Inland Marine Insurance in Action: Boy Trips and Tears Painting Worth $1.5 Million

1. September 2015 08:03

painter painting

Uh oh. A 12-year-old Taiwanese boy came very close to working off a serious debt for the rest of his life. While walking in front of a 350-year-old Paolo Porpora oil painting worth $1.5 million, the poor kid lost his footing and fell into the painting, punching a fist-sized hole through the canvas, according to NPR (which has a video of the million-dollar trip, if you need your daily dose of schadenfreude).

Focus Taiwan News states the exhibition organizers will not ask the boy's family to pay for restoration costs or damages. The report notes the painting is part of a private collection and is insured. You hear that, folks? Insurance saves the day yet again.

The story goes to show that slips and trips – which can happen to anyone – can permanently damage a priceless item. If you are responsible for caring for that item, those damages can come out of your pocket if the artwork isn't insured with Inland Marine Insurance.

Let's take a look at what this policy can do.

Inland Marine Insurance for When Property Damage Leaves You Adrift

First, let's set the scene. You're a restaurant owner carving out a piece of the trendy meets fine-dining market. For atmosphere, you offer to display work from several prominent local artists. It's a win-win situation: you get to have notable artwork adorn your place of business, and they get to put their work in front of patrons who might be interested in buying the art.

But here's where this arrangement can go sour quickly: what happens if the work is damaged? Who is responsible for footing the bill?

Both you and the artists benefit from the displayed artwork, so before those paintings or photographs go up, you need to sort out who will insure the property with Inland Marine Insurance. This coverage can "float" with the insured property as it moves around, unlike Commercial Property Insurance, which can only cover items at a fixed location (e.g., your restaurant's furniture). Inland Marine can provide coverage for valuable and rare items that are lost or damaged while…

  • In transit.
  • In someone's temporary care.
  • In a fixed but movable location (e.g., equipment in a food truck).

Arguably, the artists have a little more to lose if, say, one of your waiters falls into a painting and tears a hole through the canvas. It may make more sense that they carry the Inland Marine coverage to protect their work. That doesn't mean you're entirely off the hook. They could always sue you, claiming you had a responsibility to preserve the work while it was in your care.

To guard against that eventuality, you have a few options:

  • You can hope that your General Liability Insurance doesn't exclude coverage for expensive artwork. A standard General Liability policy can pay for damages you cause to someone's property, but it may not apply in this case. In short, artwork falls into a category of its own in the insurance world because it is rare and expensive, which means it is also difficult to restore or replace when damaged. Ask your agent what your policy will and won't cover.
  • You can request to be added to the artist's Inland Marine policy as an additional insured. If your business is the reason their work is destroyed, your additional insured status may deter the artist from suing you, your business, and your employees. That's because the policy can pay for the damages that happen under your care. To learn more about being an additional insured, read "Want Additional Insured Status? Start with These 3 Things."
  • You can sort out liability in your contract. This isn't a replacement for insurance, but it can help you and the artist settle a dispute over damaged work more efficiently. Your contract should also state who is responsible for insuring the displayed work.

To learn more about how to effectively use contracts, read "Case Study: How Good Contracts Can Protect You From Legal Trouble."

Another Court Ruling on Worker Classification

31. August 2015 07:38

judge holding a gavel

The US Department of Labor made an example out of yet another company – National Consolidated Couriers Inc. this time. According to San Jose Mercury News, the $5 million judgment against the California-based company for misclassifying 600 drivers as independent contractors serves as a warning shot for others.

Misclassify your employees, and this could happen to you, too.

The Judgment Heard Round the World

First, let's be clear that National Consolidated Couriers seems to have made many, many mistakes. The Mercury News report states the company…

  • Didn't give its 1099 contractors minimum wage or overtime pay.
  • Avoided the Department of Labor's investigation and deposition from the outset.
  • Required an employee to destroy all emails related to the DOL case.
  • Exercised managerial control over its drivers.

You don't have to make the major missteps National Consolidated Couriers made to be hit with misclassification lawsuits and fines. You simply have to accidentally treat your independent contractors like employees without offering them the benefits that comes with W-2 employment.

