Workers Compensation and COVID-19 Related Furlough Payments:

/in , /by

The Massachusetts Division of Insurance recently approved a new classification that will exempt COVID 19 related furlough payments to employees from Workers Compensation payroll. This means that furlough payments will not count as payroll when used to determine Workers Compensation premium. There are some very specific qualifiers for this program:

  1. The insurance carrier needs to be notified immediately if you intend to request that furlough payments be exempt from Workers Compensation payroll. We can assist you with this process. This new rule was approved on July 17th and insurance carriers need to be notified within 60 days of that date.
  2. Employers must have records listing furloughed employees, their normal Workers Compensation classification, weekly wage, furlough date and anticipated return.
  3. Furlough payments made between March 1st and December 30th are eligible. The program expires as of December 31st 2020.

Many other states have adopted similar provisions to exempt furlough payments from Workers Compensation payroll. Please contact your representative immediately if you believe that your policy will qualify for this program.

Business Interruption Insurance and COVID-19

/in /by

The COVID-19 pandemic and the various measures designed to contain its’ spread has had an unprecedented impact on the business community.  Many businesses, such as those in the hospitality sector, have had to cease or drastically curtail operations with uncertain prospects for a restart.  Not-for-profit organizations are seeing fewer donations at a time when many are seeing a higher demand in services due to the human toll of social isolation.  Businesses on the other end of the spectrum that have been able to continue uninterrupted are certain to be impacted in the future due to the economic slowdown.  Suffice it to say that the vast majority of organizations have had some level of negative impact in the past two months that will continue in the near future.

 

Business Interruption insurance has been a frequent topic in recent weeks as a possible avenue for organizations to recover lost profit and pay for continuing expenses.  There have been a number of high-profile lawsuits against insurance companies for denying these claims.  A recent and local example is the lawsuit by Legal Seafoods against their insurance carrier for a claim denial. Insurance policies vary in the scope and range of coverages so it is impossible to state that all of these types of claims should be covered or denied.  However, we believe that the majority of these claims face difficult prospects for recovery.

 

Business Interruption (also known as Business Income) is a coverage commonly found on commercial property insurance policies.  In some cases, there is a specified limit while other types of policies designed for smaller businesses are written on an “actual loss sustained” basis for a 12-month period.  The coverage is designed to allow a business to recover continuing expenses (payroll, rent, leases, taxes, etc.) and lost profit when it sustains a covered property loss that results in a shut down or curtailment operations.  An additional component called Extra Expense is often included with Business Interruption.  Extra Expense addresses the additional costs a business sustains over and above normal operating expenses that are required to expedite recovery.  A shut down required by “Civil Authority” is a common feature that can extend coverage when a municipality mandates that a business close due to some form of physical damage in the nearby proximity (i.e. gas main explosion).  In all cases the coverage trigger is a covered property loss such as fire, wind, vandalism, or collapse.

 

There are several challenges for Business Interruption claimants but two of them stand out.  The business closures or curtailments have been primarily due to government mandates designed to minimize or slow the spread of a virus.  In most cases there was no physical damage or direct contamination requiring the business closure.  Secondly, most policies contain a specific exclusion for a virus.  Exclusions for communicable diseases and viruses were almost universally added starting in 2006 as a result of SARS and have been reinforced by other outbreaks such as H1N1 and Zika.  The primary reason for these types of exclusions is that an event or series of related events impacting millions of individuals and businesses throughout the country at the same time period is “uninsurable”.   It is estimated that the monthly impact for COVID-19 is in the $250 to $350 billion range.  By comparison, the aggregate insured loss from natural disasters was $52 billion in 2018 for the full year.

 

Legislation has been introduced in a number of states, including Massachusetts, designed to compel the insurance industry to pay for Business Interruption losses due to the COVID-19 related shut downs.  These legislative actions will be contested on constitutional grounds that will likely draw out for years.  Perhaps a solution can be developed that is similar to how Congress and the insurance industry responded to the September 11th attack.  From purely an insurance point of view, the attack on September 11th was an unforeseen tragedy that generated more than $40 billion in losses in addition to the human toll.  Human and economic losses continue with high levels of cancers for first responders that worked on recovery at World Trade Center.  Congress and the insurance industry developed the Terrorism Risk Insurance Act that allowed insurance companies to absorb the initial $200 million in claims associated for a single terrorist event with the Federal government taking on the excess.

