Contractors or Cons?
Your home may be destroyed by a fire or storm. You’re scrambling around to get your lives and routines back in order and you may think that things couldn’t get worse. Well, they can and often do because of people who can’t spell contractor without c-o-n.
The period after a serious loss is hectic, emotional and disorienting. Your major concern is to get your home repaired or rebuilt. These elements make you very vulnerable to “CONtractors,” people who specialize in victimization instead of construction. While you may be in a hurry to restore your loss, it is critically important to avoid persons who appear on your damaged doorstep offering to start construction. While managing a loss, think of taking precautions such as the following in order to avoid compounding your problems:
- Pay attention to your “gut” being aware of any “feelings” you get about any contractor you speak to
- Refuse to pay any money “up front”; a reputable contractor always works according to a written agreement, spelling out cost of materials, labor and other important work details
- Contact more than one contractor to get competitive estimates
- Make sure that any contractor you talk to provides references and proof that they are insured
- Check references and ask for evidence of how long the contractor has been in business
- If a local chapter is available, call the Better Business Bureau and check for complaints
- Ignore any tactics intended to pressure you into making an immediate financial commitment.
Keep in touch with an insurance professional during such trying times. They’re already committed to providing genuine help.
Website Liability, Anyone?
Each day, thousands of persons around the world are discovering the Web. While many are content with passively exploring, there are plenty of people who decide to become active participants by creating their own Websites. The reasons for having a Website vary, ranging from frivolity to earnestness, or they may be strictly pleasure or serious business. Personal Websites commonly describe the host, his or her family and interests such as a particular hobby, sports, profession, humor, etc. Whatever the reason for creating your own Website, it can represent an additional source of loss that may require additional insurance. The loss potential is directly related to the purpose and content found on the Website. New Opportunity For Old Types Of Loss
Although the Web is still relatively new, Web-related loss exposure is not. Remember that legal liability to another person or party is the result of your actions that cause injury or damage to property. Your Website liability is an extension of your accountability for what you say or write and it extends to members of your household; so it’s important to be aware of your family’s little computer wizard. The types of losses that may be created by a Website include:
- Libel – knowingly publishing false information that harms a person’s reputation.
- Invasion of Privacy – disclosing information that interferes with another party’s peace of mind.
- Infringement – violating or interfering with another’s property rights or the right to pursue business
Oops, You May Not Be Covered
This is quite important. Most homeowner policies protect against liability for physical injury to another person or to actual damage to another party’s property. Liability created by Website content typically involves personal (or non-physical) injury which is not covered by a typical homeowner policy. While individuals may be able to add protection (such as add-ons to a homeowner policy or umbrella coverage), certain losses may still be uncovered because they involve intended acts or business activity. Can You Protect Yourself?
The good news is you can take steps to eliminate or, at least, minimize the possibility of facing a Website-related loss. The first step is to identify areas of concern. The key to understanding and addressing any possible Website liability is to focus upon:
- the nature of the Website
- the Website’s contents
- who may be harmed by the site
- how a party may be harmed
It’s important that you think hard about these issues and approach the job objectively. Your building a site just for “fun” could end with you explaining the punchline in court. Two people can interpret a site in radically different ways. Use a method of examining your Website that helps you view it through “fresh” eyes that won’t gloss over important facts. Asking the help of others could be a big plus.
If you or someone in your household operates or is building a Website, you need to be aware that the site could open you to legal situations. Here are some questions you should consider:
Who created the site?
Key consideration: depending upon the circumstances, a private party that created the site for you may share (or even own) the responsibility for damages caused by the site.
What is the purpose of your site?
Key consideration: Is there ANY business activity or purpose? If so, you may have an immediate need to secure appropriate protection.
What content is found at your site?
Key consideration: Not only do you have to think about YOUR message, but you must think of other parties that appear at your site such as friends, companion businesses or even miscellaneous links.
