Brown & Brown Insurance Brokers of Sacramento, Inc.
5750 West Oaks Blvd, Suite 140
Rocklin, CA 95765

913.630-8643

Fax: 800-783-0083

New Senate Bill Leaves Employers with Unexpected Insurance Costs

November 14, 2018 | Ryan Kagarakis

Senate Bill 1343 was approved on 9/30/2018 and requires employers with five or more employees to provide at least one hour of sexual harassment training to ALL nonsupervisory employees by January 1, 2020, and once every two years thereafter. The existing law requiring employees with supervisory roles to complete two hours of sexual harassment training every two years remains unchanged. This means that sexual harassment training is now required for all employees. Not only does this create an additional burden for employers but it will also have an impact on insurance premiums.

For employers in the construction and manufacturing industries, this means an additional hour of pay, workers’ compensation, general liability, and payroll taxes. Here is a breakdown of the potential insurance impact by policy type:

Workers’ Compensation

Employees in the construction industry are often times high-wage earners depending on their skill level and journeyman status. If you have a carpentry worker making $35 per hour they will be subject to workers’ compensation even if they are completing their sexual harassment training in the office. The workers’ compensation rating bureau consider all remuneration (compensation) to the employee as eligible payroll for workers’ compensation so the hour spent completing their training will also generate premiums. Depending on the total number of employees and your rates this can be a costly premium for the sexual harassment training.

General Liability

Some general liability insurance providers use employee payroll as their means of producing the annual premium for employers. The total payroll generated from conducting the sexual harassment training could potentially impact the premium for the general liability policy.

The purpose of this bill is to educate employees on sexual harassment and make the workplace a friendlier and safer environment. However, like most labor-related laws that are passed the execution of the bill creates a further burden on the employer. Along with the costs of paying for the employee to perform the training and the related insurance costs the employer also has to figure out a practical way to actually have the employees complete the training.

If you are a smaller employer and don’t have an office, where will you conduct the training? Will the employee have to perform the training at the jobsite? If you have an office will you need to buy a new computer to accommodate the training? Most employers don’t have extra computers laying around so a new one may have to be purchased in order to allow all the employees to complete the training.

Another factor to consider is whether to use the state-approved material from the Department of Fair Employment and Housing (DFEH) or to consult with your labor attorney and have them provide the training.

We firmly believe in the proper protection for employees but we also believe in the need for a fair balance between this regulation and the employer's ability to accommodate. As always, if you have specific questions regarding the rule or how it might apply to your organization please feel free to contact me, an attorney specializing in labor matters or your insurance representative.


Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.

Phone: 916.625.4616 | Direct Fax: 800.761.6733
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com



Personal Auto vs. Commercial Auto Policies

October 23, 2018 | Ryan Kagarakis

Many consumers often think that their personal auto insurance will cover them if they happen to be driving for work. Consequently, customers who have a commercial auto insurance policy believe that they are covered when they use their vehicle for personal use. With the cost of claims rising for both personal and commercial auto policies I think it’s time we set the record straight.

Personal Auto Coverage

Although there are some exceptions, personal auto policies are designed exclusively to cover the private use of vehicles. Most insurance companies see the exposure of driving commercially as a higher risk so they want to carve out any and all business related driving. Commercial driving can include hauling heavy material and/or more frequent driving exposure for service-related tasks. Since insurance companies are in the money making business, they will often times specifically exclude business related driving. For example, a typical Allied (Nationwide) personal auto policy specifically excludes claims arising from “Maintaining or using any vehicle while that person is employed or otherwise engaged in any “business” (other than farming or ranching). “Business” as defined by the policy, includes trade, profession, or occupation. For example, if a business owner purchases a personal auto policy but uses his car to pick up and deliver material to customers he would technically not be covered under his policy for liability, compressive, or collision coverage if he were involved in an accident.

Commercial Auto Coverage

A commercial auto policy is specifically designed to cover businesses while they are on the road in the course of business. A commercial auto policy is the preferred method of covering both the listed vehicles on the policy as well as liability for their employees while they are driving on behalf of the company. However, if a business owners or employee uses their vehicle for personal use while they are not driving for business they will want to check that there is coverage for that as well. Many commercial auto carriers will rate vehicles as “business” only which would exclude liability, comprehensive, and collision claims if the vehicle were being used personally.

