Commercial Insurance

Why I Did This….

In these desperate economic times, it is necessary for a lot of businesses to cut costs in a variety of ways to maintain a healthy bottom line. Throughout my career as an account executive at White Sutton & Company Insurance Services I have worked tirelessly to educate myself about the industry in order to provide consultative advice to my clients to reduce their exposures to various unforeseen accidents, which in turn, reduce their insurance costs over time. In addition, in my business I feel that it is critical to immerse yourself in a single trade to understand how the businesses operate entirely and their variety of cultures. It is essential to cater to a client’s needs and adequately address all of their issues and concerns that pertain to their specific company. Many insurance brokers believe that they are able to competently know what to provide a manufacturer, distributor, and contractor without any understanding of the inner-workings of these companies. My experience has shown me that this is often not the case. This is why I have immersed myself into the restaurant industry and consistently strived to be a specialist in many service organizations. I have worked extensively with many restaurant owners, chefs, and managers to truly understand what the biggest concerns are and how to address them. I also comprehend that the business is constantly changing and new hurdles must consistently be overcome; that we must act proactively each and every day to adapt our approaches and better position ourselves for the future. I have created this blog to provide relevant information that can get us all thinking about what is in store next week and how to utilize or combat it.

Commercial Insurance

From Insurance Journal

Restaurant Work Injury Claims Account for 4% of Calif. Workers’ Comp Benefit Payments
March 2, 2010

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Restaurant workers accounted for 6.1 percent of all California job injury claims, but only 4.1 percent of the state’s workers’ compensation benefit payments from 2000 to 2008, the California Workers’ Compensation Institute reported.

In its latest “Industry Scorecard,” which provides detailed data on claims filed by restaurant workers in California for job injuries that occurred between January 2000 through the end of 2008, CWCI analyzed 137,339 restaurant sector claims. The report noted more than 90 percent of claims were filed by employees working in restaurants and taverns, although other food and beverage service workers employed in facilities such as wineries, country clubs and hotels were also included in the sample. Total medical and indemnity benefit payments on these claims amounted to just under $1.1 billion. The Scorecard shows that with the ongoing job losses in other employment sectors, restaurant claims were up to 8 percent of 2008 claims and 5.6 percent of all claim payments.

AdvertisementThe No. 1 injury diagnosis for restaurant workers is minor wound/injury to the skin, the Scorecard said. These represent nearly 1 out of 3 restaurant claims, but only 4.4 percent of the loss payments, as they tend to be relatively inexpensive cases in which the worker is treated quickly and returns to work with no lost time. On the other hand, medical back problems without spinal cord involvement (typically sprains and strains) make up less than 1 in 5 restaurant claims but because they can require extended treatment and often result in lost time, they carry a much higher average cost and consume almost 1/3 of paid losses in this sector. Rounding out the top 5 injury categories among restaurant workers are shoulder, arm, knee and lower leg sprains (10.4 percent of the claims, 8.8 percent of paid losses); other injuries, poisonings and toxic effects (8.1 percent of the claims, 9.4 percent of the payments); and ruptured tendons, tendonitis, myositis and bursitis (3.8 percent of the claims, 6 percent of the payments). Notably, 2nd or 3rd degree burns, or burns over at least 20 percent of the body represent 3.6 percent of the restaurant claims, which is about 5 times the proportion found for all industries, though fortunately, many of these are relatively minor injuries, so burn injuries accounted for only 1.4 percent of the total dollars paid on restaurant claims.

The scorecard also features a profile of restaurant sector claimants, claim distributions based on claimant job classification and county of residence, nature and cause of injury, primary diagnosis, and employer premium size. Claim closure rates and average benefit payments at 12, 24 and 36 months post injury also are provided by accident year. Pre- and post-reform claim and payment distributions by type of claim (med-only, temporary disability, permanent disability, and death) are shown, as are pre- and post-reform attorney involvement rates for permanent disability claims, with comparative distributions shown for all California work injury claims.

