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Omni Risk Mgmt E‑Newsletter |
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January / February, 2006 Happy Holidays to all! Volume
1, Number 1 |
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In This Issue á Commercial
Lines á Personal
Lines á Surety
Bonds á Life
& Health á Construction
News Insurance Industry Links www.ambest.com Lines Of Business Bonds Property Work Comp Commercial
Auto General
Liability Umbrella Inland
Marine Ocean
Marine Personal
Auto Homeowners Flood
Insurance Group
Personal Lines Pension
Plans Payroll
Deduct Plans Health
Insurance Disability
Insurance Boiler
& Machinery Professional
Liability Executives Rob
Mastrantonio, Pres. Rob@omni-risk.com Frank
Strcich, VP Frank@omni-risk.com Glenn
Glubiak, VP Surety Glenn@omni-risk.com Commercial Lines Tara Pattona Tara@omni-risk.com Christine Schuller Chris@omni-risk.com Adam Stone Adam@omni-risk.com Gina Di Paoloa Gina@omni-risk.com Tom Weigand Tom@omni-risk.com Teressa Richardson Teressa@omni-risk.com Personal Lines Patricia Micari Pat@omni-risk.com Joe Schepis Joe@omni-risk.com Mechelle Diaz Mechelled@omni-risk.com Surety Jennifer Spadaro Jen@omni-risk.com Life &
Health Joe Schepis Joe@omni-risk.com Claims Debbie Oggeri Debbie@omni-risk.com Accounting Maria Salvo Maria@omni-risk.com Administration Natalie Perry Natalie@omni-risk.com Candace Strasser Candace@omni-risk.com |
Commercial Lines
FBI: 90% of
Organizations Face Computer Attack; 64% Incur Financial Loss The FBI
reports that 9 out of 10 organizations in the country are victims of some
sort of computer security incident, and one-fifth are hit more than 20 times
a year.Almost two-thirds suffer financial loss as a result of the cyber
incidents.The 2005 FBI Computer Crime Survey is based on responses from a
cross-section of more than 2,000 public and private organizations. Among its
findings: Frequency
of attacks. Nearly nine out of 10 organizations experienced computer
security incidents in a year's time; 20% of them indicated they had
experienced 20 or more attacks. Types
of attacks. Viruses (83.7%) and spyware (79.5%) headed the list. More than
one in five organizations said they experienced port scans and network or
data sabotage. Financial
impact. Over 64% of the respondents incurred a loss. Viruses and worms
cost the most, accounting for $12 million of the $32 million in total losses. Sources
of the attacks. They came from 36 different countries. The U.S. (26.1%)
and China (23.9%) were the source of over half of the intrusion attempts,
though masking technologies make it difficult to get an accurate reading. Defenses. Most said they
installed new security updates and software following incidents, but advanced
security techniques such as biometrics (4%) and smart cards (7%) were used
infrequently. In addition, 44% reported intrusions from within their own
organizations, suggesting the need for strong internal controls. Reporting. Just 9% said they
reported incidents to law enforcement, believing the infractions were not
illegal or that there was little law enforcement could or would do. Of those
reporting, however, 91% were satisfied with law enforcement's response. And
81% said they'd report future incidents to the FBI or other law enforcement
agencies. Many also said they were unaware of InfraGard, a joint FBI/private
sector initiative that battles computer crimes and other threats through
information sharing. Bruce
Verduyn, a special agent in Houston's Cyber Squad, which administered the
survey, said that this new survey differs from the annual CSI/FBI Computer
Crime and Security Survey conducted by the Computer Security Institute and
the FBI. "We surveyed about three times as many organizations and
focused more on new technologies, where attacks originated, and how
organizations responded," he said. Agent Verduyn
believes the survey is a clear sign of the urgent need for vigilance against
both internal and external cyber assaults. Frank
Abagnale, security consultant and subject of the movie "Catch Me If You
Can," echoed those comments, saying: "Every company, both large and
small, should study this survey and use the data as the basis for making
changes. Those who ignore it do so at their peril." HOW
AND WHY TO AVOID INSURANCE LOSSES AND CLAIMS WITH SPECIAL ATTENTION TO THE
PERILS OF WINTER In today's insurance
market, smart insurance buyers and smart consumers are putting more emphasis
on preventing losses in the first place, and minimizing the severity of any
losses that cannot be avoided. That's important for a number of reasons.