Recommendations

Because commercial auto can have many variables we recommend reviewing your policy and asking yourself the following questions:

  • Who is the vehicle registered to? Is it registered personally or to the business?
  • How is your policy rated? If you are using the vehicles for business is your policy rated as a commercial or personal exposure?
  • If you have a personal policy but you use your vehicles for business does your policy have any “give back” coverages?
  • Consequently, If you have a commercial policy but you occasionally use your vehicle for personal use does your policy have any “give back” coverages?
  • What limits do you have? Are they enough? Standard commercial auto policies are rated with $1,000,000 of liability. Considering our litigious society, would this cover you in a worst case scenario situation?


Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.

Phone: 916.625.4616 | Direct Fax: 800.761.6733
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com



Employers Now Required to Facilitate Retirement Savings Program for Employees

September 20, 2018 | Ryan Kagarakis

Does your company currently have a retirement savings program in place for your employees? If not, Senate Bill 1234 will soon require employers with five or more employees to create an employer-sponsored retirement savings program or facilitate in enrolling your employees in to the Secure Choice Retirement Savings program. The Secure Choice Savings Program is a state-sponsored retirement program that will allow employees to contribute their earnings into a retirement plan if their employer doesn’t already provide one. Employers with five or more employees will be required to either offer an employer-sponsored retirement plan or enable their employees to make direct payroll contribution to the employee’s personal Secure Choice Retirement account. This requirement will not go into effect until the Secure Choice program is fully operational, which is expected to be sometime in late 2018.

Employers who elect to enroll their employees in Secure Choice will have limited administrative responsibilities but they will be required to:

  1. Enable employees to make an automatic contribution from their paycheck into their Secure Choice Account.
  2. Transmit the payroll contribution to a third-party administrator to be determined by the Board.
  3. Provide state developed informational materials about the program to their employees.

Employers DO NOT have to match contributions and will not have any liability for an employee’s decision to participate in or opt out of the program.

The below table outlines how long an employer has to create their own savings plan, facilitate in enrolling their employees in the state-sponsored plan or have the employee opt out of the program:

Per section 1088.9 (c) of Senate Bill 1234, each eligible employer that fails to allow its eligible employees to participate in the California Secure Choice Retirement Savings Program on or before 90 days after service of notice by the director shall pay a penalty of $250 per eligible employee if noncompliance extends 90 days or more after the notice, and if found to be in noncompliance 180 days or more after the notice, an additional penalty of $500 per eligible employee. The language within the bill defines “eligible employee” as any person who is employed by an eligible employer.

As an employer, should you create your own employer-sponsored retirement program? Should you match contributions? Or should you let your employees go with the state-sponsored program? Employee benefits packages that include retirement savings plans provide an additional benefit to the employee they may help retain existing talent and attract new talent as well.

If you are considering creating an employer-sponsored retirement savings program for your employees we recommend that you consult with a financial advisor to help weigh the pros and cons of instituting a program that makes sense for your organization. As an employer, if you elect to set up a retirement savings program for your employees you will also want to consult with a commercial insurance advisor to make sure you are covered for employee benefits liability exposures as well as an ERISA bond. Lastly, if you have specific questions regarding the legal implications of this new law please consult with an attorney who specializes in labor related issues.


Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.

Phone: 916.625.4616 | Direct Fax: 800.761.6733
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com



The ABC’s of the Employee vs. Independent Contractor Distinction

August 23, 2018 | Ryan Kagarakis

Independent contractors serve an important role in our California economy by providing services to companies on a fee basis. Whether in construction, manufacturing, or services such as Uber, the independent contractor status allows the hiring entity to avoid certain taxes and expenses while the worker benefits with flexibility in their schedule and pay. On April 30th, 2018 a monumental precedent was set in Dynamex Operations West, Inc vs. Superior Court, where the California Supreme Court adopted the “ABC Test”.

Under the new “ABC test”, a person will be considered an independent contractor only if the hiring entity can prove all three of the following apply:

  • A) That the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • B) That the worker performs work that is outside the usual course of the hiring entity’s business;
  • C) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

The California Supreme Court’s decision states that although the independent contractor status may be advantageous to workers as well as businesses, that public interest in protecting workers was the central consideration in instituting the new test.

