If you own a business, you are at risk – from a variety of different directions. Periodically, we go around the industry and collect information on actual claims, settlements and jury awards affecting business owners just like you. The goal: To help you learn from the experiences of others, and to inform you as you make adjustments to your risk management strategy and insurance coverage accordingly.

Umbrella Coverage Saves the Day. Jeff Cox is the third generation owner of the Lloyd Bedford Cox insurance agency in Bedford Hills, New York and Greenwich, Connecticut. He sells umbrella liability coverage. This coverage is affordable, high-deductible coverage that kicks in when you have a liability that exceeds your claim limits on other kinds of coverages, including auto, homeowners or general liability coverage. In the New York Times, he described something a client of his experience:
His client rear-ended another car on a rain-slicked road, critically injuring the lead car’s two occupants.

The damages incurred by the plaintiffs were substantial. After months of litigation, Cox’s client settled the claim for $5 million – an amount that would have overwhelmed his own auto insurance coverage, and would have cost him everything he had, but for one factor: Cox had sold him a $15 million umbrella policy. It kicked in for nearly everything the auto policy didn’t cover and saved Cox’s client from certain financial ruin.

If you haven’t reviewed your umbrella coverage yet, it might be time to do so. Most agents find that the people they talk to are woefully under protected. In years past, $1 million or $2 million in umbrella coverage was standard. But jury awards and settlements are much higher now, and even $2 million in umbrella coverage may be grossly inadequate to the possible risk. $5 million to $20 million is not an unusual need in this day and age, and many require more.

Wrongful Termination

In a case called McKenzie vs. Miller Brewing Company, et. al, a Miller company executive was hit with a harassment complaint after a ribald retelling of an episode of Seinfeld. Miller fired the executive for sexual harassment. The executive counterattacked, in court, arguing that there was nothing in the complaint against him that rose to the level of sexual harassment.

The Miller company changed its tack – apparently sensing their accusation of harassment wasn’t going to hold water – and told the court they terminated the executive for poor performance.

The court didn’t buy it and found for McKenzie. The jury awarded him $26.6 million in damages. This was in 2000. Although an appeals court reversed the decision of the lower court on a technicality, and the reversal was upheld by the Wisconsin Supreme Court, the award of $6 million in compensatory damages and $18 million in punitive damages against the Miller Brewing Company illustrates the amounts of money potentially at stake in a wrongful termination case. They also illustrate that large amounts that juries are very willing to award – especially if the defendant is a corporation.

Business Interruption

What would it cost to shut down your business for a day? Longer? That’s what happened to one company when a car ran into a nearby power pole. The accident caused a power interruption that caused the business to have to shut down for a day – causing over $2,000 in damages thanks to the lost business.

Fortunately, the business, in this case, had business interruption coverage. The insurance company quickly paid the claim, and the business could pick up without skipping a beat.

Business interruption coverage provides you with cash to cover your operating expenses, cover your expenses and help you meet payroll if you have to close your doors because of circumstances you can not control. It’s a separate kind of coverage from disability income, which covers the policy owner or beneficiaries’ income. It is specifically designed not to put food on your table, but to preserve your business through a temporary interruption. Otherwise, even a small interruption of a couple of weeks to a month could well wipe out a years’ profit in a narrow-margin business.

Stolen Business Equipment

One construction company foreman carefully locked down his equipment for the night before leaving the worksite. When he came back the next day, a $32,000 power shovel was missing. Not only was the company out $32,000 in lost or stolen equipment – the project came to a halt until they could get a replacement power shovel on the site – costing the company thousands of dollars more.

In this case, the company had an insurance policy protecting it against theft of construction equipment. What’s more, the policy included coverage against theft that took place at the worksite, and not just from the company’s own storage facilities. The insurer paid the claim promptly, giving the construction company the liquidity it needed to go buy a replacement power shovel immediately. Work resumed within just days.

Again, these examples aren’t designed to scare anyone – just help you id identify where the risk comes from for business owners, and help you identify the countermeasures and insurance coverage you need to protect yourself.

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