MANAGING BUSINESS RISKS For the Government Contractor Linda A Christ Linda A Christ Insurance Agency, Inc. 1

Goals In this presentation you will learn to... Understand requirements you may see in a government contract Understand and manage liability risk for your business Identify, evaluate and protect yourself and your company against the most common insurance risks Manage cost and avoid expensive insurance purchasing errors and/or oversights Recognize insurance requirements in contracts & leases Understand the liability around home based offices, virtual office space, working on client sites, and hiring employees or independent contractors Make wise insurance decisions Learn what items in a contract add cost Learn what items in a contract may be negotiable © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Key Issues Business Risks Risk Transfer Company Legal Structure The Home Office Leasing Office Space and Equipment Contracts for Services Provided Employees: Full and Part-time Independent Contractors Workers Compensation Statutory Requirements How much insurance is enough? © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Purpose of Insurance Indemnification: Putting your back in the “shoes” you were prior to a loss Insurable Interest: Must be in a position to suffer financially from the loss Transfer of Risk: From one party to another Client to insurance company Prime contractor to Sub contractor Landlord to Tenant © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Methods of Risk Transfer Avoidance: Choose to not take the risk at all Contractual Transfer: From one party to another by entering into a contract Sub-Contract: Only a successful transfer if sub- contractor carries all their own insurance Assumption of Risk: Analyze risk, understand it, decide to retain it & not insure the risk Insurance: Transfer from you, the insured, to an insurance company © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Process Identify and evaluate Choose a course of action Insurance Decision-Making Process Identify and evaluate Choose a course of action Monitor course of action Adjust if necessary © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Needs Government Contractor Insurance Needs Property - Computers General Liability Professional Liability Automobile Liability Workers Compensation Employers Liability Bonding Insurance Clauses Employment Practices Liability © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Rationale Why Do Businesses Buy Insurance? Fear of Risk Exposure Contractual Requirement Statutory Requirement Worker’s compensation © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Property Coverage Definitions Who is Insured: Defines exactly who is covered in an insurance policy “Real Property” = buildings “Personal Property” = Business contents, computers “Risk” = chance of loss (What is the chance of loss?) “Peril” = cause of loss (ex. fire, windstorm, theft, or vandalism) © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Property Coverage Replacement Cost Coverage Amount it would take to replace with new Without deducting anything for depreciation © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Property Coverage Other Property Coverages Business Interruption: Covers loss of business income resulting from damage to or destruction of property. Extra Expense: The temporary extra expense to keep your business running when you have had a loss. Computer Coverage: Covers hardware, software and cost to reconstruct data no matter if location is your office, client site or in your home © 2010 Linda A. Christ Insurance Agency, Centreville, VA

General Liability All liability is based on the Principle of Negligence. The Elements of Negligence are: A duty not to harm A wrong doing (a breach of the duty) An injury Causal Relationship between the wrongdoing & injury © 2010 Linda A. Christ Insurance Agency, Centreville, VA

General Liability Commercial General Liability Provides coverage for third party bodily injury or property damage sustained. Limits of Liability: Occurrence Limit: the most a policy will pay per occurrence Aggregate Limit: the total amount the insurance company will pay for all claims submitted during the policy period © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Professional Liability Pays claims arising from wrongful acts, errors and omissions. Often the loss is intangible – financial in nature. By definition of who is Insured? Owner Director or officer Employee of BUT NOT: Independent Contractor of the Named Insured © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Professional Liability Factors That Affect Cost Occurrence Limit carried Aggregate Limit carried Gross Receipts and how they’re earned Services Provided Résumés Past experience Professional association affiliations Sample contracts Deductibles carried © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Professional Liability Errors & Omissions These are all exposures but some are not covered by all insurance companies Definition of Coverage Issues: Negligent Act Error & Omission Wrongful Act Breach of Contract Copyright Infringement Trademark Infringement Advertising Injury Libel, Slander, disparagement Unauthorized Access Intellectual Property Invasion of Privacy Denial of Disruption of Service When does the form trigger? “Glitch” Enterprise Wide No two products are alike © 2010 Linda A. Christ Insurance Agency, Centreville, VA

