Wildfires, hurricanes, a derecho.
If you live outside California or other parts of the West, you may have forgotten about the wildfires and the estimated $16.5 billion in losses they cost last summer and fall, along with at least 46 lives. If you didn’t lose a loved one or suffer property damage from Hurricanes Laura, Sally or Isaiah, those storms may be obscured among the dark recollections of 2020. If you didn’t witness the destruction a high-wind event known as a derecho inflicted on much of the Midwest, you may not remember what a derecho is.
A raging pandemic, political turmoil and a teetering economy can affect a nation’s collective memory that way.
But residents and other property owners in the areas directly affected by those events haven’t forgotten. And if the blazes that ravaged broad swaths of the western states, the hurricanes that lashed the Gulf and East Coasts, and the derecho that tore through the Midwest temporarily slipped your mind, the process of renewing your Property Insurance is sure to serve as a reminder.
On January 26, Risk Placement Services (RPS) published a report, “2021 U.S. Property Market Outlook” forecasting Commercial Property Insurance rate increases ranging from, as Insurance Business Magazine reported, “the high single digits to the 15% range on clean accounts, and higher increases on accounts with losses.”
How We Got Here and Where We’re Going
The RPS report arrives on the heels of Alera Group’s Property & Casualty 2021 Market Outlook, a whitepaper published in December 2020, and, like the Alera Group publication, cites the impact of a historically high number of recent catastrophic events, including wildfires and named storms.
From August 1 until the end of 2020 alone, severe weather events caused $71 billion dollars in damage and killed 181 people, according to the National Centers for Environmental Information (NOAA). The five most catastrophic:
The effects of such events and years of similar severe weather occurrences that preceded them, both the Alera Group and RPS reports note, include not only higher premiums but also stricter policy terms, reduced capacity, and heightened underwriter scrutiny and selectivity. This has resulted in greater carrier reliance on reinsurance providers, which in turn has led to rate hikes that ultimately get passed on to insurance buyers.
In addition to the aftermath of severe weather, commercial property owners may also encounter unfavorable conditions resulting from COVID-19 and civil disorder – specifically communicable disease and riot exclusions.
There is, however, some good news:
Outlook Heading into 2021
Here’s the overall landscape for Commercial Property insurance as outlined in the Alera Group outlook:
At the time of the Outlook’s publication in December 2020, rates, availability, capacity and underwriting scrutiny/selectivity all were trending unfavorably for Property Insurance buyers. As we head into the second month of 2021, those trends haven’t reversed, but they are, as earlier noted, less severe.
To obtain the entire Property & Casualty 2021 Market Outlook whitepaper, click the button below.
Not So Sunny and Golden
As if the overall impact of natural disasters in the Sunshine State weren’t bad enough, there’s this development, reported in Insurance Journal: “Florida’s Property Insurance Market Is ‘Spiraling Towards Collapse’ Due to Litigation.” Among the findings of the study cited in Insurance Journal:
In the Golden State of California, meanwhile, it’s disaster upon disaster.
As recently as January 26, California Insurance Commissioner Ricardo Lara was “alerting residents to review their current insurance policies in the midst of a forecast of winter weather bringing the possibility of floods, mudslides, debris flows and other disasters to recent wildfire burn areas throughout the state,” reports Insurance Journal.
“Lara issued a formal notice to insurance companies reminding them of their duty to cover damage from any future mudslide or similar disaster that is caused by recent wildfires that weakened hillsides,” Insurance Journal adds, while also including this link to a California Department of Insurance fact sheet about what Homeowners Insurance policies and the National Flood Insurance Program cover.
The publication goes on to note:
“The Montecito mudslide in Santa Barbara County in January 2018 that followed the destructive Thomas Fire claimed 23 lives and caused more than $421 million in damage, according to CDI data. Following that disaster, the department issued a notice to insurance companies about their requirement to pay mudslide claims that are directly or indirectly caused by the wildfires.”