Who do you intend to attract to the site?
Key consideration: There’s a big difference in the type of people you’re targeting, such as inviting:
- relatives to see baby pictures or family newsletters
- customers to request product/service information or to place orders
- hobbyists to distribute or solicit stories or advice
- strangers to a forum for discussing sports, political or other topics
Is there anyone you would not want to see the site? Why?
Key consideration: Answering this question honestly is critical. It can identify prime areas for possible legal action against you. It may also suggest what precautions you may take, including the easiest action such as eliminating the reference to a person, group or organization. Does Your Site Create An Insurance Need?
After examining the key concerns about your Website, you should be prepared to take precautions which may include:
- adding security features to your Website
- changing the content
- adding waivers or disclaimers about links or certain pages that appear on your site
- adding user agreements to your site
- creating guidelines on maintaining current and future content at the site
- Changing your homeowner coverage
- buying additional or special personal or business liability insurance
- adding or eliminating a guest book (if you have a guest book, pay close attention to what visitors say)
- eliminating the Website
Once you’ve carefully examined your Website situation, a discussion with an insurance professional could be an excellent step to identify coverage needs which may include having to buy commercial coverage. The instant and widespread access represented by the Internet creates new perils for individuals. Don’t hesitate to seek the help of an insurance professional or even competent legal advice.
Hobby Or Business – Pt. 2
Part 2 of our discussion on the hobby v. business exposure. Please also see Hobby or Business – Part 1.
For insurance purposes, the elements that determine a business activity are unique. A homeowner (HO) policy may use a definition so broad that nearly any activity qualifies as a business. In such instances, a person should consider business insurance.
Let’s say you love photography and you take pictures at weddings and other events to finance this passion. While you consider this to be a hobby, your insurer may define your activities as a business. If your camera equipment is stolen or damaged, there may be as little as $250 protection under your HO policy. HO coverage for business property differs depending on whether it is located at or away from your residence.
Imagine the photography situation again. This time, you’re at wedding job and have just set-up a perfect shot of the bridal party. As you are snapping a few shots, a large boom stand with hot lighting equipment tips over, injuring the maid of honor and the flower girl. A homeowner policy may exclude coverage if the injured women sue you.
There are numerous types of sales and service jobs. These include cosmetics, clothing, kitchen supplies, home decorator items, computer repair, web site design, photography, music lessons, auto repair and many contractors. Each job involves some type of business property that is excluded or severely limited under the homeowner policy. Therefore, each situation may need to be covered by business insurance.
Although independent consultants are in business, too often they think their HO policy will provide coverage because they don’t have special equipment or leave their home office to run their business. Office furnishings such as PCs, desks, chairs and file cabinets are subject to HO policy limitations. Without adjustments to the homeowner policy there may be little or no coverage for property used in a business.
The legal form of the business may create a need for business insurance. If a limited liability company, corporation or partnership is formed, the related activity is a business and needs business coverage. Also, most HO policies will not provide coverage for employees or for any professional liability.
What can you do? First, determine if your activities qualify as a business. Then talk to an insurance professional to determine what coverage is provided by the policies you currently have and what options are available to fill-in any gaps in protection.
Hobby Or Business – Pt. 1
Part 1 of our discussion on the hobby v. business exposure. Please also see Hobby or Business – Part 2.
Have you thought about how your hobby may affect your insurance needs? Hobbies often require a large investment in tangible property and may even create some legal responsibility to other persons or their property.
Hobbyists: Collectors or Activists
Hobbies typically involve either collectors or activists. A collector acquires property that especially attracts him or her. Examples include people who collect stamps, art, coins, autos, antiques, comic books, baskets, dishes, glassware, sports memorabilia, etc. An “activist” (this writer’s term) also collects a certain type of property. However, the activist acquires property in order to pursue an activity. Examples are hunters, musicians, painters, sculptors, cyclists, and enthusiasts of many types, such as fans of model or radio control planes, helicopters, etc.
