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Insuring Business: Guidance Through Catastrophic Times

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With a variety of product types depending on a business’ industry and needs, insurance can be confusing for many business owners and executives.

“The reason you’re buying insurance is to provide protection from claims,” explained Brad Pearce, chairman, A&H Insurance. “So you want an insurance carrier that provides excellent claim service and excellent coverage.”

That sounds simple enough, even when addressing the complicated subject of business insurance. However, the most common mistake business owners make when shopping for insurance is looking at price rather than product.

There are a lot of different plans and policies available for a lot of different prices. “What you’re really seeking is someone that has financial solidarity as well as enhanced coverages if available at a reasonable price,” said Pearce. “It’s not one size fits all.”

Finding the Right Fit

Business insurance policies are as unique as the businesses they cover, but there are a handful of basic coverages: property insurance, liability protection, business auto and a growing need for coverage of cyber security, money and securities.

Beyond the basics, insurance needs change by business and industry, and neither the most, nor least expensive is necessarily the right fit. People need to look at product, not price.

Finding the right product means, in part, knowing what’s being insured and its value, because underestimating the value of property is another common mistake that can cause problems when claims arise.

“Property insurance, especially in Las Vegas, is pretty affordable,” said Thomas Burns, president, Cragin & Pike Insurance. “Sometimes, in an effort to save a little bit of money, people can be shortsighted in what they purchase. There are a lot of insurance products available. People should at least take the time to get educated on them so they understand the value versus what it costs, and the type of things [the policy] will protect them from.”

It’s also good to know the types of things a policy can’t protect. Because a professional insurance broker may be able to help their clients deal with those things.

“The biggest mistake I think people make when they are purchasing insurance is, they are truly only dealing with one aspect of the risk that business owners face. Those are the risks that you can transfer to an insurance company,” said Greg Pike, vice president, LP Insurance Services. “There are other business risks that a professional insurance broker should be able to deal with that are not transferable to an insurance company. There’s not a policy of insurance that can be sold, but rather there is a mechanism to help our clients avoid risk, mitigate risk or financially plan for the risk that’s not transferrable.”

Most risks falling into that category are financial in nature. Pike deals primarily with construction companies, and the types of non-transferable risk they face include things like fines for violation of OSHA policies and procedures. Those fines can’t be turned over to the insurance company to manage, but a policy that offers risk services like site inspections can help companies plan for and manage those risks when they occur.

The insurance policy needs to fit the business. Understanding how those policies work is the best way for business owners to find the best fit.

Business Insurance 101

The best way to get educated on business insurance is to identify an insurance professional and partner up, said Burns. A qualified business insurance professional should be part of a business owner’s professional team along with the attorney, CPA and banker. That way they’re more of a consultant, rather than a salesman.

Insurance agents represent insurers; brokers represent consumers. Neither is any more one size fits all than their products are. Meeting with an agent who’s not familiar with business coverages could result in getting the wrong product for a specific business or a business in a specific industry.

One of the best ways business owners can educate themselves is one even insurance professionals admit isn’t fun: Sit down and read the policy. Maybe on an annual basis.

“Take the time to pull the policy out and ask the questions prompted by it, talk to your agent, talk to someone who is knowledgeable about it, talk to the carrier, or whoever is involved, so you can determine what elements are within your policy,” said Pearce. Review coverage needs by business and industry, preferably with an agent familiar with, and doing regular business in, that industry.

“There’s some stuff that’s industry specific,” said Burns. “There are some products out there that people should take a hard look at. Exposure to cyber liability is growing substantially and that’s made the news a couple times lately. [Large organizations] have gotten hacked, like T.J. Maxx and Sony. Those folks got hacked and personal information got stolen. There’s a lot of liability out there, so that’s something people should take a hard look at.”

“One thing we’re seeing a great deal of is cyber security policies,” said Barbara Richardson, insurance commissioner, Nevada Division of Insurance. “The number of ransomware attacks have increased significantly in the last few years and small businesses don’t always have the protections of their IT. Business owners can purchase a policy that covers cyber security, or get into a service that will do cyber protections. One of the things you don’t want is your business being forced to pay ransom just to get all your own operating systems back. That’s a pretty harsh way to go.”

Another area of concern is employee practices liability, said Burns. “That protects an employer if they’re sued or the accusation is such that somebody says they weren’t hired, they weren’t promoted, they didn’t get a raise as a result of their gender, their ethnicity, their religious beliefs or that they worked in a hostile work environment, which is mostly sexual harassment.”

