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The Surprising Business Risks You May Not Think About

This article was originally published by Erie Insurace, a Gold Company Partner of OIA, and originally published on the Erie Insurance website.

Risk control consultants are the preventative care professionals of business insurance. They can help you detect potential hazards to your business’s well-being and help you understand what actions you can take to keep things healthy.

Good news: Qualifying customers who have business insurance with ERIE have access to customized risk control services. That’s just one more way we’re looking out for you.

Bob Kupris, a commercial insurance veteran with more than 30 years in risk control, leads ERIE’s team of risk control consultants. We asked him for an insider’s perspective on what consultants look for – and the surprising things they find.

RISKY BUSINESS

To get things started, let your ERIE agent know that you’re interested in focusing on risk control for your business.  ERIE’s professional consultants can offer many resources to help, including a walk-through for  businesses who qualify. . They’re looking for ways for you to mitigate risks by identifying potential loss exposures and providing information on solutions to control and/or eliminate them.

ERIE’s consultants have specialized areas of knowledge –property, commercial auto, workers’ compensation, products liability and construction/contracting – to better meet customers’ needs.

Their keen eyes are quick to spot things you might expect, such as fire protection. However, there are a few less obvious risks Kupris says are equally as common and – in some cases – on the rise.

SURPRISING CULPRITS

You know the ins and outs of your business better than anyone. So, what might a risk control consultant be able to see that you might not?

Here are a few surprising trends risk control has noticed:

  • Lack of commitment from management. Maintaining a hazard-free workplace is the law, according to the U.S. Department of Labor. What’s more, it’s more likely to happen if owners and managers make it a priority. A recent OSHA study found that non-fatal workplace injuries cost businesses more than $125 billion a year. With that in mind, Kupris says the first thing he notices is management controls to determine the commitment to workplace safety. “It’s one of the most important things we look at,” he said. “Companies that have management support tend to have better safety records and also tend to be more productive.”

  • Data breaches caused by your company. According to the Insurance Information Institute, credit card fraud and employment-related fraud are two of the top five ways consumers fall victim to identify theft. It’s the area of risk Kupris says he’s seen grow the fastest. Having iron-clad cyber security safeguards against hacks and the right coverage is the best way to prevent your company from experiencing, or potentially causing, a data breach.

  • Employees distracted behind the wheel. In ERIE’s 2018 distracted driving study, it was discovered that in fatal car accidents caused by distracted drivers, 61 percent were generally inattentive. Kupris says drivers of commercial vehicles are no exception to this scary statistic and he’s seen a spike in commercial auto claims, which can affect your insurance rates and everyone’s safety. Does your business employ a no cell phone policy for your drivers?If your drivers have to use GPS, is it hands-free?

THE ERIE APPROACH TO RISK CONTROL

Providing preventative plans to these risks and more is where ERIE’s risk control consultants shine. Here are some examples of the most unique support in the industry they provide to commercial customers, at no additional fee:

  • All the tools in their toolbox. For qualifying ERIE customers,consultants offer a wide range of risk control services, including OSHA Outreach Training Programs, customized written safety programs and disaster planning resources from The Insurance Institute for Business & Home Safety.

  • Support that isn’t just for the big guys. ERIE offers follow-up consultations to help businesses, regardless of whether they’re the biggest fish in the pond. “Many insurance companies won’t go out on something small,” Kupris said. “But at ERIE, we don’t operate that way.” If you want follow-up assessments or training for your business, ask your agent how ERIE can help.

  • A close working relationship with your ERIE agent. “It’s really a joint effort,” Kupris said. “ERIE agents really take a genuine interest in their customers and our team of consultants. That’s something you don’t always see at other places.”

Need a risk assessment? 

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** Erie Insurance is a Gold Company Partner with OIA **


Using Hands-Free Devices While Driving Not So Risky

Written by Virginia Tech Transportation Department, originally published by Insurance Journal

New research suggests that drivers who use hands-free electronic devices, as opposed to handheld ones, are not increasing their risk of getting into a crash.

According to the research from Virginia Tech Transportation Institute (VTTI), with hands-free technology, drivers can make calls and perform a variety of other tasks while still keeping their hands on the wheel and eyes on the road.

