Baseball Lawsuit Shows What Happens When Disclaimers Aren't Enough to Limit Liability

by Ruth Awad22. October 2014 08:10

baseball stadium

Ah, baseball. It’s America’s pastime, what with the beer, hotdogs, and homeruns. But an article by Insurance Journal details how a baseball game can easily lead to America’s other favorite pastime: filing lawsuits.

Flashback to May 30, 2010, at Turner Field. An Atlanta Braves outfielder hit a ball behind the third-base dugout, and it struck a six-year-old girl in the forehead. Her skull was fractured in 30 places, and her parents are suing the team, alleging that the lack of protective netting is to blame for the injury.

The Braves’ lawyers are depending on the “baseball rule” to protect them from liability over the injury. Though the rule isn’t in place in Georgia where the lawsuit is happening, it is in other states. The rule holds that stadium operators can’t be held liable for stray balls and bats flung into the stands so long as there is protective screening behind home plate and adequate seating elsewhere.

Plus, major league baseball tickets have a disclaimer that states fans assume the risk of being injured by balls and bats. But when it comes to a child’s injury, disclaimers may not be enough to protect the team. After all, she’s too young to assume the risk.

And this brings us to the moral of the unfortunate story: even if your use disclaimers for your business’s work, you still have liability exposures. Let’s go over some tips for creating disclaimers and look at ways to protect your business if your disclaimer doesn’t hold up in court.

Disclaimers 101

Just to make sure we’re on the same page, let’s review what a disclaimer does. In short, a disclaimer is a statement that denies responsibility for particular acts or omissions. They aim to limit another party’s ability to sue for negligence. Sometimes these statements appear in contracts (e.g., in user agreements); other times, they act as one-sided warnings (e.g., warnings on the back of a baseball game ticket).

But disclaimers are notoriously challenged in court, even though their sole purpose is to help someone evade the courtroom. Often, the courts consider whether the law permits exclusion of liability given the circumstances and whether the act in question falls within the disclaimer’s scope.

If you’re going to use disclaimers to try to limit your liability for certain situations, be sure it’s up to snuff. A strong disclaimer should be…

  • Specific. If the disclaimer is too vague, someone could assert that they weren’t adequately informed about their risk.
  • Understood by laymen. It shouldn’t take a legal expert to read and understand the disclaimer. Any person who engages with your business should be able to name the risks they are taking on by working with you.
  • Written by a lawyer. Just like your business contracts, disclaimers should always be written and approved by a lawyer. Your attorney can ensure the wording can stand up to legal challenges. (To learn more about limiting liability through contracts, read, “Case Study: How Good Contracts Can Protect You From Legal Trouble.”)
  • Legally sound. There has to be underlying legal support for the disclaimer. In other words, if you’re legally considered liable, a disclaimer likely won’t spare you a lawsuit.

Disclaimers may work better in some industries than others (depending on the legal infrastructure). For example, as a doctor, you’d be hard pressed to prove that a disclaimer absolves your practice of its responsibility to adequately treat your patients. (Related reading: our Malpractice Insurance blog series.) But for an investment broker, a disclaimer about the risk involved with high-stakes investments may be enough to inform investors about their risks and limit liability. Again, this can change depending on the laws that govern your industry.

Notice: Your Disclaimer Isn’t Enough

Even properly penned disclaimers can be disputed, and the court’s opinion on a “valid” disclaimer can be subjective. That’s why, as a failsafe, your business should always invest in appropriate liability coverage.

Adequate business liability insurance can help you pay for…

  • Legal defense fees.
  • Settlements (when the case settles out of court).
  • Judgments (if you’re found liable).
  • Other court costs (e.g., witness fees).

For example, say someone brings their Pomeranian to your dog spa for grooming. The sign in your lobby acts as a disclaimer, stating that your establishment can’t be held liable for the actions of the animals at the spa. But if another dog bites that little Pom when the owner leaves the spa, your disclaimer may not be enough to shield you from a lawsuit. After all, the animal was in your care, and a court may find that it is reasonable for the owner to expect you to keep the dogs separated, no matter what your disclaimer says.

In this instance, you’d be glad to have both General Liability Insurance (if the owner sues your over vet bills) and Errors and Omissions Insurance (if the owner sues you for negligence).

how is your business exposed

“Take It from Someone Who’s Been There” – Bookkeeping Tips for Small-Business Owners

by Jaclyn Patulo20. October 2014 08:44

simpletexting logo

Felix Dubinsky is co-founder of SimpleTexting, which provides text message marketing and SMS solutions to businesses of all sizes.