What You Can Do
Protecting your organization with a cost-effective insurance program should be a proactive process. Here are some steps you can take:
About the Author
Steve Felker
President, Risk Management
GCG Financial, an Alera Group Company
Steve joined GCG Risk Management Consultants, the Property and Casualty Insurance arm of GCG, in 2009. Under his leadership, the practice has grown rapidly, acquiring key talent and deepening its relationships with key industry carriers to provide broader markets to clients. Steve’s innovative and customized client solutions have helped build strong client relationships. His clients value his technical focus and sound business advice. The primary market segment is medium-sized to large businesses with an additional emphasis on personal insurance for individuals. GCG provides risk management advice and insurance solutions to hundreds of clients and represents the leading insurance carriers in the Property and Casualty industry.
Steve began his career at Lawton-Byrne-Bruner Insurance Agency (LBB), the largest insurance brokerage firm in St. Louis at the time. During his 12-year career there he was elected Senior Vice President and then became an owner of the firm. In 1986, Steve was instrumental in the sale of LBB to Marsh & McLennan, Inc., which named him Managing Director, the firm’s highest professional designation. Over the next 24 years, he held numerous positions, including head of the St. Louis Office for 15 years.
Contact information:
In early 2020, before most Americans became familiar with the word “coronavirus,” a different risk loomed over the education industry as its No. 1 threat: sexual abuse and molestation. And while COVID-19 has since become the most top-of-mind issue for schools ranging from grades K-12 to colleges and universities, for private and charter K-12 schools in particular, sexual abuse and molestation remain an even more dangerous risk.
Like every industry, higher education is faced with a hard market for Property and Casualty insurance. Unlike some industries, the hard market is clobbering educational institutions on every line of coverage: General Liability, Cyber, Employment Practices, Professional Liability, Property – all in addition to Sexual Abuse and Molestation. You name it, the education industry is taking it on the chin from all directions – rates, availability, capacity and underwriting scrutiny/selectivity.
Yet even as education administrators at all levels deal with the day-to-day challenges of COVID-19, it’s the long-term risks of sexual abuse and molestation that pose an existential threat.
‘Reviver Laws’ and Coverage Exclusions
A January 2020 report by The Oregonian on an exclusive private school at the center of a large sexual abuse scandal noted how widespread and damaging the problem of abuse and molestation is among private institutions. That, as the report underscores, has made underwriters increasingly wary of insuring private schools:
“Schools of all sorts from all over the country have been hit hard by sexual abuse claims. That includes some of the best-known names in private education – from the Brentwood School in Los Angeles to St. Ann’s School in Brooklyn.
“In response, insurance companies have retreated from the private school business. Insurers remain eager to sell standard liability policies. But they often refuse to cover sexual abuse claims.
“’Many insurers are adding explicit exclusions in their general liability policies,’ said Ed Hancock, chief underwriting officer at Church Mutual Insurance Co. ‘Sexual misconduct is not an accident from the standpoint of the perpetrator, and traditionally general liability insurers are comfortable insuring accidents.’”
Adding to insurers’ reluctance to underwrite coverage for sexual abuse and molestation is the growing number of states with “reviver laws,” which expand the window for filing claims. In New York, for example, Gov. Andrew Cuomo in February 2020 signed into law that raised the age limit for filing a felony charge of abuse from 23 to 28 and extended the age of victims who can seek civil relief against abusers and enabling institutions to 55.
In an August 2020, Business Insurance report, Vicky Riggs, a senior financial analyst for A.M. Best Co. Inc., said the extended time frames for seeking compensation would likely increase insurer exposure. “And definitely because of the sensitivity of the subject, I believe there will be more likelihood of settlement versus extensive litigation,” she added.
For schools, organizations and institutions serving young people – and for the carriers who underwrite liability coverage – the extended time frames require a long-range view of sexual abuse and molestation risks. Both insured and insurer should be looking 50 years ahead.
To reiterate a conclusion found in Alera Group’s whitepaper Property & Casualty 2021 Market Outlook: “A limited number of carriers are writing liability for higher education institutions. When offered, limits are low. Insurers are adding exclusions for sexual abuse and molestation, and for traumatic brain injury risks, which can result in claims in excess of $1 million.”
Outlook Heading into 2021
Here’s the overall landscape for the education industry as outlined in Alera Group market outlook:
► Rates are increasing and capacity is decreasing: The insurance market for educational institutions has been steadily hardening over the last several years, and COVID-19 has added to the pressure. All sectors of education are affected, but the greatest impact is on colleges and universities.