Why Is the DOL So Invested in Employee Classification?

Worker classification is one of the many areas of employment the Department of Labor oversees. According to information on the DOL's site, it's responsible for:

  • Improving work conditions.
  • Advancing opportunities for profitable employment.
  • Administering federal labor laws.

The issue of worker classification ties into all these objectives. For example, when a company misclassifies an employee as an independent contractor, that company isn't paying the worker's overtime wages, part of their employment tax, or their Workers' Compensation Insurance coverage, which most states require employers to carry for each employee.

The laws are designed to protect workers from being exploited for the employer's gain. So businesses that sidestep labor laws have an unfair advantage over companies that do comply with those regulations. They fatten their bottom line at the expense of the workforce.

In a nutshell, that is why the Department of Labor is investing its energy into classification issues. It's trying to protect workers and level the playing field. You can read more about how it's accomplishing this goal in "Labor Department Helping States Crack Down on Worker Misclassification."

Now Is the Time to Accurately Classify Your Workers

A couple weeks ago, we discussed how 10 to 20 percent of businesses misclassify employees as 1099 contractors (catch up here: "10 - 20% of Businesses Make this Expensive Mistake. Do You?"). Unfortunately, ignorance of the laws isn't a defense for offending businesses. They can be sued and fined over misclassification all the same.

To make sure you stay on the right side of the law, get familiar with the difference between a contractor and an employee. Recently, the Department of Labor clarified [PDF] that a worker must be in business for themselves to be a contractor, which narrows the scope considerably.

In other words, if the worker is economically dependent on you, they are probably not a contractor. Learn more about 1099 vs. W-2 classification in "Workers' Comp Insurance: When Is Someone a Contractor?"

If you find that your contractors are technically employees, amend the situation right away. That may mean…

  • Updating the way you pay them. Put them on the payroll instead of having them submit invoices.
  • Offering benefits. This may include paying for overtime wages and offering health insurance if you have 50 or more fulltime employees. Read more about that on the Health Law Guide for Business website.
  • Insuring them. Most states require employers to carry Workers' Comp Insurance for their employees. This policy can help pay for their occupational injuries. You can learn about your state's insurance requirements in our guide Workers' Compensation Laws by State.

Yes, employees are an investment. However, it's better to correct course now than face all these expenses and regulatory fines later if you don't comply. If you need more inspiration to evaluate your employment practices, read "Another Day, Another Worker Classification Lawsuit."

4 Risks from Irregular Income (and How to Beat Them)

28. August 2015 07:45

piggy bank

For many small-business owners – especially entrepreneurs who are just starting out – cash flow is more unpredictable than Midwest weather. One day, it's a downpour of clients and new business. Next week, a severe work drought.

Though it's hard to budget and plan without knowing what's coming down the pike, you have a lot at stake if you don't properly manage your income. Let's take a look at some of the risks you're up against and how to minimize unnecessary monetary setbacks.

1. Missing quarterly taxes.

Being your own boss has many perks, but paying the full portion of your Social Security and Medicare taxes is not one of them. Employees get a break on that front because employers pay half of these taxes. But you must pay the full 15.3 percent of your income for this self-employment tax.

And the rub doesn't end there. You must pay these estimated taxes each quarter. Payments are due…

  • January 15.
  • April 15.
  • June 15.
  • September 15.

If you miss these deadlines, you may be penalized for underpaying your estimated taxes when you file your return in April.

Because you may not know how much money you'll make for the year, look at what you made last year and use that number as the basis for your estimate. If you just started your business, take a look at your quarterly earnings instead.

Set calendar reminders now for your quarterly tax due dates so you don't miss the deadlines. To learn more about your tax obligations, read "Did You Freelance This Year? Now Is the Time to Focus on Small Business Taxes."

2. Not having enough money for the bills.

The scramble to pay your bills during a lean month can be especially nerve wracking. Nothing burns through a modest nest egg quicker than month-to-month living expenses.