Commercial Insurance

Study Suggests Restaurants with Kitchen Managers Trained in Food Safety Had Lower Risk for Outbreaks. From Golden Eagle Insurance

Results of a cross-sectional study suggest that the presence of a certified food safety kitchen manager (CKM) significantly reduces the risks for outbreak of foodborne illness in restaurants and that the manager’s presence was the major distinguishing factor between restaurants where outbreaks occurred and restaurants where outbreaks did not occur. The study was performed by researchers from the Environmental Health Specialists Network (EHS-Net), a collaborative group of government food safety experts.
The purpose of the study was to compare food handling practices and characteristics of restaurants, in which outbreaks of foodborne illness did and did not occur, to try and identify underlying factors contributing to the outbreaks. EHS-Net researchers conducted detailed, systematic environmental evaluations in 22 restaurants where outbreaks had occurred and 347 restaurants in which no outbreaks occurred. The sites were identified from data reported to the Centers for Disease Control and Prevention’s (CDC) Electronic Foodborne Outbreak Reporting System (EFORS) between June 1, 2002 and June 30, 2003.
The restaurants were similar in many respects. A key difference identified was that 71 percent of the restaurants where no outbreak occurred were overseen by managers who had received a certificate upon completion of a food safety training course, while only 32 percent of the outbreak restaurants had a CKM. Certified food safety kitchen managers were also associated with the absence of bare-hand contact with food as a contributing factor for foodborne illness outbreaks, and with fewer norovirus and Clostridium perfringens outbreaks. The researchers surmised that since most staff training was done on the job, that the presence of a CKM probably improved the quality of food safety training provided to workers.
The presence of a CKM did not significantly affect the identification of ill food handlers in the restaurants, which is a common contributing factor for outbreaks and was a contributing factor in a majority (65 percent) of the cases evaluated by the researchers. The researchers suggest that this indicates either a lack of effective monitoring of employee illness or lack of commitment to enforcing policies regarding ill workers. They recommend that food safety training programs should put more emphasis on managing worker illnesses.
The study was published in the November issue of the Journal of Food Protection (C. Hedberg, et al. “Systematic Environmental Evaluations to Identify Food Safety Differences between Outbreak and Nonoutbreak Restaurants.” J. Food. Prot. 69. 11 (2006), pp. 2697-2702. An electronic reprint of the article is available from the EHS-Net Web site via
COPYRIGHT ©2006, ISO Services Properties, Inc.
The information contained in this publication was obtained from sources believed to be reliable. ISO Services Properties, Inc., its companies and employees make no guarantee of results and assume no liability in connection with either the information herein contained or the safety suggestions herein made. Moreover, it cannot be assumed that every acceptable safety procedure is contained herein or that abnormal or unusual circumstances may not warrant or require further or additional procedure.

Commercial Insurance

The Facts about Food Bourne Illnesses this Summer

As the Summer season approaches, more people are firing up their barbecues after a Sunday baseball game. They’re bringing the potato salad and some fresh fruit from the morning farmers market. However, the Summer season is also when food borne illnesses are the most prevalent. With a larger amount of meat being consumed, inevitably there is an increased chance that it will get people sick around the country.

Every year food borne pathogens sicken about 76 million Americans, hospitalize 325,000 and kill about 5,000, according to the Centers for Disease Control and Prevention.

The US F.D.A. has not significantly updated its laws in nearly 70 years, so it is your job to monitor what you are eating and how it is cooked. The F.D.A. also does not require food companies to test its different products for bacteria. Apparently, food inspections have decreased dramatically in the past few years, which have led to less than 50% of wholesale food distributor’s facilities actually being expected.

It’s unfortunate that many restaurants throughout the Southern California area are more susceptible to food borne illness lawsuits (not because of their cooking or storage practices), but simply because the poultry and seafood distributors aren’t operating safely or sanitarily. I provided a few suggestions below (that you might not have been aware of) and may secure your business throughout the busy Summer season and avoid any litigation against a potentially sick patron!


