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Why You Need D&O Insurance

Why You Need D&O Insurance

Written by Eric Petersen, CIC

Sure, you know that being a business owner is risky, but do you know you could get sued personally for the decisions you make for your company? Unfortunately, business owners of privately held companies can find themselves in a lawsuit from a business decision they made on behalf of their own company. Fortunately, you can protect yourself and the other officers of your company with a Directors & Officers Insurance policy. 

Often referred to as a D&O policy, this coverage is typically associated with large publicly held companies or non-profits, however every private company has some exposure that a D&O policy can protect against. 

A D&O policy is a liability policy designed to protect the personal assets of the directors and officers of a company if they are sued by interested parties for actual or alleged wrongful acts in managing the company. Employees, vendors, competitors, investors, or customers all could bring a case against the directors of a tree service for a decision or series of decisions that they make on behalf of the company. 

The D&O policy pays for defense costs that the directors incur as well as any damages that are awarded as long as the lawsuit wasn’t from an illegal act. There are a number of reasons a director could be sued individually, however a few of the more common are:

  • Decisions that lead to financial loss or bankruptcy
  • Overstating company’s financial strength or assets
  • Poor use of company funds
  • Lack of company oversight (corporate governance)
  • Failure to comply with workplace safety and employee management laws

In today’s world there is more focus on personal accountability and more and more people are attempting to hold business leaders accountable for their actions. This happens not only from an employee or investor standpoint, but also from the customers and other competitors if the neglect is bad enough where they can show how they were financially damaged from the tree service owner’s decision or lack of action. 

Tree care companies experiencing rapid growth also are subjected to greater exposure from these types of lawsuits as they navigate their way through all of the change that their company is going through. Most business owners have not been through rapid growth before and certainly make mistakes along the way. Sometimes those mistakes end up hurting others financially. 

D&O policies have a number of coverages that can be included in the policy. For instance, many D&O policies will give have the option to include Employment Practices Liability for hiring/firing, discrimination and sexual harassment lawsuits. You may also be able to purchase Fiduciary coverage to protect the person in charge of the retirement account and company funds. Some D&O policies will also include Crime coverage, protecting the business from theft of funds or company assets.

Because each D&O policy is unique, make sure you talk through your concerns with your insurance agent or reach out to an ArboRisk team member today. If you are struggling with developing a risk management program for your company, check out our Thrive New Heights Risk Management Package today!

How Industry Credentials Help Lower Insurance Cost

How Industry Credentials Help Lower Insurance Cost

Written by Eric Petersen, CIC

One of the most common questions that I get asked is “Eric, how do I lower my insurance cost?”. While there are many factors that go into the pricing of an insurance policy, it really all boils down to one thing:profit for the insurance company. The insurance company needs to make a profit to be able to deliver on their promise; to pay for insurance claims that their policyholders experience. 

To provide the lowest insurance rates possible, an insurance company must feel confident that they will make a profit on a given tree care company. It is the responsibility of the tree care company to prove why they deserve the insurance company’s confidence and how they will not have claims in the future. When the insurance company understands who the tree care company is and the internal risk management practices that they are consistently performing, then they will offer the best rates possible. Unfortunately, most insurance companies and agents don’t understand the tree care industry enough to ask the right questions and, without intentional communication about the credentials and the expertise of the tree care company, the insurance company just goes off of general answers to general questions.

Developing a good relationship with the insurance company and an agent is crucial in getting a good rate and coverage. Additionally, looking for insurance companies that understand the profession and specialize in it is also helpful. 

Before we get into how you position yourself to the insurance company, I want to explain a bit more about the insurance company. The insurance company makes a profit either by collecting more premium from their policyholders than what they have to pay out in claims plus their operating expenses or by using the premium dollars to make investment gains before they need to pay their policyholder’s claims. 

Historically, insurance companies in the United States need about forty percent (40%) of your insurance premium just to cover their operating expenses, which leaves sixty percent (60%) left to pay for actual claims. Because the insurance companies cannot exactly predict the future, they use volumes of data to try and estimate the amount they will pay in future claims and price their policies accordingly. Unfortunately, data not only comes from professional tree care companies, but also illegitimate businesses and homeowner’s trying to do tree work themselves. This can create an unbalanced approach to pricing the insurance policy for a professional tree care company if they don’t provide specific information on their business to the insurance company. 