First, by striving to prevent loss you may be avoiding accidents that can lead
to death, injury and property damage. Second, by preventing loss you can save
money, as even the best insurance policy does not pay for all of your losses
and doesn't even attempt to compensate for the inevitable disruption and
inconvenience associated with losses. Third, by preventing losses you escape
the deductible burden, which falls on the policyholder. Fourth, by preventing
loss, you can avoid submitting claims to the insurance company. That's an
important plus as each claim submitted makes more likely your non-renewal and
may assure difficulty when trying to place insurance with another company. With winter coming up, this is the perfect
time to take loss prevention steps which can help you avoid submitting claims
under your homeowners policy, and which can also more importantly prevent
death, injury, and loss of property. Here are some steps most homeowners
should be taking right now: CHECK HEATING
SYSTEM. The Insurance Information Institute (III) recommends that you
check your furnaces, boilers and chimneys once a year. That can be an
important step in preventing fire, smoke damage and carbon monoxide
poisoning. While you're at it install a carbon monoxide detector, an
essential safety measure for any home with a furnace or other potential generator
of death by carbon monoxide. Also be sure you have smoke detectors in every
bedroom, in the halls outside of each bedroom, and on every floor. Make sure
they're working. CONSIDER INSTALLING
A CENTRAL STATION ALARM SYSTEM. This step is one of the most important
you can take in preventing loss. A central station alarm can provide
protection when you're not there, perhaps making it possible to catch a fire
or other peril before it is out of control. Furthermore, a central station
system can be designed to assure you'll hear the alarm in every room,
regardless of which detector picks up the sign of trouble. I'd recommend a
burglar alarm, smoke and heat detectors, a carbon monoxide detector, a
water-rise detector (which can pick up flooding in the basement), and a
freeze detector (to alarm when the temperature starts dropping to dangerous
levels, likely to lead to freezing). CLEAN AND CHECK THE
GUTTERS. If you're gutters aren't working, water can back up in them
when ice and snow starts to melt. That can lead to ice damming, which forces
water to back up through the roof into the house. Ice damming claims can lead
to extensive damage immediately and complications later on such as mold.
Devices to keep leaves and other debris out of gutters are now designed so
they actually work, something that was not always the case. While you're
checking on your gutters, make sure your grounds have the right slope to
carry water away from the foundation. That is important to prevent leaky
basements, and to help minimize the possibility of termites. INSULATE PROPERLY. The Insurance
Information Institute says if too much heat escapes through the roof, it can
cause ice and snow to melt and then refreeze. That in turn causes more
build-up of snow and ice. This cycle can cause roof collapse and can
contribute to ice damming. According to the III, the attic should be five to
ten degrees warmer than the outside air. In addition, proper insulation of
crawl spaces and basements helps prevent pipes from freezing. MAINTAIN MINIMUM HOUSE TEMPERATURE. The III says that
unless a home is kept at least 65 degrees, there's a danger of pipes in walls
(where the temperature is lower than that of the house) freezing. KEEP TREES IN SHAPE. Winter winds and
storm can bring down branches and even trees. So it makes sense to keep them
pruned and trimmed in order to avoid injury to people and surrounding
property. This also can help avoid injury to the trees themselves. KNOW YOUR PLUMBING. The III recommends
knowing where your pipes are and where your water shut-off valve is. In the
event of a burst or leaking pipe you want to take action immediately. The III
says if your pipes do freeze, shut down the water system immediately to
minimize damage. KNOW OTHER
EMERGENCY SHUT-OFF LEVERS. An oil heating system should have an emergency shut-off
button, usually located at the top of the basement stairs. If you don't have
one, get one installed. Everyone should know where it is and what to do in
the event of a problem with the heating system. Different parts of the
plumbing system may also have shut-off levers. TAKE SPECIAL
CAUTION WITH PORTABLE HEATERS. Among the most hazardous of home appliances
and equipment are portable heaters. Make sure they are in good shape and are
properly used and maintained. Read owners manuals and follow recommended
precautions. For example, keep them away from curtains and other possible
sources of ignition. DRAIN OUTSIDE WATER
FAUCETS BEFORE ADVENT OF FREEZING WEATHER. If you have hose faucets on the
outside of your house, make sure to drain them and shut the inside valve
before freezing weather comes. It's also a good idea to disconnect, drain and
