Insurance Doesn’t Matter, Until it Does February 4-6, 2016 Presented by Gowrie Group: Dan Cooney and Rick Bagnall
Who insures you doesn’t mater. Until it does.
Have you heard anyone say this before? We can’t do “that,” our insurance doesn’t allow it.
Don’t worry about it, we have great insurance.
• Are you sure “that” is true?
• This is not a smart strategy
• Coverages can be added
• Read your 300 page policy
• Coverages change over time
• Ask questions
• Policy can be customized
• If it isn’t stated in the policy, you may not be covered
We Know! Insurance policies can be opaque
“Reading an insurance policy is like getting an ice cream headache while trying to unwrap a riddle inside an enigma.” - Anonymous
AGENDA: True or false, or it depends on your policy… 1. Our insurance covers floods 2. Our insurance covers kids swimming off boats and docks 3. Most claims occur on the water 4. Directors & Officers are excluded from coverage on our policy 5. We don’t need liquor liability insurance because we don’t sell liquor 6. We have adequate coverage for volunteers and accidents 7. Our insurance would pay to restore our historic clubhouse after a fire 8. Employees don’t file allegations against yacht clubs 9. Our insurance covers sexual molestation and abuse 10. Funds fraud can’t happen to a yacht club or community program
1. True or False? Our club’s insurance covers flood
Hurricane Irene, 2011. Sachems Head Yacht Club in CT
Hurricane Carol, 1954. Edgewood Yacht Club in RI Image: NOAA
Hurricane Sandy, 2012. Hyannis Port Yacht Club in MA. Image: Cape Code Times, Steve Heaslip
Flood Insurance should be considered for each building and docks/piers National Flood Insurance Program (NFIP, FEMA): • Coverage capped at $500,000 per building • Each policy only covers a single building • Values are depreciated • Retaining walls, decks, docks and piers are NOT covered • Not just for coastal properties; rivers and lakes also flood • If more than 50% damage, have to rebuild to NFIP standards Excess Flood Insurance: • Can be purchased to cover above the FEMA limits • Available outside of NFIP Dock & Pier Coverage: • Burgee Program includes flood and wave-wash coverage for docks and piers 7
2. True or False? Our insurance covers kids swimming off boats and docks
Image: Carol Connor.
Know what is excluded from coverage: Exclusions EXCLUSIONS. This insurance does not apply to loss, damage, liability or expense directly or indirectly caused by or contributed to or resulting from… Marine Liability 2.7. Any liability, loss, damage, or expense arising out of swimming, snorkeling, diving, or similar activities 2.8. Any liability, loss, damage, or expense arising due to the failure of the Insured to have a competent employee of the Insured at all times in charge of any watercraft being navigated 2.9. Towing of boats
Note: 2.7 and 2.8 are policy text copied from an enforce policy for a yacht club.
Know what voids your coverage: Warranties WARRANTIES. This insurance shall be void unless… OWNED WATERCRAFT INSURANCE 3.1. The watercraft insured are maintained by the Insured in a seaworthy condition at all times during the term of this insurance 3.2. The watercraft insured are operated by duly qualified persons, as required by federal, state or local regulation
Note: Policy text copied from an enforce policy for a yacht club.
3. True or False? Most claims happen on the water.
Many more claims on land than on the water By Volume (# of claims)
By $’s of Claim Payout*
1. Boat damage
1. Dock damage
2. Property damage (non-dock)
2. Property damage (non-dock)
3. Workers compensation
3. Slip & Falls (Liability)
4. Slip & Falls (Liability)
4. Workers compensation
5. D&O / EPLI
5. Boat damage
6. Dock damage
6. Liquor liability
7. D&O / EPLI
9. JR Sailing
10. Liquor liability
10. JR Sailing
*Burgee Program, historical data analysis, claims over $5,000.
KEY: Green = on land Blue = on water
4. True or False? Directors & Officers are excluded from coverage on our policy
Are our flag officers covered?