Coverage can vary by industry. A manufacturer doesn’t need the same coverage as a plumber, who doesn’t need the same coverage as a medical office. Larger companies may employ risk managers who work to identify upcoming risks and identify policies and procedures to mitigate them. Smaller companies can identify those risks by working with an agent with experience in their industry.

Fires, Flood, Terrorism and Covid-19

Insurance isn’t static. It changes as events shape the economy and business environment, locally and globally.

The current economic climate, shaped by financial impacts from the COVID-19 pandemic and civil unrest, is exposing businesses to unforeseen risks. People are starting to realize there’s coverage for business interruption, said Pearce, knowledge driven home when Nevada businesses were locked down overnight.

But while COVID-19 certainly showed business owners the necessity of such coverage, there are only a handful of policies that include coverage for the pandemic and its effects.

Most people don’t take the time to read through the coverage exclusions in a policy and understand whether a virus is covered under a specific policy, or considered an exclusion.

“People are becoming, hopefully, smarter about what they’re buying and also realizing the need for having proper coverages, and proper limits, as opposed to just having something in place or finding the cheapest,” said Pearce.

Business as usual in 2020 has been anything but business as usual. That doesn’t mean that additional coverages are being brought forth, but it might mean that state and federal governments will be stepping in soon to address business interruption policies – and their exclusions.

“It’s been shown that, for the bulk of insurance policies, business interruption policies don’t deal with the pandemic issue. They’re considered a limited risk, much like terrorism is a limited risk, or flood is a limited risk,” said Barbara Richardson, insurance commissioner, Nevada Division of Insurance. “But right now terrorism and flood both have a backstop through the federal government and the pandemic liabilities don’t. Congress right now is looking at the pandemic liability issue, in order to possibly have it be treated like the terrorism issue. It’s one of those risks, if it hits you, it’s going to hit you hard, and there isn’t much anybody can do about it. It’s going to spread pretty broadly. That’s why they’re looking at a national backstop.”

Most commercial policies have the risks written out of them. A few companies are now looking to bring back old-fashioned all risk policies which are easier for consumers to understand, are priced as an all risk policies that automatically cover any risk not specifically omitted, or that’s picked up by a national backstop for a commercial liability, Richardson said.

When it comes to covering claims from COVID-19, after the SARS outbreak it became normal for policies to have exclusions for viruses and resultant property damage, and it doesn’t seem likely that anybody is going to leap in to fill that void unless it’s federally backed, much like terrorism is, said Burns.

“The losses that were identified as a result of the pandemic to businesses under 100 employees are estimated to be about $100 billion over two months,” said Burns.

He added, “That wipes out all the capitalization of all the insurance companies for all insurance. There are some things you just can’t price for. A year ago, if I had run around and said you can buy pandemic coverage for $5,000 I would have been laughed out of the city. You can’t price for it and, as a result, it’s tough to provide.”

So what happens when a business owner’s income goes from $400,000 a month to virtually nothing? Coverage is driven by property loss, so if there’s going to be a claim on the business income policy, there has to be a corresponding covered loss on the property, said Pike.

“Well, guess what isn’t covered in a property policy?” Pike asked. The answer is, unfortunately, virus, fungus and micro-virus as well as government actions. So the client who owns a restaurant that doesn’t do takeout and which relies on its in-house liquor sales, and is ordered to shut down through government action, has no coverage for the resulting loss of income.

Why? “Because that’s the entire premise of business income coverage,” said Pike. “In order for business income to be paid, it has to tie back to a covered form of loss on the property form.” Which probably excludes it, just like it excludes nuclear war.

But what if, during the government shutdown and business interruption, a group of protestors begin to riot and burn the building to the ground in the process? That’s a covered cause of loss. The standard property loss form includes riot and civil commotion, and resulting damage.

“So, even though they were closed down, if the building gets broken into and burned to the ground, they now have a covered property loss which then triggers the business income loss,” said Pike.

After 911 property policies put in exclusions for terrorist acts, which are considered acts of war, it prompted such outrage from business owners that the federal government stepped in and created the Terrorism Risk Insurance Act, making the government a backstop to insurance companies. The act mandated that terrorism is covered, insurance companies can charge a premium for it and, if there’s a terrorist attack where policy surpluses are affected by a certain percentage, the federal government will pay on the company’s behalf.