store outside hoses. STAY ON TOP OF
HOUSE MAINTENANCE. If it's broke, fix it and fix it right away. Keep your home in
good condition, and you'll avoid problems and insurance claims. For example,
Jeanne Salvatore of the III says that many of the expensive and sometime
disastrous mold claims might have been eliminated by good maintenance and
quickly fixing leaks and other water Surety Bonds
Retainage—It Gets the Job Done Retainage has been required on
virtually all construction contracts for over one hundred years. Recently,
interest groups representing contractors and subcontractors have sought
legislation to prevent owners on public and private jobs from including a
retainage provision in their contracts. Retainage—What is It? Retainage is the
withholding of a portion of each progress payment earned by a contractor or
subcontractor until a construction project is complete. Retainage is
calculated as a percentage of each progress payment, typically 5% to 10% of
the payment. It is routinely called for in both private and public
construction contracts. On public projects, state laws often require the use
of retainage and specify the amount and the conditions for releasing it.
Otherwise, retainage is governed by contract. Construction contracts between
the general contractor and subcontractors normally also contain retainage
provisions. The Benefits of Retainage to Owners ¥ It Provides a Strong Financial Incentive to Complete a
Project---Withholding retainage gives the contractor an economic incentive to
stay on the job, work until completion, and correct any remaining details.
Near the end of a project, without retainage the contractor may find that it
will cost more to complete the work than the remaining contract funds. The
retainage is only a small percentage of the payments made to the contractor
as the work progresses, but by the end of the job it provides a strong
economic incentive to complete the project. ¥ It Provides Readily
Available Funds to Remedy a Default—If a general contractor fails to
complete a project, retainage provides an immediate source of funds for the
owner to use to cure the performance default, particularly if it occurs at
the latter stages of the project. Subcontractors and suppliers also benefit
because retainage can be used to pay them if the contractor defaults. What Arguments Are Asserted by Those
Opposed to Retainage? ¥ Does it Increase the
Costs of Construction?--If bids on construction projects include a factor for
retainage as a cost of doing business, the total cost arguably could be
higher. Elimination of retainage, however, will generate new costs for
owners. Without retainage, one of the owner's best ways to assure contract
compliance will be lost, and owners will often find themselves in the ¥ Is Retainage Needed
When Surety Bonds are in Place?—Bonds are not a substitute for
retainage. The point of retainage is to give the contractor an incentive to
finish the project, and to give the owner cash-in-hand to use to complete
minor items. Surety bonds are not an incentive for the contractor. The owner
calls on the surety only after the contractor has defaulted. Surety bonds
protect the owner, and subcontractors and suppliers on the project, from
contractor defaults, but the cost of surety bonds is reduced by retainage.
Surety premiums ultimately depend on surety losses, and retainage decreases
such losses because the retainage becomes part of the contract balance held
by the owner at the time of default and paid to the surety as it performs.
Elimination of the benefits of retainage is not the answer. ¥ Can Retainage be Abused?--After
substantial completion of a project, retainage can be a factor involved in
resolving claims for extra work performed, for delay, or for other disputes
that can arise out of a construction contract. Yet, the relative bargaining
strengths of parties to a construction contract exist in the marketplace
without regard to retainage. A project owner could withhold final progress
payments rather than retainage. Market conditions also change. In some
markets, subcontractors are in demand and can negotiate their own terms on
retainage. If there are abuses of retainage, they should be addressed in
contract terms in the marketplace, or on public projects by state laws or
mandatory contract terms. Elimination of the benefits of retainage is not the
answer. What Modifications or Compromises
Have Been Suggested? ¥Hold the Funds in
Escrow—The owner could be required to hold the retainage in an
interest-bearing escrow account. This permits the general contractor to earn
interest on the retainage amounts. One variation is to allow the general
contractor to withdraw the interest as it is earned, and a requirement that
subcontractors must be paid a pro-rata share of any interest drawn is
sometimes an additional condition. ¥ Permit Contractors to Offer Other Forms of Security in Place
of Retainage—Another option is to permit general contractors to post
alternative forms of security such as an additional bond or letter of credit.
