Professional Business
Insurance Agents
and Risk Managers

1. Abuse and Molestation Coverage
We continue to see material limitations in the coverage afforded by some insurers. For example: coverage confined to sexual molestation only; exclusions for anyone who discovered an impropriety and did not act in a timely manner and, forms that include post–judgment interest expense but not pre–judgment interest expense. Be wary of these and other restrictions that serve to increase the financial burden on your company. Recall, the true cost of risk is the premium for the insurance protection plus the cost of uncovered losses.

2. Building Insurance to Value
The cost of building material and construction labor has risen at an accelerating rate the past 24 months across country. Boeckh’s building Index charts increases of 6.12% and 7.41% in 2004 and 2005 respectively. While the U.S. Producer Price Index–materials and components for construction–details increases of 8.33% and 6.13% in the two years. You can avoid subjecting to costly coinsurance penalties by increasing insured building values by a nominal percentage (4% to 5%) at each renewal. We highly recommend running a building cost indicator and/or obtaining building appraisals every three years at a minimum.

3. Contents Insurance to Value
Coinsurance provisions also apply to contents. It is common to see relatively low stated values for contents. This may subject an insured to direct financial loss. It is more difficult to determine the value of an insured’s business personal property. We recommend nominal annual increases coupled with a periodic review of the assets portion of the nonprofit’s balance sheet.

4. Security Guard Companies
Some nonprofits retain security companies to safeguard premises and clientele. Correctly so, the nonprofit will obtain a certificate of insurance. However, they fail to determine that the security company’s general liability policy, often written by a non–admitted company, contains onerous limitations, for example "assault and battery". In some states the enforcement of security may be a non–delegable duty further exposing the insured to financial loss. Nonprofits retaining security contractors should be clear on the presence and use of firearms. If the contract stipulates that security personnel shall be unarmed, those contract terms should be strictly enforced and monitored at all times.