“Any activity that places either visual or manual demands on the driver — texting, browsing or dialing a hand-held phone, for instance — substantially increases crash risk. However, our recent study has found that the primarily cognitive secondary task of talking on a hands-free device does not appear to have any detrimental effects,” said Tom Dingus, director of VTTI and the principal investigator of the study.

The researchers sought to determine the extent to which crash risk could be affected by primarily mental behaviors, known as cognitive distractions. Cognitive distractions occupy the mind but do not require the driver to look away from the road or remove his or her hands from the wheel. Examples include interacting with a passenger, singing in the car, talking on a hands-free cell phone, and dialing on a hands-free phone via voice-activated software.

Dingus and the research team analyzed video footage of 3,454 drivers, 905 crashes (including 275 more serious crashes), and 19,732 control periods of “normal driving” for instances of cognitive distraction. For comparison, they also studied examples of drivers performing visual and manual activities, such as texting on a hand-held phone or adjusting the radio.

They used video and other sensor data from the Second Strategic Highway Research Program naturalistic driving study, the largest light-vehicle study of its kind ever conducted.

Drivers who used a hand-held phone increased their crash risk by 2 to 3.5 times compared to model drivers, defined as being alert, attentive, and sober. When a combination of cognitive secondary tasks was observed, the crash risk also went up, although not to nearly the same degree. In some cases, hands-free cell phone use was associated with a lower crash rate than the control group. None of the 275 more serious property damage and injury crashes analyzed were associated with the use of hands-free systems.

“There are a number of reasons why using a hands-free device could keep drivers more engaged and focused in certain situations,” said Dingus. “One is that the driver looks forward more during the conversation. Although engaging in the conversation could cause a small amount of delay in cognitive processing, the driver is still more likely be looking in the direction of a precipitating event, such as another car stopping or darting in front suddenly. The phone conversation could also serve as a countermeasure to fatigue on longer road trips. Perhaps most importantly, a driver who is talking on a hands-free phone is less likely to engage in manual texting/browsing/dialing and other much higher-risk behaviors.”

On Feb. 5, state lawmakers in Virginia passed legislation that aims to make holding a cell phone while driving illegal.

“VTTI’s research has shown consistently that activities requiring a driver to take his or her eyes off of the forward roadway, such as texting or dialing on a handheld phone, pose the greatest risk. It is also important to note that in many newer cars, the driver can do some tasks hands-free using well-designed interfaces. Giving the driver an option to use a safer system will help with compliance for a new law and lead to fewer distraction-related crashes,” said Dingus.

Eight-hundred and forty-three people died on Virginia roads in 2017, according to the Virginia Department of Motor Vehicles. Of these, 208 fatalities and 14,656 injuries were attributed to distracted driving, an 18.2 percent increase from 2016. Texting/cell phone use was cited as one of the top three causes.

Source: Virginia Tech Transportation Institute


UFG Insurance's solution to Ohio Supreme Court ruling on faulty workmanship

If your agency writes construction accounts, watch this video to learn about UFG's simple solution: automatically adding an endorsement for all general liability and umbrella policies where UFG explicitly states that faulty workmanship is an occurrence.

For more information on this topic and UFG solutions for your construction customers, contact Jon Wade at (513) 515-8709.


Does an HO-3 Cover Family Members Living Separately in a Duplex?

Written by Virtual University, originally published by Independent Insurance Agents & Brokers of America, Inc.

A named insured owns a duplex, where she lives in one unit and her son and his wife live in the other unit rent-free.

Q: Do the son and daughter-in-law have coverage for their contents and liability under the mom's HO-3 policy, or do they need to purchase their own renters insurance?

Response 1:

If there are two separate units and two separate households, the son and his wife need their own renters policy.

Response 2: 

Depending on how the residences are listed with the county, they are likely two separate residences. Therefore, the son and his wife are not residents of the same household as the mom, which means they need their own renters insurance.

Response 3: 

“Resident relatives” are insureds if they reside in the same household with the named insured. Since it's a separate unit, it is likely the mom maintains a separate household from her son and his wife, which means they need a renters policy.