D&O: What’s at stake 1. Assets of the club or sailing organization 2. Board members’ personal assets 3. Reputations of the club, organization, flag officers, and individuals 4. Time 5. Ability to recruit members and directors 6. Ability to get new flag officers, board members, or leaders
Directors & Officers need coverage for bodily injury, property damage, and for their decisions Club Officers and Directors are at risk for complex lawsuits • Management errors and omissions (E&O) • Unintended financial mismanagement • Violation of state/federal laws • Race management errors and omissions • Membership discrimination Coverage comes from multiple policies • Bodily injury and property damage covered on general liability policy • Decision making covered on a separate D&O policy (additional policy) • Umbrella should cover over all policies 15
5. True or False. We don’t need liquor liability insurance because we don’t sell alcohol
Do you sell drink tickets at regatta parties?
Do you bill members for attending social events that serve alcohol? 16
Liquor Liability: Is “Host Liquor” enough? Some General Liability policies include “Host Liquor” liability coverage • With Host Liquor coverage, what is acceptable/covered related to liquor in one state may not be acceptable in another • Typically covers nominal exposures like serving wine during a board/officer meeting, staff holiday party, etc. • Typically not adequate coverage for a sailing club that has a busy social calendar with events that involve alcohol for members/guests • Not adequate for entities that are in the business of selling, furnishing, and/or serving alcohol
So, what type of liquor coverage does a sailing club or organization need? 17
If your sailing organization sells, serves, or furnishes alcoholic beverages, you likely need Liquor Liability Insurance Post race keg on the dock? Yes Parties with drink tickets? Holiday galas with open-bar?
If Yes, this means your are: “in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.”
You need full Liquor
(Host Liquor coverage is not adequate)
Considerations… Liquor laws vary by local and state liquor ordinances, you may need a Liquor License or Permits Wristbands can be used to distinguish minors from adults (coverage is void if serving to minors) Verify your umbrella policy covers over your liquor policy Burgee Insurance Program includes Liquor Liability and the umbrella policy goes over it 18
6. True or False? We have adequate coverage for volunteers and accidents
On Land: Volunteers painting the interior walls? On Docks/Piers: Volunteers repairing the docks? On the Water: Volunteer race committee?
Coverage for Volunteers Varies: By location, by policy type, by carrier, and by state Which Policy Responds? • On land general liability policy • On piers and docks marine general liability • On water protection and indemnity Medical Expense Limits, if you are with The Burgee Program: • General Liability Policy: $10,000 • Marine General Liability Policy: $10,000 • Protection and indemnity: $10,000
Coverage for Volunteers Varies: Do you have enough coverage? Coverage Considerations: • Some GL policies exclude volunteers from Med Pay • Workers Compensation does not cover volunteers • Board members and Flags may be considered to be volunteers • State specific laws and coverages vary Do you need More Coverage? • Consider purchasing a “Volunteer Accident & Sickness Policy”
7. True or False? Our insurance would pay to restore our historic clubhouse after a fire
The new Southern Yacht Club, 2010 Southern Yacht Club (SYC) during Hurricane Katrina (2005)
The difference between restoration coverage and replacement coverage matters Coverage Considerations • Only Restoration Coverage restores to original condition • Building limits matter • Limits need to include cost to build to code, and to zoning & ordinance laws • Be aware of Co-Insurance, Actual Cash Value, Sub-limits, and Deductibles • Partial losses can be complicated Property Valuations are Critical • Frequent appraisals are essential (about every 3 yrs) • Replacement values and construction costs increase • Dock systems expand • Out buildings are overlooked 23
8. True or False? Employees don’t file allegations against yacht clubs
Failure to promote?
What is Employment Practices Liability Insurance (EPLI)? Employment Practices Liability Insurance (EPLI): protection for litigation alleging discrimination, wrongful termination, failure to promote, sexual harassment (non-physical), retaliation, and more.
