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.