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The manufacturing industry has a unique set of insurance needs beyond those of the typical business, whether it’s investment capital to purchase machinery or lease warehouse space, a transportation fleet to deliver materials or products, or insurance to protect against theft or damage to your property. As a manufacturer, you will also need product liability insurance to protect yourself against claims that your products caused harm to people or property.

The insurance needs of a manufacturer have become even more complex now that we live in a global economy with multi-national supply chains. What happens when you have a complex global supply chain and use products manufactured in another country? When something goes awry, who is to blame?

Now, let’s imagine that you use good ole’ widgets in your manufacturing process and you get them from a factory in Scotland. The widget could have a design defect (i.e., the design of the widget was flawed/unsafe) or there could be a flaw in the manufacturing process or production of widgets in the Scottish factory that makes the widgets unsafe. Or imagine that the Scottish factory purchases a small part from an Irish distribution center and that small part has a design flaw which makes the widget unsafe.

It can be a serious challenge for a manufacturer in America to seek damages from a foreign company as the cost of obtaining a judgment in another country may be prohibitive, or, even if you were to get a judgment, it may not be enforceable. For these reasons, the burden of a product liability claim will likely fall on you because you incorporated the small piece that was part of the widget into your manufactured product and you may have no practical means of being compensated by your supplier.

Such claims can not only be damaging to your reputation but they can put a huge dent in your bottom line. In addition to mitigating risk in your supply chain through quality assurance, you can purchase broad form product liability insurance

Fusco & Orsini can help you sort through all of your manufacturing insurance needs and create a plan that fits your business. You can schedule a call with one of our insurance agents to discuss product liability exposure or any other manufacturing insurance topic.

In a recent post, we talked about dual wage classifications for California workers compensation within the construction industry. Today, we’re continuing our chat about workers comp and what the construction industry needs to know. We’ll delve into waiver of subrogation endorsements and how they’re billed. But first, what do those words mean? Waiver. Subrogation. Endorsements. Did we just stumble into a law office?

Let’s break it down…

As a quick refresher, workers compensation insurance is insurance for an employee who has been injured as a result of their job duties. Medical costs, rehabilitation costs, and lost wages are covered under workers comp insurance, and in most states, workers comp is required by law.

An endorsement is an addendum or add-on to an existing insurance policy. A waiver of subrogation is a type of endorsement that can be added on to your workers comp insurance policy. It can be a blanket waiver for all companies or it can be for a specific company. Sometimes when you’re contracting your employees out to another construction company, they may require a waiver of subrogation for their company.

A waiver is a surrender of a right or a claim. In the context of this article, we’re talking about waiving rights to subrogation. Subrogation is basically getting reimbursed for losses. For example, say you buy your friend a coffee because they forgot their wallet at home. They swing by the house and grab the wallet and now you want to be paid back for the coffee. If you waive subrogation, you’re waiving your right to be paid back.

It’s the same when it comes to workers comp insurance. By getting workers comp insurance, it’s basically a waiver of subrogation that you won’t go and sue your company for losses due to an on-the-job injury. It works the same for insurance companies. If your insurance company pays for your medical expenses when you are injured on another company’s job site, your insurance company may want to subrogate and get back that money from that job site’s insurance company. But, if you’ve waived subrogation, your insurance company can’t get that money back.

What are the implications for you as the owner of a construction company?

Just be sure to keep track of the wages of all employees you send to the jobsites for which you have a waiver of subrogation because you will need to report this to your insurance company. Since laws came into effect in 2008, insurers are now required to perform audits to make it easier to identify which classification(s) employees fall into.

What’s the premium charge for my workers compensation when I have a waiver of subrogation?

Insurance companies are now required to audit all new policies, so you can either proactively report your waiver of subrogation payroll for the affected employees or keep records and wait for the audit. If you choose the former, for each class code that the waiver applies to, here’s the formula you use to figure out the additional premium charge:

Premium x waiver percentage = additional premium charge

In a previous article, we explained how to calculate your premium: (total wages / 100) x billing rate. For example…if your total wages for the employees affected by the waiver of subrogation is $1,000 and the billing rate is $5 for every $100 of payroll, and the waiver rate is 2%, you’d calculate the premium as: Premium = (1,000/100) x 5 = $50.

