As employers begin preparing for 2027 open enrollment (yes, it’s almost that time!), one important compliance number deserves attention. IRS Rev. Proc 2026-26 announced the ACA affordability percentage for plan years beginning in 2027 will be 10.22%, up from 9.96% for 2026. This marks the first time the affordability percentage will hit the double-digit mark,  welcomed news for employers who have been facing climbing renewals year over year.

Under the ACA, applicable large employers (ALEs) must offer full-time employees (and their dependents) health coverage that both provides minimum value and is ‘affordable’. “Minimum value” means the plan covers at least 60% of expected covered benefit costs, while “affordability” looks at whether the employee’s required contribution for the lowest-cost, self-only tier meets the annual threshold.

Because affordability is measured against household income, and employers typically do not know each employee’s household income, the IRS offers employers three safe harbors to test this metric (W-2 wages, rate of pay, and the federal poverty line). The right safe harbor may depend on the employer’s workforce and contribution strategy, and employers may use different safe harbors for reasonable employee categories, such as hourly and salaried employees, if the method is applied uniformly and consistently within each category.

For context, the affordability percentage has moved significantly in recent years. While the ACA began with 9.5%, the law also contained an index metric. In 2024, the threshold was 8.39%, the lowest in the program’s history. It increased to 9.02% for 2025, rose again to 9.96% for 2026, and will now increase to 10.22% for 2027. While the higher percentage may give employers slightly more flexibility when setting contribution rates, it does not eliminate the need to run the affordability analysis before rates are finalized.

Before finalizing 2027 renewal rates and open enrollment materials, employers should confirm that the employee-only cost for the lowest-cost minimum value plan satisfies ACA affordability under the safe harbor they intend to use. Employers should also make sure the safe harbor is applied consistently within each employee category and coordinated with payroll, enrollment, and ACA reporting processes. Your Heffernan account team is always available to assist with renewal and open enrollment compliance considerations.

Guest Author

Sara Galeb-Roskopp, UC LAW SF, Class of 2028

Tech companies are riding high on the AI boom. According to UN Trade and Development, AI technology accounted for just 7% of the frontier tech market in 2023. By 2033, it is expected to represent 29% of the frontier tech market, with a projected value of $4.8 trillion. For tech companies, the business opportunities are huge, but so are the risks.

With any product or service, there’s a risk of software bugs, missed deadlines and other failures. AI tools have these risks, but they also have additional liability exposures unique to the nature of AI, and traditional technology insurance solutions may not fully address them.

Here are three risks that tech companies should be aware of.

AI Risk #1: Intellectual Property Liability

Multiple lawsuits have accused tech companies of violating intellectual property rights by using copyrighted material to train their AI models without permission, sometimes through the use of pirated copies. In one lawsuit, Susman Godfrey secured a $1.5 billion settlement against Anthropic to settle the company’s use of pirated databases.

In another major lawsuit, The New York Times has sued OpenAI and Microsoft over allegations of copyright infringement. According to Harvard Law Review, the lawsuit claims that OpenAI committed copyright infringement when it used news articles to train its models, and that the resulting large language model (LLM) sometimes memorizes and generates near-verbatim reproductions. The lawsuit also argues that the LLM reproduces more content than the publisher would show online with a subscription, thereby harming the publisher by allowing readers to circumvent the paywall.

What does this mean for tech companies? Tech companies need massive amounts of data to train AI, but when copyrighted material is used in training without permission, and when outputs resemble copyrighted material, allegations of copyright infringement may follow.

AI Risk #2: Privacy and Personal Data Exposure

AI has raised several concerns over privacy.

As with copyright infringement allegations, some of the issues involve the data used to train AI. According to Business Insider, a proposed class-action lawsuit accused OpenAI of secretly harvesting personal data to train its models. The data used allegedly included medical records and information about children.

AI models have also been accused of privacy violations stemming from misappropriation of likeness. According to the Authors Guild, authors have sued Grammarly over its creation of a feature called “Expert Review,” which presented writing tips as if they came from real authors. However, those authors never agreed to the feature, and some complained that the advice attributed to them was not something they would say and could harm their reputation.

Meanwhile, Grok is facing litigation over its AI image generation tool. According to AWKO Law, people can reportedly use Grok and other image-generation tools to create non-consensual intimate images of real people.

What does this mean for tech companies? Tech companies that collect, store or use personal information may face allegations of privacy violations. AI outputs can also run afoul of privacy rights, and tech companies may be held accountable for the outputs created by users.

AI Risk #3: Harmful User Interactions

AI chatbots may reinforce and amplify users’ delusions, according to Psychology Today. Cases of so-called “AI psychosis” include people who suffer from grandiose delusions and think they have uncovered some truth about the world, people who believe the AI is a deity, and people who believe the AI is a romantic partner. Some people with no history of mental illness have experienced AI psychosis leading to psychiatric hospitalizations, and one man was killed in an encounter with police.

AI chatbots may also encourage suicide, according to multiple allegations. According to CBS News, one lawsuit accused ChatGPT of encouraging a man to commit suicide. According to Reuters, another lawsuit accuses ChatGPT of encouraging a young woman to commit suicide after multiple chats involving suicidal ideations. At least 18 similar lawsuits have been filed in California.

What does this mean for tech companies? Without proper safeguards in place, users can become attached to AI in very unhealthy ways, and AI companies may face product liability and wrongful death litigation as a result.

Does Your Insurance Cover AI-Related Liability?

Tech E&O insurance is a staple of liability protection for tech companies, but it may not cover all AI-related liability exposures.

As insurers try to manage AI risks, they are reconsidering policy language. According to Carrier Management, insurers are trying to decide how AI should be covered under cyber and tech E&O policies. Depending on what they decide, they may introduce new AI exclusions.

Even without exclusions, some claims may fall outside the scope of tech E&O. For example, a standard tech E&O policy does not cover wrongful death claims. To fill in coverage gaps, tech companies may need other types of insurance coverage, such as product liability that covers AI.

