PROTECT YOUR CARE FACILITY WITH THE RIGHT COMMERCIAL INSURANCE POLICY

Besides the fact the commercial liability insurance is needed by licensing, laws or regulations, commercial liability helps protection your livelihood and life style.  With the proper insurance protection, you are protecting your business and personal life from unexpected accidents or incidents.  When a lawsuit or claim occurs, the proper insurance protection helps you to maintain your life without a major financial and emotional setup that could take you years to recover.

A admitted insurance carrier comply with all state regulations regarding insurance.

A non-admitted insurance carrier (or Excess and Surplus Lines Carriers) is subjected to its domiciled insurance laws and reporting procedures, but not to other states insurance laws and regulations when conducting insurance business (i.e. an Ohio insurance carrier must comply with Ohio’s insurance laws, but not CA insurance law when conducting business in California). A California non-admitted insurance carrier can conduct insurance transactions in CA, but it does not need to comply with California Depart of Insurance’s laws and regulations regarding policy forms, schedule rating, underwriting audits, or financial examinations to satisfy the requirements of CA Insurance Guarantee Association (CIGA).

RRG is a corporation or limited liability association formed by its members to provide liability risk insurance to its group members.  In essence, an RRG is a self-insured company governed by Risk Retention Act to provide insurance only to its members with similar risks and businesses.  However, RRGs do not need to participate in the California Insurance Guarantee Association (CIGA), thus an insured has no financial protection if an RRG becomes insolvent.  RRGs are allowed to provide insurance in all states, but are not required to adhere to the state insurance laws and regulations regarding schedule ratings, policy forms, underwriting audits, and financial conditions, thus there is no A.M. Best Company’s financial rating.

In a claim-made form, a claim must be made to the insurance company during the policy period to have coverage. For example, you have a policy with an effective date 1/1/2014 and an expiration date of 1/1/2015, a claim must be filed within those dates to be covered. Any claims after the expiration will be invalid.

In an occurrence form, a loss or claim incident must occur during the policy period, but an actual claim filed could happen after the expiration date. In the above example with an expiration date of 1/1/2015, you can still file a claim after 1/1/2015 even though your coverage ends on 1/1/2015.  This will provide coverage after your expiration date.

Commercial liability premium is rated by a number of factors by the carrier:  Admitted or Non-Admitted Insurance Carrier, Claim-Made or Occurrence Form, Policy Definition and Coverage, Policy Limits, and Carrier Claims History.  Since each insurance carrier can price differently for a number of reasons, it is important to understand what insurance carrier you have.

Insurance policies are designed for a variety of business needs, protection, and premium to meet demands of the insureds.  The best way to know what policy is good for you is first determine what are your business insurance needs and goals.  By answering these questions, you should have a better picture on what are you looking for.  If you have been in business for number of years, have a lot of business assets and afraid of lawsuits, get the best coverages and policy is probably a better way to go.  However, if you are small facility and have 1 or 2 residents, getting a reasonable policy with coverage and premium would be better.    Finally, you want to look at premium.  Obviously, like anything else, you want to stay in budget to operate your business.

The best insurance carrier would be an admitted insurance carrier in the state your facility is located, written on occurrence form, broad in definitions and coverages, have legal and claim expenses outside the policy limits, and have at least an “A” on A.M. Best Rating.  A California admitted insurance carrier will give an assurance that the California Insurance Guarantee Association (CIGA) protects policyholders or insureds if the insurer becomes insolvent or bankrupt.  An occurrence form will provide protection beyond the policy expiration date unlike the claims-made policy which ends on the policy expiration date.    When a policy is broad in definitions and coverage, then you will have more liability coverage and protection.  In most cases, an admitted insurance carrier will define Professional Liability broader and usually have both Physical and Sexual Abuse Coverage with higher policy limits.  Lastly, when a claim is filed and you have the legal and claim expenses are outside the policy limits, this would preserve the policy limit for a lawsuit settlement.  Admitted insurance carriers, in general, will be higher in insurance premium than non-admitted insurance carrier or risk retention group policies.  By having the best coverage and protection, your liability claim should be well defended and settlement should be easier.

In general, a non-admitted or risk retention group, claims-made form, limited definitions and coverage, and inside policy limits of legal and claims expenses tend to be the least expensive.  Assuming that a claim never occurs, going with the least expensive liability policy would make sense.  However, when a liability claim does occur, having the least expensive liability policy may be inadequate to protect your business, caregivers, resident or your livelihood.  If your liability insurance policy is inadequate, you may be end up personally responsible for claims that are not covered by the insurance carrier.

It all depends on your business goals, needs and financial situation.  Single-line (mono) line insurance provides the flexibility to customize what you want and how you want it without additional coverage you do not need.  Single-line separates each insurance line independently, thus other policies become unaffected if you file a claim.  A commercial insurance package combines at least two or three insurance lines together, thus providing better coverage and premium.  However, if you a file a claim on a commercial package with multi-insurance lines or locations, all insurance lines and locations will be affected by the loss.

Commercial property coverage consists of:  the building, business personal properties, and property of others.  Optional coverages on commercial property are crime, business income, and extra expenses.

