Wednesday, December 23, 2015

California Faces Increased Flood Risk

The Federal Emergency Management Agency (FEMA) is urging Californians to buy flood insurance and buy it soon. Since 1978, 37% of all flood insurance claims in the state have been from two winters – those of 1982-83 and 1997-98. What makes it likely that this winter will be as bad as those two? The answer is that those were the years when there were very strong El Niño conditions and the predictions for this winter are that this year the effect will be even greater.

What Is El Niño?

El Niño is a climatic phenomenon in the Pacific Ocean that has an impact on global weather, with the greatest effect on the American Pacific Coast.  Warm waters from the western Pacific Ocean move eastwards along the equator and normally collect in the area around the Philippines and Indonesia. When an El Niño condition develops, the waters sit off the coast of north western South America, near the surface. This sets up a feedback loop between the upper atmosphere and the ocean surface, resulting in massive precipitation across the Pacific Coast, and in California in particular. This is not just heavy rain, but massive downpours that can cause major flooding.

According to the Climate Prediction Center of the National Oceanic and Atmospheric Administration (NOAA) the El Niño effect for this winter is expected to be one of the strongest since record keeping began in 1950.

A Little Child That Does a Lot Of Damage

El Niño is Spanish for “Little Boy” or “Christ Child.” The name was given by South American fishermen in the 17th century who noticed the effect that the warming of the waters had on their catch. El Niño is not just a localized phenomenon – its effects span the Pacific Ocean and reach India where it can ruin the monsoon.
In 1997-98 the flooding in California resulted in billions of dollars of damage and almost two dozen deaths. In 1982-83 the Sacramento area received 37.49 inches of rain which is the highest ever recorded in a season. It does not take an overactive imagination to appreciate the kind of damage that such rainfall can cause.

After years of drought, heavy rain will be welcome. But torrential downpour of the kind that El Niño will bring could, in a short period, do as much, if not more damage than all the years of low rain.

You Need To Act Now

The inaccuracy of weather forecasting has always been something to laugh at. But fact is that with modern technology and tools like computer modeling, forecasting is today far more reliable than it ever was. When the predictions are for a very strong El Niño, it will probably occur, and bring the big increase in flood risk.  You can do a lot to minimize the potential damage, but there is no way to completely remove it. Go to the California Department of Water Resources website to learn more. Flood insurance is not normally covered by a homeowner’s insurance policy. Without this coverage, a flood can cause irreparable damage. Contact an insurance agent, today, to get the flood insurance you need to protect your home or to increase your existing coverage, if you feel it may not be adequate.

Tuesday, December 15, 2015

The Next Big Quake is Due

For those living in California, earthquake predictions are a part of life. So much so that most minor tremors are often not even noticed. Warnings of an impending big one are usually given about as much importance as announcements that the sky is falling.

No One Is Crying Wolf

Experts at NASA’s Jet Propulsion Laboratory (JPL) say that a big quake will hit the state in the next two and a half years. By big they mean a 5.0 magnitude, and perhaps even higher – up to 6.1 or more. The warning is based on extended research using the best technology available today. Earthquakes occur when the underground stress between the tectonic plates reach acritical point and the plates shift. The small and moderate quakes that are a common occurrence in the state do relieve some of the stress, but they can also cause the plates to shift to a more volatile position, making a big quake more likely. According to JPL, there is a 99% chance of a 5.0 magnitude quake hitting the Los Angeles area within 3 years. No part of the state is immune from the risk.

The U.S. Geological Survey says that the risk may not be so great. They say it is about 85%. But does that 14% reduction really mean much? Whichever source you believe, the chances are that a big quake is coming and coming soon. These are not doomsayers standing on street corners saying that the end is near. These are predictions from 2 of the most reputed scientific organizations in the world.

Earthquakes Are Inevitable

California has survived major quakes in the past and will do so in the future. The technology for earthquake prediction is improving and new materials and building systems are reducing the damage they cause. But earthquakes are the most powerful force of nature and will never be a way to completely negate the damage and loss they cause. Many people think that federal and state aid for earthquake victims will help them recover. It will not. This aid is meant only to provide immediate assistance to enable those affected to survive. It will not help them to get back on their feet and rebuild their lives.

