The Hammer Clause - Not What You Think

"Doctor, Lawyer, Indian Chief" - Besides being the name of a popular song from 1945, what do these occupations all have in common?  Each requires that the individual with the title possess a special skill holding them to a higher standard of conduct.  They are considered professionals.  Plumbers, programmers, carpenters...the category of professional has evolved.

If allegations arise that one of these individuals failed to render services of a professional nature, their business liability policy, sometimes referred to as a Commercial General Liability (CGL) policy, will not respond.  Professional liability is excluded under CGL policies.

The astute professional carries a professional liability policy in addition to his CGL.  Professional liability insurance, also referred to as malpractice insurance, will protect the professional when allegations of errors or omissions in professional services arise.  But you knew that.

What you may not know is that many professional liability policies contain an unusual clause, known as the "hammer clause".  The hammer clause requires the insurer to seek the insured's approval prior to settling a claim for a specific amount.  Some professionals believe that settling claims out of court is an admission of error that may harm their professional reputation.  So the hammer clause appears to be a great way for the professional to have the final say before settling a suit that they deem frivolous or unsubstantiated.

However, what many professionals fail to realize is that if they do not approve the recommended settlement, the hammer will fall.  You see, the hammer clause goes on to say that the insurer will not be liable for any additional monies required to settle the claim or for the defense costs that accrue from the point that the insurer makes the settlement recommendation.

An example will demonstrate the point.  Dr. Smith has a $5 million limit on his professional liability policy.  His insurance adjuster/lawyer recommends that a settlement be reached in a malpractice claim for $500,000.  Dr. Smith refuses and wants the case to proceed to trial.  Any defense costs from that point on, as well as any settlement over $500,000, will not be paid by the insurance company.  Talk about putting the hammer down!

The 1945 song goes on:  "Tell the doc to stick to his practice; Tell the lawyers to settle his case.".  My interpretation, always work with an insurance professional who can explain these important policy provisions to you.  That way, you won't get hammered. 

What's the State of Your Union?

What's the State of Your Union?  No, not your marriage union.  Think of it this way.  The State of The Union address is an annual opportunity to learn the condition of the Nation and hear recommendations for change.  Likewise, your financial protection deserves a State of Your Union discussion with your insurance agent.

When was the last time you had a heart-to-heart with your agent to discuss what's going on with you and what's going on in the insurance world?  So many life changes can impact your insurance.  For example:

• Your ambitious son just took a job delivering pizzas - in one of your cars
• You just invested $70,000 in a room addition
• Your 15 year old granddaughter has moved in with you
• You are planning a Spring Training visit to Arizona where you will rent a car
• Your family has adopted a new family member - Fido the Pit Bull
• Your Valentine has purchased a $10,000 diamond ring 

In addition, the insurance world is transforming with options on coverage, rates and communication.  For example:

• Equipment Breakdown coverage
• Rate reductions based on home fire and safety protections installed
• Apps for everything from home inventories to what to do after a claim

Be aware that everyday life situations can impact your insurance.  Take a few minutes to schedule an appointment with your Trusted Choice Agent to discuss your insurance condition and hear recommendations for change.  The State of Your Union is just as important as the State of our country.

Pizza Delivery - No Coverage

There is no way to sugar coat this one, folks.  Better to find this out before than after your 17-year old son causes an accident while delivering pizzas in your vehicle.  

The standard Personal Auto policy excludes liability "arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance."

The definition of "Public or Livery conveyance" is: "The transporting of people and/or goods for hire, such as by a taxi service, motor carrier, or a delivery service."

Therefore, no coverage.  Nothing.  Zero.  Zilch.

Some individuals may think that since this type of food delivery is a minimal "sideline business", there may be coverage.  However, the policy specifically excludes all liability coverage resulting from the ownership or operation of a vehicle while it is being used to transport goods for hire.

Just last month, a Louisville, Kentucky family found themselves uninsured when Dad took a second job to deliver pizzas.  No coverage.

This delivery exclusion applies not only to pizza delivery but to newspaper delivery, home pharmacy deliveries - anytime you are transporting for hire.