You can make these expenses a little more manageable by:

  • Introducing payment plans for your services. Instead of getting a windfall upfront, installments allow you to receive a set amount of money on predictable dates.
  • Following up multiple times on invoices. Nonpaying clients are the worst, so don't be shy about following up on late invoices. Consider checking business credit reports before taking on future clients. Learn more about that in "A New Way for Small Businesses to Cut the Risk of Nonpayment."
  • Selecting payment plans for your bills. You can pay your small business insurance premiums on a monthly basis just like you would your utilities. The benefit of paying your premiums in full is that you save a little money, but those savings may be negligible for a business owner without a lot of funds to spare.

To learn more about insurance payment options, read "Decoding Your Small Business Insurance Quotes."

3. Getting stuck in the feast-or-famine cycle.

This isn't entirely within your realm of control. You can't force clients to do business with you, but you can make sure you spend time every day trying to find new prospects. Though your days are already packed to the brim, make sure you carve out a little time to:

  • Make clients calls.
  • Interact with your followers on social media.
  • Answer emails.

For more tips on drumming up buzz and business, check out "Make a Better Impression on 88% of Your Potential Clients."

4. Dipping into the business well.

Mixing your personal and business income is a surefire way to complicate your bookkeeping and tax records. To minimize the temptation to spend your business revenue with impunity, be sure to:

  • Separate your business and personal accounts.
  • Use your personal funds to pay your personal bills and your business funds for business expenses.
  • Set up automatic transfers from your business account to pay yourself on a scheduled basis.

There may be times when you need to pay yourself a little extra, but establishing a limit can help curb frivolous spending.

For more penny-pinching pointers, check out our insurance savings blog series.

After a Data Breach, More Communication Is Better

27. August 2015 07:37

man on several phones

Healthcare provider Franciscan St. Francis Health is wading through the fallout after its medical information management contractor Medical Informatics Engineering (MIE) suffered a massive data breach. According to the Daily Journal, the May 2015 breach affected…

  • 200 providers across the country.
  • 3.9 million patients.

The report states the breach exposed patient records, addresses, phone numbers, Social Security numbers, health insurance details, and birth dates – i.e., the key ingredients for stealing identities, which is why medical records are so lucrative on the black market. You can read more about that in "Healthcare Businesses Beware: Medical Data Worth 10× as Much as Credit Card Numbers."

Franciscan St. Francis Health is just one of many breached providers, but its data breach response is noteworthy because it's basically a blueprint for what not to do after a hack. Let's take a look at some botched data breach response tactics that you should only follow if you want to lose all hope of retaining your customers.

1. Don't Communicate Clearly with Affected Parties

On top of being worried about having their identities stolen, the Franciscan St. Francis Health breach victims are struggling to get useful information from the medical provider. The healthcare facility sent notification letters in late July, but the notices failed to convey any real information about the breach or the data that had been exposed, the Daily Journal reports. Many affected residents didn't even know who to contact about the incident.

For the customers that did locate the question hotline, long wait times and disconnected calls only stoked their frustration. The medical provider set up its own 24-hour hotline to manage the influx of calls from confused victims, but the measure may be too little, too late. Once victims get their answers, they may not trust Franciscan St. Francis Health with their business again because its response was so haphazard and delayed.

According to a survey by Intelligent Defense

  • Almost 50 percent of consumers say a company can't do anything to win back their trust if it loses their personal data.
  • 35 percent state they would stop giving their business to that company altogether.

Even if Franciscan St. Francis Health played all its cards right after the breach, it would still be fighting an uphill battle to keep its customers. Failing to communicate only makes it more likely that customers will go elsewhere. To learn more about customer attitudes on cyber security, read "Uh-Oh: Customers Don't Trust Businesses When it Comes to Data Security."

2. Keep Breach Victims Waiting

The Daily Journal notes that when affected parties heard the MIE data breach happened on May 26, many were astounded that it took until July 27 to start receiving notification letters about the incident from Franciscan St. Francis Health. There are two sides here:

  • From a business standpoint, it makes sense to wait to notify the public until the breach details are sorted out.
  • From a customer service standpoint, few things make a customer more exasperated than a long wait.