While something similar might be put in place because of COVID-19, at present only a few policies exist that cover pandemic and they’re very expensive, said Pike.

“The insurance industry has never assumed, nor priced their product accordingly, for something of this nature and magnitude,” said Pearce.

Typically after an unprecedented event – especially one that isn’t covered by most insurance policies – federal or state governments will work to broaden coverage or impose some type of aid to businesses and/or the general public.

Which is wonderful, Pearce said. “But you can’t bankrupt the insurance industry by doing this. So you’re probably going to see the federal government potentially stepping in with either a mandatory product of their own or some type of aid.” Past catastrophes have put in place the flood plan, and seen the federal government imposing conditions where insurance companies wanting to do business in certain states are required to provide coverage for specific risks, like wildfires in the West.

With regard to the COVID-19 pandemic, it’s early days yet. Business insurance risk management policies and exclusions will change as industries and the economy change in the wake of the pandemic and civil commotion. Taking the time to understand their business insurance policy and coverage needs will help business owners manage risk in the new economy.

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Centerville business raises funds for church disaster relief group – Dayton 24/7 Now

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Gainesville teen charged with murder in shooting at Gwinnett business

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The building was occupied by multiple employees when Brandt opened fire, Gwinnett police spokesman Cpl. Collin Flynn said. According to police, he wore a white balaclava-style face covering that showed only his eyes

Bryant Armstrong, an employee of Direct Technologies, told Channel 2 Action News that he and his coworkers believe the gunman entered the business through a warehouse bay door. He said he heard several gunshots but never saw the shooting victim. He fled to the break room with several other coworkers before leaving the building, he said.

“You don’t expect on a Friday at 2 p.m. to hear gunshots ring out at a super-small office park,” Armstrong told the news station.

Police said one employee was injured while running away from the scene, but Ross was the only person shot.

Brandt remains held at the Gwinnett County jail without bond, online records show.



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Maine’s small-business sector still in crisis after reopening

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The bulk of Maine’s commercial sector has been reopened for months, but many small-business owners say they are hanging on for dear life amid low consumer demand, tough health and safety restrictions and the existential threat of a viral resurgence that has ravaged other states.

While companies report some sales stability, spending at contact-intensive businesses is far below what it should be, and some worry their very survival is at risk in poor economic conditions that show no sign of improving soon.

“It all comes down to the fact that the virus itself is still spreading in the country in a way that it is hard to do business and makes it hard for people to consider that anything could possibly be normal,” said Mary Alice Scott, executive director of Portland Buy Local, a merchant trade group that promotes local commerce.

Customer Chris Evans has the parking lot seating area to himself outside Coffee By Design’s Diamond Street location in Portland last Monday. Five of the company’s cafes have reopened now in the Portland area, says co-owner Mary Allen Lindemann. Derek Davis/Staff Photographer Buy this Photo

A recent survey of 85 of the group’s members reflected a grim environment for retailers, restaurants and other locally owned businesses.

About a third of respondents said their revenue was 20 percent or less of what they made at the same time last year, according to Scott, and nearly as many said they were considering closing for good. Only a small handful said they were generating at least 80 percent of their normal revenue.

Every business faces different circumstances, but there is one constant: With heavy precautions and restrictions in place, and new COVID-19 cases reported daily in Maine, consumers haven’t resumed their pre-pandemic spending behavior. Still, protecting the community was the No. 1 concern for most businesses surveyed, Scott said.

“The thing we keep coming back to is the virus itself is the main problem,” she said. “We can’t move forward without addressing that first.”

Economists have for months tied economic success to tackling the public health threat. That appears no less true now than it was in April, even as Maine has done better than nearly every other state at containing the coronavirus and protecting its health care system.

“Our whole thing is to stay as small as we can and survive, to get through it so we can come out the other side and still be a viable entity,” said Adam Powers, co-owner of Elsmere BBQ and Wood Grill in Portland and South Portland.

Margaux Rioux of Portland works on her laptop while enjoying a drink at Coffee By Design on Diamond Street on Monday afternoon. “I was going to sit outside, but it is so hot”, she said, “Plus I have a friend,” referring to an inflatable monster inside the coffee shop. Derek Davis/Staff Photographer Buy this Photo

Powers said he feels lucky that barbecue translates well to takeout and customers have gravitated to in-person patio service. But sales remain far below what they should be.