 

We have spoken with many of you over the past few weeks regarding this issue.  We encourage any of you with questions on this issue to reach out to us.  Some of you have decided to file claims and we are certainly willing to discuss and assist others that might be contemplating the same action.  Situations are unique and policy conditions can differ.  We wish all of you a speedy recovery from the recent events and, above all, good health.

Department of Family and Medical Leave – Update

/in /by

The Department of Revenue recently released important information on how to report PFML Wages for the 4th Quarter 2019 Paid Family and Medical Leave Return. The Department of Family and Medical Leave is providing this update for all employers participating in the Commonwealth’s PFML program to ensure an accurate filing of withholdings by the quarterly deadline of January 31, 2020.

PLEASE BE AWARE THAT THIS REPORTING REQUIREMENT DOES NOT APPLY TO EMPLOYERS THAT HAVE RECEIVED AN EXEMPTION FROM BOTH THE FAMILY AND MEDICAL LEAVE PROGRAMS OR ARE CONSIDERED EXCLUDED EMPLOYMENT PER SECTION 6 OF THE UNEMPLOYMENT STATUTE.

IF YOU HAVE ONLY RECEIVED AN EXEMPTION FOR ONE LEAVE PLAN, YOU MUST SUBMIT FOR THE NON-EXEMPTED PLAN, ACCORDING TO THE INFORMATION PROVIDED BELOW.

When reporting 2019 PFML contributions, please report fourth quarter wages only in both the PFM Eligible YTD Wages and Wages This Quarter boxes on the MassTaxConnect return. For the calculation to be correct, do not report actual 2019 year-to-date wages in the PFM Eligible YTD Wages box.

The reason for reporting only fourth quarter earnings in the PFM Eligible YTD Wages box is that contributions were not withheld for the first three quarters of 2019, so the Social Security annual wage cap should only be applied against fourth quarter wages.

This will only be necessary for this first PFML reporting as contributions were not withheld on all 2019 wages.  When submitting future returns, you will report the actual YTD wages in the appropriate box.


IF YOU HAVE BOTH W-2 EMPLOYEES AND INDEPENDENT CONTRACTORS, BUT YOU OUTSOURCE ONLY W-2 PAYROLL SERVICES TO A THIRD PARTY
Important information about the timing of reporting

If your company outsources only W-2 payroll services to a third party, and handles reporting for your independent contractors (whose payments are reported on 1099-MISC) internally, there are some rules to follow when filing returns. It’s very important that the reporting be done in a specific sequence for it to be processed correctly.

First, the payroll service, filing on behalf of your salaried employees (W-2s), must file before you file on behalf of your “covered contract workers” (1099-MISCs covered under the PFML Statute). Next, when you file on behalf of your covered contract workers, you must identify your filing as an amendment to the return already filed by your payroll service (see screenshot below). Please follow this sequence to be certain the information is properly recorded.

 

MORE INFORMATION

The Department of Family and Medical Leave oversees the Commonwealth’s Paid Family and Medical Leave program. Check out their website for a fact sheet, guides and information for both employers and workers.

You will find more information on exemption requests, registration, contributions, and payments for the Paid Family and Medical Leave program from the Department of Revenue.