Commercial Insurance

The Workers Compensation Situation in California and why it’s More Important than Ever to Manage Risk, Exposures, and Claims

Brief Introduction to the Experience Modification

It is a dawn of a new era for Workers Compensation in California. The experience modification formula has been altered for the first time since January 1st 2007. Those of you who are not familiar with the experience modifier, to put it simply, it is a comparison of your business’s claim frequency against other companies in your governing class code. The industry average is 100, and anything lower (say and 84) is a credit modifier, conversely anything higher (106) is a debit modifier. Credit x-mods (experience modifiers) can have a significant reduction on your estimated annual premiums, because the insurance carrier views you as less of a risk.

On January 1st 2010, the WCIRB (workers compensation insurance rating bureau) recalculated the formula by putting more weight on a companies claims frequency (rather than the overall cost of the claims), risk of specific industries (classes of business), and the amount of employees that different companies have in their designated classes. i.e. If you had a debit modification of 104 and hadn’t had any claims for the past few years, but are in a class of business that is more susceptible to claims and have a high employee volume, then your experience modification still went up. Also, if you have a few claims in 2010 that were miniscule in cost, then your experience modification increased more than the company that only had one large claim.

Please note: that this is an extremely basic explanation of how the new formula is calculated. For everyone’s sake, I took one paragraph to explain it, and didn’t want to get into the W/B formulas, and primary/actual values.

A few Issues with California Comp

In this ever changing economic environment it is important to keep overhead at a minimum (i.e. insurance premium payments). Additionally, this soft market and diminished rates has relieved many business owners from paying extensive w/c premiums and have a variety of insurance carriers to choose from….However, the market is cyclical and there are a few subtle signs that the tide is beginning to turn. Medical payments are on the rise and so are the costs for employee long-term disability. A lot of the w/c carriers that came into California a few years ago, with the expectations of undercutting the competition by using minimal/improper rates have been leaving the market place due to their under pricing of high loss ratio accounts. These high loss ratios (riskier and more expensive) businesses will be forced to become insured with financially secure and established insurance companies that will compensate for these “risky investments” by raising the rates, which will increase the premium dollars coming in.

Consequently, the market will inevitably subside and a restaurant owner’s rate of $2.57 for the restaurant tavern class rate will rise to nearly $5.00. Regardless of a future rate increases and market potentially firming up, the new experience modification formula is a problem for business owners that don’t hold a high standard for safety. Even in this soft market, the new experience modification formula is continuously crippling companies that previously had miniscule debit x-mod and are now paying thousands more in premium dollars.

1.So is it financially feasible for business owners to continue sacrificing sound operational practices to enhance their short-term savings?
2.Will these owners unintentionally be paying out more money in the long-run if they deal with an insurance carrier that’s notorious for poor claims management and sets reserves too high/has difficulties closing a claim?
3.What is the most cost effective way to combat fiscal punishing debit x-mod formulas and imminent rate increases?

Why Inevitable Rate Increases in the Next Few Years + the Recalculation of the Experience Modification Formula = A Greater Focus on Claims Management and Risk Reduction

If you are a company with a debit 130 x-mod or higher and have a history of an elevated claims frequency: At this rate, you are paying tens of thousands more in premium dollars than you should be and the market place (insurance carrier availability) is shrinking up on you. You continuously jump at the cheapest quote that is put in front of you (usually the lowest graded carriers with third party administrators who handle the claims management) as you desperately try to stay afloat and keep your bottom line in tact.

Advice: Stop deciding to do business with a poor, low grade insurance carrier (a.k.a. 1985 Pinto) just to save 5,000 bucks at renewal. Instead, pay for a better product that will work with you to proactively minimize your claims through loss control and risk management resolving techniques. In addition, these companies will “actually” investigate assumed fraudulent claims with their SIU (special investigations unit) more promptly than other insurance companies, and will consistently send claims representatives to hearings in order to negotiate lower medical reserves/get the claim closed a.s.a.p.

