Thursday, July 30, 2009

Access Unauthorized? Claim DENIED!

Have you ever spent any time with your Errors & Omissions policy? I mean, really looked at it? You may be surprised at what you find.

Grab a magnifying glass and dig deeper. . .deeper. . .deeper into the cadaver
of your policy. Once you get past the glossy cover, you'll find that the bright, pretty logos disappear; as do the promises of unmatched service. The text shrinks and splits into 2 columns that seem to run on without end - like the yellow brick road coiling into the horizon.

Once you find the EXCLUSIONS section, you may see something like this:

The insurance does not apply to any "claim" arising from:

Security or System attack, unauthorized access to, unauthorized use of, tampering with or introduction of malicious code into: firmware, data, software, system or networks, or any resulting denial of service or repudiation of access.

As an IT company, your clients rely on you to protect them from viruses, worms, cyber attacks, & theft of information. Your customer pays top dollar. They rely on your expertise to keep their network running and stay in business.

If a customer's network falls victim to an attack, either by a virus or unauthorized access from an outside party, they will call to ask why you didn't protect them. If they determine that your company made a crucial mistake in configuring their system, then they may hold you liable for their:

  • Cost to repair their system
  • Loss of revenue during their downtime
  • Lost customers due to adverse publicity related to the attack

Once you receive the call from that irate customer, your next call will be to your Insurance Agent. If your policy contains the above exclusion, then you will not be covered.

Double check your Errors & Omissions policy to see if it contains an Unauthorized Access exclusion. It probably does. If so, ask your Underwriter if you can buy this coverage back by endorsement. If your company can't do it, then I recommend finding another insurance carrier.

Errors & Omissions policies have lots of other landmines that will surprise the IT business owner. I'll describe some of these in future posts. In the meantime, if you have any questions or want to discuss specifics, please do not hesitate to contact me @

If you've ever been caught in this coverage gap, let me know about it.

Monday, July 27, 2009

Madoff's Legacy: The Importance of Fiduciary Liability Insurance

I received the following information from Professional Risk Solutions, my main resource for specialized Professional Liability coverages. PRS's President, Kathleen Zortman, tells how Directors & Officers (D&O) or Errors & Omissions (E&O) policies may not protect you against liability claims from pensions, retirement plans, 401(k) plans, etc.

Individuals and companies who sponsor these types of plans have a Fiduciary Liability under the Employee Retirement Income Security Act (ERISA). If they mishandle or mismanage those funds, then they may be held liable by regulatory agencies and/or the funds' participants.

Fiduciary Liability insurance is a very affordable way to protect yourself against these risks.

Your client who run pensions, 401(k), benefits: A Madoff Lesson

Top line:
If you have clients who sponsor pensions, retirement plans, profit-sharing, 401(k) plans, group life and medical expense plans, it's critical to protect them with Fiduciary Liability coverage.

They could be personally at risk for lawsuits stemming from their managing or administering the assets of others. As a fiduciary, you can not wholly transfer your liability to another party, such as an investment manager or third party administrator. And D&O/E&O will not help.

Fiduciary Liability coverage is generally designed to protect individuals or firms that are responsible for managing the assets of others. This encompasses those who administer retirement plans, pension funds, 401(k), other employee benefits and trusts. The need for Fiduciary coverage is likely to increase as pensioners lose more and more value in the depressed financial markets -- and look for someone to blame.

The background:
A development in the ongoing Madoff mess points out the huge difference between D&O/E&O and Fiduciary Liability

A firm called Austin Capital Management is being sued by the members of a Philadelphia-based hospital pension fund for losing some of the fund’s assets in an ill-fated Madoff feeder fund.

Unlike other suits filed in the Madoff situation, this is an ERISA action, which is specifically excluded from D&O/E&O policies. In this case, a Fiduciary Liability policy could possibly help with defense costs, and any judgment. Without Fiduciary coverage, the principals could be personally liable for any settlement or judgment, as well as the defense costs.

Learn more about Fiduciary Liability coverage on the PRS website. Or if you have questions about when and where the coverage might apply for your clients, or how to structure a plan, just ask us.

Kathleen O. Zortman

Wednesday, July 22, 2009

Trust, but Insure

From Hartford Help: Hard Times Lead to Big Employee Crimes.