Without adequate coverage, companies could face expensive defense costs, settlements, awards and regulatory penalties without the support of insurance.

Just as AI is a rapidly evolving area of tech, AI insurance is a rapidly evolving area of coverage. Heffernan Insurance Brokers can help your tech company assess its AI-related risks, identify potential coverage gaps and build an insurance strategy that supports growth and innovation. Learn more about our insurance solutions for tech companies.

Every business needs insurance to manage risk, fulfill obligations and protect its bottom line. While insurance is a necessary business expense, it doesn’t have to strain your budget. By taking an organized and informed approach to coverage, small business owners can build an affordable insurance program that protects their operations and supports growth.

Start with a Comprehensive Insurance Strategy

Many small businesses purchase insurance reactively, adding policies as new needs arise. You rent office space, so you purchase commercial property insurance. You buy a company vehicle, so you add commercial auto coverage. You hire employees, so you secure employment practices liability insurance. And so on. If a policy isn’t renewed or premiums increase significantly, you shop for a new policy.

The problem emerges when business owners never stop to assess their program as a whole. As a result, they may have:

• Coverage gaps that leave them exposed to uncovered losses.
• Overlapping coverage that causes them to pay for coverage twice.
• Unneeded coverages that cost money while providing no value.
• Missed discounts and savings opportunities that result in unnecessary costs.

A portfolio-level review helps you determine whether every premium dollar is supporting a meaningful business risk.

1. Identify and Prioritize Your Risks

A thorough risk assessment can help you determine which insurance coverages are most vital.

Your business may have unique risks due to the nature of your operations. However, common risks include:

• Business property, including buildings, equipment, inventory
• Business interruption caused by natural disasters, cyber incidents and other events
• Employment-related risks, including injuries and lawsuits
• Management liability risks, including fiduciary breaches and misrepresentation
• Product-related risks, including recalls and product liability
• Professional risks, including negligence, errors, and omissions
• Cyber incidents, including ransomware, data breaches and fraud
• Third-party risks, including injuries, property damage, intellectual property claims and pollution

Because risks evolve as your business grows and the world changes, it’s important to reassess your risks periodically. Review your program at least once a year and whenever adding locations, employees, vehicles, products, services or major contracts.

2. Compare Policies, Packages and Endorsements

Once you have a clear idea of your business’s risks, you can compare your coverage options. This should include individual policies as well as packages and endorsements that can provide additional coverage at a lower cost.

For example, small businesses can often save money on insurance by purchasing a business owners policy (BOP). This is a common insurance package that combines general liability, commercial property and business interruption coverages. It’s also possible to add certain endorsements, such as employment practices liability coverage. In addition to costing less, a bundled insurance package can simplify claims because you don’t have to determine which policy should respond to a claim.

Although options that lower premium costs are desirable, evaluate more than the quoted premium when comparing options. Deductibles, exclusions, coverage limits and claims support can also contribute to the total cost to your business in the event of a loss.

3. Explore Alternative Insurance Strategies

For most small businesses, standard insurance options provide adequate coverage at a reasonable cost. However, your business may encounter problems, such as:

• Risks that standard insurers are not willing to cover.
• Premiums that are prohibitively expensive.
• Exclusions that leave important exposures uninsured.

If you encounter challenges like these, you may need to turn to alternative insurance and risk management solutions. There are many options to consider, including:

• Non-admitted insurance. A non-admitted insurer is not admitted in the state but is authorized to write eligible surplus lines coverage. This can be a good option for risks that standard admitted insurers don’t want to touch.
• Parametric insurance. A parametric insurance policy provides a payout based on the occurrence of an event rather than the actual losses. Parametric policies are typically written to cover specific types of events or losses, such as wildfires or earthquakes.
• Group captive insurance. A captive insurance company exists to provide coverage for its parent company. In the group captive structure, multiple businesses share ownership of the captive, making this a suitable option for smaller businesses.
• Large deductibles or self-insured retentions. When you accept a large deductible or self-insured retention, you are accepting a greater share of the risk. In exchange, you may be able to negotiate significantly lower premiums. However, you will be responsible for the deductible or self-insured retention in the event of a loss. With a deductible, the insurer covers the loss minus the deductible. With a self-insured retention, coverage does not activate until you pay your share.

Build the Right Insurance Program with Expert Guidance

Insurance is too important to be an afterthought. If you’re not giving insurance the attention it deserves, you may be overpaying for coverage. Even worse, you may not have the protection you need in the event of a loss, putting your business at risk.

Heffernan Insurance Brokers can help you build an affordable insurance program that’s tailored to your needs. Explore our small business insurance solutions.

The days get shorter, students go back to school… and everyone works on their financial plan? Most people don’t associate finances and budgeting with the end of summer, but maybe they should. The back-to-school season is the perfect time to tackle your financial plan.

Why This Is the Best Time for a Financial Checkup

Spring cleaning is a tradition for many people. After a long winter stuck indoors, it’s time to get rid of the clutter that’s accumulated and get your home ready for summer.

Fall offers an opportunity for a different kind of cleanup, not around the house, but in your finances. The timing is ideal because summer is often filled with vacations, travel and extra spending. Late fall and winter can also be a challenging time for your budget. If you’re buying gifts, hosting family gatherings or paying for plane tickets, it can get expensive quickly.

Once the calendar turns to a new year, many financial opportunities for the previous tax year have already passed. If you haven’t maximized your retirement accounts or made smart tax moves, you’re out of luck.

The transition between summer and fall is the sweet spot for financial planning. Summer activities are winding down, the kids are back in school, and you finally have time to focus on your finances. You can reassess your budget after summer spending, prepare for holiday expenses, and make sure you’re on track to end the year well.

Your Fall Financial Cleaning Checklist

There’s a lot to accomplish, so it’s important to be organized.

Balance your household budget. Emergency expenses, higher-than-expected vacation costs and the general effect of inflation can derail your budget. Check your monthly income versus your expenses to determine whether you’re still on the right track. You may need to adjust your budget going forward.