D & O Liability Protects company officers and directors against claims brought by shareholders, employees, consumers, clients or businesses for wrongful acts in the course of their executive duties. D & O Liability may be needed by directors and officers of either a for-profit and not-for-profit organizations. Companies going for venture capital or going public or going for private funding need to carry D & O as a request of their investors and shareholders. © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Automobile Owned Automobiles: covers liability arising out of the ownership, maintenance or use of owned automobiles. Non-Owned Automobiles: covers liability for use of non-owned automobiles in your business. Example: an employee using his own car on a company business. Hired Automobiles: covers liability for use of hired automobiles in your business. © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Automobile Liability: covers bodily injury and property damage caused to others. Medical payments: dollar for dollar medical bills for you or your passengers. Uninsured Motorists: covers bodily injury caused by negligent uninsured, underinsured or hit-and-run motorists to insureds automobile. © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Automobile Comprehensive: pays for loss of damage to autos from perils other than collision or upset. Examples: fire, theft, windstorm, hail, earthquake, flood, or vandalism, or glass. Collision: pays for loss of or damage to automobiles from collision with another object or upset of the vehicle For example if the vehicle flips. Hired and Non Owned Physical Damage covers damage to the car you have rented or borrowed. © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Worker’s Compensation Covers work-related injuries, including medical bills, rehabilitation expenses, loss of earnings and disability settlements to your employee or uninsured independent contractor. In Virginia - Required for employment of three or more people, including officers. In DC and Maryland – Required for employment of one Coverage A – Workers Compensation agrees to pay the benefits required by the Workers Compensation Act Coverage B – Employers Liability provides coverage for your legal liability to employees not covered by the Act © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Worker’s Compensation The only way to Sub-contract the insurance exposure is if the Sub-contractor carries their own insurance. Prime Contractors are responsible for compensation to Uninsured Sub-contractors, so you should ALWAYS obtain certificates of Workers Compensation insurance from all sub-contractors doing work for you. If you do not, be sure to understand their payroll will be added to yours as if they were an employee on that job. © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Worker’s Compensation The policy is written subject to audit and you are estimating payroll for the coming year. When that year ends, you are audited for actual payroll. If you estimated your payroll too high, you will get a partial premium refund. If you estimated too low, you will be charged an additional premium. Sub-contractors who have not given a certificate of insurance will be picked up and charged for at audit. © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Worker’s Compensation Employer’s Liability Covers the named insured should an employee bring a suit against the employer for their work related injury. © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Home-Based Business Home-based Business, Virtual Office, Office Share, or on a Client’s site: Do I need Business Insurance? If so, when? Does my Homeowners Policy cover me? © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Umbrella Liability Blanket Catastrophe Excess Liability Increases Liability coverage limit over Can be purchased in amounts of $1,000,000 to $10,000,000 General Liability : $1 million Auto Liability : $1 million Employers Liability : $1million NOT OVER Professional (errors and omissions) © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Employment Practices Liability Insurance Covers named insured for suits arising out of employment related issues such as discrimination, harassment or wrongful termination. Coverage applies to employer for the Acts of Employees No Coverage for Independent Contractors © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Bonding Employee Dishonesty Bonds: guarantees employer against employee dishonesty Third Party Crime Bonds: protects your client against theft by you or your employees. Your client is the third party. Surety Bonds: are license and permit bonds or bid and performance bonds © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Typical Government Contracts and Insurance Requirements General Liabilities Limits 1,000,000 occurrence 2, 000,000 aggregate Waiver of Subrogation – waive right of subrogation against client Additional Insured – name client as additional insured Primary/Noncontributory – your coverage applies first A+ Insurance Carrier – best rated 30 days cancellation © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Typical Government Contracts and Insurance Requirements Automobile Liability Limits - 1,000,000 Additional Insured Waiver of Subrogation Workers Compensation Statutory limits – medical coverage as dictated by Statute Employer’s Liability – 1,000,000 No Additional Insured – cannot be added to workers compensation © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Typical Government Contracts and Insurance Requirements Umbrella Liability Additional Limits – 1,000,000 to 10,000,000 Waiver of Subrogation Additional Insured Professional Liability (error or omissions) Limits – 1,000,000 Bonds – limits 1,000,000 per project vs all operations © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Vision Vision Statement: Linda A Christ Insurance Agency Inc. To be well known, well respected, and provide true added value to each and every client’s insurance needs and understanding through our unique philosophy of guidance and consultation To have a positive, supportive work atmosphere for all those who join us, work with us, and visit us To be known as the best insurance agency to be employed by and insured by. © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Mission Mission Statement: Linda A Christ Insurance Agency Inc. To find solutions to better manage risk through Intelligent Insurance Strategies To assist businesses in risk management strategies by offering thorough insurance coverage, with financially sound and stable insurance companies To offer top quality service, availability, and education to our clients so they are equipped to make wise insurance decisions for their company © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Values Values Statement: Linda A Christ Insurance Agency Inc. To be known to clients and in the industry for our professionalism, ethical behavior, knowledgeable expertise, availability, and problem solving techniques in business insurance To be one-stop for all lines of business insurance. © 2010 Linda A. Christ Insurance Agency, Centreville, VA

Contact Information Linda A. Christ Linda A Christ Insurance Agency Phone: (703) 638-8767 Email: Linda@LindaAChrist.com Website: www.LindaAChristInsurance.com Blog: LindaAChrist.com © 2010 Linda A. Christ Insurance Agency, Centreville, VA