The restaurants are closed three days a week and have limited hours because they’ve had trouble finding enough staff. Powers doesn’t expect business to recover fully until sometime next year.

“This is not going away,” he said. “We are not on the way up; we have a long road ahead of us.”

A SHIFT IN SPENDING

Seasonally adjusted data for Maine consumer spending in mid-July show spending was just about even with the level in January, and small-business revenue was only down 20 percent from the beginning of the year, according to Opportunity Insights, a real-time economic tracker developed by Harvard and Brown universities using private credit card and payroll processing data.

But economic activity is uneven. Leisure and hospitality revenue was down 57 percent from January, while retail and transportation revenue was down more than 13 percent, according to the tracker.

Those findings closely match state spending records. Maine Revenue Services said last week that tax receipts for prepared foods in June were about 35 percent below the same time last year. Hotel and lodging tax receipts were down more than 60 percent.

Meanwhile, taxes on general merchandise recovered in June to the same level as in 2018 and 2019, building supply sales were at least 22 percent higher and other retail sales were at least 55 percent higher than the prior year between April and June.

Wealthier households with more discretionary income have reduced their consumer spending to a greater extent than middle- and low-income families, according to Opportunity Insights.

Some high-income consumers have converted much of their spending into savings and investment, said Sheena Bunnell, a business economics professor at the University of Maine at Farmington. Consumer reaction to the external threat of the virus now drives large parts of the economy, she said.

“There is a lot of changes in behavior going on, and everyone doing it at a different pace and adapting differently, and that is changing the economy,” Bunnell said. “It’s definitely a financial struggle for a lot of our small businesses as they are trying to cope with living in a pandemic. The reality is, they don’t know how long they are going to be able to survive in this environment.”

Despite the challenges, some business owners feel more optimistic now than they did in the dark days of stay-at-home orders, fear and uncertainty this spring. Businesses with fewer than 100 employees are an outsize segment of Maine’s economy, employing more than 56 percent of the state’s workforce, according to the U.S. Small Business Administration.

When Momentum barbershop in Portland opened its doors in May after being closed for more than a month, it was booked solid for weeks by customers desperate to escape their homes and get a haircut.

It took about a month for the “die-hards and the desperates” to filter out, and business slumped, said owner Jason Dodge. So far, his sales are down about about 25 percent from a year ago. His summer business is down 40 percent.

Dodge said it’s enough to keep his head above water, but not enough to repair the pandemic’s damage to his business or invest for the future.

“There’s just nothing extra,” he said. “We’re doing good for now; the tough part is making up for time lost.”

Downtown Freeport, normally a bustling retail epicenter, is noticeably sedate this summer. On a recent Friday afternoon, parking lots were half-full and scattered groups of masked shoppers strolled and shopped at outlet stores, as opposed to the usual throng.

Susan Culkins, owner of The Mangy Moose gift shop on Freeport’s Main Street, opened as soon as she could in June. Traffic slowly grew through the month, and even though things are better now, sales are still way down from a year ago.

Jason Dodge, owner of Momentum barbershop, gives a haircut to CJ Manuel on July 24. Derek Davis/Staff Photographer Buy this Photo

“It has definitely gotten better, but it is nowhere near a regular year,” she said. Under state restrictions, Culkins can only have 15 customers in her store at a time. She’s shortened her hours and retained only three full-time and two part-time workers. In a normal year, she’d have at least a dozen people working for her right now.

Culkins said she feels confident even with a huge question mark hanging over her winter business.

“I feel cautiously optimistic,” she said.

Nearly every one of the retailers at The Maine Mall in South Portland is now open, and although customer traffic has been lower than normal, it is not the doom-and-gloom scenario some predicted, said General Manager Craig Gorris.

“That’s not what I see – when I talk to our tenants their sales numbers are really meeting their expectations,” Gorris said, adding that sales of athletic shoes and teen apparel skyrocketed right after stores reopened. “They are pleasantly surprised with what they see and what the numbers are – I am optimistic more than I am pessimistic.”

But consumer habits have changed significantly from earlier times. Gorris said shoppers now tend to come to the mall to make specific purchases instead of browsing for deals.

Jason Dodge, owner of Momentum in Portland, cuts CJ Manuel’s hair recently. “We’re doing good for now,” Dodge says. “The tough part is making up for time lost.” Derek Davis/Staff Photographer Buy this Photo

“People are shopping more for a purpose than they would just to go out and waste some time,” he said.