To truly control your insurance cost, you must provide proof to the insurance company on why you are different from the masses and why you will not have as many claims as others. Help the insurance company see what risk management practices you are performing so they can offer the lowest insurance premium to you. 

Whenever possible, I recommend ensuring that you discuss the following three points with your insurance agent. 

1. Industry Credentials – The most important data that helps insurance companies predict future losses for tree care companies is the experience and knowledge level of the people inside the business. I have not met one arborist who does not believe that their past work experience makes them a very safe insurance risk, however, their personal belief about themselves and their company does not go far with the insurance company. This is why credentials from the International Society of Arboriculture (ISA) and other industry organizations are vital to receiving the lowest insurance pricing. Showing what ISA credentials you and your teammates have is the foundation for building trust and confidence with the insurance company. A credential from the world’s largest arboricultural association shows the insurance company that you are a serious professional and company, who wants to perform tree work correctly and continue to learn by keeping the credential valid. Insurance companies want to see that you are committed to professionalism within your trade. Ensure your insurance company knows how many ISA Certified Arborists®, ISA Board Certified Master Arborists®, ISA Tree Risk Assessment Qualification holders, ISA Certified Tree Worker Climber and Aerial Lift Specialists® you have on staff and what percentage of your crew has a professional credential. 

2. Internal Risk Management – In addition to industry credentials that you and your teammates possess, make sure you provide copies of the written programs and policies that you have in place that help minimize accidents and injuries. Insurance companies want to see that you have a training and development plan for each employee, written safety program, policies on driving record management and vehicle usage and jobsite assessments in place. These risk management practices enhance the insurance company’s confidence in your company, bettering your chances of receiving the lowest insurance price possible. 

3. Special Insurance Programs – In the United States,there are a handful of insurance companies that only work with tree care companies that have an ISA Certified Arborist on staff. It is their first qualifier for coverage as they understand what the credential means and how it relates to maintaining a profitable business. Make sure you ask your agent if there are any insurance companies that they work with that will only allow professional tree care companies into their client portfolio. 

Don’t let the insurance company make assumptions about your business when they are pricing your insurance coverage. Control the narrative by providing them with the data that will help them understand how you can help them make a profit by having less claims in the future.

Taking risk management seriously will help you build a stronger company that will be more resistant to negative situations that arise. If you are struggling with developing a risk management program for your company, please reach out to an ArboRisk team member or sign up for our Thrive New Heights Risk Management Package today!

Simplify Risk Management

Simplify Risk Management

Written by Eric Petersen, CIC

Whether you’ve been following ArboRisk for a while or are fairly new to our weekly business tip, you’ve probably noticed that we like to talk about Risk Management a lot! The main reason is that while as a concept it is fairly easy; the process of preventing or minimizing injuries and accidents, in practice it can feel overwhelming at times. 

In this article, I will give a way to simplify risk management for your tree care company so you are prepared before something bad happens. 

With your leadership team, take each of the categories below and think about each of them as they pertain to your business. Think about what could go wrong in those areas and what could be (or is currently being) done to minimize the risk. I have included examples inside of each category to help you get started. 

 

Five Categories of Risk for your Tree Care Company:

1. Other People – How can other people affect your business? Think about your customers, the general public, state and federal governments. Common exposures result from injury or property damage to others, lawsuits and penalties and fines. 

Ex: Customer – their property is damaged while working on their tree in their yard. 

Risk Management Solution: Create/review job briefing to ensure proper jobsite set up to minimize property damage while the work is being done.

2. Your People – How can your people affect your business? Think about your employees and subcontractors that you work with. What happens when they get injured, leave unexpectedly or file an employment lawsuit against you? 

Ex: Employee – a group of employees decide to leave your company unexpectedly to start their own business. 

Risk Management Solution: Create a career path to show employees how they can advance within your company to build loyalty. 

3. Your Stuff – What physical assets does your business own? Think about your shop, equipment, tools, your brand, etc. 

Ex: Building – fire or tornado damages your shop building 

Risk Management Solution: Purchase an insurance policy with property limits to cover the building and all items inside. Make an inventory list to assist in the recovery process.

4. Your Vehicle(s) – What vehicles and trailers does your company own or use? Think about all vehicles including rented trucks and employee’s vehicles. 

