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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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

35. Contact Information
Linda A. Christ
Linda A Christ Insurance Agency
Phone: (703)
Website:
Blog: LindaAChrist.com
© 2010 Linda A. Christ Insurance Agency, Centreville, VA