► Jury awards and the cost of defending lawsuits are skyrocketing: Schools are expected to protect students against “everything,” from bullies to injuries suffered while playing competitive sports. When schools fail to keep students safe, the consequences can be enormous. Hundreds of millions of dollars have been paid out by and on behalf of educational institutions. The frequency and size of claims has made underwriters guarded about primary and excess liability for educational institutions.
► Sexual Abuse and Molestation claims are cause for concern: The market for this coverage is difficult, especially in states where immunity is limited for school districts. Compounding the challenge for underwriters are newly enacted “reviver” laws that may leave insurers responsible for historical claims that were previously deemed beyond the statute of limitations.
► Underwriting is highly selective: Given the level of risk educational institutions face, insurance companies are reluctant to consider an account with any “hair on it.”
► Communicable disease exclusions on the rise: Educational institutions have a huge exposure to COVID-19. Insurance companies want to limit their liability for unknown risks.
To obtain the entire Property & Casualty 2021 Market Outlook whitepaper, click the button below.
Big Issue on Campus
While there’s no good time for a pandemic, for the education industry, COVID-19 couldn’t have arrived at a worse time. As the publication Risk & Insurance reported in late November:
“In addition to the hard market, higher education is facing its own unique challenges, from recent high-dollar jury settlements for sexual assault and misconduct involving students, coaches and faculty plaguing many institutions to concerns about campus safety, health, security and reopening plans amid COVID-19.”
Higher education officials who had hoped the trials, errors and successes of navigating a pandemic last fall would result in return to normalcy this spring are now confronting a harsh reality. While many students are back on campus or planning to return soon, ongoing struggles with COVID-19 mean that normalcy isn’t returning to campus anytime soon.
Here’s a recent sampling from the Inside Higher Ed webpage Live Updates: Latest News on Coronavirus and Higher Education:
Of course, liability issues arising from COVID-19 and education aren’t confined to colleges and universities.
In December, when parents in the Chicago suburb of Park Ridge, IL, questioned local board of education members about why their school district was not offering full, in-person learning, the district’s legal counsel cited a letter from the school’s insurance provider. School districts, the attorney said, would not be covered for legal fees or damages caused by a “COVID-related incident.”
“As soon as those letters were sent out to many districts, that’s where the risk of liability became very real,” the attorney told attendees during a virtual board of education meeting covered by the Chicago Tribune.
Additional Considerations
The Property and Casualty challenges facing the education industry don’t end with abuse and COVID-19. Cyber Liability coverage remains widely available, but their vast number of cyber integrations make educational institutions especially vulnerable to breaches. Claims continue to rise, and increased dependency on remote learning only adds to the risk.
In every other line of coverage for education, the market is trending unfavorably for buyers across the board – availability, rates, capacity and underwriting/selectivity. These lines of coverage include:
What You Can Do
Protecting your organization with a cost-effective insurance program should be a proactive process. Here are some steps you can take:
The last segment of the webinar is devoted to a panel discussion featuring Alera Group HR experts and leaders of medium- and large-sized companies who are managing COVID-19 on the front lines across multiple industries and states.
About the Author
Michael Brooks, CRSM
Executive Vice President
Austin & Co., Inc., an Alera Group Company
A Certified School Risk Manager (CRSM), Mike oversees the commercial lines, claims and personal lines departments of Austin & Co. Inc., with responsibilities for product management and carrier to relationships, while maintaining a large and varied client base.
Contact information:
When it comes to wellbeing, employers often find themselves challenged by how to approach a shift from a traditional wellness model to a comprehensive and holistic program that supports the whole person. Below you’ll find this week’s curated list of wellbeing resources. Feel free to share these resources, as appropriate, with your team. Have a safe and healthy week!
Career Wellbeing
Social & Family Wellbeing
Financial Wellbeing
Physical Wellbeing
Emotional Wellbeing
Community Wellbeing
Employer Focused Wellbeing
Workers’ Comp Market Stable, but Uncertainty Looms
As 2021 approached, Workers’ Compensation insurance was a national outlier in an otherwise hard market for Property and Casualty insurance, showing only a narrow range between moderate decreases and increases in rates while remaining stable in terms of availability, capacity and underwriting scrutiny/selectivity.