Protect yourself against employee theft. Your insurance program should include some type of Employee Dishonesty coverage. Many companies overlook this important coverage, or they decline it with a comment like, "My employees would never do that to me." With tough times getting tougher, some employees may find themselves in difficult positions and choose to do the unthinkable. The linked article above highlights some glaring examples.

The Insurance Auditor Cometh. The End is Nigh.

Your policy year just ended, and you're all renewed for the new year. I hope it wasn't too painless. However, your journey is not yet complete. You are about to be visited by a harbinger of goodwill and efficiency. . .the Insurance Auditor!

Auditors are the eyes and ears of your insurance carrier. Their reports have caused premiums to double and coverages to cancel. Be afraid. Be very afraid.

At the start of the policy, your Agent submits information about your company to the Underwriter. To get an accurate quote, we tell them everything about your company: products, operations, locations, radius, # of employees, limits, estimated payroll, gross sales, etc. Your policy premium is based on these estimates.

The carrier then dispatches their personnel to verify that your Agent was telling the truth. The Auditor physically inspects your work site or office and interviews you about your operations. They review your books to verify the actual premium basis of the particular policy. For Workers' Compensation policies, your friendly Auditor is reviewing payrolls. For General Liability, he or she could be looking at payrolls or gross sales. Other types of policies are auditable, but Work Comp and GL are the most common. The intent of the audit is to ensure that your insurance company is getting accurate premium for their exposure to loss.

For example, if I report that a contractor has $50,000 in Carpentry payroll, then the insurance company assumes that they are insuring 1-2 employees against injury. If they actually have $500,000 in payroll, then the insurance company's exposure to loss is much higher. More swinging hammers means more potential smashed thumbs. The insurance carrier is entitled to the proper premium dollars to fund those potential losses.

The audit is a requirement of all auditable policies. Resistance is futile. If your actual payroll or sales figure is higher than the original policy estimate, then the insurance company will bill you for the additional premium. If your actual figure is lower, then you can expect a refund from the company.

Your Auditor will ask to review any or all of the following items:

  1. Quarterly payroll tax reports (IRS-941s and/or State Unemployment Statements)
  2. Individual payroll records for each individual employed by the company during the policy period

  3. Overtime reports

  4. Names of Subcontractors and amounts paid to each during policy period

  5. Certificates of Insurance for the Subcontractors on your list (see Service & Sub Contractor Insurance Guide, 4/30/09 post)

  6. General Ledger

  7. 1099s & W2 forms

  8. Cash Disbursements Journal

  9. List of Company owners, partners, officers - including amounts paid & duties

  10. Employee list and job description

  11. Description of company operations
To be fair, not all Auditors are antagonistic bookworms. They are paid by the insurance company to make sure the policyholders are staying honest. If insurance companies did not collect the proper premium dollars to pay losses, then they'd all go out of business. The sky would fall, and chaos would reign. Your Auditor can be your friend or your worst nightmare. Many of them will work with you. They will recommend ways that you can protect yourself against radical premium increases. They may let a few things pass.

How will you survive? Don't panic. We'll get through this together. Start compiling this information, and I'll tell you how to present it. Stay tuned...

In the meantime, tell me about your audit experiences. Did you prepare? Did the Auditor sit in your office for hours? Was the Auditor a good cop or bad cop?

Tuesday, July 21, 2009

To Get A Rebate, Your "Clunker" Must Have Had Insurance

Below is an article from one of my carriers, Allied Insurance, that discusses the insurance requirement of President Obama's new Car Allowance Rebate System (CARS), or "Cash For Clunkers." In order to qualify for the rebate, consumers must show that their "clunker" has been continuously insured for at least 12 months.

CARS -- Car Allowance Rebate System (Cash for Clunkers)
President Obama in June 2009 signed into law the Car Allowance Rebate System (CARS) also known as "Cash for Clunkers. This program, administered by the National Highway Traffic Safety Administration (NHTSA), is designed to increase fuel efficiency and stimulate auto sales. It also has the potential of generating net new auto premiums for insurers. Program Highlights:
· This program will help consumers purchase a new vehicle when trading in a less fuel efficient vehicle.
· Consumers can get between $3,500 and $4,500 per vehicle, depending on fuel efficiency of the new vehicle vs. the old vehicle.
· The NHTSA is scheduled to release regulations regarding required forms for compliance with CARS on or around July 24.