Determine your holiday budget. It’s not too early. The sooner you start planning for your holiday expenses, the easier it will be to avoid overspending. You may also be able to take advantage of early sales and travel deals if you plan ahead. List expected expenses, including gifts, travel and entertainment, and decide how much you can realistically spend in each category before the holidays arrive.

Check your retirement contributions. Maximizing your retirement contributions is a smart way to build your nest egg. If your employer offers contribution matching, it’s also a good way to get the most out of your employee benefits. But if you wait until the end of the year, you might not be in a position to contribute the maximum amount. Waiting until year-end may leave you without enough time to reach your contribution goals. Check your contributions now to see if you’re on track.

Assess your taxes. Tax season is still a long way off, but the financial moves you make between now and the end of the year will affect your tax bill or refund. Check your tax withholdings to make sure they’re right. Also think about any deductions you want to take or charitable donations you want to make. Finally, make sure you’re keeping your records in order. Your future self will thank you.

Check your financial protection strategies. A solid financial plan doesn’t just take care of you when times are good. It also provides for you when things go wrong. If your family depends on your income, life insurance and disability insurance are critical for financial protection. If you don’t have coverage, consider obtaining it now. If you do have coverage, check your benefits to see if they still meet your needs. If your income and obligations have increased, you may need to raise your coverage levels. Also see if there are any clauses or benefits that you’ll need to act on soon, for example, a term life insurance policy that can be converted to a permanent policy within a certain window.

Set goals for the end of the year. You don’t have to wait for New Year’s Day. Think about the goals you want to achieve before the year ends. Do you want to build your emergency savings? Cut down on your monthly spending? Diversify your investments? Once you have a goal, think about the little steps you need to take to achieve your objectives.

Need help getting your finances in order? The weeks between summer and the holiday season provide a valuable opportunity to strengthen your financial position before the end of the year, but you’ll need to act quickly. Whether you’re reviewing your retirement savings, updating your wealth protection strategy or refining your long-term financial plan, Heffernan Financial can help. Contact us to schedule a consultation.

One of the many collateral impacts from the COVID-19 Pandemic was the expansion of a remote workforce on a national scale. Communication with employees and clients relied on electronic methods in an unprecedented way. Despite the mobilization of the workplace, the DOL rules as related to health and welfare plan documents remained stuck in a pre-COVID era. A 2020 safe harbor permitted pension plans to expand their use of e-delivery, yet the department declined extension of this new rule to health and welfare plans.

Employers have been stuck with the 2002 electronic delivery safe harbor, which requires a workforce with work-related email access as an essential part of the job (‘wired at work’), or affirmative consent to receive plan materials electronically. In the July 22 news release, the DOL notes :

“Group health plans currently print and mail up to 11 billion sheets of paper each year. The department estimates the proposal could save group health plans $3.9 billion over 10 years while giving participants and beneficiaries easier, more reliable access to their health plan information.”

To take advantage of the new rule, employers would need a valid email address for each employee, and an online posting for the covered documents. In response to a participant request for a plan document, employers may send that material via email.

Some challenges still exist under the rule as proposed. For example, it does not apply to all plan materials, leaving

HIPAA notices, SBCs and certain other Section 125 plan disclosures still under the ‘old’ e-delivery requirements. Additionally, employers will need to coordinate with carriers and TPAs to determine where the materials themselves can be housed online, and what assistance vendors can offer in this regard. The comment period remains open, so we are hopeful that industry recommendations may be considered in a finalized rule.

The proposed rule can be viewed here.

The regulatory landscape changes fast. Connect with our in-house ERISA attorneys and compliance team to protect your business today. Email [email protected] to talk to our team.

A bad benefits package can cost your company far more than the price of the benefits themselves. Poor benefits can increase turnover, make recruiting more difficult and erode employee morale and productivity. For employers competing for talent, investing in the right benefits package may be one of the most cost-effective business decisions they can make.

What Counts as a Bad Benefits Package?

A bad benefits package is one that doesn’t meet the needs of your workforce. This often comes down to three common problems:

• A robust, well-rounded benefits package is better suited to meet the needs of a diverse workforce.
• It’s not just the number of benefits available. You also need the right benefits. For example, fertility benefits and retirement plans can be very popular, but they might not appeal to a college-age workforce.
• Bloomberg warns that more workers are choosing to opt out of their employee health plan due to cost. If the premiums or out-of-pocket costs are too high, employees won’t get any value out of their benefits.

The Business Impact of Poor Benefits

To see how bad employee benefits can cost your company, just think about the goals that companies are trying to achieve through their benefits program, and then consider how the wrong benefits could undermine those goals.

Employee benefits can:

• Attract high-quality job applicants – or drive them away. The benefits package is an essential tool in talent recruitment. Workers are attracted to benefits packages that meet their needs, and the top candidates often have multiple employment options. If you’re not offering strong benefits, you’re likely missing out on these job applicants. As more states pass pay transparency laws that require compensation information in job ads, strong benefits are increasingly important.
• Inspire worker loyalty – or give your workers another reason to leave. Workers often switch jobs to secure better compensation, and employee benefits are an important part of the total compensation package. If you’re not offering good benefits, your employees may leave in search of better benefits. On the other hand, if you offer great benefits, your workers may think twice before giving them up.
• Promote worker satisfaction – or become a drain on worker well-being and productivity. Employee benefits should help workers solve the various problems that can interfere with work, but a poor benefits package may not provide the support workers need. Consider a worker who avoids going to the doctor due to a lack of health insurance. Over time, the worker develops health issues that could be treated easily, but without treatment, they get worse. The worker sleeps poorly, misses work frequently and struggles to concentrate. Productivity drops, and so does workplace morale. A health plan could improve the situation, supporting worker well-being and boosting morale and productivity in the process.

The cost can be significant. According to SafetyCulture. workers lose around seven hours a month in the form of unproductive downtime, errors, and absenteeism as a result of dissatisfaction. Businesses lose a total of around $196 billion every year as a result.