Investing for the Long Haul

/in /by
Financial market ups and downs are challenging, to say the least, for many investors. Saving for retirement makes you a long-term investor, but it is important that you shape your investment strategy by revisiting a few fundamental investment concepts every 6 to 18 months, regardless of market conditions.
Revisit Your Risk Tolerance
What level of investment risk is suitable for you? Are you still an aggressive investor, or has your personal situation changed since the last time you evaluated your risk tolerance? Are you still a long-term investor, or are you getting close to retirement and therefore need to be more conservative? If your needs have not changed and you still are investing for the long term, this may not be the time to change your investment mix.
Don’t Chase Returns
How many people do you know that bought into the “hot stock” they read about, without evaluating the risk involved? This is a risky strategy, as such stocks may be overvalued and end up losing money instead of making it.
Diversify
Every asset class (investment category) has its ups and downs. If your portfolio is well diversified, you will be in good position to benefit when an asset class excels—as opposed to chasing returns after the fact. For example, when growth stock funds were excelling, value funds were not; when stock funds declined, bond funds did well. Over the course of time, a well-diversified portfolio can provide increased performance while decreasing risk. In addition, diversification is a disciplined approach to investing, rather than relying on emotions or impulse.
Keep Investing Through Payroll Deduction
When the market is down, you are buying more shares or units for your dollars. Investors should actually feel good about buying in when the market is low; ideally, when you reach retirement, those shares will be worth more.
Invest for the Long Haul
Remember your long-term goals and invest for the long haul, rather than for short-term market swings. Statistics show that staying the course, rather than switching in and out of funds, is typically the wiser choice. Often, investors make the mistake of selling when the market is declining, and buying back when it is going back up. This is the opposite of what they should be doing to maximize returns.
What About Current Events?
The uncertainty surrounding current events poses significant challenges for investors. One thing we do know: the stock market hates uncertainty. Thus, having diversification of investments is key! A mix of investments—cash, bonds, stocks—will help minimize the risk of a large loss.
Though a large event may cause a serious market reaction in the short-term, often the market balances out after the event has passed. The secret to weathering all types of market swings is to resist the temptation to panic or overreact. Stay disciplined, keep a long-term approach and maintain a diversified portfolio balanced appropriately for your particular risk tolerance. These basics of long-term investing can be your blueprint for not just surviving, but succeeding in the market.

Slip and Falls: Where Do You Stand?

/in , /by

Presented by: Christopher F. Hawthorne, CPCU, CIC

As we settle into winter, it is an appropriate time to revisit the issue of liability from slip and falls (S&F). As mentioned in prior Cleary Quarterly articles, Massachusetts laws have changed, making it easier to establish liability to those involved. As such, we are seeing an increasing number of slip and fall claims filed against our clients. When someone is injured, who is responsible?

 

S&F claims can be quite large and long-lasting claims. When a person is initially injured, the extent of the damage, medical bills, possible lost wages and other pain and suffering are unknown and therefore a personal injury attorney will often wait as long as possible before filing a lawsuit against the potentially responsible parties. However, it is always a good idea to gain knowledge about how to claim for slip and fall even before visiting the attorney!
 

As an example, Mr. Smith is walking into a local restaurant and slips on ice. After Mr. Smith falls and injures himself, he or his attorney may identify several potentially responsible parties. Those responsible might be the restaurant, the property owner or a snow removal contractor if one is used. All three will need to notify their General Liability insurance carrier and potentially, three different carriers will then post a reserve on their insured’s file be it the restaurant, the property owner and the snow removal contractor.

 

All three carriers then will wait to hear from Mr. Smith’s attorney. These losses can sit for several years before the actual suit arrives to allow the loss to grow. Meanwhile all three parties are paying premiums based on the assumption that their insurance is responsible and this can raise the rates for all three.

 

To avoid this scenario, consider the following risk management steps:

  1. Risk Transfer between the property owner and the restaurant via the lease. The lease should spell out who is responsible for snow and ice removal and be clear to what degree. (Parking lots, walkways, steps, roof, etc.)
  2. Risk Transfer between the responsible party above and the snow removal contractor. This agreement should be just as clear in terms of which party will handle the different areas where snow and ice will accumulate.
  3. In each case an attorney should be used to have the responsible party indemnify, hold harmless and defend the other party.
  4. Verification of Insurance and the limits for the ultimate responsible party with particular attention to affirming that there is no exclusion in General Liability policy of the responsible party for the removal of ice and snow.

 

In this example, if the property owner via the lease takes responsibility and also hires the snow removal contractor, then the lease should protect the restaurant and the contract between the snow removal contractor and the property owner should protect the property owner.

