and also created new ones. Good information was shared amongst the attendees and presenters that created a significantly better understanding of the changes in our industry today.

To piggyback on some of the information I shared during my presentation at the conference, the insurance market is expecting premium increases and restrictions in coverage. In your upcoming insurance renewals, please be aware and pay attention to the detail and ask questions. Here are some highlights from my presentation:

  • Expect premium increases on all lines of insurance coverage, except Workers Compensation:
    • Workers Compensation premiums my increase if you have had claims that have affected your loss ratio or your payroll has decreased
    • Insureds with similar loss ratios and payrolls for the past 3-5 years should not expect rate increases on Workers Compensation
  • Get your applications in early to allow your Broker time to obtain optional quotes.
  • Review your applications with your Broker to verify the information is accurate.
    • In some policies, the application will be part of the policy and if the information is incorrect coverage for a claim may be denied
  • Please pay specific attention to the General Liability coverage/endorsements/exclusions:
    • Insurance carriers are adding “Exclusions” to the policies
    • These exclusions may apply to your current operations
    • If there is a “Designated Operation – Exclusion” and no detail is provided, ask for a copy of that exclusion
  • Provide detailed information to your Broker regarding your Safety Policies & Procedures:
    • Workplace safety and training (Driver safety training)
    • Auto tracking and monitoring devices installed in vehicles
    • State required safety programs
  • If you have claims, provide information on what you have implemented to prevent similar claims from happening again:
    • Workers Compensation
    • General Liability
    • Business Auto
    • Employment Practices Liability

To assist in your diligence and to obtain the insurance coverage needed to protect you and your business, I would recommend working with a Broker that understands the Security Industry. All insurance policies are not the same and understanding the differences is extremely important. This could apply to all your security operations – security guards, alarm/monitoring operations, executive protection, private investigations, security consulting…

Take care.

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com.

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Aley Moyer

The Californian 2022 Q3 – What is Included and/or Excluded from Premium in a Workers Compensation Audit?

WHAT IS INCLUDED AND/OR EXCLUDED FROM PREMIUM IN A WORKERS COMPENSATION AUDIT?

Shaun Kelly, Tolman & Wiker, CALSAGA Preferred Broker

Hope all is well with everyone.

In my last article, we discussed why Workers Compensation auditors are requesting more information than they have in previous years. This is due to the passing of Assembly Bill 5 (AB-5), which redefines the guidelines of whether a worker is an independent contractor or not (The ABC test). Auditors are requesting additional financial information to determine if employers are using independent contractors.

In this article, we are providing information on what is included and/or excluded in determining your premium in a Workers Compensation audit. This will include information regarding some of the following:

  • Sick pay
  • Vacation Pay
  • Bonuses
  • Attendance at conferences
  • Automobile allowance
  • Employee benefits
  • Commuter compensation
  • Meals
  • On Call/Stand By pay
  • Uniform allowance
  • More

Please see the attached Payroll/Remuneration Table from the California Workers Compensation Uniform Statistical Rating Plan (Also known as the USRP).

The USRP is updated and approved by the California Insurance Commissioner periodically. You can find the complete USRP on the Workers Compensation Insurance Rating Bureau (WCIRB) website at wcirb.com under Filings and Plans.

If you have any questions, please feel free to contact me.

Take care and see you all at the CALSAGA Annual Conference.

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com.

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Aley Moyer

The Californian 2022 Q3 – Is Inflation to Blame for Rising Security Firm Insurance Premiums?

IS INFLATION TO BLAME FOR RISING SECURITY FIRM INSURANCE PREMIUMS?

Tory Brownyard, Brownyard Group

In California gas prices have risen above five dollars a gallon. Food banks are experiencing extraordinary demand. Mortgage rates, housing prices, residential rent and even home repair and replacement costs are soaring. For many Americans, this historic rate of inflation has become real, unprecedented and problematic. As consumers feel the brunt of inflation, its impact also spans various industries throughout the U.S. For the private security insurance industry, the market continues to harden, due to both inflation and other factors.  

While a major contributor, however, inflation is just one factor making it more challenging for security firms to secure the insurance they need to mitigate their risk exposure, and of course, meet required insurance obligations featured in every service contract.

Extreme Loss and a Rise in Crime

Inflation aside, many insurance carriers assess the risk and associated cost of premiums based on the history of loss in the industry as well as the individual organization’s claims history and operational practices.

One tragic example of an operational impact includes the May 2022 Securitas Security Services $517.5 million settlement paid to the victims of the June 24, 2021 partial collapse of Champlain Towers in Miami. Among the determining factors for Securitas paying nearly half of the more than $1 billion settlement included the failure of the security guard on duty in activating the building’s alarm system to signal an emergency evacuation. In a deposition, the company’s manager acknowledged a lack of training contributed to the system not being used despite the guard on duty calling 911 approximately 10 minutes before the structure failed, killing 98 people. 