When employees quit, the costs can soar even higher. According to Express Employment Professionals, the average cost of turnover has reached $45,236, and 32% of employers attribute higher turnover rates to employees leaving for better pay and benefits.

Employee benefits are a strategic investment that affects hiring success, retention costs and workforce performance, so it makes sense to optimize your benefits package.

How to Strengthen Your Benefits Package

If your employee benefits package isn’t supporting your company’s goals, the sooner you implement changes, the sooner you can stop losing money to bad benefits.

• Leverage Benchmarking. Your workers are comparing your benefits package to the benefits offered by other companies, so it only makes sense for you to do the same. Benchmarking lets you see how your benefits stack up.
• Elicit Feedback. Employee surveys can provide insights into how your benefits are really perceived and what employees want.
• Expand Benefit Options. Adding voluntary benefits is a cost-effective way to create flexible benefit options, allowing workers to select the benefits that matter to them.
• Raise Awareness. Employees may need regular reminders about the benefits available to them.
• Highlight the Value. If your employees are taking benefits for granted, help them see the value by providing a total rewards statement that details the value of all their benefits.
• Monitor Participation. A low participation rate is a clear sign that something has gone wrong. Monitor participation, and if it’s low or falling, investigate to see why employees aren’t enrolling in the benefits offered.

Heffernan Insurance Brokers can help you evaluate your current offerings and build a benefits package aligned with your employees’ needs and your business goals. Learn about our benefit advisory services.

If you offer design services, professional liability coverage may seem like a no-brainer. However, many contractors mistakenly assume they don’t need this protection because they don’t handle design. Without proper coverage, you may expose yourself to uninsured claims, and all the financial costs and reputational damage that can accompany litigation.

What Is Professional Liability Insurance?

Professional liability insurance is also called errors and omissions insurance, and as these two names suggest, it provides coverage for claims involving professional errors and omissions. More specifically, it provides coverage for allegations of professional negligence resulting in financial loss for the client.

If a client sues you claiming that a mistake, oversight or failure to meet professional standards on your part resulted in financial harm, your professional liability insurance policy can cover the legal costs, including your defense and settlements or awards, up to your policy limits. Coverage can help contractors preserve cash flow, maintain business continuity, satisfy client requirements and demonstrate a proactive approach to risk management.

General Liability Insurance Leaves Critical Gaps

When contractors don’t secure professional liability insurance, it often comes down to the mistaken belief that they don’t need it because they already have general liability insurance.

This common misconception can lead to a major coverage gap. General liability insurance provides important coverage, but it does not protect against claims involving professional liability resulting in financial loss.

General liability insurance primarily provides coverage for third-party claims involving property damage or bodily injury. If you’re doing reconstruction work and a client trips over the materials you’ve left out or is hit by a nail that ricochets from your nail gun, you can report the claim to your general liability insurer. Likewise, if a hot tool of yours burns the counter, or if you drop something heavy and dent the flooring, you can report the claim to your general liability insurer.

General liability insurance also provides coverage for personal and advertising injuries. As a contractor, you might use this coverage if you’re sued for copyright infringement in an ad, or if a competitor or former client accuses you of defamation.

But if a client accuses you of poor workmanship, missed deadlines, or other acts of professional negligence resulting in financial loss, your general liability policy won’t cover you. For these types of claims, you need contractors professional liability insurance.

Contractors Professional Liability Claim Scenarios

You sign a contract to build a gazebo by May 1. Unfortunately, the project takes longer than anticipated due to several unforeseen events, including a subcontractor who quits on you and a measuring mistake that means you have to buy new materials and redo part of the gazebo. The May 1 deadline comes and goes. The client wanted the gazebo for a wedding, and because of the missed deadline, the client had to book another venue at the last minute and at a tremendous cost. The client sues you for breach of contract.

Your general liability insurance policy would not cover this type of claim. However, your professional liability insurance policy could.

Other claims could involve allegations of poor workmanship that don’t result in bodily injury or property damage but do necessitate additional work and expenses, or of incorrect advice that leads to extra expenses for a client.

Even Careful Contractors Face Litigation Risks

You may think you don’t need contractors professional liability insurance because you don’t commit professional negligence. You work carefully to fulfill your contracts and maintain high professional standards. That’s great, and your diligence will protect you from many problems – but you can never completely eliminate the risk of lawsuits.

For one thing, anyone can have a bad day. One mistake, one oversight or one problem you can’t fix could result in a lawsuit.

Second, litigation is possible even when you do everything right. In order to be sued, the client needs to accuse you of professional negligence. Even if you’ve done nothing wrong, you’ll have to defend yourself, and that takes time and money. Honest misunderstandings are also possible. For example, you might give your client advice, but the client misunderstands and misapplies that advice, resulting in loss. Now it becomes a dispute over who is at fault. Professional liability insurance can support your defense.

Protect Your Clients and Your Career

Contractors professional liability insurance can provide you with peace of mind that you’ll have protection if you’re sued. It’s also a way to protect your clients and the long-term relationships you’ve built with them. As projects become more complex and litigation risks increase, contractors need insurance programs designed to address today’s exposures.

Heffernan Insurance Brokers helps contractors identify coverage gaps and build insurance programs tailored to their operational risks. To learn more about protecting your business with the right professional liability coverage, contact our team.

Nuclear verdicts are affecting many industries, but few feel the impact more acutely than the transportation sector. Large jury awards have become more common, and for fleet operators, the risk is too great to ignore. Learn about trends in liability and how to protect your company from ruinous verdicts.

Nuclear Verdicts in Trucking

A California jury awarded $52.1 million to a man and his wife stemming from a 2021 collision between a motorcycle and a truck, according to Freight Waves. The truck was owned by Montecristo Trucking, and it was transporting a load that had been subcontracted out twice. All three companies were defendants in the lawsuit.

In Utah, a family was awarded $81 million in what might be the largest civil verdict ever awarded in the state. According to Freight Waves, while in a crosswalk, the family’s son was struck and killed by a day cab pulling a flatbed trailer operated by a building supply company.