Response 4: 

Without looking at any outside-the-box forms or endorsements, most carriers wouldn’t cover the son and his wife on the HO-3. It's a two-family home, meaning each unit is a separate residence with a separate method of entrance and a separate cooking area. Based on that logic, the children living in the separate unit would not be covered under the mom's HO-3 form.

The 1991 ISO form defines an insured as “residents of your household” who are on the “residence premises," which is defined as: 

 a. The one family dwelling, other structures, and grouds; or

 b. That part of any other building; where you reside and which is shown as the "residence premises" in the Declarations.

Still, it might be worth emailing the carrier. You never know—you may get lucky!

Response 5: 

I don't see any coverage here:

COVERAGE C – Personal Property 

We cover personal property owned or used by an "insured" while it is anywhere in the world. At your request, we will cover personal property owned by:

 1. Others while the property is on the part of the "residence premises" occupied by an "insured";

 2. A guest or a "residence employee," while the property is in any residence occupied by an "insured."

That said, in the 1989 case Denn v. Vanguard Insurance Company, the court sided with the insured when a carrier denied coverage after a fire. An insured resided in one side of a duplex and his sister and her two daughters resided in the other. The sister paid him rent, but they generally shared meals, household expenses and his telephone. The insured's insurance company initially denied coverage for fire damage to his sister's contents and her additional living expenses, but the court ruled that a household existed, even though the parties otherwise lived independently in the same structure.

Admonishing the insurer for denying the claim, the court stated, "the defense advanced in this case is the kind of defense that makes policyholders justifiably mad…One would think that if there are any responsible officials left in the insurance industry (as they self-style their business), they would seek to correct this type of activity by their claims departments before it is too late."

Response 6: 

They should buy their own renters and insurance. As a husband and wife, they are a separate legal entity with their own exposures and needs. They live in their own apartment, so for all practical purposes, they are renters. It doesn’t matter if they’re living there for free.

Response 7: 

From a coverage standpoint, this could be argued either way. Ask the underwriter.

Response 8: 

Relying on an iffy resident status is a bad move. Residency is often determined in a courtroom. Check out this article from the Big “I” Virtual University for more details: “Who is a ‘Resident’ Under a Personal Lines Policy?” The very fact that we’re not sure is a perfect reason to recommend the HO-4. Without knowing all the specifics, no one can say. If the son and his wife have their own life and support themselves, it's farfetched to consider them as a joint resident. 

The cost of policies vary based on individual specifics but the HO-4 is typically very inexpensive. Errors & omissions defense attorneys will tell you that the lower the cost of the correct coverage, the worse it looks for the agent. The kids are saving a lot of money living for free next to Mom. Encourage them to use a very small amount of that for an HO-4. 

Response 9: 

The ISO HO form defines an insured as "you and residents of your household who are your relatives." I don't know how the courts in your state have defined “household” and whether that definition includes relatives living in the second unit of a duplex, but that concept would be key—these family members are sharing the same “house,” but not necessarily the same “household.” 

A court might rely on details such as tax returns to determine whether the mother and the son maintain separate households. To be safe, the son and daughter-in-law should get an HO-4.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.


Cybersecurity, Data Protection and Privacy Notices…Oh My!

Cybersecurity sheild

Cybersecurity bill helps protect your agency

Gov. Kasich has signed Senate Bill 220 (S.B. 220) to create a legal safe harbor for businesses that experience a data breach provided they have voluntarily implemented a cybersecurity program that meets certain requirements.

S.B. 220 does not bar a lawsuit but provides the opportunity for a business to provide evidence that reasonable policies and protections were in place to prevent the breach and, essentially, provides guidance as to what is reasonable.

Judges and juries would still decide, depending on the unique facts and evidence of a case, whether the business meets its burden to raise the affirmative defense provided under the act.

Cybersecurity program requirements

The act requires a business’ cybersecurity program to be designed to do all of the following with respect to the information it is meant to protect:

  • Protect the security and confidentiality of the information;

  • Protect against any anticipated threats or hazards to the security or integrity of the information;

  • Protect against unauthorized access to and acquisition of the information that is likely to result in a material risk of identity theft or other fraud to the individual to whom the information relates.