Are You Prepared?

Being prepared for a quake does not mean building a concrete bunker and never leaving it. Preparedness is understanding the damage that a severe quake can cause and taking steps to protect your family and property if it should happen. The California Department of Public Health portal on Earthquakes contains a great deal of information on quakes and how you can prepare for them. More information can be obtained online and from municipal authorities. No matter what you do, damage to your home will always be a risk. The only protection you have and the only way to recover from it is with earthquake insurance. Your homeowner’s policy will not cover quake damage. You will need a separate policy for this. If you do not have coverage or are worried that what you have may not be enough, contact an insurance agent to learn what you need to do to protect your home and your future. Remember, the next one may be really big.

Wednesday, November 25, 2015

Why you need a Personal Umbrella Policy

You may think that you have all the auto and homeowner’s insurance you need. You have studied the issues carefully, examined your potentialliabilities and done a cost benefit analysis. Perhaps you have found that the state minimum auto insurance is enough for you. But there are often factors that you do not consider and issues beyond your control that could leave you in a financial crisis if your coverage does not give you all the protection you may need.

An Example

Mike, a software engineer accidently struck Susan, a store manager when she was on her bike. Susan suffered serious injuries that required serval surgical procedures and months of physical therapy. Although the accident was not her fault, her medical bills were in excess of $500,000. Mike had only minimum coverage which was not enough to cover her medical expenses so she was left with no alternative but to sue him for reimbursement. This involved paying legal fees out of her own pocket, up front. Mike did not have enough assets, so he has no choice but to declare bankruptcy. Since Susancould not get any reimbursement and was unable to work, she too had to declare bankruptcy. This was a case where everyone lost.

If Only

If Susan had, had a personal umbrella policy (PUP) with $1 million excess UM/MIM, that would have come into play after Mike’s minimum coverage was exhausted. It would have taken care of her medical bills and lost wages. Similarly, if Mike had, had a personal umbrella coverage, he would not have had to declare bankruptcy.

A PUP is an insurance policy that that provides coverage when an automobile or homeowner’s policy is not enough to cover liability. In other words, if you have caused an automobile accident or are liable for damages due to an incident on your property, a PUP will come into play when the limits of your auto or homeowner’s policy have been reached.

What Does PUP Cover?

Generally speaking, a PUP will provide for:
  • Liability coverage that is in excess of the limits of a home, auto, RV or watercraft policy
  • Coverage that can extend to all family members living in the same household
  • Coverage for rental properties that you may own
  • Coverage that can be worldwide
  • Personal injury coverage if you should be sued for liable or slander, false arrest, wrongful eviction, wrongful entry, violation of right to privacy and malicious prosecution
  • Payment of legal costs
The actual coverage will depend on the policy that is in place. PUPs are normally available in million dollar increments from $1 to $5 million.

There is no mandatory requirement for having personal umbrella insurance, but it is the simplest and most cost effective way to provide for the additional coverage that may be required. If you do not have a PUP or are unsure if the umbrella coverage you do have is enough, contact an insurance agent who will be able to work with you to find the optimum PUP coverage for your specific needs.

Thursday, November 12, 2015

Why your Business needs Coverage against Employee Discrimination Claims

The news that Ellen Pao dropped her appeal against her former employer Kleiner Perkins in the highly publicized discrimination case may seem like good news for employers. The fact that she has to pay $275,000 in costs as awarded by the court may cause those contemplating such actions against their employers to reconsider their plans before proceeding. However, this kind of outcome is far from normal. According to a study done in 1998 by the Risk Management Consulting Services of PricewaterhouseCoopers, almost 70% of employment claims result in a monetary award and the average amount was, at that time, $1.5 million. The increase in employment related lawsuits and the higher awards being given today by courts have increased the risk for employers exponentially.

With the best of employer intensions and the strictest of polices in place, there is always room for an employee to bring a case against the employer. That is why employment practices liability insurance (EPLI) is an essential coverage for all businesses.


