Business insurance is an integral part of any game plan for a company’s success. It helps to limit financial liabilities such as lengthy and costly litigations, and also provides avenues for recovery in the event of an unforeseen property loss. However, business insurance will only work if it is properly designed, effectively implemented and constantly monitored.
National Insurance Awareness Day is June 28, 2018 and comes as a timely reminder to business owners and management that they should make themselves aware, and knowledgeable, as to what insurance coverage(s) their company has procured, or what additional coverage may be needed when considering the operations of the company.
There are three (3) general tenets for any company’s owners or management to follow to keep themselves abreast of the proper insurance needs of the company to address liability and loss recovery.
Get to Know Your Current Coverage
First, owners and officers should know what business insurance coverage currently exists focusing on the types of insurance the company has, the financial limits on each policy, and the terms of coverage. The latter point centers upon what risks or liabilities the company is insured for and what, if any, exclusions to coverage may exist under each policy. Unfortunately it is all too often that owners or management do not realize the company’s general liability policy (CGL), director and officer policy (D&O) or employment liability policy (ELP) contain certain exclusions to coverage for defense or indemnity. The realization of such exclusions is frequently made entirely too late, and only after liability surfaces when a claim is made or litigation filed against the company.
Analyze and Monitor
Second, it is important that a company, and its management, be actively engaged with its insurance broker and legal counsel to analyze and monitor the company’s insurance portfolio. The broker should be requested to visit the place of business so they can gain direct knowledge as to what the operations of the company are, and the attenuated liabilities and risks of those operations. Legal counsel should also be regularly consulted to assure proper coverage, additional endorsements and policy limits have been procured through the broker. In addition, remaining in regular communication with legal counsel assures management of which policies need to be updated, increased or supplemented as the company succeeds and develops organically through its growth cycle.
Perform Internal Audits
Finally, it is prudent for a company to schedule internal audits of it’s insurance needs. It should be standard procedure to have meetings at regular intervals with legal counsel to review existing coverage as well as what changes to coverage may be necessary. Such a check and balance system will provide the company the opportunity not only to inquire of any changes in standard policy language, but also to update counsel on any new developments in the company’s operations.
Business insurance is not a “set it and forget it” proposition where policies and binders are placed in a closet or on a “back shelf” never to be reviewed until a claim is filed. A company’s growth trajectory necessarily brings with it new and additional potential liabilities, as well as assets and revenue streams that need to be recovered in the event of an unanticipated business interruption. The company’s owners, officers and management should be proactive in regularly monitoring the insurance portfolio and consult with counsel to make any changes necessary to protect against marketplace risks facing the company’s business.