Still, not all is well at the mall. In July, department store Sears announced plans to close its Maine Mall location in September after nearly 50 years of operation, part of a nationwide downsizing effort. Many large, national retail chains have reported dismal financial results in recent months, and some have declared bankruptcy.

AN UNEVEN RECOVERY

While economic activity is sluggish in Maine, consumer spending outpaces the national average. Maine and New England also show higher spending at restaurants, entertainment and retail outlets compared with states such as Texas, Florida and Arizona, which are facing massive outbreaks and fresh business closures, according to Opportunity Insights.

Overall consumer spending in Maine was almost 1.5 percent higher in mid-July than it was in January, after adjusting for normal seasonal changes. Apparel and general merchandise sales were up more than 16 percent, and spending on health care and groceries was slightly higher than at the beginning of the year.

But adjusted spending is still down from January in contact-intensive categories such as entertainment and recreation, where it is down almost 50 percent, and at restaurants and hotels, where spending is off about 22 percent.

Kevin Gaspardi, general manager at Coffee By Design on Diamond Street, repositions an inflatable unicorn after it blew over in the wind of Monday afternoon. The owner of the coffee shop decided to incorporate large inflatables when they were still only open for curbside pickup, but decided to keep them after seeing how they helped lighten the mood. “It was a way to put smiles on their faces in a time that has weighed so heavily on many people”, said Mary Allen Lindemann. Derek Davis/Staff Photographer Buy this Photo

Older Americans at higher risk of serious illness from COVID-19 comprise a critical portion of Maine’s consumer base, said Julieta Yung, an economics professor at Bates College. People over 55 years old contribute 40 percent of consumer spending in the U.S. and have an outsize impact in Maine, the oldest state in the country, Yung said.

“The fact that this vital segment of Maine’s population is at higher risk really emphasizes the need to prioritize containment strategies to allow Maine’s economy to reopen and people to feel safe and be able to go out, work, socialize and resume their normal activities,” Yung said.

Business success depends on multiple factors, such as cash reserves and government restrictions. The service sector, including tourism, restaurant, event and retail businesses, was hit particularly hard in the early days of the pandemic and will take longer to recover, said David Clough, Maine state director for the National Federation of Independent Business, a national trade group. In a recent NFIB national survey, more than 40 percent of respondents said it has been difficult to get customers to return.

“Unfortunately, some won’t make it at all depending on when restrictions on their operations are lifted, whether customers return, or if they run out of cash,” Clough said. “The direction things go in the next few months related to government policy and whether there is a resurgence of the virus are tied to their survival.”

Five Coffee By Design cafes are reopened now in the Portland area, and customer response has been positive, said co-owner Mary Allen Lindemann.

Reopening was hard. Lindemann laid off more than half the company’s 60-member staff after keeping them on initially when the business shut down this spring.

Alina Lindemann Spear serves drinks at Coffee by Design on Diamond Street on Monday afternoon. Derek Davis/Staff Photographer Buy this Photo

“The goal was to stabilize, to make sure we understand how much cash is coming in, taking time to cut everywhere we can and invest in ways that are important, and see as business starts to build back, to bring people back,” Lindemann said.

The company invested heavily in safety equipment and delayed reopening for anything beyond takeout until the staff felt comfortable, she said. But Lindemann said she’s nervous every day that she is putting staff and customers at risk.

“It is scary – what if we make a bad decision?” she said. “These are really life-or-death choices in many cases.”

An ongoing public health crisis is what has caused and deepened the recession, said Larry Wold, commercial markets president at TD Bank in Maine. There is no playbook for economic recovery in a situation almost no one has faced in their lifetime.

“This is not anything businesses owners did or didn’t do; this is something that descended on them completely unexpectedly,” Wold said.

Measures to stabilize the economy, such as loan payment deferrals, an added $600-per-week unemployment benefit and forgivable loans through the federal Paycheck Protection Program have run out or are nearly expired. Workers, businesses and local governments are desperate for more assistance, but political jockeying in Washington makes it uncertain when more aid will arrive.

In the meantime, Maine consumers need to make spending choices that help local businesses, Wold said. The money that goes into local economies stays there and will help prop up communities until the state gets to safer, better days.

“I hope it helps everyone appreciate just how challenging running a small business is in this world, let alone when something like this happens,” he said. “They deserve a ton of credit and a lot of support and a lot of admiration from our entire community.”


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