Insurance companies started offering EPLI in 1992, after the sexual harassment claims made during the confirmation hearings of Supreme court Justice Clarence Thomas. Also it was at that time that the Civil Right Act was amended to allow juries to award punitive and compensatory damages to plaintiffs inemployment related cases. In the years since then, the number of sexual harassment and discrimination cases have been steadily increasing. While cases against large corporations garner the most publicity, it is the small and new businesses that are often most at risk. Large companies have legal departments and established practices to control employee hiring, discipline and termination. Smaller businesses usually do not have such processes in place and tend to suffer the most.

What Does EPLI Cover?

EPLI provides employers with indemnity coverage for defense costs, judgments and settlements in the following basic areas:
  • Sexual harassment
  • Discrimination
  • Breach of employment contract
  • Wrongful termination
  • Wrongful discipline
  • Negligent evaluation
  • Failure to employ or promote
  • Denial ordeprivation of career opportunity
  • Wrongful infliction of emotional stress or trauma
  • Mismanagement of employee benefits
Commercial General Liability Insurance Is Not Enough

Many employers make the mistake of thinking that their business owners liability policies will cover them against the kind of issues mentioned above. It does not. EPLI is a separate coverage that is normally offered as an extension of coverage on umbrella liability or Directors and Officers (D&O) liability policies. Most D&O policies only cover specific individuals like executives, supervisors and so on, but not the company as a whole.

EPLI Is Essential

The cost of EPLI is often surprisingly low. How much it will cost will depend on factors like the number of employees in a business, the number of prior suits filed against the company, the volume of employee turnover and the presence of effective employment rules and practices. The actual cost can be as low as $2,000 per year. If you do not have EPLI or are unsure about your coverage, contact an insurance broker to discuss your current situation and what you can do to increase your protection.

Tuesday, September 22, 2015

Employment Practices Liability: Defusing a ticking bomb

If you are like any other organization that conducts background checks on employees before hiring them, then you are at a graverisk of workplace harassment lawsuits. Protect yourself with an Employment Practices Liability Insurance (EPLI). Want to know more?

Background Checks are necessary for any organization. According to the Justice Department’s report on Workplace Violence Statistics, between 1993 and 2009, nearly 572,000 crimes of a minor nature occurred in the American Workplace. In most cases, the offender/assailant was an employer/employee/colleague of the victim. Little wonder that most companies have a thorough recruitment procedure which checks the prospective employee’s:
  • Skills
  • Family background
  • Educational background
  • Criminal Background
  • Credit History
  • Driving Offences
  • Drug and Alcohol tests
While these are common to most organizations, several of them have additional,custom checks to be completed. As a result, hiring cycles drag out much longer in the United States than in comparison to other countries.According to leading HR Consultancy – Glassdoor; since 2009, it takes an average of 22.9 days to hire a new employee, an increase of 4 days from the previous decade.

Interestingly, while most of these checks were mandated by the Federal Government, delays in hiring, during a recessionary economy, have forced the Government to rethink these policies. The Equal Employment Opportunity Commission (EEOC) and the Obama Government have been vociferous in demanding flexibilities around these checks.

Across the country, more than 100 cities and counties have adopted a policy, popularly known as ‘ban the box’. According to this, employers must primarily focus on the candidate’s skills or qualifications, and the conviction record check is conducted much later in the hiring process. As many as 18 states have adopted the policy completely, and another 7 states - partially.

The driving force behind the policy is the perception that criminal background checks and credit rating checks have a disparate or unequal impact across ethnicities. It allegedly puts African-Americans in generaland African-American males in particular,at a severe disadvantage.The EEOC published guidelines on the use of criminal background information during recruitment, in 2012. Since then, it has been aggressively driving the ‘ban the box’ policy through legislation and litigation.

Several lawsuits have brought the policy into the limelight and caused a pushback on some of the EEOC guidelines, to make it fair to both employers and employees.