These often, however, do not give the owner the same protection or give the
contractor an equal incentive to complete the work. ¥ Reduce or Release Retainage as Projects are
Completed—Some states reduce the required retainage by 50% and/or
release some of the retainage once a public construction project is 50% completed.
This only makes it more likely that retainage will not be there at when it is
needed the most. Reduction and release of retainage at some point midway
through the contract means that there will be less funds withheld at the end
of the contract, when financial incentives are most needed to assure 100%
completion of the project. What is Needed to Make Retainage Work for
all Concerned? ¥Retainage should be 10% of the total value of a contract, but in
no case should it fall below 5%. Below 5%, there can be more economic
incentive to move on to a new project than to finish the final items on an
existing contract. ¥Retainage
should be equitable. General contractors should not withhold more retainage
from subcontractors than the owner requires of them; ¥General
contractors should pay subcontractors their retainage when the public owner
releases retainage to the general contractor for the subcontractor's work; ¥Owners
should be required to release retainage promptly upon completion and
acceptance of the work. Retainage—The Benefits Outweigh the Costs The retainage withheld is only a small
percentage of the progress payments made to contractors as their work is
completed, but it provides a strong economic incentive to complete the job. We support the judicious use of retainage in all public
construction contracts, both at the general contractor and subcontractor
levels. On private construction projects, retainage, like any other contract
term, should be the subject of negotiation between the parties. Life & Health
Frequently Asked
Questions about COBRA Continuation Health Coverage What is COBRA
continuation health coverage? Congress passed the
landmark Consolidated Omnibus Budget Reconciliation Act health benefit
provisions in 1986. The law amends the Employee Retirement Income
Security Act, the Internal Revenue Code and the Public Health Service Act to
provide continuation of group health coverage that otherwise might be
terminated. What does COBRA
do? COBRA contains
provisions giving certain former employees, retirees, spouses former spouses,
and dependent children the right to temporary continuation of health coverage
at group rates. This coverage, however, is only available when coverage
is lost due to certain specific events. Group health coverage for COBRA
participants is usually more expensive than health coverage for active
employees, since usually the employer pays a part of the premium for active
employees while COBRA participants generally pay the entire premium
themselves. It is ordinarily less expensive, though, than individual
health coverage. Which employers
are required to offer COBRA coverage? Employers with 20 or
more employees are usually required to offer COBRA coverage and to notify
their employees of the availability of such coverage. COBRA applies to
plans maintained by private-sector employers and sponsored by most state and
local governments. Who is entitled
to benefits under COBRA? There are 3 elements
to qualifying for COBRA benefits. COBRA establishes specific criteria
for plans, qualified beneficiaries, and qualifying events: Plan Coverage - Group health plans
for employers with 20 or more employees on more than 50 percent of its
typical business days in the previous calendar year are subject to
COBRA. Both full and part-time employees are counted to determine
whether a plan is subject to COBRA. Each part-time employee counts as a
fraction on an employee, with the fraction equal to the number of hours that
the part-time employee worked divided by the hours an employee must work to
be considered full-time. Qualified
Beneficiaries - A qualified beneficiary generally is an individual covered by a
group health plan on the day before a qualifying event who is either an
employee, the employee's spouse, or an employee's dependent child. In
certain cases, a retired employee, the retired employee's spouse, and the
retired employee's dependent children may be qualified beneficiaries.