What we know so far:
· Consumers will be required to provide proof that their trade-in vehicle has been continuously insured for the most recent 12 months.
· The federal government has yet to define many details of this program, including what will be accepted as proof of continuous coverage.
· There have already been news stories released about this program, so you may receive questions from your clients before all details are finalized.
· Consumers can visit to determine eligibility and review information about the program.
· Since CARS is a Federal program and not a Nationwide program, consumers should rely on the CARS website for their information.

Our job will be to provide any policyholder or prior policyholder with the evidence of insurance. Once the NHTSA regulations for compliance are finalized, we will provide additional information regarding the program and what forms you may be asked to provide.
For more information or answers to your questions, please visit the website or contact your Sales Manager. Once the final details of the program are known, additional information will be posted.

Wednesday, July 15, 2009

What is a CPCU?

From the Insurance Daily Quote Calendar:

A Chartered Property Casualty Underwriter is a professional designation granted by the American Institute of Chartered Property Casualty Underwriters. CPCU designation requires an individual to pass exams in five core courses and three courses in either a personal or commercial insurance concentration. CPCU designees are also bound by a Code of Ethics.

CPCU, or Chartered Property & Casualty Underwriter, is an advanced degree in insurance. After several years and several exams, I finally achieved mine. The Insurance industry has many different designations, but CPCU is the grand-daddy of them all.

I'm glad to have it, and this study has exponentially increased my knowledge of the commercial insurance industry. If you are a new agent, I highly recommend that you take the plunge. If you are a policyholder, make sure you are using an agent who has one. We CPCUs can't wait to shower you with knowledge.

For more reading on the CPCU designation, please visit the American Institute for CPCU,

Monday, July 6, 2009

Preventing Dryer Fires

Following is great information on how to reduce your risk of dryer fires. I received this article from one of my clients, Moss Building & Design, in Chantilly, VA. Moss is a specialist in custom residential remodeling.

How a clean dryer can do more than clean your clothes…it can save your life!

The U.S. Consumer Product Safety Commission estimates that in one year alone, clothes dryers are on average associated with 15,600 fires, which result in 20 deaths and 370 injuries. Fires can occur when lint builds up in the dryer or in the exhaust duct. Lint can block the flow of air, cause excessive heat build-up and result in a fire in some dryers. These easy steps will show you how to protect your family and your home.

  • Clean the lint screen/filter before or after drying each load of clothes. If clothing is still damp at the end of a typical drying cycle, this may be a sign that the lint screen or the exhaust duct is blocked.
  • Clean the dryer vent and exhaust duct periodically. Check the outside dryer vent while it is operating to make sure exhaust air is escaping. If it is not, the vent or the exhaust duct may be blocked. To remove a blockage, it may be necessary to disconnect the exhaust duct from the dryer.
  • Clean behind the dryer where lint can build up. Have a qualified service person clean the interior of the dryer chassis periodically to minimize the amount of lint accumulation. Keep the area around the dryer clean and free of clutter.
  • Replace plastic or foil, accordion-type ducting material with rigid or corrugated semi-rigid metal duct. Most manufacturers specify the use of a rigid or corrugated semi-rigid metal duct, which provides maximum airflow. The flexible plastic or foil type duct can more easily trap lint and is more susceptible to kinks or crushing, which can greatly reduce the airflow.
  • Take special care when drying clothes that have been soiled with volatile chemicals such as gasoline, cooking oils, cleaning agents, or finishing oils and stains. If possible, wash the clothing more than once to minimize the amount of volatile chemicals on the clothes and, preferably, hang the clothes to dry. If using a dryer, use the lowest heat setting and a drying cycle that has a cool-down period at the end of the cycle. To prevent clothes from igniting after drying, do not leave the dried clothes in the dryer or piled in a laundry basket.

Source: Consumer Product Safety Commission


Justin Schopp

Moss Building & Design

Come to the July MAREMA meeting - 7/15/09

MAREMA Monthly Meeting July 15, 2009

I hope everyone had a good Fourth of July Holiday!

It’s that time to put the MAREMA Monthly Meeting on your calendar. This month’s meeting is a special one. Our Guest Speaker is Richard (Rick) Brown, Principal, B&B Realty Investments, LLC. Rick is an expert in TIC (Tenant in Common) transactions. His topic this month is "Tenant in Common Investments, the Good, the Bad and the Ugly", or "How to prosper and take advantage of this growing part of the industry".