Most states have data breach laws requiring that affected residents be notified in a semi-expedient fashion (on average, about 30 to 45 days after the breach is discovered – more on that in "Reminder: It's Your Job to Keep Customer Data Safe"). That means if you drag your feet on sending out the letters, you could face regulatory fines on top of potentially losing customers.

3. Don't Carry Cyber Liability Insurance

It's already hard enough to repair your business's reputation if a data breach exposes customer information. Don't make it more difficult by not having a data breach response plan in place. Part of that plan may include carrying Cyber Liability Insurance (aka Cyber Risk Insurance or Data Breach Insurance).

This policy may help pay for:

  • Notifying affected parties.
  • Investigating the cause of the breach.
  • Providing credit-monitoring services.
  • Creating good-faith advertising to repair your business's reputation.

Cyber Liability Insurance can offer the means to help your business wrangle the serious expenses that follow a breach, but it isn't a replacement for communicating with your customers. Always err on the side of caution by contacting customers as quickly as you can, clearly explaining who they should call with questions, and outlining what you are doing to minimize their exposure.

Hot Fall Trends for Small Business

26. August 2015 07:37

bowl of ice cream

For many consumers, summer is quickly slipping away and thoughts are already turning to fall activities and purchases. And luckily for small-business owners, consumer spending is predicted to go nowhere but up.

The recently released American Lifestyles 2015 report from Mintel shows total consumer sales will increase 21.9 percent over the next five years. Leading the way in spending are “nonessential categories,” such as vacations, eating at restaurants, and technology purchases, to name a few.

Here are a three more fall trends to keep your eye on.

1. Ice Cream, You Scream

America’s love for ice cream has gone global now that China has surpassed the United States as the world’s largest ice cream market. But don’t underestimate America’s love for the frozen, creamy treat.

According to Mintel, Americans consume 18.4 gallons of ice cream per person a year. Mintel suggests focusing on creating “better for you” recipes, such as those that don't have allergens, are low fat, and are gluten free. Artisanal or “craft” ice cream is also becoming more popular – 60 percent of Americans who eat ice cream every day believe local brands are better than national ones.

2. Women First

If women are your target market, you’d better know how women shop. Does age matter? Actually, the answer may surprise you.

According to MediaPost, multiple studies find women across all generations share many similarities when it comes to their shopping habits and use of social media. Women of all ages…

  • Heavily use social media.
  • Consider price more important than convenience.
  • Make the majority of their online purchases on computers rather than mobile devices.

Last but not least, website reviews are important to women when deciding where and what to buy.

3. Falling for Autumnal Colors

Pantone, the global color authority, has revealed a fall 2015 palette rooted in multifaceted, androgynous colors. There are a lot of earthy neutrals but also some bold shades. The list includes…

  • Stormy Weather.
  • Oak Buff.
  • Dried Herb.
  • Marsala.
  • Biscay Bay.
  • Cadmium Orange.
  • Cashmere Rose.
  • Desert Sage.
  • Reflecting Pond.
  • Amethyst Orchid.

The hot fall colors aren’t limited to the industry they’re associated with. If you own a business that needs to stay trendy (retail, some restaurants, home décor, graphic design, etc.), it’s smart to incorporate a least a few of these fall colors into your business.

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.

Court Ruling Means You Could Be Liable for Butt Dials

25. August 2015 08:02

phone in pocket

We all know butt dials can be embarrassing. But lawsuit worthy? Now that's news.

According to The Washington Post, James Huff, chairman on the Kenton County Kentucky Airport Board, and his vice chairman Larry Savage were deciding where to eat, and Huff called an assistant Carol Spaw to make reservations. Huff slid the phone into his pocket and continued to shoot the breeze with Savage. Unbeknownst to either of the men, Huff accidentally dialed Spaw again, and she quickly realized the call was a butt dial, the report notes.

But once she heard talk of unlawfully firing the airport's CEO – her boss – she took notes, recorded the entire 91-minute conversation, and reported it. The call spurred a lawsuit, and the US Court of Appeals had to decide whether a recorded butt dial is admissible.

The Washington Post states the court sided with Spaw because…

  • Huff was aware that pocket-dial calls happen and had previously made such calls.
  • Huff hadn't locked the device even though he knew the risks, so he didn't have a reasonable expectation of privacy.