EPLI claims are frequent and complicated • EEOC claims skyrocketed since financial crisis of 2000’s • Top trending EPLI cases in 2014: Unpaid internships, illegal background checks, pregnancy and health-related employment discrimination • 6 of 10 employers will face an employee lawsuit (within 5 year period) • Small employers with less than 100 employees account for 50% of claims • Defense is time consuming and expense: defense costs can be $300,000; timeline for resolution can be 18-24 months • Settlements: Most settlements, even if employer is innocent, settle for between $20,000 and $40,000 (plus defense costs) • Compensation Awards: Average more than $200,000
*Source: US Equal Employment Opportunity Commission, 2014; Hartford Steam Boiler Inspection & Ins Co; Advisen
How should I manage my Employment Practices Liability risk? 1. Develop a strong employee handbook; work with an experienced, local employment attorney 2. Be consistent in how you treat and interact with all employees 3. Follow the rules and procedures you set 4. Document any and all employment related activities 5. Make sure you have adequate EPLI coverage in place 6. Consider smart enhancements and endorsements to your EPLI policy: 3rd Party Coverage, Immigration, Whistleblower, Wage & Hour 7. If you suspect a claim might be filed against you, contact your insurance broker and lawyer right away; don’t attempt to handle it or cover it up yourself – –
Burgee Program clubs receive complementary consultations from Jackson Lewis law firm Chubb pays for defense costs, as long as the claim is defendable
9. True or False? Our insurance covers sexual molestation and abuse
Physical contact by a camp counselor to a camper… Member romance with summer-staff gone wrong…
Some General Liability policies exclude coverage for sexual molestation and abuse Inappropriate physical contact between parties could result in allegations: •
College-age sailing coach to teenage racer
General manager to young adult member
Day-camp counselor to camper
Member to member
Coverage considerations •
Read your General Liability policy carefully for exclusions
EPLI includes coverage for sexual harassment (non-physical)
Consider 3rd party EPLI coverage (vendors) 29
10. True or False. We would never be tricked into transferring money to the wrong vendor What is Social Engineering Fraud? When an employee is intentionally misled into willingly sending money or diverting a payment based on fraudulent information that is provided to them in a written, electronic, or verbal communication such as an email, fax, letter or phone call. Accelerating Reality: • 100,000+ attacks on businesses per day • 270% increase in victims of compromised business emails in 2015 (CIA) • 45% of small businesses (many nonprofits) were targets of attacks in 2014
Social Engineering: What can you do? • Train your employees and officers. It starts with awareness and education. • Implement controls. Evaluate and improve your internal controls; take action. • Consider insurance solutions. Not every crime can be prevented. Consider insurance solutions through crime and/or cyber policies and endorsements. Know what is and isn’t covered. Download the Gowrie Group whitepaper on this topic from our website at: Gowrie Risk Report: Social Engineering Fraud
Smart questions to ask your insurance broker 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.
Does our policy exclude swimming? Do we have full liquor liability coverage, and is it under our umbrella? Do we have coverage for flood and wave wash damage to our docks/piers? Would a dock claim be depreciated? Is Regatta Liability built into our policy? Does our umbrella policy go over our MOLL and Marine GL polices? Do we have flood insurance coverage on each building? Do we have restoration coverage on our clubhouse? Does our yacht policy have a navigational limit? Are there seaworthiness warrantees on our boats? Do we have Jones Act coverage on our instructors, launch drivers, and dock hands? Does our policy cover sexual molestation and abuse? Are member, employees, and volunteers included as “additional insureds” on our policy? Do we have hull and liability coverage on borrowed boats? Do we have coverage for race management errors? Do we have coverage for accidental fuel spills? Do we have volunteer accident coverage?
What should you do next? • Be proactive and ask these questions about your insurance • Make sure you understand your coverage and exclusions • Form an insurance, safety, and risk management sub-committee • Involve your board members and flag officers • Conduct a strategic insurance review at least every 2-3 years
A Sense of Calm: Brought to you by The Burgee Program The Burgee Program insures: • More than 50% of sailing organizations in the US • More than 1,000 entities in total, including clubs, schools, and community programs Team behind the program is best in class: • Managed by marine experts at Gowrie Group • Underwritten by Chubb • Endorsed by US Sailing Learn more: • www.burgeeprogram.com • 800.262.8911 34