Basically, my advice is to pay an extra 5,000-15,000 for a quality company (a.k.a. Cadillac) immediately. Rather than staying with a low cost provider that doesn’t improve your company’s safety from an operational standpoint, or provide any customer service, and is slow to respond to any request that you may have. I’m certain that you will continuously be paying more year, after year, after year as your experience modification continues to spiral out of control, until your only option is the State Fund and your $50,000 estimated annual premium is a $93,000 annual premium. Just pay more initially, and you will save a ton in the long-term.

If you are a company who has an 82 x-mod and does not historically have a prevalence of claims: You are in a great position and every insurance company wants your business (depending on your business class of course) because you are viewed as a great risk! You either know how to run a safe establishment because of your tenure in the business, are a relatively new company who has had a published x-mod for three or four years, have gotten lucky, or are in a classification of business that typically has a minimal exposure for claims.

Advice: Make sure that your representative/insurance consultant does not become complacent. It is important to always be looking for ways to enhance the safety of your business without diminishing its efficiency. When w/c rates are on the rise, the only thing that will combat a premium increase will be a credit experience modification.

It is also crucial that your insurance representative is auditing your w/c policy quarterly in an attempt to reclassify your business and employees. This could ultimately recalculate your annual premium and reduce what you are paying monthly.
Finally, make sure that your insurance consultant is looking at different carriers before renewal. If you have a great loss history and have been established for a length of time, then many insurance companies will want your business, thereby reducing their target price (which can save you money from year to year).

Commercial Insurance

Study: Calif. Workers' Comp Medical Payments Back to Pre-Reform Levels

CWCI research that measures changes in California workers’ compensation medical expense payments from 2002 through the first half of 2009 confirms that there was a brief downturn in medical expenditures immediately following the enactment of reforms in 2004, but within two years the average amounts paid for treatment, pharmaceuticals and durable medical equipment (DME), med-legal reports, and medical cost containment management had increased.

The study, based on medical data from 1.8 million California job injury claims from 2002 through the first quarter of 2009, determined the average amount paid per claim for medical services at five valuation points: 3, 12, 24, 36 and 48 months post injury for all claims and for lost-time claims, with results broken out by accident year (AY). As in previous Institute studies published in 2007 and 2009, the latest figures show average medical payments dropped sharply immediately after the workers’ compensation reforms were enacted in 2004, but by 2006 they had reversed course and were increasing steadily.

For example, among lost-time cases, which account for about one-third of all occupational injuries and more than 90 percent of all claim costs in California workers’ compensation, average first-year medical expenditures fell from $6,435 in AY 2002 to a post-reform low of $5,502 in AY 2005, but since then have rebounded sharply, climbing 49.5 percent to an average of $8,225 in AY 2008.

To measure how various medical components have contributed to the recent increases in medical expenditures, the study also examined the growth in average amounts paid for treatment, pharmacy/DME, medical management and med-legal reports at 12 and 24 months post injury. Again, looking at first-year payments on lost-time claims, the study found that since hitting their post-reform lows:

average amounts paid per claim for treatment have increased 41 percent; average amounts paid pharmaceuticals and DME are up 69 percent; average amounts paid for med-legal reports are up 79 percent; and average amounts paid for medical cost containment are up 86 percent. Looking at medical development at 24 months post injury tells a similar story, as the average medical paid for all four medical subcategories were well above their post-reform lows, with increases ranging from 22 percent for treatment to 49 percent for medical cost containment.

While medical cost containment expenditures (i.e., medical bill review, utilization review, medical case management, and network access fees) have risen sharply, these increases reflect implementation of several of the 2004 reforms designed to control costs and manage care, including the adoption of the Medical Treatment Utilization Schedule, mandatory utilization review, and the introduction of Medical Provider Networks, all of which require significant, ongoing outlays on the part of claims administrators. Such expenses must be viewed in the context of how much other medical cost components would have increased had the medical cost containment measures not been put into place. In 2009, the Institute modeled ultimate medical costs on insured claims, based on low and high projections of California workers’ compensation medical inflation trends and estimated that for AY 2002-2008, average medical payments per claim fell between 25.7 percent and 54.5 percent from what they would have been without the reforms. Thus, in terms of total medical expenditures, the reforms were associated with an estimated cumulative net savings of $12.8 to $25.3 billion in insured medical costs for AY 2004 through AY 2008.