If you aren’t familiar with TIC’s, this is a great opportunity to get up to speed. Learn the benefits of these investments. Remember, your real estate principles class. A Tenant in Common is a type of ownership of real property by two or more persons in which each owns an undivided interest in the whole. Upon the person’s death the property will pass on to their heirs. A TIC may be a good investment alternative for your Clients.

Join us this month and learn the "ins and outs" of investing in Tenant in Common properties. Take advantage of Rick’s expertise in this investing alternative.


Richard W. Brown, CCIM, 59, has been in the real estate business in the Mid Atlantic region for more than 30 years. As an agent, a manager or an owner he has been involved in over $650,000,000 of commercial investment real estate transactions.

He served as a salesman and then the manager of the Shannon & Luchs Co.

Commercial Division and as Regional Director for the Marcus & Millichap Company in Washington D.C., supervising a staff of over 25 investment real estate professionals.

From 2001 to 2004, Rick was the in-house real estate broker for the Reznick, Fedder & Silverman accounting firm in Bethesda, Maryland. Rick advised clients on the sale, development and tax structuring for a multiple number of projects, including 1031 tax deferred exchanges.

In the past 3 years, Rick has specialized in the acquisition, structuring and Co-Sponsorship of Tenant In Common (TIC) transactions.

His closed volume has exceeded $180,000,000. He has handled the acquisition, financial modeling, due diligence, TIC structuring and equity development for 7 properties: 6245 Leesburg Pike, Falls Church, VA, ($23,750,000), One Town Center, Bowie, MD, ($27,500,000), Yellow Breeches, Harrisburg, PA, ($13,500,000), Village Medical Park, Orangeburg, SC, ($14,000,000), Olde Lancaster Town Center, Charlotte, NC ($23,750,000), Pinnacle Point Center, Columbia, SC ($10,400,000) and Alexandria Corporate Park, Alexandria, VA ($57,800,000). Rick is a Co-Sponsor and signatory on loans exceeding $104,000,000 on these properties.

Rick has also advised The DeSanto Realty Group on their entry into the TIC industry. DRG has recently completed their 7th TIC transaction totaling over $150,000,000.

Rick is also an industry leader and has spoken on TIC issues at the National TIC Association Annual Conference, the National CCIM Annual Conference and the NAR National Convention. He served as a local and national director for the National Association of Realtors (NAR) for 12 years and was National Chairman of the NAR Realtors Political Action Committee in 1990. He currently serves on the NAR Federal Taxation Committee.

He was the founder and 5 year Dean of the Washington D.C. Graduate Realtors Institute and has served on the faculty of the Maryland Realtors Institute for more than 25 years. In 1979, he was named as the "Realtor Associate of the Year" by both the Montgomery County Association of Realtors and the Maryland Association of Realtors and in 1990, Rick was named the "Realtor of the Year" by the Washington D.C.

Association of Realtors.

Rick is a graduate of Towson University with a BS in Business Administration.

Richard W. Brown


B&B Realty Investments, LLC

4550 Montgomery Ave.

Suite 230N

Bethesda, Maryland 20814

office: 301- 469-3900

dir: 301-469-3902

mobile: 301-367-4489

fax- 301-469-3904 <>

Bring your Package Presentations, Quick Pitches and Cash Board items to the meeting and let’s make some deals this month. You can get the appropriate forms on the MAREMA web site at and

Don’t forget to put the MAREMA Annual Meeting on your calendar this year. The meeting is going to be held on October 2-3, 2009 at the Hylton Springfield this year. Get all the details and Registration Form at

If you are new to commercial real estate or need a little boost in your career, check out the MAREMA Intern and Mentoring programs. Information is available at

RSVP at to attend the monthly meeting. We need a head count for the luncheon as seats are limited.

Interested in joining MAREMA? Get all the information for joining at

Thank you for your membership and support!!!

Michael Setunsky





MAREMA meets the 3rd Wednesday of every month at the Westpark Hotel in Tysons Corner, Virginia except in October. Bring a colleague!Yahoo! Groups Links

<*> To visit your group on the web, go to:

<*> Your email settings:

Individual Email | Traditional

<*> To change settings online go to:

(Yahoo! ID required)

<*> To change settings via email:

<*> To unsubscribe from this group, send an email to:

<*> Your use of Yahoo! Groups is subject to: