Lawsuit!

How to Handle a Potential Lawsuit

The moment you have an indication that you may be named in a law suit, you should contact your insurance company (usually through the agent/broker). The insurer has the legal right to advise you, research the situation, take pre-emptive action, and be prepared for what may come next. To delay may be violating the terms of the contract.

Look at it like this... if you loan your car to a friend, wouldn't you like to know about any damage sooner than later so you can prepare or make arrangements to get to work tomorrow?

You have paid the insurance company to defend you... it's in your best interest to help them do that.

~ Jon

Umbrella!

Umbrella Insurance Basics

Here's an excellent article, entitled "Protect your family from lawsuits even if you aren't rich" in USAToday. It has statistics and information that are valuable to the discussion on Personal Umbrella Policies.

Most of us think that a personal umbrella insurance policy is excessive - and there's no need for it. But when we look at our liability and lawsuits, the total expenses add up pretty quickly. If you are concerned about protecting your income or future income, your assets, or your future inheritance, you ought to be consider an umbrella policy.

It is my recommendation that everyone consider an umbrella policy because it inexpensively adds significant coverage – and it will cover some things that would otherwise not be covered in the underlying policy.

Six sample Scenarios...

Tom's 22-year-old son repairs neighborhood bicycles from the garage during the summers. Both the premises liability risk and the completed operations/products liability risk are probably uninsured. Homeowners policies exclude business-related lawsuits.

Bill works occasionally from home (telecommutes). His homeowners policy excludes injuries to those who come on the premises for business purposes. (Like a courier or UPS delivery person who falls on Bill's icy driveway while delivering a business package.)

Joe is 80 years old. He has no car and no longer drives, but he occasionally needs to be driven by others to doctor appointments, shopping, etc. Under principal/agency statutes and caselaw, Joe can be sued if his driver causes an accident, but Joe has no personal auto insurance policy and therefore no coverage.

You have a company-furnished vehicle and no other personal automobile. Your employer has broad form DIC coverage for her use of nonowned vehicles. But the business auto policy contains the usual exclusion for injuries your client causes to coworkers riding with her (i.e., the fellow-employee exclusion).

You own a tractor and often plows the driveway or cut the lawn of an elderly neighbor. (The homeowners policies often exclude use of service vehicle if ever used off the resident's premises).

80-year-old Charlie needs some help getting dressed and eating. So his family helps him hire a part-time care provider to come into his home. He buys a small workers comp policy which includes employer's liability coverage, but he's not sure the policy has sufficient coverage.

You decide to rent [auto/boat/snowmobile/ATV] while you are vacationing outside the US. You want to be sure you have sufficient coverage in case you hurt someone or damage something.

You choose to rent a cabin for a wedding reception. You want to be sure there is coverage in case one of your guests gets injured.

The Results

In all above scenarios, since most homeowners or auto policies do not cover these items, you can be sure you have coverage with the right Umbrella policy. 

~ Jon

Motor Homes / Trailers

I just had a conversation with a friend who enjoys getting away with his family. Their pop-up camper gets lots of use. Then I came across this well-written article. Enjoy!

~ Jon

Merriam Insurance Agency

Insuring Liability Risks When 

Motor Homes or Trailers Are Used 

as a Secondary Residence

When trailers or motor homes are being used recreationally to explore from place to place, the auto policy that covers those vehicles covers liability for injuries and property damage to others, either in an automobile accident or while parked, as long as the injury or damage arose from the ownership, maintenance, or use of the vehicle. The auto policy covering the trailer, however, only covers the trailer while it is hooked up to the insured automobile pulling it. By contrast, the motor home policy covers liability arising from injuries or damage, whether it is being driven or parked. Neither policy covers liability when the vehicles are parked for injuries or property damage occurring on the site on which the vehicle sits. So where does one find that coverage?

by Jack Hungelmann

Your primary homeowners liability coverage does extend worldwide to your personal liability arising from those sites, if the site is rented on a daily or weekly basis. Examples include trailer parks and campgrounds. The homeowners liability coverage also extends to vacant sites that you own or rent long term. The policy defines "vacant" as free of structures, which means no sheds, docks, fences, outhouses, and trailers or motor homes semipermanently set on the site to serve as a residence.

Now the good news. For about $20 a year, you can get coverage for the site by adding an endorsement to your homeowners liability coverage. For about $10 a year more per million, you can extend your umbrella liability coverage as well. This is an inexpensive solution to a critical gap in coverage.

When Do You Extend Liability to an Owned Vacant Seasonal Lot?

I recommend that you extend coverage as soon as you buy the lot, even though it's vacant at the moment. Why? Because people have a way of doing things without notifying their insurance agent. They may add a dock or put up an outhouse. Or move a trailer onto the lot for the summer. If they do any of these things, add any structure whatsoever, they lose their homeowners liability coverage. Because the solution is so inexpensive in relation to the risk, I recommend adding it to the policy immediately upon purchase of the site. This follows a cardinal rule of risk management that I subscribe to: if coverage is uncertain and can be covered inexpensively by endorsement, always get the coverage. Or put another way, never rely on the generosity of an insurance company to pay a claim! Play it safe.

Illustrating the Problem

Paula and her husband have found a creative way of enjoying their motor home during this time of high gasoline prices. They have rented a trailer site on an annual basis on the banks of a beautiful southern Minnesota river. They park their motor home there year-round and use it much like you would use a cabin. One night, Paula and some of her neighbors are sitting around a campfire on their lot. The fire gets out of control, and one of the neighbors suffers third-degree burns over his chest and arms. He sues Paula and her husband for $1 million. They have no coverage: no defense coverage, no liability coverage. All they have for coverage is a standard unendorsed homeowners insurance policy.

The lawsuit settles for $500,000. The defense costs are $200,000. Paula and family are out of pocket $700,000, which could have been avoided with an inexpensive homeowners and umbrella endorsement for under $50 a year!

Happy camping!

---

Jack Hungelmann's book, Insurance for Dummies, contains much of this information and is available at your favorite bookstore or online. 

Used with Permission, Copyright 2012
International Risk Management Institute, Inc.

Enough?

Verify That Your Dwelling Limits Are Adequate

One of the painful aftermaths of fires and tornadoes that decimate homes may be the crushing realization that the home is dramatically underinsured. According to one of the largest residential building cost data companies, Marshall & Swift/Boeckh, 64 percent of U.S. homes are undervalued by an average of 19 percent. If this figure is applied to a home with a replacement cost of $400,000, it might be insured for only $324,000, a shortfall of $76,000.

This underinsurance results in a potentially huge coverage gap, particularly if the home is not insured with a guaranteed replacement cost provision. A survey by United Policyholders, a consumer advocacy group, said 75 percent of California home owners affected by the 2007 San Diego wildfires were underinsured by an average of $240,000. [The statistics for this year's losses look like they'll be worse.]

Here are some general tips to consider to reduce the likelihood of your home being underinsured:

• Make sure your home has been physically inspected. This will increase the likelihood that it is insured for its replacement cost value. Ask for periodic reinspections of your home (particularly high-end ones) to ascertain whether the dwelling limits are adequate.
• Consider guaranteed replacement cost (or guaranteed rebuild) coverage; an alternative would be to procure coverage that offers a 30 to 50 percent cushion above the dwelling limit (extended replacement cost coverage).
• Increase the ordinance or law coverage (10 percent of dwelling limit for many homeowners policies) to a higher percentage of coverage. Note that this recommendation is particularly important if you have an older home.
• Keep the insurance company informed about any remodeling at your home, since remodeling can dramatically increase the need for higher dwelling limits. Americans spend more than $170 million annually on home improvement projects, according to the National Association of the Remodeling Industry.
• If building costs are rising rapidly, an inflation guard endorsement is worthy of consideration. This endorsement increases the dwelling limit of insurance (along with other coverages) to reflect increases in values due to inflation.

~ Jon

Merriam Insurance Agency

Used with Permission, Copyright 2012
International Risk Management Institute, Inc.

HO/Condo Association Loss

Many people are active in their condominium or home owners' association, serving as directors, officers, and editors of association newsletters. If you are an active member of your association, consider the following risk management tips and recommendations.

• Verify that the association has directors and officers (D&O) coverage in force with reasonably high limits. If the association refuses or chooses not to obtain D&O coverage, seriously reconsider your leadership activities within the group due to your unprotected liability exposure.
• If D&O coverage is in place, verify that this policy provides errors and omissions coverage for the proper purchase of insurance. To do this, verify that the "failure to maintain insurance" exclusion is not attached to the D&O policy.
• Ask your association to hire an independent insurance consultant to audit the association insurance program to uncover any potentially lethal coverage gaps. For example, home owners' associations should have at least the following types of coverages: guaranteed replacement cost property coverage for common areas, commercial umbrella coverage, workers compensation insurance (even if there are no association employees) to cover claims brought by uninsured independent contractors, and D&O liability coverage.
• If you don't already have it, consider adding a personal injury (HO 24 82) or related endorsement to your homeowners policy.