With collectors, the focus should be placed on the nature of the property being acquired. With activists, besides attention to the property exposure, there should be equal emphasis on the liability exposure that is inherent in their activity.
Coverage Needs Created By Your Hobby
Property Coverage – Your special property should be properly insured. Most homeowner policies provide minimal protection for collectible property. Why? Items such as coins, stamps, antiques, guns, etc., are often fragile. Also, such property is very valuable in relation to its size. The value of collectibles kept in one room may be more valuable than all of the rest of your home’s contents. Regular homeowner coverage is not designed to handle high-valued property that is easily destroyed or lost.
Even when collectible property is eligible for a policy’s full coverage, this may not be enough. You may want your special property to be covered from more causes of loss than your family room couch. It may be worthwhile to buy an endorsement to add additional coverage for your collectibles to your homeowner policy. Depending upon the type and value of your collectibles, you may even have to consider specialty coverage.
Liability Coverage – if your hobby is more hands-on, then be sure you’re protected against any legal liability related to your activity. Ask yourself the following:
- Are there any dangers associated with the hobby?
- Does the hobby involve frequent travel to sites or meets?
- Does the activity attract frequent visitors to your home?
- Do you publish hobbyist newsletters or give advice to others?
- Do you actively sell or trade property on or away from your home?
- Does your activity involve equipment that’s inherently dangerous to others?
Get Serious About Your Hobby
Fortunately, many aspects of a hobby, especially legal liability, are covered by a homeowners policy. However, your activity may need special or even business coverage (see part 2 of this series). The way you spend your leisure time should be a happy diversion. Don’t let your enjoyment be interrupted by inadequate protection. Discuss your special interest with an insurance professional who has a special interest in meeting your coverage needs.
Are You Liable For Summer Fun?
Ready, Set, Summer!
Summer witnesses a huge surge in personal activities. School ends and parents start searching for leisure and recreational activities for themselves and their children. The activities range from elaborate vacations or summer-long camps to simply buying play and sports equipment (or getting it out of storage) and renewing park and pool passes. Summer Fun’s Dark Side
At the risk of being a killjoy, it’s important to remember that good, clean fun can also have consequences when things go wrong. Using sports equipment such as tennis racquets, baseballs, baseball bats, Frisbees, lawn darts, or horseshoes have the potential to harm others. There is even greater harm posed by operating skateboards, bikes, mopeds, go-karts, and radio-controlled cars, helicopters and planes. An even larger area of concern may involve inviting friends over to use your driveway, play equipment or swimming pool. Basically, the potential liability comes from either you having fun at the expense of other persons or their property, or failing to take precautions that persons you’ve invited to your residence (or other places) are safe to enjoy themselves. How To Preserve Your Fun
The easiest way to prepare for your summer liability is to ask yourself some questions:
- What can I do to keep other persons safe from my activities?
- Am I prepared to be responsible for people I hurt or property I damage?
- How do I make my home and yard safe for fun-seeking visitors?
- Am I keeping my guests to various events safe?
While accidents happen, many can be prevented by making sure that you and your children enjoy your activities in a responsible manner. Operating bikes safely and in low traffic areas reduces the chance that others will be hurt. The safe use of games and equipment also make the likelihood of having someone injured more remote. In other words, it’s important that your family uses sports and game equipment safely and appropriately. It also means that an adult be around to supervise many activities when necessary, such as when the fun may be more hazardous (street hockey) or when young neighborhood children are around. Supervision is critical for potentially dangerous activities such as the use of motorized recreational equipment, trampolines, and swimming pools, even small wading pools. It’s also important to make certain that guests you invite for camping or hiking trips are watched after carefully. In many instances, you are responsible for the safety of your guests when you bring them along to enjoy outdoor activities, particularly boating or other activities involving water-related equipment. Home Inspection
Another way to reduce the chance of others being hurt is to do an inspection of your home and yard. Do you have an adequate fence (with secure or self-locking gate) to protect young children from a pool when you’re not around? Is your playground equipment well-maintained and strong enough to support the weight of the children using it? Is your yard and driveway free of tripping hazards? Are dangerous items such as tools, chemicals and lawn equipment kept out of reach of children? If you can answer “no” to any of these questions, you’re inviting trouble. Insurance Plays A Role
When accidents happen, they may be followed by medical expenses and, more seriously, lawsuits. You must be protected against such financial consequences. Don’t assume you have coverage, especially when an activity involves motorized or powered equipment. You may have to add coverage to your homeowner policy or even buy special coverage for mini-bikes, mopeds, boats, all-terrain vehicles, etc.