Notable among them are:
  • Freeman: The EEOC vs Freeman suit was filed in 2008 by an African-American lady who alleged that her employer discriminated against her based on her credit history. Subsequent investigations and hearings expanded the scope of the charges and EEOC alleged that the employer practiced a pattern of discrimination against African-Americans by using their credit history, and against all African-American, Hispanic and white male applicants by using their criminal history, during hiring. The employer could prove that all of these checks were clearly communicated and there was no intention to discriminate.
  • Pepsi: Pepsico was forced to pay a $3.1 million fine and modify its hiring procedures, in the light of similar allegations.
  • Dollar General: In an ongoing suit, DolgenCorp is defending its right to withdraw the job offer, if a subsequent background checks reveal criminal history.
Refining existing guidelines and creating new ones is a continuous process. But the larger reality is that business organizations are constantly at the risk of lawsuits from various aspects of their operations.

The only option for organizations then, is to have anEmployment Practices Liability Insurance (EPLI) cover. EPLI is a comprehensive policy that covers not just hiring practices but a whole lot of situations that a business organization can face in its lifetime. This includes losses and injuries to prospective employees, existing employees, clients, vendors, consultants and third-party agencies;hiring practices, malpractice coverage, workplace harassment, etc.

In short, EPLI is Health Insurance for a company.

For more details, call and speak to any of our agents.

Tuesday, September 15, 2015

Homesharing Rentals: What they don’t want you to know

Between jobs, and strapped for cash? Inundated with credit card bills that are piling up? Feeling desperate? Want to rent out your spare room to a guest, and make a quick dollar? Isn’t that what your friend Joe did recently through AirBnb?

If this is what you are thinking, think again!

AirBnb is one of those new age, ‘sharing economy’ companies. Their business operating techniques are similar to Uber’s or Lyft’s modus operandi. The comparison doesn’t end there. Like these ride-sharing companies, home-sharing companies like AirBnb do not protect the interests of the car-owner/home-owner and consequently leave them open to risks from liabilities and lawsuits.

AirBnb is all about connecting people, who have a spare room or some spare space, to strangers who want to hire them for the weekend, a few days, or a week at the most. Their website lists all such properties, and the timeframe in which they are available for hire. People seeking to hire them respond to the posting, make the necessary payments and hire the space at the desired time. The space may be anywhere: on a boat, in a tent, an igloo, a caravan, or a home. Even motels and hotels whose businesses are not doing too well, are in the fray.

AirBnb and such peer-to-peer business facilitators must show rapid growth to ensure better valuation, and this typically comes from having thousands or millions of users for their services around the world. This is how most venture-capital funded businesses work. One way of enlisting more users is by keeping the costs low.

So what? Isn’t it what every business does? 

Not really. Hang on, there is more to this than meets the eye...

1. Choice of properties: Most of these properties are old, are not in good condition which is why the owner has been having a problem finding renters. When contacted by customers and regulators, AirBnb refused to share information on its customers’ properties that have had fire tragedies, accidents, break-ins, thefts, injuries to guests, and other mishaps.  

2. Lack of regulation: Since the homesharing rental business does not work like a typical hotel or motel, there are no regulations around fire safety or cleanliness. Which means: if the previous renter was ailing from an infectious condition, and the room has not been cleaned or fumigated thoroughly, chances are you may get infected too. There are hundreds of stories around the world of AirBnb hosts/homeowners getting mugged, looted, rooms being permanently damaged, or rented out by drug addicts, criminals, hookers, etc.

Don’t believe us? Check out:

Not a problem. I have a homeowner’s Insurance policy!

Is that what you are saying?Well, your homeowner’s policy does not provide cover as your spare room is being used for commercial purposes, to generate income for you.

Well, what about the policy provided by AirBnb?

The AirBnb policy does not provide primary coverage to you, as the host/homeowner. The free $1 million liability coverage that they advertise covers tens of thousands of properties, and is not specifically aimed at your property. They only allow for ‘secondary coverage’ which means, you can cover yourself against claims from your renter through your primary homeowner’s insurance. However, that does not work, as we mentioned in the previous paragraph.