The court's interpretation of what constitutes as a reasonable expectation of privacy is an important one in the age of hyper digital connectedness. Even if you inadvertently place a call with your derrière, the call can be recorded, and what you say can be lawsuit fodder.

Calling All Risks

Thanks to Huff's unfortunate experience, we now know that pocket-dial calls aren't protected conversations. That means an overhead call may be used to support allegations of:

  • Discriminatory practices. Any talk of firing or failing to hire someone can come back to haunt you if that person belongs to protected class (i.e., a group of people who are afforded a little extra workplace protection from equal employment opportunity laws because of their gender, race, religion, etc.). If someone records the conversation, it could support an employment discrimination claim. Read more about protected classes in the post "Hiring an Employee? Know What Can Go Wrong."
  • Advertising injuries. Slander (i.e., spoken defamation) is an advertising injury that can be hard to prove. That's because the statement must be false, must be made publicly, and must cause harm to the injured party's reputation. However, in the era of digital communication and readily available recording devices, it's easier than ever to document slanderous talk, which could help support an advertising injury claim. Learn more about slander in Chapter 2 of our eBook Tweet or Twibel: The Small-Business Owner's Guide to Advertising Injury.

Moral of the story: when you're having a conversation with a friend, it's natural to speak more openly and let your unfiltered opinions loose. In the context of your business, some of those opinions can be very harmful, especially if you accidentally say something offensive about an employee or a competitor.

If Huff's experience teaches us anything, it's that being aware is a good way to manage these risks. Overhead conversations in a crowded restaurant or on a misplaced phone call may be recorded and used to support a lawsuit.

Keep Your Calls Off Record

First and foremost, if you're worried about butt dials, for Pete's sake, lock your phones. If Huff had locked his phone, the entire debacle may have been avoided from the start.

Secondly, understand your limits. You can be liable for firing someone just because they are a woman or over the age of 40. You can also be liable for publicly slamming a competitor for "ripping people off" if that is a subjective statement. As a business owner, you have plenty of discretionary power, but knowing how you can be held accountable for your decisions or your statements can help you draw boundaries.

If you make a mistake, the following policies may help:

  • Employment Practices Liability Insurance. This is the policy you'll need if a former, current, or potential employee accuses your business of discriminatory management practices.
  • General Liability Insurance. So long as this policy has advertising injury coverage (and most do), it can help you pay for legal expenses if you're sued over committing slander.

Lastly, work with an IT consultant (who has adequate technology E&O Insurance!). They can help you understand the other exposures technology brings to a business.

Claim or Suit? Know the Insurance Vocab to Know Whether You're Covered

24. August 2015 07:28

man studying

Few situations illustrate the intricacies of insurance better than the case between HDI-Gerling America Insurance Co. and Ritrama Inc., a Cleveland-based manufacturer. First, let's set the stage.

Enter stage right: Burlington Graphic Systems Inc. According to a report by Business Insurance, this company bought some pressure-sensitive flexible films and cast vinyl films from Ritrama, but the products were faulty. The report states Burlington…

  • Informed Ritrama about the product failures in September 2008.
  • Sent along a spreadsheet that detailed three claims for monetary damages to the tune of $53,000.

Pay attention to that word – claims – because we'll be coming back to it.

Ritrama, like any smart company that doesn't want to lose business, proposed a settlement for half of Burlington's requested total. For those keeping score at home, that's about $26,500.

Now here's where Ritrama's real woes began: the manufacturer bought a claims-made General Liability Insurance policy from the insurance provider HDI-Gerling in 2009. The report states the policy defined the word "suit," but not "claim." (Told you we'd be coming back to that word.) So this particular policy would help pay for legal expenses in suits filed against Ritrama between March 2009 and March 2010.

So when Burlington sued in 2011, Ritrama tried to draw on its General Liability coverage, which can address lawsuits over the damages faulty products cause (more on that in "Cutting Costs on General Liability Insurance: When You Need Product Liability Coverage"). But the insurer denied coverage, and even though Ritrama sued HDI-Gerling over the denial, a court ultimately sided with the provider.