In addition, any child born to or placed for adoption with a covered employee
during the period of COBRA coverage is considered a qualified
beneficiary. Agents, independent contractors, and directors who
participate in the group health plan may also be qualified beneficiaries. Qualifying Events
- Qualifying
events are certain events that would cause an individual to lose health
coverage. The type of qualifying event will determine who the qualified
beneficiaries are and the amount of time that a plan must offer the health
coverage to them under COBRA. A plan, at its discretion, may
provide longer periods of continuation coverage. The qualifying events
for employees are: á
Voluntary or involuntary termination of employment for reasons
other than gross misconduct á
Reduction in the number of hours of employment The qualifying events
for spouses are: á
Voluntary or involuntary termination of the covered employee's
employment for any reason other than gross misconduct á
Reduction in the hours worked by the covered employee á
Covered employee's becoming entitled to Medicare á
Divorce or legal separation of the covered employee á
Death of the covered employee The qualifying events
for dependent children are the same as for the spouse with one addition: á
Loss of dependent child status under the plan rules Under COBRA, what
benefits must be covered? Qualified
beneficiaries must be offered coverage identical to that available to
similarly situated beneficiaries who are not receiving COBRA coverage under
the plan (generally, the same coverage that the qualified beneficiary had
immediately before qualifying for continuation coverage). A change in
the benefits under the plan for the active employees will also apply to
qualified beneficiaries. Qualified beneficiaries must be allowed to
make the same choices given to non-COBRA beneficiaries under the plan, such
as during periods of open enrollment by the plan. Who pays for
COBRA coverage? Beneficiaries may be
required to pay for COBRA coverage. The premium cannot exceed 102
percent of the cost to the plan for similarly situated individuals who have
not incurred a qualifying event, including both the portion paid by employees
and any portion paid by the employer before the qualifying event, plus 2
percent for administrative costs. For qualified
beneficiaries receiving the 11 month disability extension of coverage, the
premium for those additional months may be increased to 150 percent of the
plan's total cost of coverage. COBRA premiums may be
increased if the costs to the plan increase but generally must be fixed in
advance of each 12-month premium cycle. The plan must allow qualified
beneficiaries to pay premiums on a monthly basis if they ask to do so, and
the plan may allow them to make payments at other intervals (weekly or
quarterly). The initial premium
payment must be made within 45 days after the date of the COBRA election by
the qualified beneficiary. Payment generally must cover the period of
coverage from the date of COBRA election retroactive to the date of the loss
of coverage due to the qualifying event. Premiums for successive
periods of coverage are due on the date stated in the plan with a minimum
30-day grace period for payments. Payment is considered to be made on
the date it is sent to the plan. If premiums are not
paid by the first day of the period of coverage, the plan has the option to
cancel coverage until payment is received and then reinstate coverage
retroactively to the beginning of the period of coverage. If the amount of the
payment made to the plan is made in error but is not significantly less than
the amount due, the plan is required to notify the qualified beneficiary of
the deficiency and grant a reasonable period (for this purpose, 30 days is
considered reasonable) to pay the difference. The plan is not obligated
to send monthly premium notices. COBRA beneficiaries
remain subject to the rules of the plan and therefore must satisfy all costs
related to co-payments and deductibles, and are subject to catastrophic and
other benefit limits. What is the
Federal Government's role in COBRA? COBRA continuation
coverage laws are administered by several agencies. The Departments of Labor
and Treasury have jurisdiction over private-sector health group health plans.
The Department of Health and Human Services administers the continuation
coverage law as it affects public-sector health plans. The Labor
Department's interpretive and regulatory responsibility is limited to the
disclosure and notification requirements of COBRA. If you need further
information about ERISA generally, write to the EBSA office nearest where you
live. Consult the U.S. Government, U.S. Department of Labor listing in
your telephone directory for the office nearest you or call EBSA's Toll-Free
Employee & Employer Hotline number at: 1.866.444.EBSA (3272) and request
a list of EBSA offices, or write to: U.S. Department of
Labor The Internal Revenue
Service, Department of the Treasury, has issued regulations on COBRA
provisions relating to eligibility, coverage and premiums in 26 CFR Part 54,
Continuation Coverage Requirements Applicable to Group Health Plans.
Both the Departments of Labor and Treasury share jurisdiction for enforcement
of these provisions. The Center for
Medicare and Medicaid Services offers information about COBRA provisions for
public-sector employees. You can write them at this address: Center for
Medicare and Medicaid Services Construction News
In
today's economic and business climate, large construction projects are
becoming more difficult to finance because of increasing costs, lack of
control, and rising litigation. Owners and contractors of these projects want
innovative solutions to decrease the cost of construction while making the
project safer. In recent years, "wrap-up" insurance programs have
been used to help achieve both of these goals. The Concept
Wrap-Up Advantages
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