These verdicts are massive, but they’re far from the biggest in the country. Freight Waves gives multiple examples of other nuclear verdicts, including a 2024 verdict for $141.5 million, a 2020 verdict for more than $400 million, and a 2021 verdict of more than $900 million. All three of those verdicts occurred in Florida.

Jury verdicts have gotten so large that they require a new name. While the term “nuclear verdict” often describes awards of at least $10 million, the term “thermonuclear verdict” is sometimes used to describe awards of at least $100 million. According to Marathon Strategies, there were 20 thermonuclear verdicts in 2022.

The Business Impact of Nuclear Verdicts

Trucking companies don’t always survive nuclear verdicts. In one example, iTrucker reports that a family-owned trucking company based in Arkansas had to shut down after 19 years in business due to a nuclear verdict. The initial award was for $23 million, and even though it was later lowered to $7.5 million, the award and subsequent insurance rate hikes were too much for the company.

Even companies that aren’t hit with nuclear verdicts may pay the price in the form of higher insurance premiums.

The Council of Insurance Agents & Brokers reported that the property and casualty market has softened as of the first quarter of 2026. Rates were down by an average of 1.2% across all lines and account sizes, marking the first time the property and casualty market has seen an average decrease since the third quarter of 2017.

However, commercial auto rates were still up by 5.8%, the largest rate hike of all lines. AM Best called commercial auto “one of the worst-performing P/C segments over the last ten years,” citing net underwriting losses of more than $5 billion in 2023 and 2024. While distracted driving and traffic congestion contribute to claim frequency, social inflation and nuclear verdicts are contributing to claims severity.

Managing Your Fleet’s Risks

Whether you operate a single truck or a large fleet, you could be affected by the nuclear verdict trend.

Explore your coverage options. As verdicts climb ever higher, fleet operators may be interested in obtaining larger coverage limits. However, doing so may be difficult due to capacity and affordability issues. To secure adequate coverage, it may be necessary to layer coverage, accept large retentions, or leverage captive insurance solutions.

• Establish a culture of safety. A commitment to safety can bring multiple benefits. By decreasing the likelihood of collisions, you can support worker well-being and make your company a more attractive employer. A better claims history can also help you secure lower premiums, in commercial auto as well as workers’ compensation lines. And if a collision does occur, your culture of safety can be used in your defense. Assess your hiring and training practices, as well as your day-to-day policies, to identify any weaknesses that can be targeted for improvement.
• Leverage technology. In-cab cameras and AI-powered driver monitoring tools allow you to identify dangerous driving habits and fatigue early. In the event of a crash, dashcam footage could also provide evidence. As long as your drivers are driving safely, this evidence could be used in your defense.
• Have documentation ready. If your company is sued, you’ll need to demonstrate that you were not negligent. This requires thorough documentation. Be ready to show evidence of how you’re committed to safety in your hiring, training, and operations.
• Exercise care with subcontractors. When you subcontract work or hire independent contractors, you may still face liability for any injuries that occur. You can limit your exposure by vetting your subcontractors, requiring proof of insurance, and using contracts that spell out liability and indemnification issues clearly.

Are your risk management practices strong enough to withstand the nuclear verdict trend? Heffernan Insurance Brokers can help you build a risk management and insurance program designed for today’s liability exposures. Learn more about our insurance solutions for the transportation sector.

One Year In; One Big Beautiful Bill (OBBB) Medicaid Reforms Arriving

A year after it became law, one of the OBBB’s biggest pieces is moving from paper to practice. Signed into law on July 4, 2025, the OBBB established work requirements for adults ages 19 to 64 in states that expanded Medicaid under the Affordable Care Act. The requirements reach 43 states and the District of Columbia and are projected to apply to 18.5 million enrollees. To keep coverage, affected individuals must complete 80 hours of work or qualifying activities each month, enroll at least half-time in an education program, meet a set income threshold, with compliance verified every six months. States must have these programs running no later than January 1, 2027.

On June 1, 2026, the Centers for Medicare & Medicaid Services (CMS) published an interim final rule on how states must run these requirements, and one provision stands out for employers. The rule narrowed the “medically frail” exemption. Individuals must now not only have a qualifying medical condition but also demonstrate that the condition significantly limits their ability to satisfy the work requirements to qualify for an exemption. CMS estimates that roughly 15% of Medicaid enrollees subject to the new requirements could lose coverage.

OBBB does not directly change employer-sponsored group health plan requirements. Employees who lose Medicaid eligibility may seek coverage through their employer’s health plan, increasing enrollment and mid-year special enrollment requests. Here is the part worth flagging for HR: losing Medicaid eligibility is a HIPAA special enrollment event. An employee who loses Medicaid has 60 days to request enrollment in the employer’s plan, twice the usual 30-day window. Employers should confirm that their enrollment process, onboarding materials, and plan documents account for these requests.

CMS Administrator Mehmet Oz said, “We hope by guiding able-bodied individuals in this initiative, we aim to support their path to independence, but hopefully they don’t need to depend on Medicaid, and are supported by employer-sponsored health plans that would free up critical space in the program for our most vulnerable population to receive the care they deserve.”

As the phased in implementation rolls out across the country, employers should be aware of the potential need for mid-year enrollment, field employee questions, and monitor potential downstream cost impacts. Your Heffernan account team is always available to assist.
Guest Author

The regulatory landscape changes fast. Connect with our in-house ERISA attorneys and compliance team to protect your business today. Email [email protected] to talk to our team.

Sara Galeb-Roskopp, UC LAW SF, Class of 2028

How Can Employers Prepare for Summer Vacation Season and PTO Requests?

Summer is on the calendar in a few short weeks, and across the Country employers can expect to see an increase in paid time off (PTO) requests. There are some important ‘Dos and Don’ts’ when it comes to managing employee time off requests.
While ‘vacation time’ is largely at an employer’s discretion, there are presently 3 states that actually mandate general use paid time off- Illinois, Maine, and Nevada. Additionally, there are 15 states that require employers to pay out unused, accrued paid time off to terminating employees while the majority of states permit forfeiture of unused PTO.