What gives? Let's unpack this mess of lawsuits so you get a better understanding of how claims-made policies work and the difference between a suit and a claim.

Claims-Made Coverage: A Finicky Thing Indeed

The basis of any claims-made policy is usually this: in order to receive your insurance benefits, your policy must…

  • Be in force at the time of the incident that sparked the claim.
  • Be in force when the claim is filed.

The filed claim doesn't have to necessarily be a lawsuit against the policyholder for claims-made coverage to apply. The policyholder may simply receive a demand letter to cover losses, much like the one Ritrama received from Burlington in 2008.

However, a standard claims-made policy can't reach back to retroactively cover incidents that happened before it was active. To learn more about that, read "What Is Claims-Made Insurance Coverage?"

That was Ritrama's first mistake: it assumed its coverage would apply even though the triggering incident – that is, selling faulty products to Burlington back in 2008 – happened well before the policy was in effect.

Ritrama's second mistake is that it didn't understand the difference between claims and suits.

Know Your Jargon: Claims vs. Suits

Ritrama's confusion is understandable. It may have assumed the claims Burlington made in 2008 were separate from the suit filed in 2011. Moreover, because the insurance policy said it covered suits, Ritrama probably thought its coverage would address the lawsuit.

But in the insurance world, context is everything.

In the context of claims-made insurance…

  • A claim can be any kind of notice that the policyholder may be liable for damages that the policy can cover. Once someone informs you of a mistake that could later lead to a lawsuit, that's a claim.
  • A suit is the formal lawsuit filed against your business. It can be considered a claim if it is the first notice received from the injured party that you may be liable for damages.

Because Burlington made three claims in 2008 before Ritrama's policy was even purchased, it makes sense that the insurer denied coverage and that the court upheld that decision.

The major takeaway is this: claims-made policies are tricky. While it's somewhat rare to find a claims-made General Liability Insurance policy these days, nearly every Errors & Omissions Insurance policy is claims-made coverage.

If you purchase a claims-made policy, ask your agent to explain its provisions to you so you clearly understand the parameters of your coverage and what constitutes as a triggering incident and claim. This legwork can save you serious disappointment later on.

Small Business Spotlight: All in the Family with The Bookkeeper

21. August 2015 07:51

The Bookkeeper logo

Courtney Barbee and her father Craig Barbee own and operate The Bookkeeper. Located in Raleigh, NC, The Bookkeeper provides accounting and virtual CFO services to startups and small businesses.

We talked with Courtney Barbee about her experience working alongside her father Craig and establishing a family business. Learn how small-business owners can run a successful company while working with their closest relations. The transcript below has been lightly edited for length and clarity.

Tell us a bit about yourself. What's your background?

Craig has over two decades of experience as a corporate controller. He has built and sold successful companies.

I began my accounting career at 15 years old as an intern in my father's department. I have worked in both public and private sector accounting.

When did The Bookkeeper get its start? Who's your typical client?

Founded in January 2014, The Bookkeeper provides total accounting solutions tailored for each business we serve. Instead of offering à la carte services, we create whole packages – everything from daily bookkeeping to budgeting to bill pay – based on the client's needs and goals.

Our typical clients are companies with 1 to 25 employees, who need either full-charge bookkeeping and/or top-level financial management. At the beginning, our clients were all located in the Triangle, but now we serve companies nationwide.

Why did you decide to go into business with your father?

We have always worked well together, so when Craig announced he was starting this business, it was really a no-brainer that I would be involved in some capacity. As the business has grown, my role has increased exponentially.

How do you split responsibilities and tasks?

For the basic, daily bookkeeping, we divide clients fairly evenly. For the high-level CFO examination and idea implementation, Craig is the one with the experience. He discovers problems, areas of growth potential, etc.

I enjoy writing and design, so I put a lot of focus into using different tools to present his thoughts in ways that can be understood by someone without a financial background. That can include writing up feasibility studies, presenting mid-year financials, and maintaining our company blog.

How do you communicate?