As the risk manager of your household, there are a few solutions.  

• One technique of risk management is avoidance.  Sorry, Junior,  you can't take the job.  
• Another risk management technique is transfer.  Ask the pizza business owner to provide insurance or, better yet, provide the delivery vehicle.   
• A less popular risk management approach is to accept the risk of an accident occurring and budget accordingly.  (ouch!)

Discuss all personal insurance situations with your own Trusted Choice Agent during your annual review.  As issues arise during the year, feel free to contact your agent as part of your personal risk management team.  

The risk management technique of retention can be very costly when it comes to an auto liability claim.  Is your pocketbook able to deliver?  

No Need to Fear, Underdog is Here!

Did you know that are approximately 70 million pet dogs in the US?  How many four-legged family members does your family have?  Remember when the "responsibility" discussion ensued about getting a dog?  What did you, as the responsible adult, make your child do to prove that he or she was "ready" for pet ownership?

• Walk the neighbor's dog for a month
• Write an essay explaining how responsible he or she is
• Obtain One Million "Likes" on Facebook (seriously - and these enterprising kids did it!)

Sooner than later, your newest family member, in the form of a lovable pooch, arrived. Within a few weeks, the parental unit was walking the dog while Junior was working his thumbs on a mobile device.  So much for teaching Junior responsibility, but what about your responsibility as a pet owner?

It may be a surprise to you that dog bites accounted for more than 1/3 of all homeowner claims in 2011, with the average claim totaling close to $30,000!

Yes, if Fido "accidentally" nips the neighbor's toddler and injury results, you could very well be sued for medical bills, pain and suffering and the like.  If Rover gets loose and bites someone else's dog, you could find yourself paying for vet bills.  "There's no need to fear.  Underdog is here!"  That is assuming you have a home / renters / condo policy.  The "underdog" of coverages on your policy that I am referring to is "Coverage E - Personal Liability".

Personal liability will defend you, even if the suit is groundless, false or fraudulent.  This inexpensive coverage can be increased up to a $500,000 limit for an additional premium of usually less than $30 per year.

This coverage is not limited to dog bites.  If you or family members are sued for many types of bodily injury or property damage claims, underdog "Coverage E", can rescue you. Talk to your Trusted Choice agent for more details.

There is one more thing to keep in mind regarding your dog.  Injuries caused by your dog will automatically be covered by your home insurance in most situations.  Some insurance companies, however, do have a "restricted" list of dogs that they do not want to cover on the home policy.  These breeds are perceived to have aggressive tendencies. Other insurance companies define what dogs are "restricted" from coverage based on behavior; i.e. biting history.  Be sure to discuss your pet honestly with your insurance company.

Be a responsible dog owner.  Train your dog.  Take necessary precautions with your dog around neighbors and visitors.  Finally, armed with your insurance policy, you can have no fear, underdog is here.

Are You SURE You Have Enough Insurance?

Just about every day, you can pick up the local paper (or online paper, or Twitter) to read about a family who lost their home to fire and discovered that they didn't have enough insurance to rebuild. Case in point, this morning's story, "Insurance will only cover about $160,000 and preliminary estimates indicate it will cost at least $200,000 to rebuild the structure."  Where will this family round up the missing $40,000+ for their home?

With these types of stories continually staring you in the face, why do you balk when your home insurance renewal increases the coverage on your home by a meager 2%?  You know who you are.  You are not alone.  Insurance agents across the country field these calls on a daily basis.  The dialogue is something like this:

Homeowner:  "I just got my renewal.  Where do they get these amounts?  I WISH I could sell my house for $250,000!  In this market, I would be lucky to get $200,000 for it."
Agent:  "I appreciate your concern, Mr. Homeowner.  Insurance is based on the replacement cost of the home; not market value."
Homeowner:  "That's ridiculous.  I can't afford this premium.  Please reduce my coverage back to what it was last year or I am moving my coverage to Compete-Cheap-Insure-Agency, down the street".

