Technological advancements are changing the way contractors work. From high-tech tools that improve safety to new threats that may delay projects, technology is both increasing and helping to control construction risk.

Technology Is Improving Construction Safety

Construction is a dangerous industry. In fact, the BLS says the construction industry accounted for nearly half of all fatal falls, slips, and trips in 2021. Plus, nearly one in five workplace deaths occurred in the construction industry that year. Any advancement that makes construction work safer is welcome. Below are just a few of the new technologies that look promising.

• Wearable technology monitors workers, prevents injuries, detects hazards, and provides alerts. For example, according to ConExpo Con/Agg, smart boots detect when a worker falls and automatically send an alert to colleagues.
• Exoskeletons (another popular type of wearable technology) help construction workers avoid injuries while boosting productivity. ConExpo Con/Agg says human construction workers wearing exoskeletons can lift heavy steel beams, lumber, and other items that would normally require heavy equipment without suffering from muscle strain.
• Site monitoring devices make it easier to remotely assess potential hazards. For example, by using drones, construction leaders may be able to avoid sending human workers into dangerous locations. Alternatively, drone footage can give workers a heads-up to show them what to expect and allow them to prepare.

Construction Projects Are Vulnerable to Cyberattacks

As construction sites leverage more technology to boost safety and productivity, they also become more vulnerable to cyberattacks. According to the 2023 Threat Intelligence Report from Ontinue, the construction and IT sectors accounted for nearly half of all ransomware attacks in 2023.

Unfortunately, many construction leaders may be unprepared for the impact of cyberattacks. In a study from the Dodge Construction Network, 77% of architecture, engineering, and construction firms said they would experience critical schedule delays if a ransomware attack blocked access to documentation for more than five days. According to Travelers, the average ransomware incident lasts 16.2 days.

Given the serious potential for project delays, it’s important to take the threat of ransomware seriously. Construction leaders can take steps to reduce the odds of a successful attack. Some basic steps include:

• Using antivirus and firewall programs and applying system patches as soon as they become available to reduce vulnerabilities that hackers may exploit.
• Maintaining secure backups that are not connected to your network and will not be compromised in the event of a ransomware attack.
• Configuring access controls using the principle of least privilege to limit who can access your system.
• Training workers on how to avoid phishing attacks, which may become more common and sophisticated due to new generative AI tools.

Leveraging Technology to Find and Train Skilled Workers

The construction industry is experiencing a skilled labor shortage. According to Associated Builders and Contractors, the sector will need to hire more than half a million more workers than usual to meet demand for labor in 2024.

Worker shortages have many negative impacts on construction – from project delays to heightened risks of injuries and defective construction. However, technology is helping.

Some of the same technology that improves worker safety can help with the labor shortage. For example, drones that assess sites in place of human workers reduce the number of workers needed, whereas exoskeletons increase the amount of work an individual worker can take on.

Technology can also help with training and hiring. According to Construction Dive, construction-specific job boards are making it easier for construction leaders to find workers with the skills and experience they need.

Once companies have hired workers, virtual reality (VR) and augmented reality (AR) tools can assist with training by giving them an immersive but safe experience to learn how to do their job safely and effectively. The National Safety Council (NSC) recommends VR and AR as one way to reduce risk in the construction sector. According to the NSC, 55% of workers lack workspace awareness training, but 22% say AR or VR for training would reduce their personal risk of a serious injury.

Is Your Insurance Keeping Up?

As technology drives change in the construction sector, your insurance needs may change. Heffernan Insurance Brokers will work with you to create a program that meets your needs. Learn more.

With an increasing number of common items adopting high-tech features, there are new ways for things to go wrong. From home devices that can be hacked to automated vacuum cleaners that may catch fire, innovative products are creating unexpected product liability risks for manufacturers.

More Automation Creates Risk for Unsupervised Exposures

Many people recommend not leaving common household appliances running when no one is around to watch them, such as when everyone’s sleeping or out of the house. If a dishwasher leaks or a clothes dryer catches fire when no one is home, there will be no one around to mitigate the damage.

What does this mean for appliances that are explicitly designed for remote and automated operation? If consumers use these appliances when they are not around, they won’t be able to respond quickly to any issues that arise.

According to Property Casualty 360, a homeowners insurance company paid $691,305.12 to settle a claim after a robotic vacuum cleaner allegedly became jammed and caused a fire. The insurance company has filed a lawsuit against the manufacturer.

This is not the only time a robotic vacuum cleaner has been linked to a fire hazard. According to WPLG Local 10 News, one person was airlifted to a hospital after a robotic vacuum caught fire, apparently due to an exploding lithium battery.

Smart Devices and Cyber Risks

Smart devices also create cyberattack risks. For example, a hacker may access a smart device to monitor the owners, launch phishing attacks, gain access to other devices on the network, or even control the device remotely.

When smart device vulnerabilities leave users exposed to cyberattacks and privacy violations, lawsuits may follow. In fact, several lawsuits have already occurred. According to Investor’s Business Daily, a lawsuit filed against Mattel claims that Hello Barbie (an interactive doll) recorded and stored children’s voices without parental consent. Bitdefender says families have sued Amazon after their Ring security cameras were hacked. In one case, a hacker used Ring to harass an eight-year-old. In another, a hacker used Ring to blast sirens and demand a ransom.

According to the IoT Magazine, product liability for IoT devices depends on state-level laws and legal rulings. However, manufacturers, distributors, retailers, and other parties involved in IoT development and product support may be named in lawsuits.

New federal guidance may increase the risk of liability. According to Cybersecurity Dive, a new national cyber strategy holds private sector companies liable for the security of their products. This guidance may lead to new legislation to increase liability for software products and services.

Risks Stemming from Generative AI

Products that leverage generative AI may also contribute to new product liability risks.

Generative AI sometimes produces incorrect or even harmful messages. It’s easy to see how bad advice could lead to real-world damage. For example, people who follow a chatbot’s advice on matters related to nutrition, exercise, or medication may inadvertently hurt themselves if the advice is not sound. People could also damage or destroy their belongings by following faulty repair advice.

There have already been instances of AI chatbots providing dangerous information. In one case, People says a man in Belgium died by suicide after a series of disturbing conversions with an AI chatbot. Wired says another chatbot has been discontinued after it gave out advice that may be dangerous for people with eating disorders. Lastly, AP News says a chatbot offered by New York City to help small business owners gave advice that would result in business owners breaking the law.

As more developers incorporate generative AI into products, evolving product liability risk deserves consideration. Generative AI is a fairly new technology. Stanford University says courts will have to grapple with the question of who is liable when AI says something harmful.

Could Lawsuits Target Your Products?

New technology helps make products more convenient and safer. However, there are also product liability risks to consider when devices use automation or are connected to the internet.

Is your company protected against lawsuits? Heffernan Insurance Brokers will help you review your exposures and product liability insurance options. Learn more.

Before food makes it to consumers’ tables, it needs to go through a number of steps involving multiple companies. At every step of the process, there’s a chance for something to go wrong. Let’s take a look at some of the most common food supply chain risks and how food manufacturers and distributors should manage them.

Contamination

According to the Los Angeles Times, Rizo Lopez Foods Inc has had to recall all its packaged goods after Listeria monocytogenes was found in samples. CBS News says Sargento Foods has had to recall some of its products because they included cheese from Rizo Lopez Foods.

Contamination with bacteria, foreign objects, and other harmful substances may occur at any stage of the supply chain. Even contamination with other food ingredients, such as peanuts or eggs, may represent a safety hazard, due to food allergies from undeclared allergens. Contamination is usually accidental but may be deliberate. This may be the case with the recent recall involving high levels of lead in cinnamon applesauce pouches, which the FDA says may have been added for economic reasons.

Since contamination is a serious risk that may impact a company’s finances as well as public health and safety, good risk management is critical. Risk management steps may include:

• Implementing controls to prevent mold, bacteria, and cross-contamination.
• Vetting suppliers carefully to avoid disreputable sources.
• Conducting regular testing and quality control checks.
• Securing product liability and recall insurance and requiring partners to do the same.

Cyberattacks

Reuters says meatpacker JBS USA paid approximately $11 million to resolve a ransomware attack. CNN says Dole had to temporarily shut down operations in North America due to a cyberattack.

Cyberattacks against food manufacturers are common. In fact, Dragos identified manufacturing as the most targeted industry and food and beverage manufacturers as the most targeted subsector for ransomware.

Since cyberattacks may lead to major direct and indirect costs, risk prevention is critical. This may include:

• Implementing best practices for secure computer systems and networks.
• Training workers on how to avoid phishing and other social engineering scams.
• Verifying that vendors and partners are also using strong cybersecurity measures.
• Securing cyber insurance.

Theft

CargoNet reported that cargo thefts increased by 59% year over year in the third quarter of 2023. An expert from Travelers told FreightWaves that he expects cargo theft rates to continue to increase in 2024. Food and beverage cargo has been a top target along with electronics and household goods.

In some cases, criminals use cyber tactics to steal shipments. According to CISA and the FBI, criminals have used business email compromise tactics to steal shipments of food.

Several practices may help shield food manufacturers and distributors from theft losses, including:

• Considering whether different routes or modes of transportation may be safer.
• Implementing verification protocols to prevent shipment diversion tactics.
• Securing insurance for cargo.

Transportation Incidents

According to WINK News, a semi-truck spilled 40,000 pounds of raw chicken onto an interstate in Florida after a crash. The driver appeared to have experienced a medical issue and was taken to the hospital. In another incident, Food & Wine says a truckload of nacho cheese spilled onto an Arkansas highway.

Whether they’re due to a train derailment, truck collision, or shipping disaster, transportation incidents often result in destroyed food shipments or delays.

Food manufacturers and distributors should take steps to guard against these risks, such as by:

• Promoting driver safety.
• Monitoring for inclement weather and other hazards and rerouting as needed.
• Securing insurance for their cargo.

Shortages and Price Fluctuations

During the COVID-19 pandemic, many companies encountered supply chain snags and severe price fluctuations as lockdowns impacted various parts of the globe. Even outside of pandemics, these issues may impact food manufacturers.

When your food supply chain is complex, issues on the other side of the country – or even on the other side of the world – may cause problems for your operations. For example, if your only sugar supplier is in Florida, a major hurricane in Florida may make it impossible for you to secure the sugar you need on schedule. You may also end up paying higher prices for sugar.

Food manufacturers can reduce their risks by building supply chain resilience, such as with the following tactics:

• Sourcing critical supplies from multiple suppliers. If one supplier increases its price or experiences delays, you’ll be able to switch to a different supplier.
• Creating business continuity plans that cover supply chain disruption.

Insurance is a critical part of managing food supply chain risks. Heffernan Insurance Brokers offers insurance designed for the food sector, including motor truck cargo, warehouse legal liability, product contamination, and equipment breakdown. Learn more.

Everyone’s talking about AI. Unfortunately, some companies are talking more than doing, which may lead to allegations of AI washing. Let’s take a look at how getting caught up in the hype may lead to fines and lawsuits.

What Is AI Washing?

Since ChatGPT launched in late 2022, the AI race has heated up considerably. AI companies are competing to come out with the newest and best generative AI tools. Other businesses are focused on leveraging those tools. Amid all the hype, some companies may be getting carried away with their claims, which has led to claims of AI washing.

AI washing refers to deceptive, exaggerated, or false claims about the use of AI in services or products. When companies engage in AI washing, they try to make their services or products seem more sophisticated by overstating (or completely lying about) the role of AI. The intention is often to make the company more desirable to customers or investors who want to see cutting-edge technology.

The Crackdown on AI Washing

The SEC has made it clear that companies engaging in AI washing may face significant fines.

In March 2024, the SEC announced it had charged two investment advisers with making misleading and false statements about their use of AI. The firms have agreed to pay $175,00 and $225,000, respectively, in civil penalties. The SEC says one of the firms issued a press release claiming it leveraged AI and machine learning that incorporated client data in its investment process, whereas the other firm falsely claimed on its website and social media to be the “first regulated AI financial advisor” and said it used “expert AI-driven forecasts.” These claims were determined to be false.

“We’ve seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies. Investment advisers should not mislead the public by saying they are using an AI model when they are not. Such AI washing hurts investors,” said SEC Chair Gary Gensler.

Learning from Greenwashing Lawsuits

Similar situations have occurred with greenwashing and ESG claims. In fact, company leaders who are looking at how not to proceed with AI would be wise to consider recent greenwashing and ESG lawsuits.

Truth in Advertising has tracked more than 100 lawsuits involving allegations of greenwashing – or making products and services seem more environmentally friendly than they actually are. The U.S. Department of Justice says Kohl’s and Walmart agreed to pay $2.5 million and $3 million, respectively, in civil penalties to settle allegations. These involved deceptive claims about products supposedly made of environmentally-friendly bamboo, when the products were actually made of rayon. In another case, Dairy News says Oatly, a Swedish oat drink company, agreed to a $9.25 million settlement over allegations of greenwashing. The lawsuit, which occurred after a $1.4 billion IPO, claimed that Oatly exaggerated environmental sustainability claims and engaged in financial misrepresentation.

Companies have also been accused of exaggerating diversity efforts. According to Risk & Insurance, companies have been making ESG and DEI commitments – but if they fail to fulfill those promises, they may face lawsuits. In 2020, Jones Day said it was tracking an uptick in shareholder derivative actions claiming that officers and directors had misrepresented their companies’ commitment to diversity and inclusion, citing a lack of diversity among boards and senior executive teams.

Could Your Company Face Allegations of AI Washing?

Companies that are deliberately deceiving customers and investors about their AI capabilities may rightfully be called out for AI washing. However, even companies that don’t mean to be deceptive may end up facing allegations of AI washing if their actions don’t live up to the hype they create.

For example, a company may make vague but boastful claims about leveraging AI. The company leaders may think these claims are safe because they are vague. However, vague claims may be particularly difficult to substantiate, which may lead to disputes. Likewise, companies may make aspirational claims about AI. The company may want the claims to become true, but investors may feel deceived if this proves impossible.

Does your company have protection against lawsuits alleging AI washing? Heffernan Insurance Brokers can help you review your management liability insurance needs. Learn more.

Many businesses are switching to captive insurance arrangements. As the traditional insurance market becomes increasingly challenging and premiums keep rising, some wineries may want to consider switching, too. Below are some key considerations.

What Is Captive Insurance?

Captive insurance is an alternative risk management solution. It is a type of self-insurance in which a parent company is formed to control a risk management entity that exists purely to provide its parent with insurance. Captive arrangements are suitable for multiple lines of insurance, particularly liability and workers’ compensation. Large wineries can also form captive companies for property insurance.

A captive approach has several advantages. In a traditional insurance model, if you have lower than expected losses, the insurance company profits. Conversely, if you’re part of a captive, you can reap the financial rewards of having lower-than-expected claims. There are also potential tax incentives, since the premiums paid to the captive may be tax deductible, provided the company meets certain requirements.

There are many variations of the captive insurance model. For example, a single-parent captive (also called a pure captive) only has one owner and exists to provide insurance for that owner. A group captive, on the other hand, has multiple owners and exists to insure all the members of the group. A rental captive (or rent-a-captive) is a way of obtaining some of the benefits of a captive insurance program by paying a fee.

What Is the Appeal of Captive Insurance?

The traditional insurance market offers a simple way for businesses to transfer risk. In exchange for premiums, the insurance company takes on risk and handles claims. It’s a convenient option for many businesses – as long as they can obtain the coverage terms they need at a reasonable price.

However, in recent years, property and casualty insurance prices have risen, with property insurance seeing particularly steep price hikes. In 2023, CIAB says the average quarterly property insurance price increases ranged from a low of 11.8% in the fourth quarter to a high of 20.4% in the first quarter. These are just the national averages – businesses in high-risk areas are facing even steeper price hikes and difficulty obtaining coverage. The Sacramento Bee says one winery in Northern California received notice that its property insurance premiums were doubling. Wineries are also seeing more limited coverage, such as property insurance policies that exclude coverage for inventory.

The insurance market naturally goes through cycles, but there’s reason to expect the property insurance market will stay challenging. Natural disaster losses keep rising, and climate change means they may become worse. Swiss Re says global insured losses from natural catastrophes have outpaced economic growth for the last three decades, with losses exceeding $100 billion for the past four years.

CNBC says insurance companies have been pulling out of fire- and flood-prone areas. The head of climate implications research at First Street Foundation says this trend will likely continue. As a result, property owners will have increasingly fewer coverage options.

Captive insurance offers an alternative. When companies embrace the captive model, they take control of their own risk and coverage. They can also receive money back in the form of dividends if they keep their losses down.

Is Your Winery a Good Candidate for Captive Insurance?

To find out if your winery is a suitable candidate for captive insurance, consider the following factors:

• Size: Don’t assume you can’t leverage captive insurance just because your business isn’t large. Although only large corporations are typically able to deploy single-parent captive insurance (due to the resources and investment this requires), group captive insurance is a viable option for many small to midsize companies.
• Risk Management Stance: Captive insurance is successful when the owners are able to control their losses. Although stop-loss insurance options limit risks, businesses still need to control their losses to make a captive arrangement worthwhile.
• Past Loss History: Group captives generally only accept new members with strong risk control measures in place, and a history of lower-than-average losses.
• Investment: Switching to captive insurance requires some upfront investment, although the amount of collateral required has come down in recent years.

Given the current state of the insurance market and the likely impact of natural disaster losses in the foreseeable future, captive insurance may be a good long-term investment for companies that can commit to proactive risk management.

Are you interested in captive insurance for vintners? Contact us to discuss your alternative risk management options.

Are you overpaying for workers’ compensation insurance? State law requires cannabis employers to carry workers’ compensation, just like employers in other industries. Unlike employers in other industries, though, cannabis employers don’t always have access to programs that may help them save money. The legal gray area remains a barrier for cannabis companies, but thanks to the Cannabis Dividend Program, it’s now possible to enjoy savings for promoting a safe work environment.

Being Safety Conscious Leads to a Great ROI

Imagine two companies manufacture marijuana edibles. Since they operate in the same state, they are regulated under the same laws. They also have approximately the same number of employees, whom they pay approximately the same wages, and their operating costs are similar.

However, Company A spends more on safety programs and worker training, whereas Company B saves money by cutting corners. Initially, it looks good for Company B – but then the worker injuries begin to add up. Company B faces numerous workers’ compensation claims, which leads the company’s insurance rates to increase. The injuries also lead to lost productivity for Company B. Morale plummets, resulting in high turnover, which increases employment costs while further reducing productivity.

Meanwhile, Company A is seeing fewer injuries than is typical for the industry. The company’s workers’ compensation rates drop. Since worker morale is high, workers are loyal and often refer their friends to apply for jobs. In addition to surging productivity, the company isn’t spending much on worker recruitment. As operating costs decrease, profits increase.

As you can see, worker safety has always been a good investment. However, now, with the Cannabis Dividend Program, there’s one more way to profit from being safety conscious.

Cannabis Companies Are Often Locked Out of Programs

As reported by CNN, Vice President Kamala Harris recently said it was “absurd” and “patently unfair” that marijuana is considered more dangerous than fentanyl under federal law. She called on the DEA to change this as quickly as possible.

Change may be coming, both in the form of a possible DEA rescheduling and the passage for the SAFER Banking Act, which would help cannabis companies access financial services. In the meantime, though, meeting insurance requirements is often an expensive hurdle. According to the American Bar Association, cannabis companies are often required to maintain multiple types of coverage, but finding insurance can be difficult. When coverage is available, it’s generally though the surplus market, which is typically expensive.

To add another layer of complication, cannabis companies are usually denied financial services. The American Bankers Association explains that, since marijuana remains illegal at the federal level, any funds that can be traced to marijuana operations may be considered money laundering. This results in significant risks for banks that take on marijuana or marijuana-related clients.

Some Options Do Exist

Workers’ compensation programs with dividends allow employers to receive a return on their premiums if they succeed in keeping their claims costs down. In other words, if there’s money left over after the insurer has used the premiums to cover expenses, the employer is eligible for a return in the form of a dividend.

Cannabis companies may assume that dividend programs aren’t available to them. Historically, that has been true. However, the Cannabis Dividend Program now brings this option to the cannabis industry.

Are You Eligible for the Cannabis Dividend Program?

The Cannabis Dividend Program is available to eligible members of the Heffernan Cannabis Association:

• Many cannabis businesses, including cultivators, processors, manufacturers, distributors, and dispensaries, starting at $5,000 in premium.
• Oil extraction operations, starting at $100,000 in premium. They are subject to a loss control inspection.
• Accounts with armed guards or security, starting at $100,000. Accounts with less than $100,000 in premium may be considered if the armed guards and security services are subcontracted with certificates of workers’ compensation insurance.

Are You a Safety-Conscious Cannabis Company?

If your cannabis company prioritizes safety, the Cannabis Dividend Program can help you control your claims with a loss control specialist, indemnity claims professionals, and a dedicated client service account manager. You’ll receive a quarterly claim review and you can request Medcor injury triage services. If you keep your claims down, you’ll also receive a dividend.

Are you interested in the Cannabis Dividend Program or the Heffernan Cannabis Association? Learn more.

Calculations for workers’ compensation may become more complicated when employers offer alternative forms of compensation. A growing number of companies offer employees equity in the company via restricted stock units (RSUs). This strategy is especially popular among tech companies as well as PE- and VC-backed companies. However, recent clarification from the National Council on Compensation Insurance (NCCI) may force these employers to allocate more to workers’ compensation premiums.

The Rise of RSUs

RSUs are awards of stock shares that employers may give as employee compensation. They are typically subject to a vesting period before the employee receives the shares, a practice that encourages employee loyalty.

According to Investopedia, RSUs became more popular after the accounting-related scandals of the mid-2000s that involved companies like Enron and WorldCom. Employers were looking for new stock awards to help them recruit and retain talent; RSUs emerged as a practical option. Between 2003 and 2005, the median number of stock options granted individually by Fortune 1000 companies dropped by 40% and RSU awards increased by 41%.

The Workers’ Compensation Implications

Workers’ compensation premiums are calculated using several factors, one of which is the employer’s payroll. For this reason, accurately calculating payroll is a critical part of determining workers’ compensation premiums.

RSUs and similar equity-based compensation strategies add a new wrinkle to the process. When a company offers RSUs, its value is estimated based on the current value of the company’s stock. However, by the time the RSUs are fully vested, the stock value may have changed considerably. Since the vesting process may take several years, there’s a lot of time for stocks to increase (or decrease) in value. This may lead to difficult workers’ compensation premium calculations.

New Guidance from the NCCI

The NCCI found that the inclusion of equity-based compensation has become increasingly common. Research found that additional rules are needed in the Basic Manual for Workers Compensation and Employers Liability Insurance to clarify issues of payroll inclusions and exclusions.

Effective from January 1, 2024, the NCCI says the value of equity-based compensation plans (other than stock options and stock purchase plans) should be included at the time of vesting. Equity-based compensation plans subject to this ruling include RSUs as well as stock transfers, stock warrants, and restricted stock.

The vesting schedule may take many forms, such as graded, scheduled cliff, performance goals, or milestone anniversaries vesting. However, the NCCI says the market value of equity-based compensation plans should be excluded from payroll when accelerated cliff vesting is triggered by an IPO of stock or a change in majority ownership where the owner or owners before the change own less than one-half interest after the change.

Who Does This Affect?

The NCCI guidance applies to employers in Alaska, Alabama, Arkansas, Arizona, Colorado, Connecticut, D.C., Georgia, Hawaii, Iowa, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Maine, Missouri, Mississippi, Montana, Nebraska, New Hampshire, New Mexico, Nevada, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Vermont, and West Virginia.

The ruling does not apply to California. However, California previously released guidance on equity-based compensation. Effective since January 1, 2019, the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) amended its rules to clarify when equity-based compensation could be excluded from payroll. According to the WCIRB’s Learning Center, payment of equity-based compensation that is due to accelerated cliff vesting triggered by an IPO or change in ownership is typically nonrecurring and infrequent but may result in a large increase in payroll. These increases may produce volatility in payroll that does not reflect volatility in the underlying loss exposure. To offset this, equity-based compensation triggered by an IPO or change in ownership is not included as reportable remuneration – this is similar to the new guidance from the NCCI.

What This Means for Your Next Renewal

Workers’ compensation insurers are catching up with the widespread use of RSUs. If you offer RSUs as part of your compensation package, you may see changes in the way these benefits are treated during your workers’ compensation premium calculations, which could result in higher rates.

Do you need help controlling your workers’ compensation insurance rates? Heffernan Insurance Brokers can help. Contact us.

California’s new workplace violence protection plan requirements go into effect on July 1, 2024. To comply with this new law, employers in California need to develop and implement workplace violence prevention plans.

Senate Bill 553

SB 553 includes two critical changes:

• Starting July 1, 2024, employers must develop a workplace violence prevention plan as part of their Cal/OSHA Injury and Illness Prevention Plan and keep a log of workplace violence incidents. Employees must receive training through this plan.
• Starting January 1, 2025, a collective bargaining representative of an employee may seek a restraining order on behalf of an employee who has experienced violence or a credible threat of violence at the workplace. This expands the existing law that authorizes an employee to seek a restraining order.

What Do You Need to Include in the Workplace Violence Prevention Plan

SB 553 provides a list of elements that businesses must include in their workplace violence prevention plans – see the text of SB 553 for details. Along with the names and job titles of the people responsible for implementing the plan, your plan must include effective procedures to:

• Accept and respond to reports of workplace violence and to prohibit retaliation against employees who make reports
• Ensure employees comply with the plan
• Communicate with employees regarding workplace violence matters, including how to report incidents, threats, or concerns and how you will be investigating reports
• Respond to actual or potential workplace violence emergencies, including how to alert employees, evacuation or sheltering plans, and how to obtain help from staff assigned to respond, security personnel, or law enforcement

What Must You Include in the Violence Incident Log?

Employers must keep a record of information about every workplace violence incident. This log must include the following:

• The date, time, and location of the incident
• The workplace violence type or types
• A detailed description of the incident
• A classification of who committed the violence (a customer, family member, stranger, etc.)
• A classification of the circumstances at the time of incident (the employee was completing usual job duties, working during a low staffing level, alone, working in a community setting, etc.)
• A classification of where the incident occurred (in the workplace, in the parking lot, etc.)
• The type of incident (physical attack without a weapon, attack with a weapon, threat of physical force, etc.)
• The consequence of the incident (whether you contacted law enforcement, actions you’ve taken to protect employees, etc.)

The full text of SB 553 contains more details and examples.

What Counts as Violence?

SB 553 classifies four types of workplace violence:

• Type 1 – committed by a person who has no legitimate business at the worksite.
• Type 2 – directed at employees by customers, clients, patients, students, inmates, or visitors.
• Type 3 – targeting an employee and committed by a present or former employee, supervisor, or manager.
• Type 4 – committed by a person who does not work there but has or is known to have had a personal relationship with an employee.

Acts of self-defense or defense of others are not classified as workplace violence.

Which Employers Are Subject to the New Law?

SB 553 applies to all employers, employees, places of employment, and employer-provided housing, unless they meet one of the exceptions.

Certain employers that comply with Section 3342 or Section 3203 of Title 8 of the California Code of Regulations are not required to comply with SB 553. These employers include healthcare facilities, law enforcement agencies, and facilities operated by the Department of Corrections and Rehabilitation.

The law also excludes employees teleworking from a location of the employee’s choice, provided the location is not under the control of the employer.

Does the Law Make It Illegal to Confront Shoplifters?

Some critics of SB 553 have claimed that the law makes it illegal for employees to confront shoplifters and other criminals and prohibits them from fighting back. The critics say this will only encourage more crime.

According to AP News, previous versions of the bill included a provision that prohibited businesses from requiring non-security employees to confront shoplifters and active shooters, but this provision was removed. Therefore, the law does not make it illegal for non-security employees to confront shoplifters and other criminals.

Do You Have Questions?

Workplace violence is a growing threat for many businesses. For questions about SB553, California’s new workplace violence protection plan requirements, or appropriate insurance coverage, Heffernan Insurance Brokers can help. Contact us.

It’s becoming more expensive to insure your company’s vehicles. The Council of Insurance Agents & Brokers (CIAB) says commercial auto insurance rates were up 7.3% in the fourth quarter of 2023. Prices have been rising steadily for a while, meaning small businesses are now feeling the pressure of the cumulative rate hikes. Several factors are behind the price increases. When they understand these root causes, business leaders can take steps to control their risks and costs.

A Surge in Reckless Driving

It’s not your imagination: the roads really have become more dangerous.

The National Highway Traffic Safety Administration (NHTSA) says driving patterns began to change after the declaration of the COVID-19 public health emergency in March 2020. Some drivers have been engaging in riskier behavior, including speeding, driving under the influence of alcohol or drugs, and failing to wear seat belts.

Crash severity has spiked as a result. Research from TransUnion shows that the death rate for motorists has increased by 22% compared to pre-pandemic figures. There has also been a 21% increase in fatal crashes involving a lack of seat belts, an 18% increase in alcohol-related fatal crashes, and a 17% increase in speed-related crashes.

What can businesses do? Businesses can’t control the behavior of other drivers, but they can make sure their own drivers operate safely. In addition to screening and driver training, businesses may like to consider providing tips and lessons in defensive driving.

Rising Repair Costs

Vehicle damage has become more expensive to repair. There are several reasons for this, including a backlog at auto repair shops. CCC says nearly all repair shops have reported significant increases in backlogs, with 85% saying they are scheduling work at least two weeks into the future. The backlogs are driven by issues with parts availability and labor shortages. Newer cars are also more complicated to repair, which can lead to additional delays.

Sophisticated vehicle technology also makes repairs more expensive. New car tech often involves sensors that may need to be recalibrated or replaced after even minor collisions, resulting in higher costs.

As repair times and costs rise, so do commercial auto insurance claims. When insurers have to pay more in claims, they have to adjust their underwriting, which results in higher prices for insureds.

What can businesses do? New vehicle tech improves safety, reduces crashes, and saves lives, making it a good investment. However, when purchasing vehicles, businesses should consider the potential repair costs and factor these expenses into their budgets. Keeping up with regular maintenance will also reduce the risk of collisions caused by poorly maintained vehicles.

Increased Claims Severity

The Insurance Information Institute says auto claims severity has increased by 72% since 2013. Inflation alone does not explain this – the Consumer Price Index has only increased by 27% since 2013. Furthermore, four of the last five years have seen higher than median increases in claims severity, indicating the increase may be accelerating.

The increase in claims severity may be linked to some of the issues discussed above, such as an increase in reckless driving and vehicle repair costs. Social inflation, which refers to rising litigation costs, is another factor. The Insurance Information Institute says social inflation added $30 billion in commercial auto liability claims costs between 2012 and 2021.

According to the National Association of Insurance Commissioners (NAIC), jury verdicts in excess of $10 million – often called nuclear verdicts – are one of the main contributors to social inflation. The rise of third-party litigation funding has also been linked to increased liability costs and higher premiums. According to the U.S. Chamber of Commerce’s Institute for Legal Reform, third-party litigation funding has experienced massive growth recently and may now account for $13 billion in assets under management in the U.S. Criticisms of the practice include that litigation funders are motivated to maximize their return on investment and that agreements are often kept secret.

What can businesses do? A single claim can become a massive loss. Businesses can reduce the risk of a claim by prioritizing safe driving. They can also reduce their liability by installing cameras in vehicles. If a crash occurs, these cameras may provide evidence that helps exonerate the driver.

Control Your Commercial Auto Costs

Some of the factors contributing to rising commercial auto costs are outside of your control. However, business leaders can promote safety and reduce liability within their companies. Heffernan Insurance Brokers can help with insurance and risk management solutions designed for small businesses. Learn more.

Medical spas are a booming business. Acumen Research and Consulting says the medi-spa market was worth an estimated $16.3 billion in 2022 and it’s expected to reach $63.4 billion by 2032 as demand for non-invasive cosmetic procedures grows. Growth of this magnitude will bring risks as well as opportunities. Let’s take a look at the most common medi-spa insurance coverages to help mitigate those risks.

Medical Spa Malpractice Liability Insurance

Yahoo News says a man was awarded $1 million in a lawsuit against a skincare spa. According to the lawsuit, a chemical peel he received at the spa severely burned his face. In another case, Law.com says a Pennsylvania court issued a judgment of $1.2 million against a spa over botched chin injections administered by a nurse with a suspended license.

Although medi-spa professionals may not face the same risks as surgeons or OB-GYNs, there is still a chance a treatment could go wrong and result in a lawsuit. Medi-spas may also face unfounded lawsuits that are nevertheless expensive to fight in court. Medical spa malpractice liability insurance provides coverage against such lawsuits, making it one of the most important coverage types for this industry.

Commercial Property Insurance

Commercial property insurance is important for any business with a physical location, including medi-spas. If a fire, storm, burst pipe, or other covered peril damages the property, commercial property insurance covers the building itself as well as the equipment, furniture, inventory, and other business property.

Since commercial property insurance excludes some risks, medi-spas may need additional property insurance. As well as standard commercial property insurance, medi-spas should consider securing coverage for flood damage, earthquake damage, and equipment malfunction.

Business Interruption Insurance

If a medi-spa experiences severe property damage, it may need to halt operations until repairs are complete. This requires canceling appointments, resulting in lost revenue. Business interruption insurance can provide compensation for the lost revenue. Since it’s typically tied to commercial property insurance, it covers perils that this insurance also covers.

General Liability Insurance

Malpractice liability insurance covers claims related to the services the medi-spa provides. General liability insurance covers other types of claims involving bodily injury, property damage, and personal and advertising injury. While there are a wide range of exposures, two common claims involve slip, trip, and fall incidents on the premises or lawsuits alleging copyright infringement in one of the medi-spa’s advertisements.

Employment Practices Liability Insurance

Employment practices liability insurance (EPLI) provides important liability coverage for employers. It covers a wide range of employment-related claims, including allegations of wrongful termination, discrimination, harassment, and breach of contract.

Workers’ Compensation Insurance

The medi-spa industry isn’t especially dangerous for workers, but there is still a risk of injury. For example, medi-spa employees may be injured through accidental injections or equipment malfunctions. They could also develop repetitive strain injuries such as carpel tunnel or epicondylitis. Clients or coworkers may also injure them.

Workers’ compensation insurance provides coverage for worker injuries. In most states, it is a requirement for most or all employers.

Commercial Auto Insurance

Some medi-spas may not need commercial auto insurance, but it’s important to understand the risks and insurance options before dismissing this coverage outright.

If your spa owns vehicles, you need to insure them according to the minimum auto insurance requirements in your state. If your spa does not own any vehicles, you may still need to obtain coverage if the owner or any of your employees use personal vehicles for business purposes. For example, if employees frequently pick up supplies using their personal vehicles, you may need hired and non-owned insurance to cover your own liability risks. Otherwise, if your business is named in a lawsuit over a crash, it may lack liability insurance to cover the claim.

Does Your Medi-Spa Have the Insurance It Needs?

Running a successful medi-spa involves a lot of moving parts. You need to focus on hiring, licensing, operations and marketing – the list goes on. With so much to consider, you may neglect risk management until you’re dealing with an issue – and, by then, it’s too late.

Heffernan Insurance Brokers can help. Our healthcare risk management experts have experience serving medi-spas and are familiar with their unique needs and exposures. We will help you determine which types of coverage are most important for your business, including (but not limited to) the coverage types listed above. Learn more.

Running a profitable senior living facility is becoming more difficult. In addition to rising insurance costs, reduced property and liability insurance capacity is making it harder for facilities to find the coverage they need to manage their risks. Controlling costs requires strong risk management and creative insurance strategies.

The Worker Shortage Is Impacting Liability Exposures

The senior living community is battling a serious staffing shortage, increasing liability exposures.

A 2023 poll from LeadingAge found that 92% of nursing home provider members and 70% of assisted living provider members are experiencing a severe staffing shortage. Overall, 64% of respondents say the workforce situation has not improved since 2022. It’s common to have 20% of positions open with no applicants. The remaining staff have to take on heavier workloads, and providers are tapping reserve funds to pay for pricey staffing agency personnel.

Insurance Journal warns that high staff turnover generally correlates with issues that may also lead to losses, making this a liability issue for insurers. For example, the CNA Aging Services Claim Report shows that a lack of appropriate staffing may contribute to allegations of failure to monitor and lead to an increase in unwitnessed falls or delayed identification of injuries.

It’s easy to see how high turnover could put residents at risk and expose facilities to claims:

• New or temporary workers may be unfamiliar with the facility’s policies, leading to failures in documentation and carrying out procedures incorrectly.
• Inexperienced workers may not know how to handle serious issues, such as resident health complaints or wandering.
• Busy workers may cut corners because they don’t have the time to do everything.

Short-staffed facilities have a high risk of claim frequency and severity, and as a result, some insurers are tightening the reins, making it increasingly difficult to obtain liability coverage.

Commercial Property Rates Are Surging

Like all industries, the senior living community is also dealing with rising commercial property rates.

Recent data from CIAB shows the extent of the problem. Commercial property insurance rates have been rising since around 2017. However, in the first quarter of 2023, rates increased by a recent high of 20.4%. In the third quarter of 2023, rates went up by a steep 17.1%.

Reduced capacity has also been an issue as property insurance companies reduce their exposures in high-risk areas, sometimes leaving entire states. For example, AP News says State Farm announced in the summer of 2023 that it would no longer accept business or personal lines of property and casualty insurance in California. Allstate has also paused new homeowners, condo, and commercial insurance policies in the state.

Rising inflation and natural disaster losses are two common explanations for the challenging property insurance market. In recent years, the number of weather and climate disasters with losses of at least $1 billion has been rising steadily – and that’s with adjustments for inflation. In 2023, NOAA says there were 28 billion-dollar events, a new all-time high.

How Senior Living Facilities Can Take Control of Risk

Since risk management and cost management are inextricably linked, controlling costs requires measures to control risks.

• Focus on training. Claims often arise from the day-to-day practices of workers. Their default practices may not always align with your facility guidelines and policies. As new workers enter your facility, they must be trained to adhere to your policies and prescribed best practices. Even experienced workers need training refreshers.
• Prioritize worker wellbeing. Workers who are suffering from stress and burnout may be more prone to mistakes. They may quit, which creates heavier workloads and even more stress and burnout for the remaining workers, resulting in a vicious cycle. Leaders can break the cycle by ensuring workers have the time off they need to recharge providing reasonable workloads, and by offering employee benefits that support mental health and wellbeing.
• Document everything. Not everything that goes wrong is the facility’s fault. However, without documentation, it may be difficult to defend your team. Unfortunately, when workers are busy, documentation may fall by the wayside. Regular documentation audits can prevent this from happening.

If you’re struggling with insurance and risk management, reach out to us. Heffernan Insurance Brokers can help you explore all your options, including excess and surplus insurance, parametric insurance, captive insurance, and self-insured options.

Learn more.

Running a profitable senior living facility is becoming more difficult. In addition to rising insurance costs, reduced property and liability insurance capacity is making it harder for facilities to find the coverage they need to manage their risks. Controlling costs requires strong risk management and creative insurance strategies.

The Worker Shortage Is Impacting Liability Exposures

The senior living community is battling a serious staffing shortage, increasing liability exposures.

A 2023 poll from LeadingAge found that 92% of nursing home provider members and 70% of assisted living provider members are experiencing a severe staffing shortage. Overall, 64% of respondents say the workforce situation has not improved since 2022. It’s common to have 20% of positions open with no applicants. The remaining staff have to take on heavier workloads, and providers are tapping reserve funds to pay for pricey staffing agency personnel.

Insurance Journal warns that high staff turnover generally correlates with issues that may also lead to losses, making this a liability issue for insurers. For example, the CNA Aging Services Claim Report shows that a lack of appropriate staffing may contribute to allegations of failure to monitor and lead to an increase in unwitnessed falls or delayed identification of injuries.

It’s easy to see how high turnover could put residents at risk and expose facilities to claims:

• New or temporary workers may be unfamiliar with the facility’s policies, leading to failures in documentation and carrying out procedures incorrectly.
• Inexperienced workers may not know how to handle serious issues, such as resident health complaints or wandering.
• Busy workers may cut corners because they don’t have the time to do everything.

Short-staffed facilities have a high risk of claim frequency and severity, and as a result, some insurers are tightening the reins, making it increasingly difficult to obtain liability coverage.

Commercial Property Rates Are Surging

Like all industries, the senior living community is also dealing with rising commercial property rates.

Recent data from CIAB shows the extent of the problem. Commercial property insurance rates have been rising since around 2017. However, in the first quarter of 2023, rates increased by a recent high of 20.4%. In the third quarter of 2023, rates went up by a steep 17.1%.

Reduced capacity has also been an issue as property insurance companies reduce their exposures in high-risk areas, sometimes leaving entire states. For example, AP News says State Farm announced in the summer of 2023 that it would no longer accept business or personal lines of property and casualty insurance in California. Allstate has also paused new homeowners, condo, and commercial insurance policies in the state.

Rising inflation and natural disaster losses are two common explanations for the challenging property insurance market. In recent years, the number of weather and climate disasters with losses of at least $1 billion has been rising steadily – and that’s with adjustments for inflation. In 2023, NOAA says there were 28 billion-dollar events, a new all-time high.

How Senior Living Facilities Can Take Control of Risk

Since risk management and cost management are inextricably linked, controlling costs requires measures to control risks.

• Focus on training. Claims often arise from the day-to-day practices of workers. Their default practices may not always align with your facility guidelines and policies. As new workers enter your facility, they must be trained to adhere to your policies and prescribed best practices. Even experienced workers need training refreshers.
• Prioritize worker wellbeing. Workers who are suffering from stress and burnout may be more prone to mistakes. They may quit, which creates heavier workloads and even more stress and burnout for the remaining workers, resulting in a vicious cycle. Leaders can break the cycle by ensuring workers have the time off they need to recharge providing reasonable workloads, and by offering employee benefits that support mental health and wellbeing.
• Document everything. Not everything that goes wrong is the facility’s fault. However, without documentation, it may be difficult to defend your team. Unfortunately, when workers are busy, documentation may fall by the wayside. Regular documentation audits can prevent this from happening.

If you’re struggling with insurance and risk management, reach out to us. Heffernan Insurance Brokers can help you explore all your options, including excess and surplus insurance, parametric insurance, captive insurance, and self-insured options.

Learn more.

Any period of volatility involves both ups and downs. The D&O insurance market has experienced major price fluctuations in recent years. 2019 and 2020 saw rising rates, but now rates are falling. However, recent trends in securities class action risk could lead to additional volatility in the future.

What Goes Up Must Come Down

D&O prices jumped by 16.8% in the first quarter of 2020, according to CIAB. Price hikes remained in the double digits every quarter for a period of about two years, before dropping to 7.8% in the first quarter of 2022. In the third quarter of 2023, prices declined for the first time since 2017. The decrease was modest – just 0.3% on average – but that’s a far cry from the price increases of just a couple of years earlier.

In a panel sponsored by the NACD Northern California Chapter, Joseph Talmadge, Senior Vice President at Heffernan Insurance Brokers, discussed some of the causes behind the recent D&O market volatility with Patrick Gibbs, Partner and Head of Securities Litigation & Enforcement Group at Cooley LLC, and Christine Gorjanc, a Board of Director at Shapeways, Carbon Health, Invitae, and Juniper Networks Inc.

Patrick identified two main factors behind the volatility: trends in securities class action litigation and developments in the scope of fiduciary duties. Christine noted the rise of compounding risks (including cyber and supply chain risks) that board members need to oversee. ESG exposures are another growing area of concern, with some carriers adding ESG enhancements to their policies.

2023 Securities Class Action Litigation Trends

Although securities class action litigation is far from the only issue influencing the D&O insurance market, it is a major factor. Therefore, to see what may lie ahead in the D&O market, it makes sense to look at recent developments in securities class action filings.

According to the 2023 Year in Review Securities Class Action Filings report from Cornerstone Research, overall filing volume increased from 208 in 2022 to 215 in 2023. The number of core filings (which excludes M&A filings) also increased.

The 2023 Full-Year Review Recent Trends in Securities Class Action Litigation from NERA also shows an increase in federal securities class action lawsuits in 2023. The report says there were 228 new federal securities class action suits filed in 2023. Notably, this is the first increase since 2019.

Although the increase in total filings was small, Cornerstone Research shows that the types of filings shifted dramatically. The combined number of federal Section 11 and state 1933 Act filings actually decreased by 62% – from 50 in 2022 to only 19 in 2023. However, the number of other federal filings increased from 151 in 2022 to 190 in 2023, which resulted in the overall increase.

There has also been a shift in which industries are seeing the greatest impact of securities filings. The Cornerstone Research report shows that the percentage of S&P 500 companies in the consumer staples sector that experienced a core federal filing increased to 10.5% in 2023, whereas the percentage of communications, telecommunications, and IT companies increased to 11.6%. The utilities sector was the only sector to see a decline.

Factors Driving Securities Class Action Activity

The report from Cornerstone Research shows that, even though total filing volume was up, core SPAC filings, cryptocurrency-related filings, and COVID-19-related filings all fell in 2023.

The NERA report points to violations of Rule 10b-5 v, which prohibits securities fraud, as the main driver behind the uptick in securities class action activity. The turmoil that occurred in the banking industry in 2023 played a significant role: the number of filings in the finance sector doubled in 2023 and comprised 18% of all new filings. Environmental issues were another major factor, with the number of environment-related filings quadrupling between 2022 and 2023.

What’s in Store for the D&O Market in 2024?

At the start of 2024, the D&O market is fairly soft. However, the increase in securities class action activity could signal a harder market ahead. The same factors that contributed to increased filings – namely financial disruption and ESG concerns – could impact D&O coverage.

To keep up with changes in the D&O market, contact Joe Talmadge.

Managers in the restaurant industry may need to reexamine their practices in light of changing rules and recent regulatory activity. Both workers’ compensation classifications and tip sharing practices require attention as restaurant risk management continues to evolve.

WCIRB Introduces Six New Codes

The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) is introducing six new codes that will replace Classification 9079 starting September 1, 2024. Policies that start on or after this date will use the following new codes:

• 9058, Hotels, Motels or Short-Term Residential Housing – food or beverage employees
• 9080, Restaurants – full services
• 9081(1), Restaurants – N.O.C.
• 9082, Caterers, not restaurants
• 9083, Restaurants – fast food or fast casual
• 9084, Bars or Taverns – not restaurants

According to the WCIRB, the introduction of these new codes will facilitate a more discreet analysis of the payroll and claim characteristics of different types of restaurants. Initially, the six new classifications will all share a single advisory pure premium rate. However, once the WCIRB determines that there is enough payroll and loss data to evaluate the differences between these types of businesses, different advisory pure premium rates will be established. This means that restaurants will not see any changes to their experience ratings when the new codes go into effect, but changes may lie ahead in the not-too-distant future.

How Can Restaurants Prepare for the New Codes?

Restaurant leaders should ensure that their establishments are being classified correctly under the new codes. The WCIRB says it will launch a campaign ahead of the September effective date to provide education and boost awareness, and this campaign will include a series of webinars and online tools to help employers, agents and insurers understand the new classifications.

As always, strong risk management is an essential part of controlling costs. Some types of restaurants may eventually see changes in their premiums based on the new classifications, but their individual experience modifier will also impact rates. By keeping claims severity and frequency below the industry average, restaurant leaders can also keep their premiums down.

DOL Cracks Down on Tip Sharing

Tip pooling is a common practice at many restaurants. However, shared tipping practices could land restaurant owners and managers in hot water if they run afoul of federal regulations, and at least two restaurants have come under scrutiny recently.

According to the U.S. Department of Labor (DOL), a tipped employee is an employee who is engaged in an occupation in which they regularly receive more than $30 in tips each month, and the handling of tips for these employees is subject to regulation under the Fair Labor Standards Act (FSLA). Notably, tip pooling is allowed among eligible employees, but managers, supervisors and other employers are not permitted to keep tips for any purpose. This is true regardless of whether an employer takes a tip credit and whether it’s done directly or through a tip pool, even if the employee receives at least the minimum wage.

The DOL says 11 restaurants operating under Pizzicato, a Portland-based restaurant chain, violated tip pooling rules by allowing managers to participate in the tip pool. The DOL’s investigation also found the chain hired a 17-year-old to drive a car in violation of FLSA’s hazardous occupations for minors rules. As a result of these infractions, the restaurant chain is required to pay more than $540,000 to 367 employees, including $270,101 in back wages and $270,101 in liquidated damages.

According to The Oregonian, the DOL has also accused McMenamins of illegally forcing employees to share tips with managers. In January, employees received a letter from the DOL stating that $800,000 in tips earned by them may have been illegally withheld and shared with Assistant Managers. The DOL asked McMenamins to return the tips, but after the restaurant refused, the DOL decided not to take further action, so employees may need to file lawsuits on their own to receive compensation. The Oregonian says that McMenamins has denied any wrongdoing, arguing that the Assistant Managers and Assistant Assistant Managers are hourly, entry-level, non-exempt employees who are entitled to tips.

What Does the Tip Pool Crack Down Mean for Restaurants?

While tip pooling is allowed among eligible employees, restaurants may face investigations and fines if they include anyone who may be interpreted as a manager participate. This can get especially complicated when employees are given titles with the word “manager” but are not considered actual managers per DOL rules. According to the DOL, manager and supervisors are employees “(1) whose primary duty is managing the enterprise or a customarily recognized department or subdivision of the enterprise; (2) who customarily and regularly directs the work of at least two or more other full-time employees or their equivalent; and (3) who has the authority to hire or fire other employees, or whose suggestions and recommendations as to the hiring or firing are given particular weight.”

Is Your Restaurant Managing Emerging Risks?

Changes in workers’ compensation and regulatory action are keeping restaurant leaders on their toes. Having a risk management expert in your corner can help you avoid problems and control costs. Heffernan Insurance Brokers offers specialized risk management and insurance programs for hospitality businesses. Learn more.

Financially-aware kids grow up to be financially-savvy adults. By teaching your children about the value of money and the importance of saving, you can prepare them to successfully manage money when they grow up.

Money Doesn’t Have to Be Stressful

Many adults are stressed about money. In a Capital One survey, 77% of participants reported feeling anxious about money and 58% felt that finances controlled their lives.

As a parent, you may want to shield your children from this stress. However, a smarter approach is to educate your children about money matters to help them avoid the stresses associated with money problems as adults.

Many young adults wish they had learned more about finances. In a poll of UK adults conducted by the Centre for Social Justice, 44% of respondents said they’d be in better shape financially if they had received more financial education and 68% of young adults with financial problems blamed a lack of money management skills.

It’s unlikely young adults in the U.S. are faring much better. The Milken Institute says many individuals in the U.S. lack the basic knowledge and skills needed to navigate the complexities of modern finances. To determine financial knowledge, individuals received a series of financial questions covering various categories. Only 40% of individuals demonstrated overall financial knowledge.

Teaching Kids About Money

By starting your kids’ financial education when they’re young, you can give them the knowledge and tools they need to successfully manage money. You can also instill values and help them form habits that will last a lifetime.

Understanding Money

Before children can learn to manage money, they need to learn what money is. Even young children can learn how to count money and exchange it for items. According to Psychology Today, it’s better to stick to cash and coins than cards for young children.

Another way to learn about money is to start earning it. The American Institute of CPAs (AICPA) says 66% of parents give their children an allowance and the average amount is $30 a week. This can be a wonderful way to start conversations about money. This handout includes an allowance checklist with key points parents should discuss with their kids, as well as a weekly budget chart.

Saving Money and Setting Goals

According to the AICPA, only 3% of parents say their children primarily save their allowance. You can teach your children better money management skills by encouraging them to save their money.

When adults save money, it’s often for a specific goal, whether that’s a vacation, a house, retirement, or just a rainy-day fund. Children can also learn to save for specific goals. For example, they can save up money until they have enough to buy a specific toy they want. This teaches them the value of money and the habit of saving.

Kids often save money in a piggy bank. You can take this to another level by giving your kids more than just one. Bucketing is a common method adults use to save money for multiple goals at once. They put money into different buckets (or savings accounts), which represent different goals. You can do this for children with piggy banks or jars.

To do this, you and your child need to decide on multiple long-term and short-term savings goals. Another option is to use one bucket for money your child can spend immediately and another for money your child will save. You can use a third bucket for money your child can donate to charitable causes or use to buy gifts for other people. Label each piggy bank or jar with the goal or purpose.