From there, you can calculate the additional premium charge: 50 x .02 = 1

In this scenario, the additional premium charge would be $1, so the total premium would be $51.

So, when another company asks for a waiver of subrogation, now you know what the term means and what the implications are; i.e. you’ll be paying a higher premium on your workers compensation insurance. If you know the approximate payroll of the employees you’re contracting out, you’ll even be able to estimate out your additional premium payment. If you have any questions about workers compensation insurance and waivers of subrogation, don’t hesitate to call or text us at (858)384-1506.

If you own a construction company and have a California-based business, this post is for you. Workers compensation is critically important when it comes to the construction industry because of the physical risk inherent in the profession. You (or your employees) are lifting things. There may be strain on the muscles and ligaments. There could be an accident. You know you need it and it’s required by law. But what’s covered in a workers compensation policy?

Workers compensation is an insurance policy that helps to protect your assets in the event that one of your employees is hurt on the job.

What’s covered in a workers comp policy?

When your employee is injured on the job, the policy provides them with financial support to cover medical expenses and lost wages.

Medical coverage + wage replacement =”indemnity”

Only injuries that arise out of and in the normal course of business are reimbursed. Medical coverage may include physician visits, prescription medications, surgeries, etc. The amount to cover lost wages is based on the employee’s weekly wage as determined by California law.

What’s not covered?

The key to workers compensation is that the injury must be work-related. If an employee gets hurt offsite on their lunch break, that typically doesn’t fall under their coverage. If you are commuting to your regular workplace, an injury is likely not covered but if you’re traveling to another job site during work hours, then it usually would be. Employees may also be denied coverage for self-inflicted injuries or if the employee was committing a crime.

Protect yourself from unexpected financial burdens by setting up your business with workers comp insurance. If you’re interested in getting a quote on a policy or if you have any lingering questions about what is or is not covered, schedule a call with us.

Workers compensation is necessary, not evil. It protects you, the employer, from being sent into financial dire straits in the event that an employee is hurt on the job. Before workers compensation, employees would sue their workplace to recoup costs after an injury, and the employer would be forced to shell out steep sums of money that they hadn’t planned on spending.

Today, we as employers have the luxury of protecting ourselves from these unexpected costs, by taking out a workers compensation plan. “But how much do I need to pay for this protection?” you might be asking yourself. Read on to learn more about how these rates are formulated.

It’s important to note that you should be keeping careful records of your employees’hours and days worked. This is because laws came into effect in 2008, requiring insurers to perform audits on all new policies, making it easier to identify which classification employees fall into. The different classifications tell you how much you’re paying on your premium per $100 of payroll for those employees. So, it’s vitally important for you to keep careful records of hours worked for each employee each day including daily start and stop times.

Let’s dig in and define a few terms that come into play when we talk about workers compensation rates:

What’s the difference between an “advisory pure premium rate” and an “insurer’s rate”?

The difference between the two is that an advisory pure premium rate is a recommendation from the Workers Compensation Insurance Rating Bureau of California (WCIRB) to the California Department of Insurance that helps to determine insurer rates. The advisory pure premium rate accounts for claims/losses as well as a loss adjustment expense. The insurer’s rate includes both of those factors but also includes administrative costs including taxes and commissions.

What do dual wage classifications mean?

Dual wage classifications mean that there are two classifications for a particular industry segment, based on wage. For example, instead of there being one rate for “steel framing – light gauge,” there are two: #5632 for steel framing – light gauge employees who make less than $29/hour and #5633 for those who make $29/hour or more.

Each of these dual wage classifications has a different advisory pure premium rate. As of this writing, there are sixteen dual wage classifications. The WCIRB has a handy chart so you can look up the rates yourself, once you know your classification(s).

How much can I expect to spend on my worker’s comp insurance?