The results of the Institute study have been published in a CWCI Research Update report, “Medical Development Trends in California Workers’ Compensation, Accident Years 2002-2009.” The report is available in the “Research” section at

Article from the Insurance Journal.

Read more:

Commercial Insurance

A Great Example of Why Employment Practices Liability Insurance is Important to Your Business and Relevant in This Day and Age!

Restaurant Pays $170,000 To Settle Sexual Harassment Lawsuit

Chilbo Myunok USA LLC, a Korea-based food company which owns a Los Angeles restaurant and a chain of fast-food stores in Korea, pays $170,000 to settle a sexual harassment lawsuit filed by the Equal Employment Opportunity Commission (“EEOC”) on behalf of a class of waitresses. According to published reports the waitresses were sexually harassed at the Chilbo Myunok restaurant and four of them were forced to quit to escape the harassment–this is commonly referred to as a constructive discharge. When the harassment gets too severe and a person can no longer work because of the harassment they are forced to quit and this is a separate discriminatory act that is compensatable.

Details of the lawsuit include the victims facing continuous verbal and physical sexual harassment from the restaurant’s manager. The manager, who has since been fired, repeatedly subjected the women to sexual touching with a sexual device and to unwanted hugging and kissing. The EEOC many times will take up cases where there are more than one victim and they can get more bang for the buck. If there were only one waitress the chances are the EEOC would issue a right to sue letter and the waitress would be left to hire a private attorney to continue the lawsuit. In Illinois I prefer to file directly with the Illinois Department of Human Rights (“IDHR”) which automatically cross-files with the EEOC. I believe the IDHR does a faster and more thorough job than the EEOC of investigating individual charges.

“By working with EEOC this way, Chilbo Myunok has clearly shown its commitment to making needed changes to policies and practices to ensure equal employment opportunities for all of Chilbo Myunok’s employees,” said EEOC’s Perry.

Commercial Insurance

The Top Ten Reasons Why Private Company Directors and Officers Need D&O Insurance.

1. Involvement in day-to-day operations makes private company directors and officers particularly vulnerable to claims brought by employees.

2. Third party discrimination claims, brought by customers and clients, are increasingly common in today’s society.

3. D&O Insurance from a quality insurer can take private companies through their IPO and into public ownership well protected.

4. Complex claims brought by competitors, such as antitrust and unfair competition claims against directors and officers, can generate sky high defense and settlement costs.

5. Investigations by government and regulatory agencies can generate enormous defense costs – even if no wrong doing is found.

6. Company assets can be closely tied to personal wealth of directors and officers, making claims brought solely against the company vital.

7. When the company cannot indemnify its directors and officers in D&O claims, D&O insurance can step in instead.

8. Shareholders of private companies frequently sue for inadequate or inaccurate disclosure in financial reports and statements made in private placement materials.

9. D&O insurance can protect the personal assets of the directors and officers spouse, as well as the assets of a diseased director and officers estate.

10. With D&O insurance in place, management can focus on managing the company, rather than managing a protracted litigation.

Commercial Insurance

Broker-dealers face escalating insurance costs

The cost of liability insurance is expected to increase up to 20% at some broker-dealers in response to rising arbitration claims by investors after the market crash.

Driving higher premiums on the so-called errors-and-omissions policies are increases in the number of arbitration claims after the 2008-09 market crash. Claims surged 52% to 4,982 in 2008 over the year before and another 43% to 7,137 in 2009, according to the Financial Industry Regulatory Authority Inc.

E&O insurance premiums vary at independent broker-dealers but generally range from $2,400 to $4,200 a year per rep, according to brokerage executives.

While not all broker-dealers are expecting big increases in insurance premiums — some said they have negotiated single-digit increases, and some said their premiums haven’t gone up at all — others are bracing for sharp increases.