Employers should have a clearly documented time off policy, that is uniformly applied to all employee requests. Notice requirements, manager approval processes and any supporting documentation procedures must be communicated to all employees.
For employers subject to FMLA, it’s a best practice to include PTO policy in the same place as FMLA procedures so employees can easily reference the different requirements. If an employer is ‘on notice’ or has reason to know that an employees has a FMLA-eligible reason for leave, even if the employee does not mention FMLA, the employer is required to inform the employee of their FMLA rights. In Fact Sheet #28D, the DOL states “when an employee first takes time off for a reason that may qualify for FMLA leave, the employer must notify the employee whether he or she is eligible for FMLA leave.”

The intersection of Summer vacation plans and FMLA can be tricky. The law does permit employers to require a second (or even third) opinion when they have “good faith reason” to doubt the validity of an employee’s FMLA certification. But an employer that suspects an employee’s FMLA request is a smokescreen for a tropical beach vacation should tread carefully. The Departments would generally resolve questions of veracity in favor of the employee.

The regulatory landscape changes fast. Connect with our in-house ERISA attorneys and compliance team to protect your business today. Email [email protected] to talk to our team.

House Bill ‘Optimizing Participant Tax Incentives through Optional Noncash Selections’ (OPTIONS) Act

The spring flowers are blooming, and the House Democrats and Republicans are getting along (for this day, at least). On April 15, the federal OPTIONS Act was introduced in the House by Greg Steube and Suzan DelBene. The bill would amend the Internal Revenue Code to let employers offer a new kind of benefit option, allowing employees to direct certain employer contributions among multiple tax-favored benefits.

For HR and benefits teams, the biggest advantage is benefit design flexibility. The proposed menu of eligible options includes employer contributions to retirement arrangements, HSAs or HRAs, educational assistance programs under section 127, and potentially other employer-provided benefits that are already excluded from gross income.

If enacted, the bill could help employers tailor benefits to a more diverse workforce by allowing some employees to prioritize retirement savings, while others direct employer dollars toward health care expenses or student-loan-related educational assistance. The bill also applies nondiscrimination concepts similar to those used for cafeteria plans and includes reporting and recordkeeping provisions.

The Press Releases quotes American Retirement Association CEO Brian Graff stating “The OPTIONS Act is a smart, forward-looking solution that empowers employees to direct employer contributions where they need them most, whether that’s retirement savings, healthcare, or paying down student debt.”

The OPTIONS Act signals potential future flexibility in employer-sponsored benefits, and we will watch this bill’s path closely.

The regulatory landscape changes fast. Connect with our in-house ERISA attorneys and compliance team to protect your business today. Email [email protected] to talk to our team.

What Benefits Questions are Employers Asking Right Now?

Q: Do wrap docs need to be distributed to only enrolled members, or all benefits eligible employees?
A: The ‘plan document’ and ‘wrap plan’ (which are often one in the same) are not actually subject to distribution unless a participant requests it. However, the plan summary plan description (SPD) is required to be distributed to all benefit eligible employees at least once every 5 years. It also needs to be provided to new employees when they become eligible for the benefits plans.

Q: We offer 3 medical plans, one of which has an integrated HRA. At this time, we do not include the HRA as a COBRA eligible benefit for anyone, and thus its not included in the COBRA premium. Is this correct?
A: An HRA is a COBRA benefit and needs to be offered as a component of the underlying medical plan since they are considered one bundled plan. There are 2 options for calculating the HRA COBRA rate- past cost method, or actuarial value method (past cost method is the more popular choice). It is important that all COBRA election notices are updated to include the HRA bundled with the applicable medical plan.

Q: An employee was just terminated for theft. Are we allowed to deny COBRA on the grounds of ‘gross misconduct’? What constitutes ‘gross misconduct’ within the meaning of the exception to COBRA?
A: While the COBRA rules provide an exception to the requirement that employers offer COBRA election paperwork to employees upon termination for instances of ‘gross misconduct’, the applicable rules do not define what might constitute this type of event. The DOL states ‘whether a terminated employee has engaged in “gross misconduct” that will justify a plan in not offering COBRA to that former employee and his or her family members will depend on the specific facts and circumstances. Generally, it can be assumed that being fired for most ordinary reasons, such as excessive absences or generally poor performance, does not amount to “gross misconduct.“’ Employers should exercise caution when denying COBRA on this basis, and should clearly document what might result in this denial in their written employee materials and COBRA policy.

The regulatory landscape changes fast. Connect with our in-house ERISA attorneys and compliance team to protect your business today. Email [email protected] to talk to our team.

Six months from now, will your workers be satisfied with their employee benefits elections? Or will they be frustrated with the options and regretful of their selections? Open enrollment plays a critical role in employee satisfaction and the perceived value of your benefits program. The steps that you take over the next few months will determine the outcome of your open enrollment.

Five Common Open Enrollment Pitfalls

The concept of open enrollment is simple. Every year, employees are given a chance to review their benefit options and select the benefits that best fit their needs. In theory, it should be a positive experience for employees… but that’s not how it always plays out.

Here are five ways open enrollment can go wrong.

• Rushed Timelines. The open enrollment period usually lasts for two to four weeks. While that may seem like plenty of time, it can end up feeling rushed. The process often takes place in October or November, so it may overlap with the Thanksgiving holiday break, when workers are preoccupied with family and food and may not be thinking about work. If your open enrollment also overlaps with a busy time at your company, the entire process can end up feeling rushed.
• Missed Deadlines. Even if your workers have ample time, missed deadlines are possible. When people have plenty of time, they tend to procrastinate. As a result, a long open enrollment period may increase the risk of missed deadlines if there aren’t enough reminders.
• Uninformed Elections. Selecting your benefits is a high-stakes decision, so it deserves a person’s full attention. However, according to HR Dive, a study from PlanSource found that employees spend an average of just 18 minutes on the process. This is probably not enough time to read over plan details.
• Constant Confusion. Research from Businessolver found that 85% of employees struggle to understand their benefits. Confusion can make the open enrollment period a source of stress, and employees who don’t understand their benefits may make selections they later regret.
• Lackluster Enthusiasm. If employees don’t like their benefit options, they’re unlikely to get excited about making their selections, and employers may not see a positive return on their benefits program as a result. Rising premiums are particularly likely to put a damper on the experience, and employees may view it as a pay cut.