~ Jon

Merriam Insurance Agency

Used with Permission, Copyright 2012
International Risk Management Institute, Inc.

Storage (follow-up thought)

Most homeowner's insurance policies do not cover (or cover adequately) your stuff while it's in storage... there are policies that do cover it quite well - and they're not cost-prohibitive.

~ Jon

Merriam Insurance Agency

Storage!

More and more Americans are storing their excess personal property in self storage rental units. In fact, the Self Storage Association indicates that approximately 11 million households in the United States rent some type of storage unit.

The first consideration, after deciding to rent a storage unit, is which self storage facility to select. The following are some tips for selecting the appropriate storage facility.

• Select a rental company that has adequate security, such as proper lighting, formidable fencing, coded security pads, and 24-hour video surveillance cameras.
• Look for a unit that you can access any time of the day.
• Consider your need for a climate-controlled environment—particularly important if you are storing items that could be damaged by damp, cold, or hot weather such as upholstered furniture and archived items.
• Choose a unit that is well-maintained, clean, and pest-free.
• Ascertain the reputation and history of the rental company through referrals and the Better Business Bureau.
• Select a rental company that offers competitive rates for insurance for your property in order to give you more options; the rental company should also have its own commercial general liability insurance if someone gets hurt on its premises.
  ~ Jon
  Merriam Insurance Agency
  
  
  Used with Permission, Copyright 2012
  International Risk Management Institute, Inc.

Protect! (Historic Homes) p3

If you are planning any type of restoration to your home, make sure you hire contractors and architects that specialize or have experience in restoring historic homes. Note that the local historical commission typically has to approve any renovation plans.

~ Jon

Merriam Insurance Agency

Used with Permission, Copyright 2012
International Risk Management Institute, Inc.

Protect! (Historic Homes) p2

If you want to replicate custom or historical features of your historic home, such as stained-glass windows, antique wood floors, ceiling moldings, or hand-carved banisters, ask us about a restoration cost homeowners policy or about adding an endorsement onto your policy providing this coverage.

~ Jon

Merriam Insurance Agency

Used with Permission, Copyright 2012
International Risk Management Institute, Inc.

Protect! (Historic Homes) p1

Historic homes pose more challenges for home owners as they are typically subject to historical renovation regulations. Here are some recommendations worthy of consideration for your historic home.

You should avoid any type of functional replacement cost endorsement because this allows less costly construction materials and methods to be used to repair your home. These materials and methods may reduce the value of your home.

~ Jon

Merriam Insurance Agency

Used with Permission, Copyright 2012
International Risk Management Institute, Inc.

Ouch!

A friend, whose daughter is away at college, recently loaned her car to a friend. Unfortunately, the friend had no insurance, but was at fault in an accident. So, the burden of responsibility fell to my friend's insurance policy.

Personal Risk Management Tip...

Unless you intend to insure your kid's friends and their choices, it's probably worth discussing the ground rules with your kids if they're going to stay on your insurance policy.

Such risk may not be covered under a personal auto policy because the roommate's car is "available for regular use." If prohibition is not the risk management method of choice, adding the extended nonowned endorsement to the personal auto policy would also solve the problem.

~ Jon

Protect! (Older Homes) p2

Difficulty in estimating replacement cost

Older homes are often constructed with materials and using techniques that are either no longer available or extremely expensive to duplicate, making it quite difficult to accurately forecast what the cost would be to rebuild following a loss. As a result, there is a risk that the value for which your home is insured is too low. 


Sometimes a guaranteed replacement cost endorsement is available to protect against this contingency. With it, the insurer will pay the actual replacement cost to entirely rebuild your home after a total loss, even if it is much higher than your dwelling limit. If guaranteed replacement cost coverage is unavailable, consider extended replacement cost coverage, which might allow an additional 20 percent or 30 percent of the dwelling limit in the event of a total loss to your home.


~ Jon
Merriam Insurance Agency


Used with Permission, Copyright 2012
International Risk Management Institute, Inc.

Protect! (Older Homes) p1

Older homes (i.e., greater than 40 years old) present extra risks for home owners; thus, special insurance needs may arise. The following are some factors and tips for you to consider when purchasing insurance for your older home.


Increased construction costs. In some cases, building ordinances can increase rebuilding costs by 30 percent or more. Thus, an ordinance or law increased limit (HO 04 77) or similar endorsement is worthy of consideration. This endorsement provides higher limits for rebuilding an older home when an ordinance will increase the cost.

~ Jon

Merriam Insurance Agency

Used with Permission, Copyright 2012
International Risk Management Institute, Inc.