Florida Insurance Network

I stumbled upon this blurb the other day about a survey, which shows that a large percentage of small business owners are whistling by the graveyard.

It seems small business owners would rather focus on growing their companies than on protecting them. Naturally. Most small business owners are entrepreneurial by nature. Risk is just part of their landscape. It’s not in their nature to stress over it.

At some point, though, you cross a line between optimism and denial. Case in point: 41 percent of small business owners surveyed are “extremely confident” that they’re protected against insurable risks that could drive them under or cause huge financial losses.  Yet 39 percent said they “can’t make the time” necessary to identify those risks and manage them.

See the disconnect? Anyone who has eaten a big loss has plenty of time to insure against another. It’s sort of like people who back up their hard drives. If you’ve ever lost one, your back-up plan probably borders on compulsion.

The computer analogy is especially appropriate here because one of the big risks small businesses face is data loss owing to hardware failure and human error, not to mention more sinister varieties of data breach.

I won’t bore you with stats. You already know this is a huge problem that’s growing worse. Businesses that accept credit cards or store personal data, like Social Security numbers, are vulnerable to losses. Expensive losses, not to mention lawsuits and reputation implosions.

What’s more interesting is that many of these losses originate from simple managerial oversight or common criminality as opposed to high-tech intrusions.

Check this list of data breach incidents from the Privacy Rights Clearinghouse. Choose a month then scroll down and scan the descriptions. You’ve got employees losing company laptops, dishonest workers selling credit card numbers and outdated software displaying personal data online.

Notice that the list of organizations covers the spectrum from giant corporations to mom-and-pop restaurants. Auditors went into the Oakridge National Laboratory in Columbus, Ohio and found old hard drives containing sensitive information tossed into hallways, unused offices and loading docks.

So, let’s say you own a restaurant and someone on the wait staff decides to keep credit card numbers. Or maybe you run one of those varicose-vein removal centers and a laptop full of patient records turns up missing. Or suppose your server crashes and takes about three years worth of critical data with it.

Are you ready for that? Are you covered, if patrons or patients sue you? Are you covered for the many thousands of dollars it’s going to take to try to recover data from that crippled drive?

If not, you might want to make time to learn about data breach insurance. Better now than after a meltdown. A good policy could literally mean the difference between a setback and a total loss.

Here’s one only a lawyer could love.

It goes something like this: A woman drives to work one morning. It’s cold outside. The roads are icy. She trundles into the office, goes to her workstation and turns on her computer.

Whew! Break time! So she heads back outside for a smoke.

Now, maybe you’re thinking to yourself “why didn’t she smoke before going inside to work?” Or why didn’t she just smoke a butt in the car, then go inside? You thoughtless, inconsiderate lout, you. Why should she smoke in her car when she can smoke and get paid?

Anyway, our worker lights out to light up at the smoker’s outpost, which her employer established as a convenience for his nicotine-dependent employees who would otherwise ruin everyone else’s air with second-hand smoke and probably get the employer sued by a disgruntled ex-employee.

She stands out there, smokes and freezes her tush, then heads back inside. On her way she slips and falls, hurting her left knee, side and back. She’s not just embarrassed all laid out on the floor like a walrus. This poor woman is injured; on the job. Get the picture? That’s right – workers-comp claim.

“Oh, no you don’t!”, says her employer. “You smoke on your own time. We call that a ‘personal  errand,’ which doesn’t qualify as a work-related injury. Don’t expect us to pay your medical bills. You’re on your own, girl.”

“Excuse me,” says the employee. “I don’t think so.” And she sues the company. Well, time goes by and wouldn’t you know it? She loses the lawsuit. The court sides with the employer. No argument there, right? Wrong. The civil appeals court reversed the lower court. Turns out the employer is responsible for her injuries.

Damn! I hope they had good insurance.

By the way, Florida requires employers to purchase workers compensation insurance when they employ four or more people. Some business owners with less than four employees think this law absolves them from paying for work-related injuries. It doesn’t. It just absolves them from buying workers compensation insurance.

If you’ve got employees and no workers comp insurance, you might want to speak to an agent. Those medical bills can get real expensive.

Good luck. I’m going out for a smoke.

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If you own or manage vacant property, or know someone who does, read this.

Whether it’s residential or commercial, vacant property poses special risks for insurance companies, which – naturally – means reduced coverage for the property owner. The link above provides a concise explanation by way of some great examples. If you’re involved with a vacant property, you really should understand specifically what is and is not covered under your policy and in what amount.

In this economy, you can throw a stone across almost any street in any town and hit a foreclosed home or a vacant storefront. How many owners of these properties understand the insurance implications is anyone’s guess but I’d be willing to bet it’s less than half.

For example, did you know the word “vacant” doesn’t necessarily mean empty?

Clintonesque, (Is is is, or is?) I know, but true. If it’s a single-family home, vacant pretty much means vacant. If it’s a commercial property, like a four-plex or a strip mall, “vacant” doesn’t mean unoccupied. The common definition of “vacant” for insurance purposes is less than 31 percent of the total square footage rented and used for customary purposes.

In other words, a strip mall of 10 units with seven vacancies is considered vacant. The same would be true of an apartment house with seven of 10 apartments unoccupied.

Generally speaking, vacant property is not covered for damages resulting from theft, attempted theft, broken glass, sprinkler leakage, vandalism and water damage over a period of more than 60 days. As for damages resulting from other, covered causes, payment is generally reduced by 15 percent across the board.

Fifteen percent maybe doesn’t sound like enough to send you screaming in a panic to your insurance agent but think about what that really means. Suppose fire burns a significant portion of your vacant strip mall. The cost of repairs is going to run into tens of thousands of dollars and you’re looking at a 15 percent kick in the shorts, in addition to the deductible. For some businesses that’s a make or break scenario, especially in these times of scarce revenue and weak cash flow.

Check your policy and speak to your agent. If you need more help, give me a call. Our agency works with underwriters that do write policies for vacant properties.