So make safety a part of getting ready for summer fun. It’s also smart to include a visit or call to your insurance professional to make sure you have the right coverage to support a fun summer.
Isn’t Insurance Discriminatory?
Does The Insurance Industry Discriminate?
First, let’s admit that this article title and question is tricky; but the answer is yes. Not only is discrimination practiced by every insurance company; discrimination is absolutely critical to the industry. The practice is also quite legal and rightfully so! Before going further, let’s remember that discrimination can have more than one meaning. How may discrimination be defined? Let’s use a very large dictionary, say Webster’s Encyclopedic Unabridged Dictionary Of The English Language (Deluxe Edition):
1. the act or an instance of discriminating.(differentiating or noting differences), 2. Not applicable, 3. treatment or consideration of, or making a distinction in favor of or against, a person or thing based on the group class or category to which that person or thing belongs rather than on individual merit. Unfair Discrimination?
The confusion over the desirability or legality of discrimination arises out of unfair discrimination. Unfair discrimination stems from the latter definition mentioned earlier. A choice that is based on a group, class or category. Choices that revolve around a distinction that is irrelevant to offering insurance coverage is unfair discrimination. The best (or worse) example of this is to deny coverage based upon an arbitrary difference such as race or religion. Fair Discrimination
Insurers are constantly involved in discriminating because they are always studying persons and situations to see if they are in a position to offer insurance coverage. In other words; they note differences and make choices among the requests they constantly receive for coverage. The distinctions made among their insurance applicants are important. Insurers design their insurance programs based on assumptions on the type of persons, property and situations they wish to cover. Market Selection and Pricing
When an insurance company does business, it has to make decisions about the type of market it wants to serve. For example, in the car market, does it wish to insure only regular cars and drivers with pristine records or expensive sports cars and drivers with a few blemishes? In the homeowner’s market, does the company wish to target very expensive homes, such as those with a value over $300,000 or might it decide to exclusively write mobile homes?
Once their market niche is selected, a company has to implement matching prices. What components must a company consider? Well, an insurer must charge premiums that reflect the:
- dollar amount of losses paid to all parties filing valid claims
- company’s costs to investigate and settle claims
- insurer’s operating expenses (including compensation to employees and agents)
- premiums charged by their competitors
A company’s premiums also consider their ability to invest their income and, of course, they must also consider what rates, particularly changes in rates, are approved by state insurance regulators. Underwriting
In the next step after market selection and pricing, a company has to create and follow rules on selecting and keeping the type of business that matches its market and which is supported by their premiums. The rules and practices that a company follows in selecting and rejecting business is called underwriting. In other words, via underwriting, an insurer must discriminate or choose among persons and kinds of property that fit its insurance program. If a company doesn’t apply their selection standards consistently; it will eventually lose the ability to do business. What is a quick method to learn what a company considers to be valid factors to do business? The company’s application(s). If the information is important for underwriting, it should show up on the application. This is true no matter the type of insurance or market targeted by the insurer. Discriminating Conclusion
Remember, the decisions made by an insurer in writing and renewing coverage must validly affect their market and prices. When the decisions are not based on these factors…unfair discrimination takes place.