In general, homeowners’ insurance policies that have business operation like ARFs, RCFEs, or HHAs are considered as an exclusion from homeowners’ policy coverage.  This means when property loss occurs from the business operation, the claim adjuster can deny the claim.   There are a few “grandfathered” homeowners’ policies that are granted policy coverage for running a care facility.  You should check with your insurance agent or broker and verify if your homeowner’s policy will cover a business operation like an ARF, RCFE or HHA.

Insurance carriers usually require at least 90% co-insurance replacement cost (replacement cost value) on building coverage.   Replacement cost is the cost of restructure on building to its present time.  Replacement cost is not the same as real estate value (current value your home if you were to sell it).   Most insurance carriers require the building or residential home to be at least 90% co-insurance, meaning that your insurance limit should be at 90% of the replacement cost. Failure to comply will result in penalty or reduction when a claim is filed on building loss.

A deductible is the amount of money that you need to pay before the insurance company pays their amount on a loss.  For example, $1,000 deductible on $5,000 claim reimbursement would mean that you will pay the first $1,000 before the insurance carrier will pay the next $4,000 totaling the reimbursement of $5,000.

Business personal property (BPP) coverage includes items such as computers, desks, chairs, equipment, and business furniture that you own and use for your business.  You can also think BPP as anything that is not part of structure or a fixture to the building.  Also automobile, aircraft, or watercraft that requires a licensed by the DMV is not considered as business personal property.

Basic, board and special form are three types of coverage options you can select as a covered cause of loss.  Basic form will offer the least comprehensive of the three which include coverage of fire, lighting, windstorm, explosion, smoke, vandalism, aircraft, riot, sinkhole and volcanic activity.  Broad form will include all of basic form perils and include burglary, falling objects, weight of ice or snow, freezing of plumbing, and accidental water damage.  Special form includes all of broad form and a few other perils.  It is important that you understand what form of coverage in your policy when placing insurance coverage.  You do not want any surprises when you need to file a claim.

IActual Cash Value (ACV) is replacement cost minus depreciation (RC – Depreciation).  This is also known as market value and is usually applied to business personal properties or properties of others coverage rather than building coverage.  Depreciation can be interpreted as the “cost of wear and tear (usage) on a property or item”.  Actual cash value method will tend be lower in reimbursement than replacement cost because of depreciation factor.

Other property coverages to consider are:  Ordinance of Law, Emergency Evacuating Expense, Debris Removal Expense, Crime Coverage, Water Damage, and Backup of Sewer.

When your commercial property (facility) is destroyed, “Business Income” coverage provides the income to your business operations. Business income calculation is based on net income (net profit or loss before taxes) plus what our normal business operating expenses including payroll if your business had been interrupted by a loss.

“Extra Expense” coverage provides additional reimbursement for necessary and unexpected extra expenses you have to incur during the "period of restoration" that you would not have incurred if the loss had not happened. Ex: Temporary relocations, hiring additional help, catering food service, or any other expenses to continue operations normal during the "period of restoration".

In an emergency such as fire, water, burglary, or major property damages, you want to contact the proper authority first (Fire Dept., Police Dept., or 911).  Depending on what type of loss, then contact the proper Emergency Services Company to mitigate the loss and prevent further damages.  Then, contact your insurance carrier or broker to file a claim at your earliest convenience.

Since your facility is a business, any vehicles associated with the business need to have commercial auto coverage.  This includes vehicles that transport clients, drive for business errands, employees drive on behalf of employer, and transport business goods.

Yes, if you or your employee is found at fault in an accident, commercial auto insurance would provide coverage for you, your employee and your residents.  If you have personal auto coverage, your personal auto claim could deny coverage.  This means you have no protection, thus you must pay from your pocket.

Unless you have commercial auto, you should never let your employees drive their own vehicles for business errands.  Ultimately, you can be held responsible if your employee had an accident.

Non-owned liability covers vehicles owned by others or your employees, and hired-auto liability covers vehicles you rent or borrow.  This liability covers bodily injury and property damaged caused by a vehicle you hire (borrowed) or caused by non-owned vehicle (employee’s vehicle).  This is optional coverage you can purchase on your general liability or commercial auto policy.  This type of auto liability coverage is considered as secondary insurance only after the primary liability coverage of vehicles has been exhausted.

Depending on the insurance carrier, commercial auto can be written as no named driver or individually driver rated like personal auto policy.  There are advantages and disadvantages to each underwriting method.

Commercial Umbrella insurance is additional liability limits on your general liability, professional, auto and sometimes your abuse coverages.  Since most commercial liability limit is $1 million, umbrella insurance can be purchased to raise the coverage limit from $2 to $10 million of liability coverage.

If you own multiple facilities, you will have a higher chance of liability claim than 1 facility.  A standard $1 million liability limit coverage may not be enough and you should consider additional limit for your business protection.   Also, if your personal wealth is significant, you should an umbrella insurance for added protection limit.

Umbrella insurance policy usually increases the protection limit for general, professional, and commercial auto liability coverage.  Only in few cases, an umbrella policy can provide additional protection limit on workers’ compensation insurance.  Please review your policy and consult with your broker before binding.