“It’s an express elevator going up,” said Ronald Kovack, chairman of Kovack Securities Inc., which has 259 independent representatives and advisers.

Even though few investor arbitration claims have been filed against Kovack, he expects a 10% to 20% increase in premiums. Right now, reps pay about $200 per month for insurance at Kovack, he said.

Likewise, Timothy Murphy, president and chief executive of Investors Capital Holdings Ltd., which has 577 reps and advisers, expects an increase of 10% to 20% for the cost of E&O insurance.

In addition to increasing premium, an increasing number of insurance underwriters are attaching “troubled-investments exclusions” to renewals, said John McKenna, an insurance broker with ARC Excess and Surplus LLC. The exclusions typically pertain to real estate deals or other alternative-investment products, he said.

Broker-dealers have “seen some exclusions already and will probably see more,” said Mr. McKenna. He has about 10 broker-dealer clients with 20 to 900 registered reps, he said.

Securities America Inc. was the biggest seller of the $2.2 billion in private-placement notes issued by Medical Capital Holdings Inc., which was charged by the Securities and Exchange Commission last summer with fraud. When the broker-dealer recently renewed its E&O coverage, its carrier included a rider that excluded clients’ new claims involving Medical Capital losses, said James Sallah, an attorney who has spoken with a number of Securities America reps.

“The brokers feel misled,” Mr. Sallah said. “Securities America just doesn’t care” about the potential impact of claims against the reps, he said.

Typically, if a client makes a claim that is covered before the policy is renewed, the insurance carrier will pay. If an investor makes a claim after the policy is renewed and new exclusions have been added, the broker will be left uncovered, attorneys said. In such situations, broker-dealers and reps can buy tail coverage over such claims, but that can prove prohibitively expensive, industry observers said.

“Securities America advisers have errors-and-omissions-insurance coverage for claims related to Medical Capital made in 2010,” Janine Wertheim, a Securities America spokeswoman wrote in an e-mail. “E&O policies are customarily renewed each year, and renewal policies often exclude coverage for existing matters.”

Now that the stock market has recovered somewhat, the litigation furor seems to have abated. Through June of this year, 2,919 arbitration cases had been filed, a drop of 25% when compared with the comparable period last year, according to Finra.

Meanwhile, some reps and advisers are clueless as to what their E&O policies actually cover. Reps and advisers need to be aware of the limits of their coverage, particularly if they have sold stocks or private deals that have soured, industry observers said.

“Half the reps have no concept of the coverage they have,” said Brian Kovack, president of Kovack Securities and son of chairman Ronald Kovack.

Article Provided by Bruce Kelly for Investment News 8/5/2010

Commercial Insurance

10 Reasons Why You Should Consider Cyber Security Liability for Your Business

•Information and Intellectual Property is an organizations most valuable asset today. Therefore the impact of data breach, malicious programming, etc. can have dire impacts on an organization.

•As technology becomes increasingly prevalent in society and business, so have the exposures. (Ex. Misplacement or theft of a company blackberry/pda, hacker attack, virus transmission, email sent to wrong contact that contains privileged information, employee sabotage, fraud, system malfunction)

•The potential cost of a breach can be substantial. On average, it costs $200 to replace a single lost record. These costs are incurred by system back-up work, data restoration, customer notification, loss of reputation, etc.

•If your business maintains a data base with sensitive customer information, sensitive employee information, confidential third party information.

•If this private information is ever stolen, HIPPAA requires your company to notify all employees, vendors, and clientele. This will inevitably result in loss of business, reputation, and is an exposure to third party liability lawsuits.

•Identity theft and data breach is the #1 crime in the United States and consistently growing each year, due to low overhead and physical risk to the criminals.

•In 2009, 85% of businesses had experienced a data breach at some point in time. 222,000,000 records were penetrated during this year as well.

•70% of company assets are tied to information resources.

•Cyber security products are becoming more comprehensive and provide significant limits for a relatively minimal cost.

•The business interruption alone can cause hundreds of thousands of dollars in expenses.