What’s the Difference Between Policy Cancellation and Non-Renewal?

In some policyowners’ minds, whether your insurance company cancels your auto coverage, or simply chooses not to renew it, it all means the same – you’re suddenly without insurance. However, it isn’t quite that simple. The difference between cancellation and non-renewal can be a significant factor in finding another auto insurance policy.

There are specific conditions, outlined in each state’s laws, under which an auto insurer is permitted to cancel your policy. Here are some common ones:

  • Failing to pay your premium in a timely manner.
  • Losing your ability to drive because your license was suspended or revoked, or because it expired during the term of the policy. This can also apply to any members of your family who are covered under the policy.
  • Falsifying information on your insurance application.

Your insurer has the right to cancel your policy at any time if you’re guilty of one of these actions. If it decides to do so, it must send you a written notice of the cancellation that explains why your coverage is being cancelled. Depending on the laws of your state, your insurer must provide 10 to 30 days notice before the cancellation becomes effective.

There is one other instance where an insurer has the right to cancel your coverage, and that is during the 60 day binding period immediately following your application. An insurer could cancel your policy during this time if it discovers some information that marks you as an unacceptable risk.

If your auto insurance is cancelled for any reason, you will likely have trouble finding another insurance company willing to issue you a policy. The only cancellation circumstance where the possibility of reinstatement exists, is being cancelled for not paying your premium.

In this case, you would be sent a letter informing you that your premium was not received and providing a specific amount of time to rectify the situation. If the payment is received before the cancellation date, you will receive a letter of reinstatement. However, reinstatement does carry consequences. You will probably have to pay a late fee and an extra premium to cover the period between the cancellation and the reinstatement.

You auto insurer can also elect not to renew your policy. State laws aren’t always as specific about what constitutes reasons for non-renewal as they are about reasons for cancellation.

If your insurer decides not to renew, it is usually because you filed too many claims for at fault accidents, were convicted of driving under the influence, or were cited for too many traffic violations during the previous three to five years.

As is the case with cancellation, your auto insurer has between 10 to 30 days to send written notice of non-renewal, which should explain the reason they chose not to renew. If this isn’t included in your non-renewal notice, request an explanation from your insurer. The one advantage non-renewal has over cancellation is that it is less of a deterrent in finding another company to provide you with auto coverage.

Keep a Time Limit on Workers’ Comp Claims and Hold Down Costs

Workers’ compensation claims are a major cost of doing business, and the length of time a claim remains open has a large effect. Claims that stay open for long periods of time are more likely to involve attorneys, high medical bills, and significant payments for lost wages. According to the Insurance Information Institute, between 2002 and 2007 the medical cost per lost-time claim (claims where the injured employee is unable to work) rose 50 percent faster than the annual rate of medical inflation for the economy as a whole. The institute estimates that attorney fees increase claim costs by 12 to 15 percent with no net gain in benefits to the worker. Most states index the maximum payment for lost wages to the state’s average weekly wage, a figure that generally rises each year.

Limiting the duration of workers’ compensation claims is an important strategy in the effort to hold down costs. To do this, employers have several options at their disposal:

  • Prompt notice of claims to the insurance company hastens the onset of medical treatment, speeds up the injured worker’s recovery and return to work, and reduces the likelihood that he will hire an attorney. Therefore, requiring workers to immediately report all injuries, however minor, and promptly reporting them to the insurance company can have a huge impact on the duration of a claim.
  • A prompt and thorough investigation of the incident is just as important. Interviews with the injured worker and witnesses, photographs, and other information gathered as soon as possible will help the insurance company to properly adjust the claim.
  • If the employee will be out of work for an extended length of time, the employer should keep in regular contact. An injured worker who gets the sense that his employer does not care will become a receptive audience for plaintiff attorneys. Employers may want to call the worker periodically to check on his condition, offer assistance with completing the paperwork, and generally to check on his emotional state.
  • The employer should have a good understanding of the state law pertaining to the waiting period for benefits covering lost wages. This is especially true if the employer operates in several states, as their laws may vary widely. Understanding how the law applies to the worker’s situation will help the employer set expectations properly. This reduces the chance of misunderstandings that can lead to problems down the road.
  • Building relationships with the physicians treating the employee will keep the employer better informed as to his condition, treatments, medications, and expected duration of disability. This should eliminate surprises and help the employer get the employee back to work sooner.
  • Return to work programs can shorten claim duration and reduce costs significantly. These programs permit an injured employee to return to work in some capacity before he has recovered to the point where he can resume his previous duties. They reduce payments for lost wages, meet the worker’s need to feel productive again, and remove incentives for the worker to hire an attorney.
  • Employers should review loss reports with their insurance agents and claim adjusters and ask questions about losses that do not appear to be progressing toward closure. They should also look for patterns in the loss reports to identify correctible factors that raise the cost of lost-time injuries.