Ex: Flood – major storm enters your area and floods your yard which damages vehicles

Risk Management Solution: Create an emergency plan to move vehicles to a safe spot before the storm hits your area. 

5. Yourself – What could happen to your business if you, the owner, are not around or not physically able to do everything that you do for the business? Think about each of your responsibilities and how someone else would have to take them on for the business to continue.

Ex: Disability – a work related injury causes you to be physically unable to work for 3 months

Risk Management Solution: Create an internal employee development plan that teaches certain team members how to do the physical tasks that you are responsible for.

 

And this list is the start to your risk management program! 

If you want to dig into it deeper, you can rank each risk that you have listed from the most likely to happen to the least likely to happen. It also may help to put a severity rating on them; something that is most likely to happen, that has potentially severe results, should be dealt with right away. A severe auto accident is an example of this type of risk to your company. For more information on categorizing each risk, read our article on Insurance is NOT Risk Management to find a risk matrix. 

After you have the risks ranked, delegate each of them to your team members to begin to manage. This is now the beginning of your risk management plan! The only thing left to do is to set a follow up time for your leadership team to circle back on these items to ensure they get taken care of or to make adjustments where needed.

Taking risk management seriously will help you build a stronger company that will be more resistant to negative situations that arise. If you are struggling with developing a risk management program for your company, please reach out to an ArboRisk team member or sign up for our Thrive New Heights Risk Management Package today!

Working with Insurance Adjusters

Working with Insurance Adjusters

Written by Tom Dunn

You sustain a loss to your property, and report it to the insurance company. Shortly after, you  are notified who the adjuster is that will be handling your claim. For most people, the fear of the unknown now sets in. What will it be like working with this person to resolve the claim and get your business back to normal? Will I be treated fairly and receive just compensation or will they find ways to deny coverage or try to pay as little as possible? 

I know first-hand of this experience, having worked for a national TPA adjusting firm as well as as a staff adjuster for a self-insured risk pool that insured municipalities and school districts. From my perspective as an adjuster, I always tried to put the person who sustained the loss at ease during the first interaction and assure them they would be treated fairly. 

It is probably a normal reaction to have some anxiety, but there is no reason for this relationship to turn out poorly. If you go into the relationship with the mindset that this person can be my advocate instead of adversary and follow some simple steps, you can walk away from the experience feeling like you have been made whole.  

This article will focus on property losses, but there are many different types of claims that adjusters handle. The same basic principles for working with an adjuster apply for any type of claim. It probably helps to know what the role of the adjuster is to help know how the process will work. Here is a summary of the process an adjuster may take:

  • Determine the cause of loss
  • Determine if there is coverage available under the applicable policies
  • Determine the extent of property damage
  • Determine if the damage should be repaired, replaced and what to do with the damaged property
  • Determine the amount of payment

 

Seems straightforward, but here are some steps to make the process smoother:

  • Report the claim to the insurance company promptly. Your agent can help with reporting a claim. 
  • Know your policy. You don’t have to be an expert or know all of the ins and outs of the policy, but you definitely should become familiar with what is generally covered and your obligations. Pay attention to the “Duties after a Loss and Proof of Loss Requirements”. 
  • Ask questions of your adjuster. A good adjuster will explain your duties and obligations and bring up any coverage concerns, but don’t be afraid to ask for explanations if you have questions. As with all strong relationships, communication is the key. Be polite and responsive in all interactions, but it is ok to be firm.   
  • Take steps to mitigate any further damage while the claim is being investigated. This is required in the policy language. See #2
  • Collect documentation of your damage. Take a complete inventory of damaged and undamaged property (pre-loss inventory is even better). Take photos and videos of everything that was damaged as soon as possible after the loss and identify what it is showing. 
  • Insurance companies may recommend a contractor or you may be able to choose your own to complete repair work. Make sure they are present when the adjuster comes to inspect the damaged property and have experience working with insurance adjusters.
  • Keep a claims journal documenting your interactions with the insurance company adjuster (dates, times, subject matter). The adjuster is doing the same with you and this can help resolve any discrepancies.  
  • Remember the appraisal clause in the policy language. Hopefully, if you have followed steps 1-7, this won’t be necessary, but if you don’t feel you are receiving just compensation for your loss, you have the right to invoke the appraisal clause and seek a non-biased opinion of a third party. See #2

 

Dealing with the aftermath of a claim can be a stressful situation. Being prepared, detailed, proactive and advocating for yourself goes a long way in obtaining a successful resolution. A good insurance agent knows when and how to become involved, without being a hindrance to the claims process. Utilize that relationship, when needed.  