But uncertainty loomed, amid questions arising from COVID-19.
Outlook Heading into 2021
Here’s the general landscape for Workers’ Compensation insurance as outlined in Alera Group’s Property & Casualty 2021 Market Outlook:
► This major line of the Property and Casualty sector continues to perform as an outlier by producing profitable underwriting results.
► Capacity and availability remain unchanged.
► Rates have remained fairly stable for several years and in some states are now rising modestly to reflect the drop in insurers’ investment income and an increase in the average cost of claims involving lost work days.
► Payroll-based premiums have been suppressed as a result of governmental mandates to close or reduce business activities due to COVID-19.
► Going forward, this line of business faces uncertainties related to:
To obtain the entire Property & Casualty 2021 Market Outlook whitepaper, click the button below.
Evolving Conditions Due to COVID-19
So what’s happened since Alera Group released the Market Outlook in December 2020?
Telemedicine, or telehealth – a subject Alera Group colleague Paul Curtis of Phalanx Healthcare Solutions addressed in his recent article on the property and casualty insurance outlook for the healthcare industry – has expanded exponentially during the pandemic. State regulations, provider requirements and carrier reimbursement arrangements for telemedicine, meanwhile, are in various phases of catch-up.
PropertyCasualty360 earlier this week ranked telemedicine services No. 1 among its “Three key 2021 workers’ comp trends to watch.” Citing a study by the National Council on Compensation Insurance (NCCI), the publication reported:
“There will continue to be questions in 2021 as to how COVID-19 will impact the utilization and accessibility of telemedicine services for workers’ comp, including whether certain states will elect to adopt/implement permanent telemedicine regulations and provisions, how certain provider requirements may change, and how carriers will be reimbursed for services — to name just a few.”
State regulations also vary—n terms of both adoption and scope—in how they address whether COVID-19 is presumed to be a workplace illness. One encouraging development: In California, a state with one of the highest COVID-19 infection rates in the country, the state insurance commissioner recently declined the Workers’ Compensation Insurance Rating Bureau’s request to increase rates.
Vaccination Deliberation
As the nation steps up distribution and administration during Phase I of mass vaccination, employers are scrambling to determine what kind of policies to implement and what the ramifications might be for their organization. Gary Pearce, Detroit-based Chief Risk Architect at risk management consultancy Aclaimant Inc., summed up the situation in an interview with Business Insurance.
Employers “need to recognize that if they do impose a vaccination mandate that it’s likely that they are going to have to pay for the vaccination, that this will be compensable work time, and … medical complications in a mandatory vaccination environment are going to be under workers’ compensation and be covered,” Pearce said.
What You Can Do
Protecting your organization with a cost-effective insurance program should be a proactive process. Here are some steps you can take to address the hidden costs of workplace accidents, contain Workers’ Compensation insurance now and prepare for an eventual increase in rates:
The last segment of the webinar will be devoted to a panel discussion, during which you’ll have the opportunity to ask questions of Alera Group HR experts and leaders of medium- and large-sized companies who are managing COVID-19 on the front lines across multiple industries and states.
About the Author
Stephen Paulin, CIC
Risk Strategies and Workers’ Compensation Practice Leader, Orion Risk Management
Steve Paulin, CIC, has more than 35 years of experience as a risk strategist helping privately held, mid-market businesses in Southern California reach their profit goals by improving risk management outcomes that optimize the insurance program’s financial efficiency and produce better long-term business performance. Steve’s innovative, results-driven approach, exacting research and diagnostic process make businesses safer, more productive and profitable by delivering a proven methodology to:
Contact information:
This alert is of interest to all employers that sponsor workplace wellness programs.
Since 2019, employers faced uncertainty regarding the status of wellness program incentives under the ADA and GINA. On January 7, 2021, the EEOC issued a Notice of Proposed Rulemaking on Wellness Programs Under the ADA and GINA that addresses this issue. The proposed rules deviate somewhat from prior EEOC guidance and positions.
Specifically, the proposed rules apply the ADA’s insurance “safe harbor” to health contingent wellness programs offered as part of, or qualified as, an employer-sponsored group health plan, thereby segregating them from health contingent wellness programs offered to all employees, regardless of their participation in the employer’s health plan. Instead, the latter are lumped in with non-health contingent wellness programs (i.e., wellness programs that involve a disability-related inquiry or medical exam but are not activity-based or outcome-based) and subject to the ADA wellness rules.
Consistent with the EEOC’s announcement in the summer of 2020, the proposed rules require any incentives provided for participatory wellness programs and/or wellness programs not offered as part of a group health plan to be “de minimis.” If the rules are finalized as proposed, employers may no longer rely upon the 30% (or 50% for smoking cessation) limit on incentives for these types of programs.
Finally, the proposed rules amend the GINA regulations by, among other things, limiting wellness program incentives for employees who complete health risk assessments that contain information about their spouse or dependents’ family medical history or other genetic information to a similar de minimis amount.
The proposed rules are described in more detail below.
Background
As background, under the ADA, wellness programs that involve a disability-related inquiry or a medical examination must be “voluntary.” Similar requirements exist under GINA when there are requests for an employee’s family medical history (typically as part of a health risk assessment). For years, the EEOC had declined to provide specific guidance on the level of incentive that may be provided under the ADA, and their informal guidance suggested that any incentive could render a program “involuntary.” In 2016, after years of uncertainty on the issue, the agency released rules on wellness incentives that resembled, but did not mirror, the 30% limit established under U.S. Department of Labor (DOL) regulations applicable to health-contingent employer-sponsored wellness programs.
While the regulations appeared to be a departure from the EEOC’s previous position on incentives, they were welcomed by employers as providing a level of certainty.
However, the rules were subsequently challenged by the AARP, which alleged that the final regulations were inconsistent with the meaning of “voluntary” as that term was used in ADA and GINA. After much back and forth in the lawsuit, in December 2017, the court vacated, effective January 1, 2019, the portions of the final regulations that the EEOC issued in 2016 under the ADA and GINA addressing wellness program incentives. This was, in most part, due to the timing proposed by the EEOC to develop new regulations.
Accordingly, since January 1, 2019, employers have been operating with little guidance or clarity regarding whether incentives provided for participatory wellness programs would be agreeable to the EEOC.
EEOC Proposed Wellness Regulations
ADA Proposed Wellness Regulations
The EEOC’s proposed rule seeks to amend two sections of the ADA regulations, related medical examinations and inquiries and the insurance safe harbor. In the preamble to the proposed rule, the EEOC recognizes that the meaning of “voluntary” is in the eye of the beholder but takes the position that if incentives are too high, then employees may feel coerced to disclose protected medical information in order to be rewarded or avoid a penalty. Accordingly, participatory wellness programs that include a disability related inquiry and/or a medical examination or health contingent programs that are not part of, or do not qualify as, a group health plan must not impose terms that would adversely affect the terms, conditions, or privileges of employment for employees who do not participate and, therefore, must limit incentives to a de minimis amount.
While “de minimis” is not specifically defined, the EEOC provides some examples to help guide employers, including:
Items the EEOC indicates would not be de minimis include:
The EEOC requested comments on the types of incentives that should/should not be considered de minimis.
The proposed rules list four factors that can be used to determine whether a wellness program is “part of” a group health plan:
The proposed rules included other protections for employees. Specifically, they (1) prohibit employers from retaliating, interfering with, coercing, intimidating, or threatening employees, such as coercing them to participate in the program or threatening disciplinary action if they don’t participate, (2) protect employee confidential information obtained by a participatory wellness program or a health-contingent wellness program that is not part of the group health plan by requiring information collected to be aggregated in a form that does not disclose, and is not reasonably likely to disclose, the identity of specific individuals, (3) with limited exceptions specific to carrying out wellness program functions, prohibit the employer from requiring the employee to agree to the sale or disclosure of medical information or waive confidentiality protections under the ADA to participate in the program; and (4) clarify that employers must still comply with other federal civil rights laws.
Finally, because the EEOC is now proposing a de minimis incentive standard for most wellness programs, it no longer believes that it is necessary to require employers to issue a unique ADA notice that describes, among other things, the type of medical information that will be obtained and the purposes for which the information will be used.
GINA Proposed Wellness Regulations
Under the proposed GINA rules, employers may provide de minimis incentives to employees who complete health risk assessments that contain information about their spouse or dependents’ family medical history or other genetic information. The EEOC uses the same examples of what would be de minimis under the ADA for purposes of GINA, such as providing a water bottle or a modest gift card.
The proposed rule does not prohibit an employer from offering a greater incentive (i.e., a non-de minimis incentive) to employees who provide their own genetic information as long as the employer makes it voluntary for the employee to complete the questions regarding genetic information (and the instructions clearly indicate which questions are voluntary), or to an employee who completes a health risk assessment that includes genetic information, if the employee participates in a disease management program, other program that promotes a healthy lifestyle, and/or meet a particular health goal, as long as the programs are also offered to individuals with current health conditions or health risks.
The EEOC uses an example of an employer who offers $150 for completion of a health risk assessment which requests information about family medical history or other genetic information but makes it clear that the incentive is available regardless of whether the employee completes any questions related to genetic information. The assessment identifies which questions are related to genetic information. Employees can earn $150 if they disclose family medical history and participate in a program designed to encourage weight loss or a healthy lifestyle; however, if the employee does not want to complete the questions related to genetic information, they can still earn the $150 if they attain a certain health outcome by participating in other activities. The incentive complies with GINA.
What’s Next for Employers?
The wellness regulations are proposed at this time and it is uncertain when they will be finalized; however, if history is any indication, any final regulations will be challenged in court. While employers are not required to make any changes to their wellness programs at this time, they should continue to monitor developments and work with employee benefits counsel when designing their wellness programs. The release of final regulations may be further delayed if the Biden administration freezes new rules pending further review.
About the Authors. This alert was prepared for Alera Group by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.
The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions.
© 2021 Marathas Barrow Weatherhead Lent LLP. All Rights Reserved.
Latest Acquisition Expands National Trucking Expertise
Alera Group, one of the nation’s top employee benefits, property and casualty, retirement services and wealth management firms, today announced that it has acquired Bondar Insurance Group, Inc (Bondar), effective January 1, 2021.
Founded in XXXX, Bondar focuses on serving clients through outcome-based, stewardship-oriented solutions. With vertical expertise in trucking, Bondar’s team of experts create solutions that include specialty coverages including cargo/freight, trailer interchange, property and warehousing. The firm is located in Oak Brook, Illinois, and serves clients across the country.
“We are proud to welcome Bondar Insurance Group to Alera Group, and we look forward to the impact of their industry expertise as we grow our property and casualty practice,” said Alan Levitz, CEO of Alera Group. “Alera Group firms across the country will benefit from future collaboration with Bondar Insurance Group, and together, we will continue to enhance the client experience.”
“Becoming an Alera Group company is an exciting step for our firm, and we anticipate significant benefits for our clients through the national resources now available to us,” said Paul Bondar, Managing Partner of Bondar Insurance Group. “The scope of Alera Group’s footprint across the United States positions us to gain additional market access and leverage on behalf of our clients.”
The Bondar Insurance Group team will continue serving clients in their existing roles. Terms of the transaction were not announced.
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About Alera Group
Based in Deerfield, IL, Alera Group’s over 2,000 employees serve thousands of clients nationally in employee benefits, property and casualty, retirement services and wealth management. Alera Group is the 15th largest privately held firm in the country. For more information, visit www.jmjwebconsulting.com or follow Alera Group on Twitter: @AleraGroupUS.
Aside from healthcare and long-term care, is there an industry that’s been more adversely affected by the COVID-19 pandemic than the restaurant business? As if restricted capacity, fears of community spread, vacated local offices and a battered economy weren’t enough to endanger independent dining establishments, a hard market for Property and Casualty insurance in general and COVID-related complications to an already troubled Employment Practices Liability (EPL) environment are making privately owned restaurants an endangered species.
How dire are the circumstances? On January 15, New England’s largest newspaper, The Boston Globe, ran a rare front-page advocacy article headlined “IF YOU WANT RESTAURANTS TO STAY, TAKE IT TO GO.” The subtitle: “All of them need our support now, so do your part.”
The situation, of course, is not unique to New England. As the Globe reports:
“The story is the same everywhere, even as the details differ. Independent restaurants are on the ropes. The owners, chefs, servers, line cooks, bartenders and dishwashers who animate them are fighting hard to survive. The pandemic may have slashed seating capacity for customers willing to eat indoors. Winter may have howled down outdoor dining. But these businesses just need to make it a little longer—to the warmer weather, to the vaccine’s full roll-out. They just need to make it to the other side.”
P&C Costs and Risks
Making it to the other side of the pandemic will take more than robust takeout sales. The restaurant industry continues to be persistently vulnerable to EPL lawsuits while also facing rising Property and Casualty insurance rates and/or underwriting scrutiny for lines of coverage including:
Already saddled with heavy Employment Practices Liability premiums resulting from age discrimination, harassment, wrongful termination and other employment-related claims, the industry has continued to see a surge in such cases. COVID-19 has contributed to the surge while also being the primary cause of two employee claims in particular:
Under these circumstances, EPL insurance remains an essential coverage for most restaurants, with risk management policies and procedures taking on ever greater importance.
Even before the pandemic exerted its full grip on the nation, the insurance industry publication PropertyCasualty360 last March reported on the restaurant industry’s “glaring EPLI coverage gap.”
Outlook for 2021
Here’s a summary of the landscape for the healthcare industry as outlined in Alera Group’s Property & Casualty 2021 Market Outlook:
► Unlikely to see rate decreases: While the sales and payroll for restaurants in General Liability and Workers’ Compensation are decreasing, rate increases, as a result of the current hard insurance market, will offset any exposure decreases for most restaurants.
► Little change in availability or capacity: The market for restaurants has always been fairly restrictive. Clients won’t see much change in the number of insurance companies who want this business. Most restaurants will be able to purchase the limits they want; it will be a question of affordability.
► New risks to consider: With the advent of COVID-19, owners are vulnerable to new risks from “to-go” alcohol sales and expanded food delivery to claims from customers and employees alleging they contracted the virus while in the restaurant. It’s critical to flag any changes in how your business is operating and to understand how insurance will or won’t provide protection if there is a claim.
► Few COVID-19-related claims are being covered by business interruption insurance: Since the virus triggered government-ordered shutdowns in March 2020, judges have dismissed more than four times as many business-interruption lawsuits as they’ve allowed to proceed, according to a preliminary analysis by the University of Pennsylvania Law School. As insurers issue/renew existing policies, most are including COVID-19/contagious disease exclusions.
► Increased focus on balance sheets: Given the impact of shutdowns and operating restrictions on revenues, underwriters will be paying close attention to restaurants’ financial strength.
► Be mindful of vacancy exposure: It’s important to be aware of vacancy provisions in your policy. Most policies include provisions that exclude or limit coverage once a building becomes vacant. Vacancy is typically defined as having less than 31% of the total square footage in use for conducting customary operations.
There is some good news: The outlook is generally positive for two lines of coverage, Property and Workers’ Compensation. To obtain the entire Property & Casualty 2021 Market Outlook whitepaper, click the button below.
What You Can Do
Here’s what you can do…
Fortunately, restaurants aren’t entirely dependent on customer loyalty and takeout-service promotions to endure the pandemic. Proactive measures, including collaboration with trusted advisers and applying for federal assistance, are vital as well.
To view the recording, click the button below.
About the Author
Paul Werner, Senior Account Executive, AIA, Alera Group
Paul is a Senior Account Executive in the Property & Casualty division of AIA, Alera Group whospecializes in mid-market and large accounts. With 30 years of insurance industry experience , he has built strong, long-lasting relationships with hundreds of clients. Paul takes pride in understanding the business of each client and enjoys his role as an experienced advisor to some of Central Pennsylvania’s top companies and their executives. Providing risk management solutions that are the best-fitting and specific for each of his client’s needs has helped him become a sought-out insurance advisor.
Don’t miss our blog series, Compliance Matters! In the blog below, you’ll learn more about the Health FSAs. Download this article.
The Affordable Care Act (ACA) requires healthcare flexible spending accounts (health FSAs) to be considered an “excepted benefit” to avoid being subject to the ACA market reform provisions (e.g., preventive services requirements). In general, there are two requirements for a health FSA to be considered an excepted benefit:
An employer who does not offer group health insurance coverage may not offer a health FSA. Likewise, an employer must make available group health plan coverage to all employees whom which they are also offering the health FSA in order to meet the excepted benefit test. An employee does not need to enroll in the major medical plan; however, they do need to be eligible to participate in it.
Under the ACA, an employer providing a health FSA that does not qualify as excepted benefits is a violation of ACA market reforms and the employer could be subject to $100/day per employee penalties under IRC § 4980D.
This content was written by Michelle Turner, MBA, CEBS, Compliance Consultant, Alera Group Central Region. This blog post intends to provide general information regarding the status of, and/or potential concerns related to, current employer HR & benefits issues. This blog should not be construed as, nor is it intended to provide, legal advice. The opinions expressed herein are based upon the author’s experience as a Compliance Consultant and may not reflect the opinions of your counsel.
The information contained herein should be understood to be general insurance brokerage information only and does not constitute advice for any particular situation or fact pattern and cannot be relied upon as such. Statements concerning financial, regulatory or legal matters are based on general observations as an insurance broker and may not be relied upon as financial, regulatory or legal advice. This document is owned by Alera Group, Inc., and its contents may not be reproduced, in whole or in part, without the written permission of Alera Group, Inc.
This article was last reviewed and up to date as of 01/19/21.
When it comes to wellbeing, employers often find themselves challenged by how to approach a shift from a traditional wellness model to a comprehensive and holistic program that supports the whole person. Below you’ll find this week’s curated list of wellbeing resources. Feel free to share these resources, as appropriate, with your team. Have a safe and healthy week!
Career Wellbeing
Social & Family Wellbeing
Financial Wellbeing
Physical Wellbeing
Emotional Wellbeing
Community Wellbeing
Employer Focused Wellbeing
On January 12, 2021, the United States recorded a record 4,250 deaths due to COVID-19 while the Trump administration announced an accelerated schedule for administering vaccines to fight the disease. For employers already navigating the novel and challenging landscape created by the coronavirus, volatility surrounding the recent elections, a deeply divided nation and a new administration preparing to take office, the time had come to sharpen focus on a too-often overlooked aspect of running a business: Employment Practices Liability (EPL).
That these developments occurred amid a hard market for property and casualty insurance also served to make the imperative of risk management all the greater.
COVID-19 is the latest in a series of society-altering phenomena that have heightened public consciousness of issues related to employment practices, following closely on the heels of the Black Lives Matter and #MeToo movements. As we reach the midway point of the first month of 2021, these are some areas that underscore the importance of a sound employment practices liability insurance program backed by well-conceived and articulated company policies:
How these company policies are crafted and administered can mitigate the challenges employers face in the current property and casualty/executive liability insurance marketplace.
Outlook for 2021
Here’s a summary of the landscape for the healthcare industry as outlined in Alera Group’s Property & Casualty 2021 Market Outlook:
► While national insurers remain in this market, they are focusing heavily on the impact of COVID-19 on workers. Buyers will likely face price hikes and restrictions in coverages and limits.
► Pandemic-related job losses are causing an increase in employment-related claims that will likely continue into 2021, including:
► The pandemic-based surge in claims costs was not contemplated in 2020 pricing, so buyers may experience price increases in the range of 10% to 50% as well as a reduction in limits and increased retention requirements, depending on the type of risk.
Terms and coverages will be limited by some carriers for select risks, for example:
What You Can Do
Protecting your organization with a comprehensive, cost-effective insurance program should be an active process. Here are some steps to include in your business plan for property and casualty coverage:
These are dynamic and demanding times. Alera Group is here to help you work through them – Stronger Together.
About the Author
Alan Goodrich, CPCU, AAI
Commercial Insurance Advisor, HMK Insurance
Involved in Commercial Insurance since 1985, Alan continues to build his book of commercial clients by utilizing his extensive risk management experience and knowledge. Over the years, Alan has developed a significant emphasis on the manufacturing industry, including plastics, metal workers, electronics and foods. Other industries he serves include wholesalers, veterinarians and medical/dental organizations. A Salem (WV) University graduate, Alan has successfully earned the Chartered Property Casualty Underwriters (CPCU) and Accredited Advisor in Insurance (AAI) series industry designations.