Employers owe it to their workers to provide a safe workplace and benefits to help them should they get hurt. With some extra care and attention, employers can meet those obligations and keep costs in check.

Don’t Be Victimized Twice By a Hit and Run Driver

The National Highway Traffic Safety Administration (NHTSA) reports that nationally, from 2003 to 2006, one out of every eight accidents was a hit-and-run; however, some regions of the country exceeded the national average.

The South had more than one million reported hit-and-run crashes, making it number one nationwide. The Midwest ranked second with over 835,000 reported incidents. California received state honors for having one of the highest rates of hit-and-run accidents in the nation.

If you are the victim of a hit-and-run, it doesn’t matter where your region ranked on NHTSA’s survey. What is important is that you aren’t victimized twice because you aren’t prepared for the financial consequences. In a hit-and-run accident, you become responsible for all the expenses associated with medical care, car repairs and replacement car rental that normally would have been covered by the at-fault driver’s auto insurance carrier.

That’s why the Insurance Information Institute recommends that you purchase Uninsured Motorist coverage, if not already required in your state. Since being involved in a hit-and-run accident is essentially the same as being in one with an uninsured driver, uninsured motorist coverage will pay the costs resulting from the accident.

Also consider that some auto insurance companies don’t necessarily cover the cost of a replacement rental car, even if a hit-and-run driver damaged yours. So it makes sense to add replacement rental car coverage to your auto policy because it typically costs less per year than the average daily rate for most rental cars.

While having proper insurance protection is important if you are involved in a hit-and-run, the best strategy is to avoid being a victim in the first place. Here are some simple tips to remember:

  • If you have to stop on the highway, be safe — Stop on the right shoulder. Stopping on the left side will increase your chances of being involved in an accident by 80 percent.
  • Carry flares or triangles in your trunk — Use these to mark your location once you come to a stop on the side of the road. You should also put on your hazard lights. Emergency flashers, used in conjunction with flares/triangles, are an effective way of giving other drivers advance warning of your location. Flares/triangles can also act as a backup if flashers become inoperable in the event of a failure in your car’s electrical system.
  • Become a member of an emergency roadside service — Although you may have to wait as long as an hour for assistance, it is preferable to trying to fix the problem yourself. Working on your vehicle in high traffic or where oncoming motorists may not see you is asking for trouble.
  • Maintain your car — Tire blowouts are a common reason vehicles become inoperable. Always keep your tires inflated according to the manufacturer’s recommendations. Check your tires periodically for wear and tear, cuts, or abrasions that could cause the tire to deflate while you are driving.

Get the Injured Worker Back on the Job the Right Way

Workers’ compensation premiums represent a major personnel expense for most organizations. Injuries that cause employees to miss work are especially costly, in terms of both lost wage compensation and lost productivity. Also, the longer a worker is disabled and unable to work, the more his future earning power decreases and the more likely it becomes that he will hire an attorney. For these reasons, it is advantageous to both employer and employee to get the injured worker back on the job as soon as possible. As a result, many employers have implemented return to work programs.

Under a return to work program, the injured employee performs a different job while receiving his prior level of pay. The new job should be matched to his current physical capability, reflecting his state of recovery from the injury. To succeed, this requires a good working relationship between the employer and treating physician. The employer needs accurate information as to the tasks the worker can safely perform; otherwise, the result may be a second, more severe injury. If the worker’s physician will not cooperate or provide a realistic estimate, the employer or insurance company may have to require a physical examination by an independent physician.