For additional help in working with insurance adjusters, contact a member of the ArboRisk Insurance team! ArboRisk also can work one-on-one with you to create an extraordinary business through our Thrive Risk Management New Heights package!

Lastly, check out this article on maximizing compensation from vehicle accidents in October 2021 TCI Magazine.

Tom Dunn

Why Auto Insurance Rates are Increasing

Why Auto Insurance Rates are Increasing

Written by Tom Dunn

Commercial auto rates have been increasing at an alarming rate across all industries and the tree care industry is no exception. 

This article is meant to shed some light on the causes behind the rate spike and point you to a few resources to help you minimize your cost. 

Distracted Driving and Accidents

As with any insurance coverage the rate that you pay is directly connected to the likelihood of a claim happening. Therefore, when there are more accidents, the cost of the insurance goes up.

For many tree care owners, their truck is also their mobile office and just like working in a traditional office, there are plenty of distractions that can take your focus away from what you should be doing. The only difference is in a vehicle, the consequences of lack of focus are always more severe, leading to property damage, injuries and even death.

Distracted driving is the largest cause of motor vehicle accidents and comes in many forms. Some of the most common are: 

  • Cell phone use: Talking or texting. Even the hands free options can distract.
  • Multi-tasking like eating or drinking while driving
  • Adjusting controls in the vehicle
  • Checking GPS navigation system
  • Talking with another passenger
  • Looking at something outside car

Inflation

Technology has led to many advances in vehicles that are supposed to make them safer, however that technology comes at an increased cost for consumers when it comes time to repair a damaged vehicle, especially delicate electronics.

Same principle at work with individuals who are injured in a motor vehicle accident. Hospital services have gone up dramatically in cost.

More Drivers

Yes, there were less drivers on the road during the peak of Covid, however, the number of licensed drivers has grown overall to over 230 million across the country.

Inexperienced Drivers 

Unfortunately, there are enough experienced drivers with the skills and expertise to drive commercial vehicles to replace the drivers who are retiring. In general, inexperienced drivers have more accidents. 

Infrastructure

Old, crumbling roads and bridges increase the wear and tear on vehicles, making accidents more likely. Roads not designed to handle the volume of traffic we see today which leads to more congestion and accidents.

Supply Chain Disruptions 

Covid did lead to a decrease in the need for vehicle parts for a short period, however as driving has returned to more normal levels, there has been an increased demand. Sadly, the supply of available parts has not caught up.

Extreme Weather

It doesn’t have to be considered an extreme weather event to lead to an accident, and you don’t have to be a meteorologist to see the increase in extreme weather events. Company vehicles can be damaged just sitting in a parking lot, however, Tree Care companies are often on the road as first responders in extreme weather events thereby increasing their chance of being involved in an accident during a storm.

Huge court verdicts

Also known as “Nuclear Judgements,” these are defined as a verdict in favor of a plaintiff with a damage award over $10M, but can be used for any verdict larger than anyone expected. 

One of the insurers that ArboRisk works with recently had a $6M verdict handed down for a motor vehicle accident involving a tree care company. An interesting look behind the reasons for nuclear verdicts shows that how a company addresses safety definitely matters:

  1. Juries have shown that if a company overlooks workplace safety, doesn’t provide adequate safety training for employees and has a history of repeat violations, they will be punished for their lack of training oversight.
  2. Failure to utilize available technology (driver monitoring systems, forward collision systems, back-up cameras, voice control-Bluetooth) can also lead to punishment from a jury.  

 

While it may seem like there is no hope for your business auto rates, know that you are not helpless in controlling your own rates. Companies that take driver and fleet safety seriously position themselves to receive the lowest rates possible. We actually recently wrote an article to give you four ways you can lower your rates. 

Additionally, every ArboRisk client has access to our extensive driver and fleet management resources on our Thrive website. Not an ArboRisk client? No problem! Enroll in our Thrive Safety Package to get one-on-one help lowering your risk of an auto accident within your company.

Tom Dunn