Strategies for Open Enrollment Success

The challenges are real, but employers and HR professionals who start preparing early can help drive engagement and reduce regret.

1. Build a benefits program that employees will value.

Ultimately, open enrollment is all about the benefits. If the benefit options don’t meet your workers’ needs, no amount of employee education or engagement will change that.

• For diverse workforces, consider offering two or more health plan options. Workers who don’t expect to have significant healthcare costs may prefer a high-deductible health plan, while workers who expect to have higher healthcare costs may want to pay more in premiums for a more robust health plan.
• Consider offering additional voluntary benefits. Vision, dental, life and disability insurance are often offered as voluntary benefits. Employers may want to add extra options, such as identity theft protection and pet insurance, to appeal to a wider range of worker needs.
• Leverage data-driven insights. You may think your benefit offerings are great, but what do your workers think? Satisfaction surveys, participation rates and benchmarking can help you assess your benefits fairly, so you can focus on options that support your business goals.
• Be mindful of the out-of-pocket costs. If premiums, co-pays and other out-of-pocket expenses are too high, enrollment and plan utilization will go down.

2. Create a comprehensive enrollment timeline.

An open enrollment schedule should consist of more than just the start and end dates.

First, it’s important to plan the open enrollment period for a good time. Consider conflicts with holidays, busy periods and other potential issues. Some overlap may be unavoidable, but there should be enough time for everyone to give their enrollment the attention it deserves.

Second, plan out all the notices, events, meetings and reminders that will occur before and during open enrollment. The goal is to ensure that open enrollment stays top of mind, so no one misses the deadline.

3. Make benefits education accessible to all employees.

Most workers need help understanding their benefits. If your education efforts only reach some of your workforce, you may end up with a lot of workers who struggle.

• Appeal to different types of workers. In-person events can be great… for in-office workers. If you have remote and hybrid workers, you’ll need some remote options, too. If your company has satellite offices or graveyard shifts, make sure those workers receive help, too. And if you have workers on leave or receiving COBRA coverage, don’t forget about them.
• Appeal to different types of learners. Graphics for your visual learners, meetings for your collaborative learners, online tutorials for your kinesthetic learners – there should be something for everyone.

4. Build in time for verification and improvement.

Mistakes happen. Even if you prepare everything as well as possible, some problems may arise.

• Give yourself time to review employee elections. This allows you to verify that everything is correct and fix problems before it’s too late.
• Consider how to improve next year’s enrollment. Reflect on what went well and what could have gone better, and conduct surveys to elicit feedback from employees. This should be done immediately to ensure that everything is fresh in your mind.

A successful open enrollment begins long before enrollment materials are distributed. Heffernan Insurance Brokers can help your company design a competitive benefits program and increase engagement throughout the enrollment process. In addition to helping you develop a benefits package that meets your company’s goals, we can act as an extension of your HR team and provide ongoing support. Learn more about our benefits and advisory services.

A lot can change in six months. If you’re waiting a full year between risk assessments, problems and opportunities could slip through the cracks. The mid-year point is a good time for an insurance check-up that assesses your company’s risks, strategies and coverage. Right now, changes in the insurance market, evolving climate risks and emerging tech exposures deserve careful attention.

What a Softening Insurance Market Means for Your Business

A softening property and casualty insurance market has given businesses some relief. According to a report from the Council of Insurance Agents & Brokers, average rates decreased by 1.2% in the first quarter of 2026. Large and medium accounts saw decreases of 2.7% and 1.9%, respectively, while small accounts saw a small average rate increase of 1.1%.

Rates also varied by line. While most lines saw falling premiums, commercial auto was up by 5.8%, umbrella was up by 4.8% and general liability was up by 2.6%. Location can make a big difference, as well. Commercial property rates fell by 5.5% on average, but non-cat properties saw the biggest decreases in rates.

Despite the variation, overall, the market is significantly softer than it has been in recent years. For businesses, this can provide some financial relief from rate hikes. It’s also an opportunity to strengthen your coverage.

• Do you have coverage gaps that you can fill? Emerging risks can lead to new exposures, and this may be a good time to negotiate more robust coverage or add separate policies.
• Do you have sufficient limits? Litigation costs have been rising, and nuclear verdicts can put businesses in jeopardy. Falling rates may make it easier, and more affordable, to negotiate higher limits.

How the Arrival of a Super El Niño Could Affect Property Insurance

Commercial property insurance rates were down by 5.5% in the first quarter, according to CIAB. However, climate risks continue to put pressure on the insurance market.

As predicted, a super El Niño has developed. According to Smithsonian Magazine, this is a naturally occurring climate pattern characterized by warm surface water in the Pacific Ocean. However, the current El Niño is particularly powerful, and it may even be one of the strongest in recorded history.

Whether this is beneficial or disruptive depends on your location. NOAA says El Niño tends to lead to lower levels of hurricane activity in the Atlantic basin, but it can trigger higher levels of activity in the eastern and central Pacific basins. In other words, the Florida and surrounding states may catch a break, but Hawaii may face a challenging season.

El Niño can also trigger increased drought and wildfire risk in the Northwest, according to the USDA. In Southern California, heavy rainfall is possible, and it could increase the risk of landslides, according to the California Department of Conservation. Areas burned in recent wildfires can be particularly vulnerable to flash floods and debris flows.

For businesses, a strong El Niño could increase the risk of property damage and supply chain disruption.

• Does your supply chain include backup options for essential goods that may be disrupted by storms or wildfires?
• Have you taken measures to fortify your property against flood, landslide and wildfire risks?
• Do you have sufficient insurance? Standard commercial property insurance does not cover flood or landslide risks. For the former, you need a standalone flood insurance policy. For the latter, you need a Difference in Conditions policy or endorsement that adds earth movement coverage.