A return to work program should be one piece of a comprehensive and coordinated loss management program. The elements of the program should include:

* Immediate reporting and investigation of accidents

* Arrangement of primary medical care

* Return to work program

* Regular communications with the injured worker

To assist in the arrangement of primary care, the employer should provide the treating physician with job descriptions that explain each job’s physical tasks in detail. Meetings with the physician to explain the nature of the employer’s operation will help match a job to the worker’s capabilities. Communications between the physician and the employer are vitally important. The employer may want to arrange for direct reports from the physician or regular reports delivered by the employee. The ideal situation is one where the employee can assume light duties without missing any time. Barring that, limiting lost time to a week or two will still keep the claim’s cost down, resulting in premium savings for the employer. The experience modification formula, which adjusts the premium based on loss history, gives the most weight to losses of $5,000 or less. Getting the injured worker back on the job quickly will help keep the loss well under that limit. Since losses remain in the calculation for three years, the effect of holding down claim costs is long lasting.

Of course, return to work programs have pros and cons. The pros include:

* Limiting or eliminating lost work time

* Keeping the worker involved in the work environment

* Eliminating the need to locate, hire and train a replacement

* Increasing the chances of success should the worker refuse the new duties and sue for lost wage benefits, since the employer can show that it made a reasonable job offer

Among the cons are:

* The employer will pay the employee’s full wage for reduced productivity

* An employee with a bad attitude about his alternative duties could lower morale among the other employees

* If the alternative arrangement does not work out, returning the employee to lost wage benefits will wipe out any cost savings

While individual cases might not produce the desired results, employers should realize long-term savings by implementing return to work programs. Beyond the verifiable dollar savings, return to work programs can give the employer a more stable, happier workforce and a good reputation with potential employees.

Cutting the Cost of Your Teenager’s Car Insurance

Auto insurance for teenagers has always been expensive, and that will probably never change. It’s common for most parents to add their teen as a named driver to the family auto policy because it is usually the most affordable alternative.

However, less expensive doesn’t mean cheap. That’s because insurers calculate their rates based on the likelihood of a driver getting into an accident. The National Safety Council says that drivers between the ages of 16 and 17 are three times more likely to be killed in a traffic crash than drivers between the ages of 25 and 64. Statistics like these make drivers under the age of 25 bigger risks in the eyes of auto insurance companies, so expect your premium to increase anywhere from 50 to 75 percent.

There are some other important factors that affect how much you will pay when adding your teen to your insurance:

  • Gender – Teenage boys are considered to be more reckless and bigger risk takers than teenage girls. All of that bravado comes with a price, higher rates than for teenage girls.
  • Experience – Lack of driving experience translates into higher premiums because insurers assume that inexperience makes the driver more prone to accidents.
  • Geography – Driving in a high-traffic geographic area is another rate booster because it increases the probability of getting into an accident.

While the deck seems to be stacked against you, there are ways you can lower premiums:

  • Buy them an older model car – Older cars cost less to insure than newer models.
  • Avoid the extrasAll of those add ons that teenagers love, like chrome rims and big stereo systems, will increase the rate you’ll pay.
  • Lower/drop collision coverage on older cars – If the value of the car is less than the product of your annual premium times 10, think about dropping the collision and/or comprehensive coverage portion of your policy.
  • Raise your deductible – A higher deductible can lower your auto insurance rate by 15 to 30 percent.
  • Enroll the teen in a defensive-driving class – This could result in a premium decrease.
  • Obtain car insurance from the same company that provides your homeowner’s or renter’s insurance – Many insurers will offer a 10 to 20 percent discount for multiple lines of coverage.
  • Maintain your credit score – Insurers base your premium in part on your credit score; the higher it is, the lower your rate will be.
  • Ask about low mileage discounts – As gas prices increase, many people aren’t driving their car as much. If you drive less than the annual average miles allotted by your insurer, see if you can qualify for a low mileage discount. 

Toxic Torts Can Poison Your Business

In the 1800’s, manufacturers and builders started using a natural resource that vastly improved the quality of their products. It added strength to materials, resisted heat, electrical and chemical damage, and absorbed sound. When mixed with cement and used in building construction, it enhanced fire safety. By the middle of the 1900’s, manufacturers were using it in insulation, automobile brake pads, drywall, lawn furniture, fireplace cement, gaskets, and a host of other products. Unfortunately, this material, asbestos, can cause serious lung disease and even death in those who inhale its fibers. Builders and manufacturers who used it have endured hundreds of thousands of lawsuits from the victims or their survivors.

