Office Insurance Needs
by Jaffe-Schlossberg, Inc.
When you enter into a lease agreement in which you assume responsibility for an office space, you also undertake the risks involved with that responsibility. Those risks can be broken down into four parts: Third party liability; employee liability; property; and financial responsibility for the lease. We at Jaffe-Schlossberg, Inc. would welcome the opportunity in assisting you with all these coverages. Let us discuss each of these issues individually.
- THIRD PARTY LIABILITY
The landlord will want to be protected from liability issues that are caused by you or occurs on your property. Of course, you, too, wish to have this protection. Generally, the landlord will stipulate in the lease document what level of liability coverage you must carry as well as naming the lessor as additional insured under your policy.
You have the option to exceed that amount or augment the liability limit with a separate policy which is known as an "excess liability policy". Most often the first $1,000,000 of coverage is attached to a "office package policy" which also covers additional parts of your insurance needs. You also need to cover the responsibility of the lease area that you occupy or for which you are responsible. This area under your care, custody, and control is an excluded peril which must be covered. These policies will exclude malpractice and errors and omissions coverage, and these must be covered elsewhere (usually through your occupational group).
In addition, you will wish to protect yourself against the risks of your employees driving their own car or leasing/renting a car within the scope of their employment. In that situation, you as the employer could get sued as an additional entity responsible for the incident. Therefore, we always include non-owned auto and hired car coverage to pick up those exposures.
- EMPLOYEE LIABILITY
Fidelity Protection
This coverage will reimburse you for the theft or embezzlement of funds by your office staff. Needless to say, you and any partner (or officer in a corporation) are excluded from protection. The fidelity bond protects against forgery and theft of money and securities. The limit of coverage should be determined by computing what amount is at risk before the discovery of the event is made. In addition, should you have a pension/profit sharing plan, you are required to have an ERISA bond equal to 10% of the asset value of your retirement plan.
Employer Practices Coverage
This relatively new coverage provides protection from various problem areas in the scope of your being an employer. These include discriminatory hiring or firing such as racial, age, or religious discrimination; violation of the Fair Labor Standards Act; Gender discrimination or sexual harassment; or violation of the Americans with Disabilities Act. In addition, it should protect you from wrongful termination suits. While in the past the premium was inordinately inflated, the rates have been significantly reduced recently.
Workers Compensation
This required coverage protects you from the statutory requirements of an employee injury or death. The policy assumes the risks associated with on the job injury. You are obligated to carry this coverage or with very large employers, you may establish a self-insured program. The rates for this coverage have been de-controlled and the costs are competitive.
- PROPERTY COVERAGE
This group of coverage will protect you from damage to your own property or to property for which you are financially responsible such as leased telephone equipment. Generally, this will part of a package policy and will cover you against the main perils of Fire, Vandalism, Theft, Water Damage and Smoke Damage as well as others. Earthquake and flood are not covered under a normal package policy. You should also protect yourself against the peril of fire damage to your tenant improvements. The package policy can have additions to it which incorporate other property exposures. These could include outdoor signs, glass, antennas, and the extremely critical area of EDP (Electronic Data Processing). In addition, one could add inland marine coverage to protect you from the replication of files or the recovery of accounts receivable. Also, should your office occasionally be the repository of valuable property of others, you should temporarily cover that property until it is no longer in your care custody and control.
Your computer equipment should be itemized and covered as a separate part of the policy inasmuch as the rate is lower than for general property. The coverage can also be extended to Data/Media, Extra expense and off premises computers. We always recommend that valuation of the equipment be on a replacement cost basis.
Business Interruption
This coverage protects the ongoing cash flow of the organization should your space become untenable. It is coupled with extra expense to smooth out your removal to another tenancy. You would be paid for your lost business income as well as the costs associated with the move such as new stationary, cards, etc.
- FINANCIAL PROTECTION OF THE LEASE
The lease is a long term obligation with a large financial risk to the individual members of the partnership. The easiest and least expensive method of protecting yourselves from the risk of premature death of a partner is a Term Life Insurance policy for the length of the lease. The costs are quite low and the security derived from the policies is unparalleled.