We primarily use email because it's an easy way to track information. We also meet in-person at least once a week and talk on the phone almost daily.

What's your favorite part about working together? Least favorite?

My favorite part of working together is conducting strategy sessions on my parents' front porch or at a diner.

The least favorite thing is probably the conflicts that arise from generational differences. For instance, Craig puts a lot of value on dressing formally and making an impression at live networking events, while I prefer to put emphasis on our web and social media presence.

How do you separate business from family life?

We are very careful to schedule company meetings around times that will not interfere with family activities. My stepmom is great at enforcing a "no shop talk" rule at family gatherings. Plus Craig is a great "Papa" to his seven grand kids. When my sons are around, he'd rather spend time with them than work anyway.

How do you work through disagreements?

We are both very strong willed. When we reach an impasse, we normally pull in a third party to help settle the decision. Or if it's something Craig feels strongly about, he gets the final say – he is the boss.

Does being a family business give you an advantage over other businesses?

Yes, there's innate trust already built in. Neither of us has to worry about the other not carrying their weight.

What's the biggest challenge?

It's challenging to find a babysitter for company meetings. Normally, I would just ask my parents to watch the kids – but when it comes to work, they're part of the meeting, too.

How will the business adapt as time goes on?

I don't know if Craig is actually capable of retiring. As time goes on, my role in the company will grow as his diminishes. Eventually, I plan to buy him out for company ownership, and he will stay on in a consulting role.

What's the most important lesson you've learned from your father about running a business?

The value of reputation. Trust is difficult to gain, but easy to lose.

Tips from The Bookkeeper on Working with Family

  • Take a step back. Ask yourself, "If this person wasn't family, would I work with them?" If the answer is "no," don't work with them.
  • Consider what's best for your business. Don't hire friends or family for their benefit; hire them because you trust them to do the job.
  • Learn separation. Keep family matters apart from business discussions. A tidy, clear divide will keep everyone happy and on track.

For more advice on working with family, check out "What You Need to Know about Hiring Your Kids."

Check out previous posts in our Small Business Spotlight series for more small business stories and tips.

Tianjin Explosion Highlights Business Interruption Insurance Issues

20. August 2015 07:45

building on fire

The Chinese port of Tianjin suffered a series of deadly explosions last week. According to BBC News, the explosions originated at one of the port's warehouses that stored hazardous and flammable chemicals. In a city of more than 15 million people, the chemical blasts are particularly alarming. Business Insider reports that…

  • The blasts have claimed 104 lives, including 21 firefighters.
  • 720 people were injured.

BBC News states the devastation doesn't end there. The blast waves decimated the port's commerce, too. Plenty of goods were stored at or around the port, such as the logistics park brimming with several thousand cars, all lost to the explosions. The report notes Hyundai had around 4,000 cars on the site, but it hasn't assessed the damage yet.

For business owners in the affected area, picking up the pieces after this tragedy can seem insurmountable. Where do they begin? How do they grapple with the expense of the somber aftermath? Let's take a look at how Business Interruption Insurance may lend a helping hand in times of crisis.

Business Interruption Insurance as a Way Forward

Business Interruption Insurance is an endorsement that can be added to a standalone Commercial Property Insurance policy or bundled with a Business Owner's Policy. It usually kicks in when a covered Property Insurance claim shuts down a business for more than 72 hours. Most policies can cover up to 12 months of interruption costs while the business rebuilds and recovers from the triggering event.

In the context of the Tianjin explosions, Business Interruption Insurance's benefits are immense. For example, say a manufacturer's plant was destroyed in the blasts. Fire damage is typically a covered property event, so Business Interruption coverage may help pay for the manufacturer's…

  • Lost income (i.e., the profits that would have been earned if the explosion didn't happen).
  • Ongoing expenses (i.e., the costs that must be paid even when the plant is temporarily shut down, such as salaries, taxes, and loan payments).
  • Relocation expenses (i.e., the cost of moving the business to a temporary location).

The policy can give the manufacturer the means to stay afloat while their Property Insurance policy helps pay for the cost of repairing and replacing the damaged property.

What about the businesses that depend on the manufacturer's products? They may not have suffered any direct damage, but the interruption in the supply chain may force their businesses to temporarily shut down, too.

For those parties, Contingent Business Interruption Insurance is their best bet. If they have this rider in place before a covered property event shuts down a supplier, it can help them pay for ongoing expenses while they search for a new supply source.

That's worth keeping in mind if your business depends on one supplier's raw materials or goods to operate. That supplier could be across the country or overseas, but if a sudden disaster brings it to a grinding halt, you may be miles or oceans away and still feel the sting.

Business Interruptions Can and Will Happen, So Make a Plan

One thing small-business owners can learn from this horrific event is this: interruptions don't give any advance warning. Start thinking about what your business would do when faced with a sudden and long interruption, and make a plan that can help you survive. That may mean…

  • Sourcing backup suppliers.
  • Backing up digital and physical data.
  • Compiling contact information for clients, insurance providers, and employees.
  • Investing in Business Interruption Insurance.

That last point is especially important for small-business owners. A National Association of Insurance Commissioners study [PDF] found only 35 percent of small businesses carry Business Interruption Insurance. In other words, when a game-changing disaster hits, 65 percent of small businesses have no income protection or way to keep their employees during a shutdown.

Make sure your business isn't one of them. For more information on disaster planning, read "What's Your Business Interruption Plan?"

Want Additional Insured Status? Start with These 3 Things

19. August 2015 07:29

woman reading a contract

At face value, being an additional insured sounds like a pretty good deal. An additional insured is simply anyone other than the policyholder who is covered by an insurance policy. For example, say you own a commercial building and you rent it out to a business. Your lease might require that the business owner name you as an additional insured on its General Liability Insurance policy in case one of the business's visitors tries to sue you over bodily injuries that happen on the property.

In other words, you reap some of the policy's benefits without having to pay for it. What's not to love?

As the attorney Robert M. Frey points out, people often take refuge in their additional insured status, but when it's put to the test in a lawsuit, the coverage is often challenged or inapplicable. That could be because…

  • The endorsement offers coverage for a very limited type of liability (e.g., vicarious liability).
  • The contract clause that required the additional insured endorsement wasn't specific enough.

To stave off potential disappointment, let's review three things you should do when you want your business to be named as an additional insured on a client's or business partner's insurance policy.

1. Make your additional insured contract clause as specific as possible.

Imprecise contracts make it difficult to enforce an additional insured status. For example, if your contract clause only requires the other party to promise to carry General Liability Insurance and name you as an additional insured on the policy, you can't be sure what kind of coverage you will be afforded.

To make this clause as specific as possible, request that the coverage isn't limited to vicarious liability, which can only address claims when you are held partly responsible for the policyholder's actions. The problem with this kind of coverage is it doesn't address the realities of your risk. If an injured party thinks they will get more monetary mileage out of suing you directly, vicarious liability coverage won't help.

For more tips on using contracts effectively, read "When an Arbitration Clause Might Not Actually Help Your Business Avoid a Lawsuit."

2. Get a copy of the full General Liability policy.

Don't be satisfied just to see your name on the certificate of liability insurance (i.e., the document that proves your client or partner has commercial liability coverage). Request a copy of the actual General Liability policy to ensure it names you as an additional insured. This extra step may save you the heartache (and major legal expenses) a couple general contractors received when they tried to draw on their additional insured coverage offered by a subcontractor's policy.

According to The National Law Review, the general contractors' contracts only required they be additional insureds on the certificate of liability insurance – not to the actual General Liability Insurance policy. Because they weren't named in the policy, the insurer didn't have to pay out on the claim.

3. Read the policy and consult an insurance agent for clarification.

Do more than just scan for your name when you get a copy of your partner's insurance policy. See what kind of coverage your additional insured status offers. If you have questions about what the terms mean, ask an insurance agent to explain the policy provisions to help you understand the limitations of the additional insured coverage.

In short, your additional insured status isn't full body armor. While it can afford you some extra protection, it may not apply in every situation, which is why it's still a good idea to carry your own small business insurance.

If you have questions about your additional insured status, feel free to talk to an Insureon agent at 800.688.1984.

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