Claims resulting from exposure to asbestos fall into the category of what is known as “toxic torts” — injury and damage lawsuits stemming from exposure to substances proven to cause illness or injury in people. Other substances that lead to toxic torts include lead paint, toxigenic mold, industrial chemicals, pesticides, and toxic landfill waste. These lawsuits can ravage a company’s balance sheet, ruin a good reputation that took years to build, and divert resources and attention away from normal operations and toward legal defense.

Asbestos has been associated with instances of cancer affecting the protective lining that covers most of the body’s internal organs. This form of cancer was killing 3,000 Americans a year by the late 1990s. Most of the victims had long-term occupational exposure to asbestos; a Rand Corporation study estimated that 27.5 million people in the U.S. were exposed to asbestos in their workplaces between 1940 and 1979. Consequently, by 2002 more than 730,000 people had sued more than 8,400 firms for illnesses caused by the fiber. The cost of asbestos-related litigation in the U.S. has exceeded $250 billion.

Toxigenic molds produce a chemical that can be dangerous to people exposed to large amounts of it over a long period of time. Normally, the mold is not present in large enough quantities to be harmful. However, concern has grown over the last several years about the possible effects of long-term exposure to these molds. Newer energy efficient homes have become air tight, preventing moisture from escaping and creating an environment where mold can grow. A Texas woman who sued her insurance company over its refusal to pay for cleaning up mold that allegedly made her home unlivable won a multi-million dollar damage award; a court later reduced the amount. While health experts have not reached a consensus about the actual harm mold can cause, the increased attention to it makes future litigation likely.

The standard commercial general liability insurance policy does not cover most losses resulting from pollutants. However, alternatives exist — pollution legal liability insurance policies. These policies cover damage to the organization’s own property; injuries or damages that others suffer as a result of a toxic incident for which the organization is liable; and associated cleanup costs. Depending on its terms, such a policy might also cover new injury claims, cleanup, and the discovery of new toxic substances after the organization implements a pollution remediation plan. A professional insurance agent can help locate the appropriate coverage at a reasonable cost.

Toxic torts are likely to remain a financial threat to all organizations for the foreseeable future. Controls to prevent injuries or to make existing ones less severe, coupled with the right insurance company, can help ensure that your organization will survive this threat.

Can Your Car Insurance Survive a Storm?

With winter coming to a close, it’s time for many parts of the country to start preparing for tropical storms. Such storms can cause massive amounts of damage, not only to your home, but also to your car. Do you have enough auto insurance coverage to withstand that kind of destruction?

The Insurance Information Institute (I.I.I) says that even with comprehensive auto coverage, you may not be fully protected. Comprehensive coverage will pay for losses caused by fire, falling objects, catastrophic storms, vandalism, or animals. It will also protect your car against flood damage.

What you may not be aware of is that even with comprehensive coverage, your auto insurance does not automatically pay for a replacement rental car while your car is being repaired, or while waiting for an authorization from your insurer to purchase a new one.

That’s why it’s important to review your car insurance annually with your insurance agent to determine the extent of your coverage. It’s also a good time to talk about the need for additional coverages such as rental car reimbursement.

Here are a few more tips if your car suffers storm damage:

  • Report damage as soon as possible. If your car is not drivable, your agent or claims center may be able to save you time and money by having the car towed directly to the repair facility instead of to a temporary storage facility. In addition, arrangements may be made immediately to provide you with a replacement rental car, if your policy includes this coverage.
  • Know what your deductible is, as well as any additional charges you will be expected to pay before you authorize any repairs. Be sure your insurance adjuster, claims representative or repair facility appraiser reviews the damage with you and explains the repair process, including the use of original or generic auto parts.
  • Ask about warranties on repairs. You should also find out if your insurer has a repair facility referral program that offers a written limited or lifetime repair warranty backed both by the repairer and insurer for as long as you own your vehicle.
  • Do business only with a reputable insurer. Obtain insurance from companies that have a proven track record of handling auto insurance claims effectively. Get a referral or contact your local Better Business Bureau or State Department of Insurance.

Employers Vulnerable to Associational Discrimination Claims

Most employers are aware of the employee protections found in Title VII of the Civil Rights Act of 1964. Employers may not discriminate against employees on the basis of race, color, religion, sex or national origin. Also, they may not retaliate against employees who have protested against an illegal employment practice or who participated in an investigation or other activities against the employer for an illegal practice.