We talked with Felix Dubinsky about the difficulty of bookkeeping for small businesses. Check out the interview where he offers some tips for managing your books. The transcript below has been lightly edited for length and clarity.

How did you start your business, SimpleTexting?

SimpleTexting is a fairly new venture we started about three years ago, but I’ve been in the online marketing space for about five years now. Our versatile clients include restaurants, medical offices, spas, gyms, churches – you name it. We use small business data and advertising, helping clients build a subscriber base. Customers are kept informed via text about inside communications and appointment reminders. For example, we’ve had universities use our services to notify students and faculty about emergency closings, upcoming events, etc.

They come up with the use – some things we’ve never thought of. Like a church group that sends out Bible quotes. It’s simple. Users opt in and businesses or organizations are able to message them quickly and efficiently about special deals or news. Sometimes it’s a tough sell to businesses, but once they use it, they love it. It’s a text message platform for whatever service they need.

What’s your background with bookkeeping?

I knew a lot about bookkeeping. I did some when I was younger and in college. For my own business, I didn’t have the time. And honestly, I didn’t think we needed to. But around tax time, I realized, what do we spend our money on? What do we show the accountant? Bank statements weren’t enough. Our accountant was requesting things we didn’t have. We didn’t have any records of the right things. And we quickly discovered it’s overwhelming to find a good bookkeeper.

What were the challenges of starting bookkeeping? Where did you find guidance?

Small-business owners wear many hats, and we can’t spend too much time away from concentrating on the business. When running a small business, the last thing you care about is the books. When tax-filing time comes around, you start scrambling to get them in order. At that point, it’s much more difficult to get organized and find what we needed. We can’t do it ourselves – no time.

Referrals from sources you trust are a good idea, but we didn’t have much luck. At first, we went with a recommendation from a friend. For us, she wasn’t reliable. Our books aren’t that complicated, but mistakes were made. There was a language barrier and poor communication.

We tried outsourcing to a firm. We paid twice as much. The firm assigned two or three bookkeepers to learn our business. They did it fast, and if a bookkeeper leaves, two more know our business. But it was an expensive solution.

Eventually, we went through three or four more people. Each time someone does our books, everything the previous person did is useless. It’s like starting over every single time. We spent a lot of money on our books being done wrong. You see this pattern across anything you outsource. It’s trial and error. It’s difficult to find someone trustworthy.

Searching and hiring a bookkeeper takes time and money away from your business, too. And when you’re first starting out, that’s time you need to spend building up the business.

How did you solve your bookkeeping dilemma?

We hired a full-time bookkeeper. She’s knowledgeable and does various admin work for us. After an initial learning period about our business, she just knows everything. We ask, “Where’s this expense or that expense?” She knows. Our bookkeeper puts statements on Dropbox where they’re easily accessible. She takes care of our books, reports, and miscellaneous needs. We pay her a little more, but there’s no hassle. It’s worth it. We’re doing well.

What’s your advice for other small businesses struggling with bookkeeping?

Get a good bookkeeper you like. Consider how much revenue you’re bringing in. You really shouldn’t skimp on the books. There are a lot of really good do-it-yourself tools, if you prefer that. If you’re using your own cash or you’re part-time, try to figure out a way to use simple tools, such as QuickBooks. Do your homework. It depends on the person. If you’re not good with numbers or accounting, maybe you shouldn’t try to take it on.

Small-business owners make the mistake of trying to do it all themselves. Bookkeeping should be a priority. If an owner is serious, it’s essential to have someone reliable to take care of the books so they can focus on the day-to-day stuff. Because we have someone informed and dependable taking care of our books, it allows me to keep my eyes on the cash flow and be ready for tax season.

Small-Business Bookkeeping Tips from Felix Dubinsky

  • Evaluate what works for your business. Should you hire a bookkeeper or use do-it-yourself software? Consider your experience, business size, and revenue when making your decision.
  • Educate yourself. Determine what sort of major expenses you may face. Track your expenses to prepare.
  • Build a budget. Figure out what and who you can afford. Set aside money for paying quarterly taxes.
  • Find someone you trust. A bookkeeper handles your business’s financial interests. Get referrals or recommendations to find someone dependable and knowledgeable.

protect your assets

One More Way Customers Can Sue You

by Ruth Awad17. October 2014 08:03

gavel on a keyboard

It’s a sad wakeup call for small businesses: according to the online news site Cincinnati.com, a federal court in Northern California gave the go-ahead for victims of the Adobe System, Inc. data breach to proceed with a class-action lawsuit against the company. The dismal twist? None of the victims have suffered any injuries.