Essentially this means, you do not have any cover for your rented-out space. Guests could damage them, or sue you for injury they incurred during their stay, and you would have to pay that from your pocket. AirBnb will not pay you a cent!

This looks like a scam to me. Aren’t the authorities watching?

Well…the shared economy brings in money to hundreds of jobless or low-income American families. This takes the burden of providing jobs and boosting the economy, away from the Government. They are happy to look the other way. At-least for now...

Does this mean I should not rent out my spare room, ever, without being at risk?

Not really. A proper Homesharing Rental Insurance policy offered by mainstream Insurance companies like Allied Brokers, provides exclusive cover for such an arrangement,together withcomprehensive protection that covers different kinds of situations.

Remember, in a shared economy, only the rewards are shared. The risk still remains with the owner. Whereas, a proper Homesharing Rental Insurance policy lets you enjoy the rewards without facing any kind of risk. Isn’t that what you are looking for?

Call us and we’ll help you out.

Thursday, August 27, 2015

Strike Back with Complete Specialty Home Insurance Coverage

‘Standard’ Home Insurance Policies offered by most carriers seek a healthy mix of age, value, condition, location, and resale value –in order to insure the home. This leaves several homes and home owners at a disadvantage. Again, home owners with a poor credit history or multiple claims are not generally ‘preferred’ by most carriers. 

In order to help those homeowners whose homes don’t qualify for a standard Homeowners’ Insurance Policy, some insurance companies offer a ‘Specialty Home Insurance’. Insurance carriers have steadily increased the types of property or applicants covered by Specialty Home Insurance policies and presently they include:
  • Vacant Homes: Vacant properties are vulnerable to break-ins, vandalism and accidental damage from vehicular collision. In addition to damage to the property, the homeowner is liable for bodily harm sustained by anybody, including the intruder, due to the property. Creating an insurance policy that covers such situations can be a challenge, so most carriers do not offer cover for Vacant Homes and they are typically covered by Specialty Insurance. 
  • Landlord Insurance: Landlords or owners of properties that are rented out must subscribe to a Specialty Insurance for the said property. The Policy covers damages to the main structure, garages, lawns or parking area, as well as damage to machinery provided by the landlord to the tenant.
  • Second Homes/Seasonal Homes/Vacation Homes: Depending on the location and condition of the second home or vacation home, it may not qualify for a standard Home Insurance Policy unlike the Primary Residence of the owner. And similar to a Vacant home, such homes are vulnerable to intruders and trespassers who may sustain bodily harm in the process. A Specialty Home Insurance policy factors all of these to provide the right kind of cover for such homes.
  • Older Homes and Lower-Value Homes: Plantation homes and countryside bungalows that have been inherited may lose value, and/or be vulnerable to extensive damage or repairs, as it ages. Most insurance companies do not cover such homes, and Specialty Home Insurance is the only option open to the owners.
  • Credit/Loss issues: Homeowners who have a poor credithistory and have made multipleclaims in the past are generally not preferred by most carriers. A Specialty Home Insurance is the only option for such applicants.
Depending on the type of property and certain unique factors, Specialty Home Insurance offers various options:
  • Named Peril Coverage: Cover for specific disasters or perils such as fire, thunderstorms, lightning, hailetc, that are mentioned in the policy.
  • Vandalism & Mischief Coverage: Coverage for acts of mischief; generally applicable to vacant homes and seasonal homes.
  • Liability Coverage: Liability for property damage or bodily harm incurred by another person due to your property.
  • Agreed Loss Settlement for Total loss: In case the vacant home or second home is destroyed or damaged, the entire amount for which the property is insured is awarded, minus applicable deductibles.
  • Actual Cash Value for Partial Loss: In case the vacant home or second home is damaged, the cost of replacing or repairing the damaged sections is awarded, less depreciation and applicable deductibles.
  • Replacement Cost: This is similar to actual cash value, except that the settlement covers cost of replacing damaged parts with new items of similar quality and design, without deducting depreciation.
Talk to an Insurance agent who will assess your property and recommend a Specialty Home Insurance policy that will offer the right kind of cover for your unique situation.