Further, recent court decisions have applied Title VII’s protections to an employee’s association with another person whose characteristics fall under those protections. The U.S. Supreme Court held in 2006 that employers cannot discriminate against someone closely related to or associated with a person who is exercising protections under Title VII. Two federal courts earlier this year ruled that employers violated the law by discriminating based on association. One allegedly fired a white basketball coach because his wife was African-American; the other allegedly fired an employee whose coworker’s fiancé filed a complaint with the Equal Employment Opportunity Commission.

All employers are vulnerable to these types of accusations, even those who strive to obey the law. Employment practices liability insurance (EPLI) policies cover many types of losses resulting from employee claims. How will they respond to association discrimination claims?

EPLI policies vary somewhat from one insurance company to another, but most provide coverage for acts such as discrimination, wrongful termination, harassment, retaliation, and inappropriate employment conduct. A typical policy covers discrimination against an employee for termination of the employment relationship, demotion, failure to promote, denial of an employment benefit or other adverse action based on a number of characteristics such as color, race, sex, ethnicity, age and religion. It also covers retaliation claims if the employee engaged in a protected activity, the employee suffered an adverse action, and the protected activity caused the adverse action. Because they specifically apply to employees who have these characteristics or who perform protected activities, these policy provisions do not appear to cover actions against employees because of their association with others.

However, the policies usually also cover “inappropriate employment conduct.” Among the acts that may fall within this category are coercion, wrongful demotion, wrongful discipline, retaliatory treatment, and others. The definition of “inappropriate employment conduct” will be different from one policy to another. One insurance company may cover association discrimination while another may not. As such, employers should discuss specific terms of coverage with their insurance agent.

The policies might cover the employer, but not the employee alleged to have committed the act, if a court determines the employee deliberately acted illegally or with intent to harm the other employee. For example, if a court ruled that a supervisor was acting maliciously when he fired an employee for marrying someone of a different race, the insurance might pay for the employer’s defense and liability but not for that of the supervisor.

In this era where job cuts and lawsuits are common, employers face a real exposure to actions against them for the decisions they make. Lawsuits can be costly even if they are groundless; the costs of defending them can mount rapidly. EPLI provided by a financially solid company is an important part of every employer’s risk management program.

EPLI, coupled with a well-executed loss prevention program, will help any employer survive employee accusations.

Using Airbags Without Seat Belts Increases Risk of Spinal Cord Injury

The National Safety Council reports that significant cervical spine injuries can result from car crashes occurring at speeds as low as 5 miles an hour and that result in little or no damage to the car itself. According to a recent study conducted by the University of Pittsburgh, the risk of injury increases when airbags are deployed during a crash and the driver and passengers aren’t wearing seat belts.

The cervical spine is the seven vertebrae of the spinal cord that comprise the neck. It can be damaged when it is compressed against the shoulders during a collision or when the head is violently jerked either backwards or forwards, causing injuries to the muscles and ligaments of the neck. The resulting neck sprain is commonly referred to as whiplash.

The research team, lead by Dr. William F. Donaldson III, used data gathered from a Pennsylvania trauma database to identify crashes resulting in spinal cord injuries from 1990 to 2002. They examined approximately 12,700 spinal injury patient records and of these, 5,500 were identified as either drivers or passengers who experienced fractures of the cervical spine.

After studying the cervical spine injury records, researchers found that drivers who were not wearing a seatbelt had a 54 percent rate of cervical spine fractures. However, drivers who used both an airbag and seatbelt had only a 42 percent rate of injury. After adjusting for other factors, the relative risk of cervical spine fracture was 70 percent higher for drivers using an airbag alone compared to drivers who used an airbag and seat belt.

The risk of cervical fracture was approximately seven times higher for passengers who used only an airbag. For both drivers and passengers, men were more likely than women to be injured when using an airbag alone.

Another important discovery the researchers made was that drivers and passengers who used an airbag alone were more severely injured than those who used both. They also spent more time in the intensive care unit and more total time in the hospital.

The results of the study indicate that drivers and passengers who use airbags without seatbelts have a higher rate of cervical spine fractures and have more severe injuries, including injuries to the chest, abdomen, and head. Dr. Donaldson and his team concluded that using a seatbelt with an airbag and maintaining at least 10 inches between the steering column and the sternum may decrease the severity of injuries in general, in addition to reducing the instances of airbag induced cervical spine injuries.