 

The end result after a slip and fall is the easy identification of which party will handle the claim and allow the other two parties to protect their loss history and future premiums. This subject deserves close attention by all three parties to make sure they know where they stand after someone falls.

Auto Post Accident To Do Suggestions

/in , /by

Presented by Christopher F. Hawthorne, CPCU, CIC

It is frustrating to see a client’s auto carrier pay a claim to a third party based on false information.

An example being a client who had a car, with four people in it, pull in front of him and slam on their brakes. He stopped his vehicle but he did touch the other car. There was no visible damage to either car and no one was injured.  He exchanged information but did not call the police. He then filed the report of the accident in case a claim was made against him.

Soon after we received notice that five people were claiming to be injured and that the other car was totaled. The carrier paid $190,000 and stated without evidence and due to the fact it was a rear-end, they had to make the payment.   We see variations on this all too often.

To help avoid this situation, doing the following will put your insurance carrier in a better position to defend you and not pay false or inflated claims.

Once you have made sure you are safe, we suggest you:

  1. Do not admit fault, apologize or offer unsolicited information such as you were rushing or that you are very busy.
  2. Call the police with goal of having an official report filed to support your information. Request officer’s name and badge number.
  3. Obtain name and contact information of driver and the auto’s owner.
  4. Obtain the name of the other autos insurance carrier and policy number if possible.
  5. Get the name of all passengers in the other auto and note where they were sitting in the car.
  6. Obtain the names of any witnesses and their contact information.
  7. Ask police to ask each person if they are injured or if anything was damaged (EX; Musical Instruments).
  8. Get the year, make, model and license plate number of the other auto/s.
  9. Take pictures of your auto, the other auto, as well as, any surrounding aspects that might be useful such as a traffic sign that is shrouded by trees.
  10. If the weather is a factor, try to capture with picture and print out the weather report for that day.
  11. Record name and contact information of anyone in your auto.
  12. Complete an accident report and submit to Cleary Insurance as soon as possible.

If police are not called, do not leave until the other party had driven away.  We have seen situations where both parties agree that the police are not needed, one party departs and the other party then calls the police.

If police are called, do not leave the scene of the accident until the police arrive.  If you can no longer wait, do not leave without calling the police and getting permission. If you leave and the other party stays, you could be charged with leaving the scene of an accident.

If you would like an accident form to keep in your auto, please contact your Cleary representative.

By obtaining and recording the above information, you can put your insurance carrier is a stronger position to defend you and reduce or eliminate claim payments. As always, it takes a team effort!

Cleary Insurance Featured Speaker at The Boston Arts and Business Council’s Seminar

/in /by

Pictured (L-R): BOSTON A&BC Operations Director Alexa Dearborn, President Jim Grace, Cleary’s Chris Hawthorne, Volunteer Lawyers Association Exec. Director Luke Blackadar.

Cleary Insurance was a featured speaker at the Boston Arts and Business Council’s Seminar for the National Arts Strategies Program. The NAS gathered in Boston to learn about business related topics for artists and art non-profits. Cleary’s Chris Hawthorne led a session on structuring insurance programs for Public Artists and non-profits.

Information Management Liability aka Cyber!

/in /by

Presented by: Christopher F. Hawthorne, CPCU, CIC

Technology has delivered an exposure for those who hold, use or depend on information be it paper or electronic. Just as inventory once was the life line for a business, data and information now takes their place alongside the tangible assets of a business. This can be data in the form of client records, billing operations, employee files, websites and inventory management. When data or information is shutdown or stolen, it can represent a large loss. The loss can be both a first party loss (out of pocket) and a third-party loss (demanded by another) as well as trigger government action and penalties against the business.

First party losses are out of pocket expenses for a business such as rebuilding lost data, cost of forensic studies to determine what was lost, cost to restore systems and loss of income from business interruption.

In between first- and third-party losses are losses from extortion or ransom. A criminal may demand money to allow a computer system to released from any hold the criminal has on it or to stop a website from being overrun by an attack. While the cost is out of pocket it is caused by a third-party demand.