More Advanced Financial Topics

As your kids grow up, you can start working on more advanced financial topics. There are several important topics to cover, including:

• Saving for college – The Junior Achievement USA Teens & Personal Finance Survey found that rising education costs have impacted post-secondary education plans for 69% of teens. Parents can help their teens create a financial plan for college costs.
• Monthly budgeting – When young adults move out of their parents’ homes, they need to figure out how to budget to afford rent, bills, and groceries. This is easier if they have experience before they’re on their own.
• Debit cards versus credit cards – Student loan debt is only one type of debt college students have to worry about. According to U.S. News, 46.1% of college students have credit card debt. Debit cards may seem safer, but overdraft fees can add up if the cardholder isn’t careful.
• Taxes – As TurboTax explains, minors claimed as dependents may not have to file taxes if their annual income falls under the standard deduction. However, they may still choose to file and may receive a refund on withheld earnings. This is a good opportunity to learn how to file taxes and recover money.
• The stock market – The Stock Market Game is an online simulation that helps kids of all ages learn about investment and risk.

While you’re raising financially-aware kids, be sure to model positive practices by focusing on your own finances. Heffernan Financial Services provides investment advisory services, portfolio review and management, insurance planning, and other services to help individuals achieve financial stability. Learn more.

When a restaurant property is damaged, it may have to temporarily close its doors for repairs, interrupting business income. Fire is a common cause. Restaurants have more fire exposures than most other businesses due to their kitchens. FEMA says approximately 5,900 restaurant building fires are reported to fire departments in the U.S. every year.

During these temporary closures, business income insurance is a crucial coverage that can help business owners stay afloat. However, it’s important to be aware of coverage limitations.

How Does Business Income Insurance Work?

Business income insurance, also called business interruption insurance, provides compensation for lost income after a covered event. This protection is often included in Business Owner Packages (BOPs) and is typically available as an endorsement on commercial property insurance policies.

A business income insurance policy covers lost net income, based on financial records, as well as mortgage or lease payments, loan payments, payroll, taxes, and certain other overhead expenses while the business is unable to operate following a covered loss. Many policies also include extra expense coverage, which covers additional operating expenses that occur as a result of the loss.

When a restaurant is badly damaged, it cannot operate and welcome paying customers until repairs are complete. In this scenario, the restaurant’s commercial property insurance covers the cost of the repairs, minus the deductible, whereas the restaurant’s business income insurance covers the operating expenses and lost net income.

Insurance Does Not Cover All Perils

Business income insurance is tied to commercial property insurance. It typically only covers business disruption caused by any property damage covered by the commercial property portion of the policy. Coverage typically excludes:

• Certain types of property damage. A standard commercial property insurance policy does not cover flood or earthquake losses. As a result, business interruption insurance does not cover lost income resulting from flood or earthquake damage. However, restaurants can obtain separate flood and earthquake insurance policies.
• Business disruptions not caused by property damage. When COVID-19 forced restaurants to close their doors, many restaurant owners filed business interruption claims – only to find out that their coverage excluded these losses. This lead to a series of lawsuits. However, The Wall Street Journal says courts have mostly sided with the insurers that denied claims because it was not physical damage to the property that led to the losses. Since then, many insurers have added virus exclusions for clarification.
• Cyberattacks. According to Cybernews, Yum Brands (which owns KFC, Pizza Hut, and Taco Bell) had to close nearly 300 UK restaurants for a day due to a cyberattack. Since many restaurants depend on computer systems for payments and orders, a cyberattack may disrupt operations and lead to business losses. A commercial property insurance policy’s business interruption coverage will not typically cover these losses. However, restaurants can obtain a separate cyber insurance policy.

Other Business Income Limitations

Although business income insurance may save many restaurants from bankruptcy after a disaster, coverage can be complicated. There are a few more considerations and limitations that may impact restaurants:

• The period of restoration determines how long you can receive benefits for. Your policy may limit the period of restoration to a certain number of days. If you are unable to complete repairs in time, you will lack both benefits and income after the restoration period is over. Since repairs can take a while (especially after widespread disasters), you may want to select a policy with a longer restoration period. Some policies also include an extended period that allows you to continue receiving payments for a limited period after you’ve completed the repairs. This is beneficial because your revenue may not reach pre-loss levels as soon as you reopen.
• During the waiting period, you will not receive business income payments. For example, if your restaurant’s policy has a 72-hour waiting period, you will not receive payments for the first 72 hours of business interruption. Once the waiting period is over, coverage will apply during the period of restoration. Some policies do not have a waiting period, but they may have a deductible.
• Accurate financial records may be critical. If your restaurant has accurate income and expense records, it will be easier to file a claim.

Do you need help navigating business income insurance for restaurants? Heffernan Insurance Brokers offers specialized risk management and insurance programs for restaurants. Learn more.

The risks involved in transportation can pose a serious threat to a food manufacturer’s or distributor’s bottom line. Cargo insurance provides critical protection, but it’s important to insure cargo for its full value. Furthermore, whether your policy has a margin clause will impact how much coverage you have for a loss.

What Is a Margin Clause?

A margin clause is an insurance provision found in some commercial property insurance policies, including some cargo insurance policies and many blanket insurance policies. It establishes the maximum amount the policyholder can collect in the event of a loss at a location, typically expressed as a percentage higher than 100 and based on the declared value.

How Does the Margin Clause Impact Payouts?

When determining whether you have sufficient coverage for a shipment, it’s not enough to look at the maximum limit of your blanket insurance policy – you also need to consider your per-occurrence or per-location limits. It is here that the margin clause plays a major role.

Let’s consider this scenario:

• You have a blanket insurance policy with a limit of $1 million.
• The margin clause establishes a 120% margin.
• A shipment with a declared value of $100,000 is destroyed in transit.
• According to the margin clause, the maximum amount you can receive from the insurer is $120,000, regardless of the actual value of the loss.
• If you under-declared the shipment, and the actual value of the loss is $150,000, you still can only claim $120,000, even thought the blanket limit is higher.

If your cargo insurance policy does not have a margin clause, you will need to find out how the insurer determines the maximum limit for a single shipment. Do not assume it is the policy limit – it’s possible that a shipment will have a limit equal to the declared value without a margin to provide a buffer. This can result in less coverage than you would have with a margin clause.

Is Your Food Shipment Properly Protected?

Food shipments are vulnerable to many loss events while in transit. For example, collisions and rollover crashes could cause food shipments to spill out onto the road or the vehicle could catch fire. Cargo theft is another major concern – and one that may be becoming worse. CargoNet says there were 582 incidents in the second quarter of 2023, representing a 57% increase compared to the second quarter of 2022.

Cargo insurance provides protection against losses. However, food manufacturers and distributors should not assume their policies will provide sufficient protection. When reviewing your coverage, a few issues to consider include:

• Whose insurance covers the shipment? If you are relying on a carrier’s policy to protect your goods, confirm the appropriate coverage is in force and adequate. Since the policy may not fully cover your property in transit, you may need additional coverage.
• What modes of transportation does the policy cover? If a shipment will travel by multiple modes of transportation (for example, by road, rail, air, or sea) confirm that coverage is in place for all these.
• What are the insurance limits? Since a single shipment can have a high value, make sure the policy provides sufficient coverage for a total loss. To do this, you need to determine the limit for an individual shipment, which may be based on the declared value rather than the policy limit. As discussed above, whether there is a margin clause will determine exactly how much you can receive for a loss.
• Is the declared value of your shipment accurate? Underinsurance is a problem for both policyholders and insurance companies, who rely on correct values for accurate underwriting. Having accurate values can also help you avoid uncovered losses, since your payout may be limited based on the declared values.

Navigating the ins and outs of cargo insurance can require extensive knowledge. Don’t wait until you have a claim to find out if your coverage is sufficient.

Heffernan Insurance Brokers helps food manufacturers and distributors secure insurance packages designed for their needs. Learn more.