Multi-million-dollar settlements like that of Securitas will have major ripple effects across the security industry for years to come.

Other examples include the recent spike in active shooter situations, including the devastating incident in Uvalde, TX and the Fourth of July shooting in Highland Park, IL. In addition to the tragic loss of life, more than 300 mass shootings have occurred by the mid-point of the year, putting 2022 on track to meet or surpass the record 700 shootings in 2021 or the previous record of 611 shootings in 2020. In many, but not all such mass shooting incidents, private security firms face the public’s wrath, legal inquiries and countless lawsuits. The resulting litigation often produces what many term nuclear verdicts handed down by the courts, loosely defined as exceptionally high jury awards that exceed what most would consider reasonable.

Large jury awards against security firms can often be traced back to failures in training, client screening, contract language and communication. So, while inflation is certainly a factor, there are other circumstances within the control of the industry itself to limit its own risk and exposure.

Managing Risk

Steps security firms can take to reduce their exposure and slow or mitigate the rise in their premiums include:

  •         Carefully selecting clients: As the shootings in Uvalde, Buffalo, Highland Park and Biloxi — among others — have taught us, active shooter or violent situations can occur anywhere, among anyone at any time. However, when it comes to underwriting the security industry, insurers will often look closely at the types of clients the firm takes on. Those who take on high-risk clients, those with more public exposure such as bars and nightclubs, shopping malls and sport or concert venues, will often give insurers pause. If an insurer does cover a security firm with such clients, the premium is sure to be much higher than those who take on low-risk clients. Low-risk clients are those with less public exposure, including warehouses, office buildings and industrial type clients.
  •         Mitigating liability: To minimize risks, a security firm should always speak with their insurance partner before taking on a new contract. The insurance partner can help advise on what to avoid and can ensure proper coverage is obtained to best meet the firm’s needs and client types. Firms should also consider their policy limits when taking on new clients and make necessary adjustments in consultation with their agent or broker. High-risk clients can often demand higher limits of liability, and excess and umbrella policies can provide needed coverage beyond the scope of the original policy.
  •         Reading the fine print: Security firms should also consider contractual language carefully before taking on new clients. Ensuring their guards are only liable for their own negligence and wrong doing is critical. Also, it is recommended that clear and concise expectations for all parties are written into the contract. This can help avoid costly lawsuits and needless blame.
  •         Prioritizing training and communication: California state law requires 32 hours of training to acquire a security license, and eight hours of training each subsequent year to maintain the license. While this training provides guards with the tools and knowledge to perform their duties to industry standards, additional training for de-escalation, the dangers of restraints, active shooter or other situations is also recommended. Regularly revisiting and updating such training is vitally important. However, even the best training can fall short in an emergency. Clear communication protocols for security guards to seek and receive updated instructions can make the difference between managing a crisis or facing unfortunate and avoidable consequences. When all else fails, security guards should be able to rely on universally understood and transparent orders and expectations established within the signed contract.

Staffing and resource limitations among local law enforcement along with rising crime in certain localities will continue to drive the need for more private security by event and property managers, among others. Increased demand, paired with higher risk security situations, directly affects the rise in insurance premiums for private security firms. This rise of risk and premiums will continue to contribute to insurers being much more selective in the types of security firms they are willing to cover. Working with their insurance agents and brokers, security firm leaders can play an active role in minimizing their risk to avoid major losses and secure reasonable coverage to allow them to keep both their clients and their businesses safe.

Tory Brownyard, CPCU, is president of Brownyard Group, an insurance program administrator with specialty programs for select industry groups. In addition to his responsibilities as president, he currently spearheads the Brownguard® security guard insurance program.

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Aley Moyer

The Californian 2022 Q2 – WORKERS COMPENSATION AUDITS – BE PREPARED!

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WORKERS COMPENSATION AUDITS – BE PREPARED!

Shaun Kelly, Tolman & Wiker, CALSAGA Preferred Broker

Hope everyone is doing well and getting out to enjoy more activities outdoors!

Over the past 6 to 12 months, we have been receiving more calls from employers (PPOs) than ever before regarding Workers Compensation Audits. Their concern is that some auditors are requesting more information than they have in previous years. The reasoning behind the auditor’s request for additional information is the result of Assembly Bill 5 (AB-5). This is the radical change in the definition of Independent Contractor status in California. And, as a result, Workers Compensation auditors are requesting additional information to obtain verification that employers are classifying their workers correctly and collecting the appropriate premiums.

AB-5 implemented the ABC Test and put the responsibility on the employers to determine the status of their workers. In order to hire and classify a worker as an independent contractor, the employer must demonstrate that all 3 of the independent contractor requirements are satisfied. These 3 requirements include the following:

  1. The worker is free from control and direction in the performance of services; and
  2. The worker is performing work outside of the usual course of the business of the hiring company; and
  3. The worker is customarily engaged in an independently established trade, occupation, or business.

Even before the implementation of AB-5, a Guard carded security worker is not allowed to work as an independent contractor.

Workers Compensation auditors are now requesting financials in conjunction with the usual 941 quarterly payroll reports and other documents to determine if payments have been made to independent contractors. Per the terms and conditions of the Workers Compensation policy, audits are mandatory and in Part 5 G-Audits; auditors are able to request the following: “You (policyholder) will let us examine and audit your records that relate to this policy. These records include ledgers, journals, registers, vouchers, contracts, tax reports, payroll and disbursement records, and programs for storing and retrieving data. We may conduct the audits during business regular business hours during the policy period and within three years after the policy period ends. Information developed by audit will be used to determine final premium. Insurance rate service organizations have the same rights we have under this provision.” 

Since AB-5 was signed into law in 2019, Workers Compensation policies expiring in 2021 and going forward are being affected by the new legislation.

Please be prepared to address the request from the auditors and provide the following documents:

  • Workers Compensation reports and/or Payroll Journals and/or Payroll Summaries
  • Federal (941) and State (SUI) quarterly tax returns that correspond with your policy period
  • List of Executive Officers, Owners or Partners (Ownership %, Amount Paid, Job Duties and Titles)
  • List of employees that have been reported in Clerical (8810) and/or Outside Sales (8742)
  • Access to General Ledger and Cash Disbursements Records
  • For any subcontract, please have certificates of insurance available for review along with the amount paid and their job duties*

*It is very important to request insurance certificates from all subcontractors that you hire, or the cost of the subcontractors you hire will be included in your final premium calculation.

Auditors are being required to request this information. Hopefully now you will have a better understanding of why it is being requested.

Thanks and take care.

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com.

 

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Kate

The Californian 2022 Q1 – GENERAL LIABILITY INSURANCE – ARE YOU COVERED?

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GENERAL LIABILITY INSURANCE – ARE YOU COVERED?

Shaun Kelly, Tolman & Wiker, CALSAGA Preferred Broker

Happy New Year and hope everyone is doing well!

Over time, insurance carriers experience losses or events that make them reconsider providing coverage for certain types of exposures under the Commercial General Liability policy. It is important to note that as each insurance carrier evaluates these exposures, they develop their own underwriting guidelines and can or will modify the terms and conditions in their own policies to minimize risk. It is likely that most of you have not read through your entire policy to understand the coverage terms and conditions, unless you have insomnia and have nothing better to do. To assist you in understanding the Commercial General Liability coverage for contract security services, here is the short version of what to look for, “Exclusions”. 

Commercial General Liability (CGL) policies are intended to provide coverage to the Named Insured for their negligence (resulting from the services provided) for bodily injury, property damage, personal & advertising injury to a 3rd party. Most insurance carriers use a standard ISO CGL form and attach endorsements and exclusions to add, remove or limit coverage. We are not going to go through the entire CGL policy, however we are going to discuss some of the exclusions that may be on your CGL policy that you need to be aware of. 

The following “Exclusions” may be part of your CGL policy (Some exclusions may be added back with underwriting approval and additional premium):

  • Terrorism
  • Pollution
  • Communicable Disease
  • Personal and Confidential Information Disclosure (Cyber liability)
  • Employment Practices Liability
  • Employers Liability (Part of Workers Compensation policy)
  • Abuse and Molestation
  • Firearms
  • Unmanned Aircraft
  • Animal exclusion
  • Mobile Equipment (ie. Golf carts, scooters, segways…any vehicle licensed for the public road should be on an auto policy)
  • Cannabis Operations
  • Public/Low Income Housing
  • Airports
  • Crowd Control/Concert Facilities/Sporting Events
  • Liquor Establishments: bars, hotel bars, nightclubs, lounges…
  • Bodyguards: High Profile Individuals/Entertainers/Athletes…
  • Baggage checking
  • Inside Retail/Loss Prevention
  • Convenience Stores
  • Fast Food Restaurants
  • Schools

 

These “Exclusions” may not apply to all policies and your policy may have other exclusions not listed above. If you are providing security services that involves any of the above, please review your policy.

At the end of the day, including all of your operations (client exposures) in your application for Commercial General Liability coverage is critical to obtaining the proper coverage. Policies can be modified to include some of the high risk exposures and remove exclusions, with approval from the insurance carrier. In regards to some of the extremely high risk exposures (for example, Crowd Control/Concerts/Sporting Events, Low Income Housing, Liquor Establishments, Inside Retail/Loss Prevention, High Profile Individuals/Entertainers/Athletes…) that the standard insurance carriers will not accept, specialty insurance carriers are available.

Take care and be safe.

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com.

 

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Aley Moyer

The Californian 2021 Q4 – LOOKING FORWARD: WHAT’S DRIVING THE HARD MARKET INTO 2022

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LOOKING FORWARD: WHAT’S DRIVING THE HARD MARKET INTO 2022

Tory Brownyard, Brownyard Group

The insurance industry is now experiencing a hard market that experts predict will continue well into 2022. In practical terms, this means security firms, among other businesses and industries, will continue to see rising insurance premiums and may have difficulty obtaining coverage. 

A range of factors have contributed to the hardening insurance market. For security firms planning for the year ahead, understanding the drivers and knowing the risks that concern insurers may help soften the blow and provide better coverage options in the shifting economy. 

What’s driving the hard market 

In a hard market, insurance rates rise as insurers become more risk averse. Some insurers institute stricter underwriting parameters, while others may leave certain markets entirely. An example of this can be found in California where, years ago, many insurers reduced the amount of earthquake coverage they wrote while others stopped providing earthquake insurance entirely. 

For security firms in the U.S., the pandemic, economic uncertainty, rising crime rates and civil unrest in 2020 and 2021 all contributed to the hardening of the security insurance market. One of the primary drivers is large settlements awarded against guard firms. Such settlements, coupled with the risk of active shooter claims, are increasing insurance rates for security firms across the board. 

The security industry saw a respite from active shooter situations throughout 2020 and 2021 due to nationwide lockdowns. However, as lockdowns ended, active shooter concerns began to rise again. For instance, a workplace shooting at a Northern California rail yard in May marked the third such incident in less than two months. In many of these situations, security professionals are often the first line of defense. As such, they face considerable liability.

Another factor driving increased insurance premiums for guard firms is the ongoing trend of asking guards to perform work that is not only outside of their regular duties, but also exposes them to increased risk. For years security guards have been asked to provide additional services such as hospital patient transfer and even janitorial services. The pandemic exacerbated this trend as guards found themselves performing temperature, mask, and vaccination checks. In places such as Los Angeles County, where vaccine mandates are strongly enforced, guards will likely continue to be asked to provide additional services for the foreseeable future. 

If these services are not included in a security firm’s contract and the guard, or those involved with the guard’s actions, are in any way harmed, lack of insurance coverage for those services could expose the firm to considerable liability, as some insurance policies will exclude operations not disclosed to the insurance company.

Additional factors contributing to the hard market include a global increase in the cost of doing business and late claims reporting. The later a claim is reported, the more time sensitive it becomes and the more costly it is to settle. 

Choosing clients carefully

One of the biggest concerns for insurers when it comes to underwriting the security industry are the types of clients taken on by the firm. Security firms that take on clients considered high-risk are seen as having an increased exposure. Clients that fall into the high-risk category are typically those with more public exposure, including sport and concerts venues, shopping malls, and clients that are prone to criminal activity, such as certain medical dispensaries, subsidized housing and payday lenders. 

In addition to paying higher insurance rates, security firms that cater to high-risk clientele might also find it more difficult to get coverage. Some markets are also reducing coverage and introducing exclusions for certain client types such as low-income housing, special events or places serving liquor. 

While the hard market presents challenges to finding affordable and consistent insurance coverage, security firms can take steps to lower their risk exposure. Doing so can contribute to either better costs or access to limited coverage.

What you can do to soften the blow 

Poor contractual language can open the door to security firms assuming responsibility — and potential liability — for actions over which they have no control.  Reviewing contracts to ensure they are clear and transparent can help firms ensure they only accept liability for their own wrongdoing or negligence. Security firms should provide clients with contract language that has been both drafted and approved by the firm’s attorney, as well as reviewed by their insurance provider. Doing so can limit liability when a claim is made and help control the cost of those claims, thus making those security firms more appealing to insurers. 

Another way security firms can reduce the impact of a hard market is by reporting incidents as soon as they happen, even if the security officer is not considered responsible for the incident in question. Through timely reporting, security firms can provide the insurance company with the necessary information to get ahead of the claim and lessen the potential liability from long-tail claims (those that typically carry a long settlement period, high settlement amounts and a lengthy court case) and put themselves in a more defensible position. 

Finally, serving clients with lower risk profiles, such as office buildings, government contracts and industrial clients will lower a security firm’s risk profile. In most cases, insurers view such low risk more favorably because they tend to have a better loss experience. 

As the economy shifts and the need for private security expands, it is more important than ever for security firms to better understand and mitigate liability risks where they can. To accomplish this goal, security firms should work with their insurance partner to better understand their coverage and their potential exposure. This can find greater stability during uncertain times. 

About Tory Brownyard

Brownyard, CPCU, is president of Brownyard Group, an insurance program administrator with specialty programs for select industry groups. In addition to his responsibilities as president, he currently spearheads the Brownguard® security guard insurance program.

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