Third party losses arise when there is damage or loss of another’s data or private information, damage to their hardware or to their website.  The cost associated with third party losses are notifying parties of their lost or released information, credit monitoring, defending from law suits, and paying settlements.

In addition, governmental actions (fines and penalties) may arise on both state and Federal levels. It is worth noting, that Massachusetts has the toughest data privacy laws in the nation.

Neither Property nor General Liability insurance pays for these types of losses.

There are several carriers now offering coverage for this exposure and many provide hotlines and proactive risk management assistance. In addition to obtaining this coverage, it is worth reviewing your technical / system support vendor to make sure the job description includes “security and compliance” as opposed to simply having the technology function.

In summary, the Information Management Liability (Cyber) exposure requires the attention of every business from perspective of insurance protection and risk management mitigation. To fail to do so is to put the survival of the business at stake.

 

Photo by Pixabay

Budgeting, Discipline and Looking Ahead: Getting Started in Life Planning

/in /by

Achieving your financial objectives has a lot to do with how well you plan for your family’s future. It’s important to begin this process sooner rather than later because the demands of work and a busy family life can force long-term planning onto your “to-do” list. Being ready for unexpected expenses and having a plan for your children’s futures also shouldn’t be delayed, because by the time you get around to them, you may have other financial commitments and too much debt to start saving.

Savings

Saving is fundamental to financial planning, and it’s still one of the best ways to protect yourself against financial emergencies. Budget carefully, purchase wisely and plan ahead so you’re well-positioned to grow your savings. Bear in mind that saving is about more than preparing for the future; these funds are also there to shield you from the financial damage that emergency home repairs, serious illness or job loss can cause, and from having to rely on credit cards and other high-interest options.

College savings

According to US News & World Report, annual public tuition will cost more than $40,000 by 2030, with a four-year degree totaling an expected $205,000. Those are daunting figures for someone who hasn’t set aside money for a child’s college fund. If you want to help your child achieve a degree so they can get a good job and succeed in life, consider starting a college 529 plan as soon as possible.

Retirement savings

For young couples, retirement is little more than a vague idea, something their grandparents talk about. It’s difficult to feel a sense of urgency when you’re looking at 30 to 40 more years of earning money and building a life. But if you enroll in a retirement plan at work and continue investing in a 401(k) and Roth IRAs, your retirement fund will continue to grow and be there for you when it’s needed.

Life insurance

Purchasing a death benefit for your family is one of the first steps in making sure your loved ones are protected should you die unexpectedly. Joint life insurance policies cover both spouses, but tend to be more expensive and may not be the best option for some families. A 30-year term life policy can be an excellent option for a young family because it’s there for you when it’s most needed (i.e. until the kids are out of college and your mortgage is paid off). That being said, you should consult your insurance agent when choosing a life insurance plan since there are several types of plans and deciding which is best for yourself can be quite difficult. Moreover, ask your agent if he uses something like a life insurance quote engine (https://ilife.tech/life-insurance-quote-engine-for-agents/) that can help him to easily access a transparent database of the highest-rated life insurance plans quickly. If he takes the help of such a technological tool, he could perhaps provide you with a greater selection of plans that can better suit your needs.

Estate planning

Estate planning is something that people often concern themselves with later in life, perhaps when retirement is within reach and estate plans need to be finalized. But there are fundamental aspects of estate planning that require your attention now because they come into play if you or your spouse die unexpectedly or become incapacitated.

When young couples prepare a will, it’s generally so they can name a guardian for their children, but a will also provides for the distribution of money, assets and property. A living will or advance directive, another aspect of estate planning, establishes your wishes concerning end-of-life care. For further information about life planning, consult a professional financial planner or estate planning expert.

When you’re young, life planning tends to be about financial basics, like saving money, establishing retirement and college funds, getting life insurance, and taking care of estate planning basics. Careful budgeting will make it easier to stick to a plan and build the kind of savings and college funds you’ll need later on, so stay disciplined and allow those seeds you planted to grow.

Courtesy of Pixabay.com