The scale and scope of a business’ cybersecurity program is considered appropriate if it is based on all of the following factors:

  • The entity's size and complexity;

  • The nature and scope of the entity's activities;

  • The sensitivity of the information to be protected;

  • The cost and availability of tools to improve information security and reduce vulnerabilities;

  • The resources available to the entity.

Approved cybersecurity frameworks

Under the act, a business’ cybersecurity program also must reasonably conform to an industry recognized cybersecurity framework.

For insurance agencies, the recognized frameworks listed in the act that are most pertinent because they are likely already being followed are the security requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) or Title V of the federal Gramm-Leach-Bliley Act (GLBA) of 1999.

Ultimately, S.B. 220 is intended to be an incentive to encourage businesses to achieve a higher level of cybersecurity through voluntary action. This legislation is not only a benefit to you, but also to your commercial clients that proactively ensure they are protecting their data by complying with the requirements of the act.

S.B. 220 takes effect Nov. 2, 2018.


Data Security

So, just what are the requirements in Title V of the "Gramm-Leach-Bliley Act of 1999," Public Law 106-102, as amended?

This answer can be found in a very comprehensive memo from the Independent Agents and Brokers of America, Inc. (IIABA) that outlines the privacy provisions of the GLBA and their impact on insurance agents and brokers. Specifically, Section VI of this memo found on pages 11-13 outlines the data security and integrity requirements.

Agents are already supposed to be following these federal requirements, however, as a result of S.B. 220, agents can now receive a legal safe harbor in Ohio for doing so since this is a specified industry recognized data security framework that is acceptable in conjunction with the implementation of a cybersecurity program.

Cybersecurity Template

Not sure if you are following the data security requirements of the GLBA? IIABA and the Agents Council for Technology have come to the rescue!

They have created a sample written cybersecurity policy as a tool to assist agencies in creating a policy appropriate and customized for their agency.

In creating this policy, they worked from requirements set forth by several acts, including the New York Regulation 23 NYCRR 500, and Gramm-Leach-Bliley, because these regulations impose some of the most specific and demanding requirements.

What does this mean for you? You can customize this written policy for your agency and since it complies with the GLBA standards, it meets the requirements of Ohio’s S.B. 220 to qualify your agency for a legal safe harbor.

Privacy Notices

I can’t talk about the requirements of the GLBA without also mentioning privacy notices.

In Ohio, we have a rather confusing situation with privacy notices since there is a distinction between the federal requirements set forth by the GLBA and some Ohio laws that also address the issue.

But, the bottom line is this: P&C agents should follow the GLBA requirements, but agents who sell life, health or disability coverage have requirements for insurance information practices, including privacy notices, that they must adhere to in Ohio Revised Code Chapter 3904.

So, what are the GLBA requirements for privacy notices that P&C agents should be following? Rather than reinvent the wheel, let’s go back to IIABA’s very comprehensive memo.

While agents can benefit from a refresher on the requirements in the GLBA and should read the entire memo, Section III found on pages 3-7, specifically discusses the privacy notice requirements.

Note that the GLBA no longer requires agencies to provide annual notices if they:

  • Share NPI with non-affiliated third parties only pursuant to the established exemptions from which consumers cannot opt out (see Section IV.D. of the memo); and
     

  • Have not changed their disclosure policies and practices since their most recent consumer privacy notice. The amendments do not affect any initial notice requirements.

This exception does not apply to agencies that share NPI beyond the established exemptions, even if the agency has not changed its disclosure and practices.

Moreover, agencies that use this exception still have to provide consumers with any revised privacy notices, even if the agency narrows the circumstances in which it discloses NPI to non-affiliated third parties.

References:

Additional Cyber Resources:


NOTICE: The Ohio Insurance Agents Association, Inc. (OIA) provides this information with the express understanding that 1) no attorney-client relationship exists, 2) neither OIA nor its attorneys are engaged in providing legal advice and 3) that the information is of a general character. You should not rely on this information when dealing with personal or professional legal matters; rather, seek legal advice from retained legal counsel.

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