The premium you pay is determined in large part to your business’ industry classification(s).

The basic formula is: Insurance rate for your classification(s) x total payroll of the employees in each of your classifications.

Workers comp rates are per $100 of payroll, so if you have a rate of $5, and you have $200 of payroll, your premium is $10.

Next time you get that premium bill, you will have a better understanding of how workers compensation rates are determined. If you want to know more about how a workers compensation policy can protect you and your business, email us a question. Or, if you’re looking to take out a new policy, why not request a quote?

Do you know the difference between a bond and insurance? If you don’t, have no fear. That’s what we’re here for! Specifically, we’ll be going over the difference between surety bonds and liability insurance in the construction industry. If you’ve ever won a big government contract, you’re likely familiar with surety bonds.

A surety bond, in the context of construction, is a guarantee that a contractor will perform a certain action stated in the bond – whether that’s to complete the project, properly pay subcontractors, or honor the budget.

There are at least three parties involved with a surety bond. There’s the surety (or person issuing the bond), the obligee (the person who gets paid in the event that the contractor does not fulfill the obligation), and the principle (the contractor).

This is in contrast to liability insurance, which involves two parties: the insurer and the insured. There’s commercial general liability (CGL) insurance that covers you for personal injury, property damage and advertising injury that could occur during the course of your business activities. There’s also professional liability insurance that protects your business when a client feels they’ve been harmed due to your professional advice and guidance.

A key difference between bonds and insurance is that insurance protects your business in the event that you are accused of a wrong whereas a surety bond protects your client’s business if you do something wrong. Another important distinction is that insurance operates under the assumption that mistakes will be made whereas with a surety bond, it’s to ensure that mistakes will not be made.

There are four types of surety bonds:

• Bid bonds, i.e. I promise to stick to the price I bid on the project.
• Performance bonds, i.e. I promise to fully complete the project.
• Payment bonds, i.e. I promise to pay my suppliers.
• Ancillary bonds, i.e. I promise to fulfill a specific non-performance related obligation stated in the contract.

Now you’re probably wondering, ͞Why would I want a surety bond?.

You usually get a surety bond because the project owner of the work you’re bidding on requires it in order for you to perform the work. Federal construction contracts costing $150,000+ require them, and state-level government contracts often require them too.

What happens if I don’t fulfill the promise stated in my surety bond?

When a contractor fails to deliver on the promise stated in the surety bond, the contractor, and the surety are severally (both) responsible for paying the project owner (obligee) a penalty (known as the penal sum).

When you look to obtain a surety bond, the bond issuer looks at several factors including your business’s years of operation, reputation, your capacity to do the work (i.e. whether they think you have the bandwidth), and makes a determination as to whether they think you’ll be able to fulfill the obligation.

Do you have any experience with surety bonds? Add your thoughts/advice/questions in the comments! If you need to obtain one for an upcoming project, use one of our time-saving tools to request a quote or schedule a call!

If you’re in the construction industry and in the market for a CGL policy to fulfill a contract, read on. Today we’re talking about Commercial General Liability (CGL) Form CG 20 10 (11/85) endorsements, and why your clients may require one.

As we’ve mentioned in previous posts, an endorsement is an add-on to an existing insurance policy. The CG 20 10 additional insured endorsement extends coverage to your clients. What makes the CG 20 10 11/85 endorsement different, and client preferred, boils down to the phrase: “your work”. After November 1985 (hence 11/85), the phrase your work was replaced with “your ongoing operations.”

Though this may sound like a small change, it’s a huge difference to the person you’re completing the work for. The 11/85 endorsement provides broader coverage for the additional insured because it guarantees the work itself for a period of 10 years. If there’s a problem with your work, your client may likely not know about it until after your operations have been completed for the project. If the endorsement only covers your “ongoing operations”, your client won’t be protected in the event that your work fails sometime after operations on the project have ceased.

To learn more about CGL endorsements, CG 20 10 11/85 and otherwise, schedule a call with a Fusco & Orsini insurance agent.