To the average American, your home is your most valuable investment.  And yet, some statistics shows that two out of three homes are underinsured.  Were you aware that the typical home insurance policy requires  that the homeowner insure the building to at least 80% of what it would take to replace the dwelling?  Replace, not sell.  Once that provision is met, the typical homeowner policy will pay up to policy limits.

Many home insurance companies offer "Additional Replacement Cost" coverage that will automatically increase your maximum amount of dwelling coverage by 25%, 50% and in some cases, a "guarantee" to replace the home, whatever it costs.  The additional premium for this invaluable coverage is usually around $25.

Another thing to consider is the cost of rebuilding your home up to code.  City, county and state ordinances will undoubtedly add costs to your rebuild.  Are you aware that some cities are considering a code addition to require the mandatory installation of fire sprinklers in new home construction?  How much will that set you back?  Yes, these ordinance or law costs are typically covered by your insurance but are limited to 10% of your building coverage amount!  You can, and should, purchase increased ordinance or law cost coverage.

Are you SURE you have enough insurance?

I know home insurance premiums are on the rise but there are ways to get the disaster coverage you need at a price that will fit in your budget:

• Consider increasing your deductible to a $1,000 or higher
• Ask your agent to shop your coverage with all of his companies to make sure you are getting the best coverage for your premium dollar
• Talk to your agent about your "insurance score" - what can you do to earn the preferred rate?
• Bundle your home, auto and umbrella policies with the same carrier for maximum discounts

If you still feel the replacement cost figure that your insurance company has is off-the-mark, spend some time assessing your home's replacement cost by visiting AccuCoverage.com.  For $7.95, you can accurately input your home's features into the same building-cost data base that insurers use.   Another option is to invite your Trusted Choice Agent to your home for a good old-fashioned home insurance review.  After all, who better than you and your local agent to calculate your home's replacement cost?

Smart Coverage for Smart Gadgets

Exciting news from this year's Consumer Electronics Show in Las Vegas - your new appliances may be "smarter" than you!   In addition, they will communicate with each other and you, via your smart phone.  Your refrigerator will be able to suggest recipes based on what you have in the fridge, your washer will recommend a cycle to get a stain out and your robotic vacuum will sweep the living room on your way home from work.  Rosey the robot maid, step aside! Even George Jetson's home wasn't this automated.

All of this smart technology is great when it works and frustrating as all getout when it doesn't.  Even worse, when smart technology breaks down or is damaged to the point of replacement, our wallets begin to "smart"!

The Insurance Information Institute reports that in 2011, the average claim for power surges to high dollar electronics was $5,112. However, most home policies will not cover damage to appliances caused by a power surge, not to mention the lack of coverage when the equipment has a mechanical or electrical breakdown.  

What's a "smart" consumer supposed to do? One solution is to make sure your emergency fund can handle the cost to replace one of these items when it is damaged. Unfortunately, when all of your electronics are networked together, the damage to one may lead to damage to the others. That may wipe out your emergency fund! 

Others may consider purchasing manufacturer warranties with their new electronics.  A recent article entitled "Extended Warranties" from ConsumerReports.org, advises that these service plans are "cash cows" for the retailer and "bad investments" for the consumer.  If you are going to purchase a warranty, be sure to investigate it fully.

A third option is an enhancement that you can add to your homeowners policy called "equipment breakdown".   Many innovative insurance companies are offering it for less than $50 per year.  This coverage can secure protection for your appliances and home systems from power surge, breakdowns and other losses that are not specifically stated in the policy contract.

This unique coverage extension is convenient and seamless — there are no separate warranty programs or fees to manage. And, best of all, you’ll have peace of mind knowing you’re covered for mechanical and electrical breakdown of your favorite gadgets, including:

• Flat screen, plasma and 3D televisions
• Computer and peripheral equipment
• Washers, refrigerators, ovens
• Freezer units
• High-efficiency home heating and central AC systems
• Home security systems

As you contemplate adding more gadgets to your futuristic utopia called home, contact your Trusted Choice Agent to discuss your options for adequately covering these items on your home, condo or renters policy.   It's the smart thing to do.