That’s right – the court ruled that so long as there’s sufficient threat of future identity thefts, a lawsuit can proceed. In the past, parties affected by a data breach had to actually sustain injuries before they could seek damages. However, the CA judge found that the actual hacking – which resulted in stolen names, Adobe IDs, passwords, credit card numbers, expiration dates, mailing addresses, and email addresses of 38 million Adobe users – qualified as harm.

While this might be good news for the victims, for small-business owners, it reinforces just how big an issue data security is right now. Let’s review what you can do to keep your company’s data under lock and key.

How to Build a Fortress: Best Practices for Data Security

A lax approach to your data security is one of the quickest ways to end up with a nasty breach on your hands. And you don’t want that. A data breach can cost hundreds of thousands of dollars in notification costs, credit-monitoring fees, and legal bills if you end up in court. Plus, only an oil spill and shoddy customer service are more reputation damaging for a business than a data breach, according to Experian’s research.

Then there’s the fact that small businesses are often the targets of cyber crimes because their information is simply easier to get to. According to security experts, 70 percent of breaches involve small businesses, and the recovery costs average a cool $300,000. (You can read more about that here: “‘No Business Too Small’ to Be Hacked, Says Security Expert.”)

Now that you know the stakes, let’s recap some ways you can limit your risk of hacks and data breaches:

  • Educate yourself and your staff about cyber threats. Most hacks are crimes of opportunity, and individual users are usually the weak links that allow those opportunities. For example, more small businesses are being hacked thanks to spear phishing scams that look like legitimate messages from financial institutions or employers. An employee responds to the email with the requested information, and then cyber crooks can use that info to access other records. Malware links in email or on social media sites can also expose your business’s network. (For more on that, read, “Data Security: When Malware Training Could Save You Thousands.”) Teach your employees about these tricks, and reinforce that they will never be asked to share sensitive information via email.
  • Change company passwords regularly. Be sure to have a different password for each of your major accounts. You’d be surprised how many folks use the same password for everything from computer logins to bank and email accounts.
  • Encrypt like your life depends on it. When a stolen data record is encrypted, there’s a good chance cyber criminals can’t do much with it. And if the stolen information can’t be used, it will be difficult to sue your business for damages over the breach. So be sure to encrypt security codes, access codes, passwords, and customer information.
  • In the event of a data breach, notify affected parties immediately. The Adobe lawsuit claims the company failed to promptly notify customers after the breach. In most states, you have a set timeframe wherein you must contact affected parties if a breach compromises their information. Read more about state data breach laws in our post, “Small Business Faces $3,000 Fine for Data Breach.”
  • Carry Cyber Liability Insurance. If you store sensitive third-party information on your servers, this coverage is a must. If you’re hacked, first-party Cyber Liability Insurance can help you pay for the cost of notifying affected parties after a breach, repairing security flaws on your network, implementing credit-monitoring services, and more. If you are an IT professional who is responsible for keeping clients’ data secure, you’ll need third-party Cyber Liability coverage, which pays for lawsuits over client data breaches. This third-party coverage is usually part of IT Professional Liability policies.

To learn more about data security, check out our blog series about data breaches.

know your business risks

5 Business Insurance Mistakes Costing You Money

by Ruth Awad15. October 2014 08:01

empty pocket

As a small-business owner, chances are you’re always on the lookout for ways to trim the fat from your budget. But when it comes to your business insurance, you may not be looking in the right place.

Fear not. Here’s a rundown of the top five costly mistakes small-business owners make when it comes to their coverage and ways to ensure you don’t make them.

1. Using the Wrong Classification Codes for Workers

This mistake affects your Workers’ Compensation Insurance premiums. But before we delve into the issue, let’s first get on the same page about what a classification code is.

Employee classification codes are part of a system used to determine how much you’ll pay for Workers’ Comp. Here are the takeaways:

  • There are more than 700 of these codes.
  • Each code denotes a specific profession’s injury rates.

As you might have guessed, the logic behind this system is that some professions are more hazardous than others. The higher risk the job is, the more you can expect to pay for coverage for that worker. For example, covering a construction worker is going to cost your business more than covering a secretary. The construction worker simply faces more risk of serious bodily injuries while working.

Now that we have that straightened out, here’s the issue: if you use the same classification code for all your employees, you may be overpaying for your Workers’ Compensation coverage. For instance, if you run a restaurant, you wouldn’t want to classify all your workers as kitchen cooks if you also have clerical staff. The clerical code assigns a lower rate.

You can read more about how to properly classify workers in the post, “How Do I Use Workers’ Compensation Class Codes?

2. Misclassifying Independent Contractors as Employees – Or Vice Versa

Sometimes, the line between independent contractors and employees can get confusing – especially if you rely on the same independent contractor for long-term work. But it’s worth educating yourself because…

  • The IRS can audit your business if it suspects you’re misclassifying employees as independent contractors. If you accidentally do make this mistake, you could end up owing back taxes, benefits, and overtime pay.
  • If your employee is really an independent contractor, you’re spending unnecessary money. As an employer, you pay part of your employees’ Social Security and Medicare taxes. You’re probably also paying for their Workers’ Compensation coverage, as most state laws require that employers insure their employees with this policy.

There’s no hard-and-fast way to distinguish between the two types of workers. However, independent contractors usually have free rein over the manner in which they complete their work. That means they set their own schedules, except for deadlines. They usually provide their own tools and supplies for the work at hand, and they have the freedom to work for other clients.

Read more about the difference between independent contractors and employees in the post, “This Common Mistake Can Cost Small Businesses Thousands.”

3. Not Updating Your Insurance Plans

When your business experiences a major change, it affects all aspects of your business – including its insurance policies. If you don’t update your policies to reflect significant decreases in income, you could be paying too much for coverage you no longer need.

By contrast, if your business takes off and you start making money hand over fist, you may need to adjust your policy limits so you’re not underinsured when something goes awry.  

In general, check in with your insurance agent to update your policies if your business…

  • Moves to a new location. Your agent will need to update your General Liability Insurance and Property Insurance.
  • Hires or fires employees. This impacts your Workers’ Compensation Insurance needs.
  • Invests in commercial real estate or expensive new equipment. You might need to update your Property Insurance to reflect these new assets.
  • Starts offering new services. This change impacts your Errors & Omissions Insurance. Your agent will need to amend your policy to cover the new service your business provides.

4. Paying for Policies Your Business Doesn't Need

Is there anything more disheartening than spending your hard-earned cash on something useless? At insureon, we’ve seen it happen with far too many of our customers before they started working with us.

It’s not that other insurance agencies are evil. It’s just a matter of them not understanding the nuances and risks that come with different industries.

That’s why it’s always best to work with an agent who…

  • Knows your industry. This insider knowledge saves you and your agent both a lot of time. You don’t have to explain the ins and outs of your business because your agent is already familiar with how it operates. That means your agent already knows the risks you face (and the ones you don’t) and can tailor your coverage accordingly.
  • Has experience insuring small businesses. Your needs are not going to be in the same ballpark as big-box stores or billion-dollar companies.
  • Works with several top-rated insurance providers. That way you can get the most competitive prices on your policies.

For more tips on cutting down your insurance spending, check out our blog series on insurance saving tips.

5. Not Implementing Risk Management Strategies

Did you know that some risk management measures can lower your insurance premiums? Though every insurance provider has its own criteria, many take into account the following preventative strategies when calculating your premiums:

  • Having a central station burglar alarm. This deters theft, which impacts your Property Insurance premiums.
  • Updating old office buildings. Old buildings are a gamble in the eyes of your insurer. Updating them to current building code may reduce General Liability and Property Insurance premiums.
  • Using security cameras. These tend to deter property theft and vandalism.
  • Using client contracts. These may prevent unnecessary E&O lawsuits.

Be sure to talk to your insurance agent about the safety measures you can implement that could reduce your insurance rates.

protect your assets

Healthcare Businesses Beware: Medical Data Worth 10x as Much as Credit Card Numbers

by Ruth Awad13. October 2014 08:08

nurse on a laptop

As if you didn’t have enough on your plate, small healthcare business owners – with all that life-saving work you do – the Insurance Journal reports that your patients’ health records can fetch a pretty penny on the black market – about ten times the rate of a stolen credit card, to be exact. This explains why the annual survey by the Ponemon Institute found that cyber attacks on healthcare organizations has risen to 40 percent in 2013 from 20 percent in 2010 – a 100 percent increase.

That means, in addition to all the other work demands you must contend with, you also have a pesky target on your back.

Let’s take a look at why health records are so lucrative and what healthcare professionals can do to keep their valuable information away from prying eyes.

Why Healthcare Providers Are Top Prey for Hackers

A healthcare provider’s cyber vulnerability is a perfect storm that involves…

  • Outdated systems. For many healthcare professionals, investing in security takes a backseat to investing in the latest medical technology. After all, there’s only so much room in your budget. Unfortunately, this means healthcare providers often forgo firewalls and building encryption into software that manages electronic patient records or budgets.
  • Lax security. Human error is almost always a factor in data breaches. If employees can use their own devices on your health business’s secure network, they could inadvertently download malware that infects your system. A thumb drive with patient records could easily be stolen or lost. And if data on those devices isn’t encrypted, the finder can easily access all that information and sell it off to the highest bidder.
  • A wealth of personal information. A single health record includes names, birth dates, policy numbers, diagnosis codes, and billing information. When that information is stolen and sold, frauds can use the data file to fake claims with insurers or buy medical equipment or drugs that can be resold. There’s no limit to what a criminal mind can do with someone else’s complete identity and a little imagination. Each record can sell for about $10 each, and when the criminal has access to thousands of records, the payoff speaks for itself.

To learn more about the risks healthcare businesses face, read, “Allied Health Professionals: Why Your Data Isn't Safe.”

Locking Up Shop: How to Protect Patient Data

You already know that exposing patient data is more than just a headache for your business. Federal HIPAA and HITECH laws demand that you protect confidential health information. The following tips can help you comply:

  • Beef up your passwords and change them regularly. Make sure your passwords use letter and number combinations with special characters. And be sure not to use the same password for all your important accounts. Each one should have its own password that is changed every month or so.
  • Keep personal devices off your network. The only computers and devices connected to your network should belong to your business. Be sure that employees don’t take these devices home or use them anywhere but on the secure network.
  • Encrypt your data. Encrypted data is nearly useless without the encryption key. Though data breaches always cost money to fix, the chance of identity theft decreases dramatically with encrypted records. Be sure you encrypt all patient records, financial data, and passwords. And don’t forget to keep the encryption keys in a separate location.
  • Invest in firewalls and antimalware software. Though your budget is probably already stretched thin, know that a data breach will cost you hundreds of thousands in regulatory fines and cleanup costs. That’s why you should ensure your network has a firewall and that your antivirus software is up to date.
  • Train employees on how to avoid potential cyber threats. Teach them about malware, spear phishing scams, and other ways hackers try to access secure networks. (You can learn more about that here: “Data Security: When Malware Training Could Save You Thousands.”) Regularly review HIPAA and HITECH laws and compliance issues with your staff, too.

It seems these days, you can never be too careful when it comes to protecting your data. That’s why, in addition to these safe practices, all healthcare businesses should carry Cyber Liability Insurance. This coverage steps in after a breach to help you pay for…

  • Notifying affected parties about the breach.
  • Implementing credit-monitoring services.
  • Repairing your business’s reputation.
  • Negotiating with cyber extortionists.

To learn more, check out our post, “4 Reasons Your Business Should Have Cyber Liability Insurance.”

how is your business exposed

Why You Need to Go Mobile

by Rieva Lesonsky10. October 2014 07:55

someone using a smartphone

With the latest global Mobile Media Consumption report showing 60 percent of Internet access now takes place on a mobile device, the writing is on the wall: if you haven’t developed a mobile marketing strategy yet, now is the time. Here are a few more statistics to convince you:

  • More than 70 percent of digital coupon users rely on mobile devices to redeem discounts, according to eMarketer.
  • 45 percent is the annual growth rate of mobile data traffic. It’s estimated the amount of total mobile data traffic will increase tenfold by 2019.
  • 70 percent of mobile searches lead to action on a website within one hour of when the search was conducted, according to a study by iAcquire

Get the picture? Here are three ways you can take advantage of mobile mania and make smart marketing decisions that pay off:

  1. Offer coupons, specials, and more. Set up an opt-in mobile marketing campaign so consumers can receive promotions, specials, and announcements directly on their mobile devices. Ask for specific permissions, such as how often they want messages and regarding certain topics. Don’t get carried away, or your customers will unsubscribe in a hurry. The quality of your messages is more important than the quantity.
  2. Use location-based marketing. Make sure your business is listed on all local search directories and maps, such as Yelp, Google Maps, and Yahoo Local Search. As an added bonus, users on these sites often review your business and tell their friends about it.
  3. Create a mobile-friendly website. Have you ever tried to navigate your website on a smartphone? Do all the images load quickly? Is it readable? Think less text, fewer photos, and bigger buttons. If your site takes too long to load, mobile users will head to another website. Ask your web designer to make your website more responsive across all platforms.

Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at rieva@smallbizdaily.com, follow her on Google+ and Twitter.com/Rieva, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports.

know your business risks

The Small-Business Owner's Guide to Contractor Liability Insurance

by Brenna Lemieux8. October 2014 08:59

business man meeting with a contractor

Sometimes, you have to hire independent contractors, vendors, and other third parties to work for you or provide services to your small business. But having this help can come with its own set of problems and questions, such as…

  • Are independent contractors required to have their own insurance?
  • What insurance should I require my contractors to have?
  • Does my small business insurance cover contractors and vendors I hire?
  • Do I need Workers’ Compensation Insurance for my contractors?

Let’s troubleshoot these insurance issues.

What Insurance Should I Require Independent Contractors to Have?

When you hire someone to work for you, they could make a mistake that costs you serious money. Say you hire an IT contractor who installs a slow, non-secure network. If your client suffers a data breach, your business can be sued for their mistake.

That’s why it’s important to hire insured contractors. If they make a mistake or fail to deliver the goods they promised, you are able to recoup some of the expenses by filing a lawsuit against them. Contractor insurance typically covers these damages and makes sure you don't end up paying for someone else's mistakes.

Here are a couple coverages you may require your contractors to carry:

  • Professional Liability Insurance (aka Errors and Omissions Insurance). It covers mistakes and oversights your contractors make when carrying out professional services (e.g., IT security work, consulting, etc.).
  • General Liability Insurance. This covers a number of accidents, including property damage or physical injuries the contractor might cause to you and your employees. Some General Liability Insurance policies include Product Liability coverage, which covers lawsuits if the contractor makes a physical product that causes bodily harm.

To ensure your contractors are adequately covered, be sure to…

  1. Check to see if the contractor has coverage by reviewing their Certificate of Liability Insurance.
  2. Include language in your contracts that requires any vendor, contractor, or their subcontractors to have insurance for their liabilities.

How to Check a Contractor's Insurance

Small business insurance is common, so don't be shy about asking to see a contractor's insurance. If you want to avoid sounding like you're nit picking, you can always say something like, "My insurance provider requires me to check your liability coverage."

If they have coverage, a contractor should have no problem sending you a Certificate of Liability Insurance. Insurance companies make it easy to download and print off these certificates.

If you want to be extra cautious, you can call the insurance company's number listed on the certificate to make sure the contractor's policy is still active. Though insurance certificates list the policy expiration date, there’s no harm in double-checking.

Can I Cover Contractors with My Small Business Insurance?

Generally speaking, your contractors should have their own insurance, but in some cases, you might need to.

A general contractor might do this if they hire a few extra helpers for a job. Say you're installing a new deck for client. They also want some custom woodwork, so you hire a subcontractor to build a bench and trellis. You could cover the subcontractor by calling your insurance provider and adding them to your policy. 

The extra parties you add to your policy are called “additional insureds.” By paying a little more, you're able to offer temporary coverage for these contractors.

Do I Need to Have Workers' Compensation Insurance for My Contractors?

Usually, small businesses won't need to offer Worker's Comp coverage for independent contractors and temporary workers. However, there are a few things to keep in mind:

  1. Each state determines its own WC laws. Check our guide to state Worker's Comp laws to find out who you need to cover.
  2. There isn't a strict definition for "independent contractor." If you hire a contractor for a long time and work with them with the same oversight you would give to an employee, a judge might rule that this person is, for all intents and purposes, an employee. In this case, you might have to offer them Workers' Comp and other benefits. (Read more about the high price of misclassifying employees in the post, “This Common Mistake Can Cost Small Businesses Thousands.”)
  3. Temporary help can be a gray area, too. If you hire temporary workers from a staffing firm or employment agency, check with the agency to see if it already covers them.

If you have any questions about contractor liability, contact an insureon agent at 800-688-1984

how is your business exposed

How Many Natural Disasters Does It Take to Ruin a Small Business?

by Susan Solovic6. October 2014 07:52

destroyed building

A major hurricane – with winds at least 111 mph – hasn't hit the United States since 2005, and I'm not forgetting about "Hurricane Sandy" and the devastation it caused. Technically, Sandy wasn't a hurricane.

However, we should take Sandy as a stark warning that stands in the midst of some pretty mellow years in terms of hurricane damage. While I'm not a fan of saying "we're due" for a major hurricane, I am a fan of saying small businesses should take disaster preparedness seriously.

It's always easy to think that bad stuff is going to happen to "the other guy." But remember, to everyone else, you are the other guy. Many businesses that were caught unprepared during Hurricane Sandy took a long time to recover, even when they didn't suffer substantial damage to their physical plants. More on that below.

Business Survival Guides: Hurricanes and More

Hurricane Sandy hit more than 23,000 New York City businesses, and most of them had fewer than 50 employees. Disasters like that claim about 40 percent of the businesses they hit, according to FEMA. Just as it takes a solid business plan for success in business, it takes a solid disaster plan to come through these terrible situations and land on your feet.

Here are some resources that can help you start planning:

  • For East Coast businesses, NOAA offers a general guide to hurricanes and hurricane preparedness that you can download for free. It's good, especially in its ability to scare you to action. 
  • To get a more comprehensive picture of natural disasters – such as tornadoes, wildfires and floods – go to Ready.gov.
  • The Small Business Administration website offers materials specifically for getting your business ready should a disaster strike.

Why You Should Always Back Up Your Data

It's no secret that many small-business owners still refuse to take data backup seriously. And when disasters strike, it's easy to lose valuable business information forever, even if the roof doesn't get blown off your building.

Until a few years ago, many backup devices were vulnerable because they were typically kept in the same location as the devices they were backing up. But now, with cloud backup services widely available and inexpensive, there is really no excuse for any small business to lose important data during any kind of natural disaster.

We need to add a word of caution here, however. If you're located in a hurricane or flood zone, it's not very helpful if the data center you use for backup – or your web presence – is only one block away.

When you sign on with any data center service, find out where their facilities are located and how well they are prepared to deal with natural disasters.

Susan Solovic is THE Small Business Expert. In addition to her work guiding small businesses, Susan is a NYT bestselling author, media personality, keynote speaker, and former ABC News small biz contributor. Follow her on Twitter, or visit her website, SusanSolovic.com.

protect your assets

When Team-Building Goes Wrong: How a Kickball Injury Became a Workers’ Comp Claim

by Jaclyn Patulo3. October 2014 08:13

red ball

A delightful team-building romp may seem like a great way to build strong relationships and improve employee communication and morale. But as the saying goes, it’s always fun and games until someone gets hurt. And if an employee gets hurt while doing mandatory company activities, well, you just might have a Workers’ Comp claim on your hands.

That’s what happened at the public relations firm Jackson Dawson Communications. A company kickball game turned into a legal conundrum, according to the Associated Press. With his boss’s approval, former employee Stephen Whigham organized a kickball game as a team-building event. Everything seemed to be on track for a whimsical day full of teamwork and good sportsmanship when things took a dark turn. Whigham, who made a valiant effort to avoid being tagged out, ended up shattering two bones in his leg. Though he’s already had two surgeries, he’ll eventually need a knee replacement because of the injury.

He filed a claim for Workers’ Compensation benefits, which was initially denied. But the South Carolina Supreme Court ruled in his favor after it determined he was required to participate in the game as part of his job.

It should go without saying: it’s smart to have Workers’ Compensation Insurance. Most of the time, you have to carry it once you have employees. As this case proves, you never know when it’s going to come in handy.

The Inevitability of Workplace Accidents

Accidents are called “accidents” for a reason. If you could prevent them, you would. So while you can (and should) take every measure to make your workplace as safe as possible, there’s always going to be the chance that one of your employees gets hurt.

For example, a testy Pomeranian who’s not fond of blow dryers could bite a dog groomer. A florist could nick a finger on pruning shears. A wedding photographer may stumble over a flower girl while walking backward to get the perfect angle. For all of these accidents, your business can be held liable for your employees’ medical expenses.

That’s where Workers’ Compensation Insurance can help. This policy protects covers costs related to workplace injuries, including…

  • Lost wages.
  • Medical bills.
  • Legal expenses if you’re sued over the injury.

If an employee brings a lawsuit related to a work injury or illness against your business, you can rely on your Employer’s Liability Insurance to handle your legal defense costs and damages. Most Workers’ Compensation policies include this coverage.

How to Keep a Company Event from Becoming a Work-Injury Hotbed

To keep Workers’ Comp claims at a minimum, be careful when arranging team-building events and other work activities. Here are some ways to reduce your exposures:

  • If an event involves physical exertion, make participation voluntary.
  • Don’t serve booze at company outings.
  • Host the event after work hours and out of the office. 

Injuries that happen at work-sanctioned events, like Whigham’s kickball game injury, are a gray area when it comes to Workers’ Comp benefits. As of now, courts make these kinds of decisions on a case-by-case basis. The high court awarded Workers’ Comp benefits to Whigham, and other state courts may follow suit in similar cases.

The Appropriate Insurance Can Be a Game Changer

Workers’ Compensation Insurance coverage for your small business means you won’t be left paying for worker injury costs out of pocket. If you have questions about Workers’ Comp, talk to an insureon agent that specializes in your industry, or submit an online insurance application for free quotes.

know your business risks

This Common Mistake Can Cost Small Businesses Thousands

by Jaclyn Patulo1. October 2014 07:49

someone being interviewed

When your business is just starting out, it may make more sense to hire independent contractors instead of employees. You don’t have to worry about paying half of their employment taxes, and you don’t have to cover them with Workers’ Comp Insurance, either. Still, you get the help you need, and your contractor gets a gig. Sounds like a win-win, right?

Not exactly. Turns out, the line between an employee and an independent contractor isn’t always so clear. You may think you’re following all the rules, while the contractor thinks they are being treated like an employee without the benefits.

At least that’s what happened to Tya Bolton, chief executive of Exceptional Business Solutions. She recently shared her small business’s worker misclassification dilemma in an article with The Washington Post. Bolton thought she did her research on what constitutes an employee versus an independent contractor. Then she faced an audit from the Maryland Department of Labor, Licensing, and Regulation. One of her independent contractors filed for unemployment benefits after a long-term project ended.

Bolton had to submit the work and compensation history for not only that independent contractor, but records on every person she hired in the past three years. After reviewing materials, the DLLR determined the past contractor was an employee, as well as three others. As a result, Bolton had to pay thousands of dollars in employment taxes.

The moral of the story? Your small business may owe unexpected expenses (e.g., employment taxes, unpaid overtime, benefits, and more) to independent contractors, even years after working with them. Let’s find out how you can avoid such a debacle.

Drawing Lines: How to Tell If Your Independent Contractor Is Really an Employee

A worker is usually an independent contractor if they work independently, are paid on a per-project basis, use their own tools, and don’t receive benefits. But it’s not always that simple.

While there are general criteria to follow, there’s no black and white definition to distinguish a contractor from an employee. Employment lawsuits are typically decided on a case-by-case basis. Small businesses and workers can file Form SS-8 with the IRS to request a determination of worker status when considering employment taxes and income tax withholding.

The IRS uses three categories to classify workers: behavioral control, financial control, and relationship of the parties involved. To ensure you’re properly identifying your contractors, Bolton suggests asking questions such as…

  • Does your contractor do similar work for others and identify that on their tax forms?
  • Does the contractor have a website?
  • Has the contractor provided you with a complete W-9 tax form?
  • Are you giving the contractor control to handle tasks with little direction from you?

If the answers to these questions are “yes,” then you may well have an independent contractor on your hands. You run into trouble when you are a contractor’s only source of revenue and they can’t control the manner in which they complete their work.

If you’re not sure how to classify your workers, ask someone who does. You can call the IRS with questions, consult your state’s guidelines, and seek guidance from a legal professional. For help getting started, check out the Internal Revenue Service’s 20 factor checklist.

Do You Need to Insure Your Independent Contractors?

Improper worker classification can cost you big time, but that’s just the start. If your contractor is really an employee, you may need to purchase Workers' Compensation Insurance. Most states require employers to carry Workers’ Comp coverage once they hire employees. A Workman’s Comp policy can help your business pay for employee occupational injuries.

If your contractor is properly classified, you may need to add them to your General Liability Insurance policy as an additional insured for the duration of a project. That way, your business can be financially protected if it’s sued for mistakes your contractor makes.

Alternatively, you can require independent contractors to have their own General Liability coverage. But in most cases, they should have their own or Workman’s Comp Insurance, especially if they work in the construction industry. You can check their Certificate of Liability Insurance for proof of these coverages.

how is your business exposed