Managing AI and Cyber Exposure

According to a survey from McKinsey & Company, 62% of respondents say their organizations are at least experimenting with AI.

With most companies still in the pilot or experimentation phases of AI adoption, the risk is high. Not all experiments pan out, and businesses may experience setbacks and unexpected liabilities before they start to see value. In one example of what can go wrong, Tom’s Hardware says a Claude-powered AI coding agent deleted a company’s entire database in just nine seconds. Afterward, the AI agent confessed that it violated every principle it had been given.

But AI can be a powerful tool – as hackers have discovered. According to Cyber Defense Magazine, AI-powered malware has emerged as a significant threat. For example, BlackMatter ransomware uses AI to overcome standard cybersecurity tools. AI-powered malware can also act autonomously, which enables hackers to carry out a greater number of attacks, and create personalized attacks that are more likely to trick recipients.

For businesses, technological advancements are both an opportunity and a source of risk.

• Do you have insurance coverage for your AI initiatives? Watch for new AI exclusions in your insurance policies and assess whether additional coverage is needed.
• Are your vendor contracts and software supply chains strong? Your vendors may also be adopting AI, and cyberattacks on software vendors have become common, so it’s a good time to review contracts for indemnification provisions and insurance requirements.
• Are your cybersecurity practices keeping up with new threats? Businesses may need to increase their defenses, for example, by using AI threat detection. Cyber insurance rates have been falling, so this is also a good time to assess your insurance coverage.

Risks are evolving fast. A mid-year review can help identify vulnerabilities before they become costly problems. Heffernan Insurance Brokers can help your business evaluate its risk, strengthen its coverage strategies and build resilience for the future. Learn more about our business insurance options.

Real estate is widely recognized as a reliable long-term investment, but it’s not without risks. Rising natural disaster losses and the resulting insurance market volatility are creating new challenges for property owners, managers, developers and investors. Traditional insurance may not always provide the coverage, limits and prices required, but alternative risk transfer strategies offer valuable solutions.

Understanding Today’s Real Estate Insurance Market

For real estate investors, insurance is a critical component of asset protection, lender compliance and long-term investment performance, so it’s important to know what’s happening in the real estate insurance market.

As of early 2026, the commercial property market has softened noticeably. According to the Council of Insurance Agents & Brokers (CIAB), rates decreased by 5.5% in the first quarter of 2026. This is a complete turnaround from the insurance market of just three years prior, when rates increased by 20.4%.

Insurance markets are cyclical, and it appears we have entered the soft market phase of the cycle. For real estate professionals, this is a source of relief. However, it may be short-lived. Eventually, the market cycle will harden again, and rates will increase.

Properties in catastrophe-prone areas are particularly vulnerable. CIAB says non-catastrophe properties have seen the biggest rate decreases, although even some catastrophe-prone properties have seen rate decreases or improved terms. Going forward, worsening natural disasters could lead to more premium increases and increased difficulty securing adequate coverage.

The forecast for the 2026 wildfire season doesn’t look good. According to CNN, wildfire season started early this spring, with notable fires in Georgia, Nebraska and California. Low snowpack, drought, abundant vegetation and the potential for a super El Niño weather pattern could result in an active wildfire season.

Managing Real Estate Risks

Real estate investors can minimize their risk through proactive maintenance, property hardening, security and monitoring, but some risk will always remain. This is why risk transfer is an important part of any risk management strategy.

Traditional insurance is a common form of risk transfer. However, in some instances, real estate investors may face challenges securing the coverage they need.

• Rising rates may make coverage unaffordable.
• Low limits may provide insufficient coverage.
• Restrictive terms may exclude coverage for key risks.
• A lack of capacity may mean coverage simply is not available.

When real estate investors face these challenges, they can turn to alternative risk transfer strategies.

Five Alternative Risk Transfer Strategies for Real Estate Investors

When the traditional insurance market leaves gaps, alternative risk transfer strategies give real estate investors the tools they need to manage risks and safeguard assets.

If you’re struggling to find the terms, limits or rates you need to manage your real estate risks effectively, one of the following alternative risk transfer strategies may be the solution you need.

• Excess & Surplus Insurance. The traditional insurance market consists of admitted insurers that are licensed by the state and governed by the rules of that state. The excess and surplus market consists of non-admitted insurers. Because these insurers are not licensed in the state, they have more flexibility to design coverage for risks that admitted carriers won’t cover.
• Captive Insurance. In the captive insurance model, the insurance company is wholly owned by the organization it insures. This can be considered a form of self-insurance, but structured in a way to manage risk effectively. Smaller organizations can pursue the captive model by joining a group captive.
• Parametric Insurance. While traditional insurance pays out based on actual losses for covered perils, parametric insurance pays out based on the occurrence of pre-defined triggers. Parametric insurance can be used to cover many types of loss events, but it is particularly common for wildfires and other natural disaster perils, often as a supplemental policy to fill in gaps left by other risk transfer strategies.
• Self-Insured Retentions. A self-insured retention is the amount the policyholder agrees to pay for a loss before the insurer responds. With a large self-insured retention, the policyholder is retaining more risk. This strategy can help lower the cost of insurance, so it can be desirable if the policyholder has a way to cover the retention, such as a parametric policy or cash reserves.
• Carve-Outs. If one risk or asset is making your insurance package unaffordable, excluding it with a carve-out can open the door to more affordable coverage options. The downside, of course, is that the high-risk asset or loss no longer has coverage. However, this risk can be managed through a number of alternative options, such as self-insurance, parametric insurance, or excess and surplus insurance.

Heffernan Insurance Brokers provides customized risk management and insurance solutions for real estate professionals, including property owners, managers, developers and investors. If you’re facing rising premiums, limited capacity or growing catastrophe exposures, our specialists can help you evaluate alternative risk transfer strategies that align with your long-term business objectives. Learn more about our real estate risk transfer solutions.