There is another major concern for employers as it relates to this new rule: Does the Dynamex decision apply retroactively to when it was filed? This is the primary difference between a disastrous financial setback, or simply a new protocol to be followed moving forward. Businesses maintain that the decision should NOT be retroactive as they have been making strategic decisions based on the old rule. Proponents of employee rights argue that this decision merely clarified an existing law. The issue is currently in front of the California Supreme Court.

So what does this mean for insurance?

Workers’ Compensation: Among the many costs an employer faces, workers’ compensation will likely be one of the highest. In the construction and manufacturing trades in particular, insurance carriers see the probability of injury occurring to independent contractors higher than other industries. Consequently, the rates follow suit. If you hire independent contractors or subcontractors and they do not meet all three of the ABC prongs then you will be subject to the workers’ compensation rates of that particular trade if they are not considered independent contractors. This will have a major impact on premiums paid moving forward. Even worse, if the rule is made retroactive the financial burden has the potential to be enormous.

Employment Practices: If the new ABC test is made retroactive that means that independent contractors, now-made employees, may try to recover lost wages and benefits. Although wage and hour related claims are not insurable, having defense costs under an Employment Practices Liability Insurance (EPLI) policy can offset the costs associated with defending yourself.

This is just a snapshot of the potential ramifications brought on by this complex new ruling. We recommend consulting with an attorney familiar with employment related issues and evaluating your independent contractor relationships. We also recommend consulting with an insurance professional to discuss the possibilities this new rule brings to your premiums.

Ryan Kagarakis
Property & Casualty Consultant
Brown & Brown Inc.

Mobile: 562.290.9051| Office: 916-625-4616
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com



Silica In Construction

July 10, 2018 | Ryan Kagarakis

Regulations that restrict business owners are an all-too-common theme in California. These same regulations are usually enacted with the intention of providing a safer working environment for employees but often fail to address it in a fair way to the employer. The most current silica regulation was constructed, enacted, and enforced in a similar manner.

Crystalline silica is a common mineral found in the earth's crust. Materials like sand, stone, concrete, and mortar contain crystalline silica. It is also used to make products such as glass, pottery, ceramics, bricks, and artificial stone. Respirable crystalline silica – very small particles at least 100 times smaller than ordinary sand you might find on beaches and playgrounds – is created when cutting, sawing, grinding, drilling, and crushing stone, rock, concrete, brick, block, and mortar.

In 2008, OSHA issued a new standard to address the issue of respirable silica in construction. OSHA standard 1530.1 primarily applied to contractors using concrete and masonry materials. The standard had exceptions for roof tile, stucco, wall cladding, downward drilling, incidental masonry/concrete drilling, and powder actuated tools.

OSHA standard 1532.3 went in to effect 9/23/2017 and broadened the scope of enforcement. All of the previously excluded items from the 2008 standard now require dust reduction systems. Furthermore, the new rule established a Permissible Exposure Limit (PEL) of 25 micrograms of respirable crystalline silica per cubic meter of air as an 8-hour Time-Weighted Average (TWA) in all industries covered by the rule. This lowers the permissible level by 50%!!! It also includes other provisions to protect employees, such as requirements for exposure assessment, methods for controlling exposure, respiratory protection, medical surveillance, hazard communication, and recordkeeping. If the employer has objective data proving that employee exposure is under 25 micrograms per cubic meter as an 8-hour TWA then no further action is required under the silica standard. If employee exposure is higher than 25 micrograms per cubic meter then the employer must follow the new OSHA standards for silica.

The most effective method of staying under the PEL is to use a Dust Reduction System:

  • Water: Use a tool with a water delivery system that supplies a continuous stream OR spray the water at the point of impact.
  • Local Exhaust Ventilation: Use tool equipped with commercially available shroud or dust collection system.

If employees are still exposed to silica level above the permissible level here are some highlights of the steps that must be taken to reduce their exposure:

  • Respiratory Protection: Employers must provide employees with appropriate respirators where required by the silica standard. The respirators must comply with requirements of the silica standard and with OSHA’s Respiratory Protection standard.
  • Housekeeping: No dry sweeping or dry brushing if the silica is airborne. No compressed air unless the air is captured and filtered. Wet sweeping and HEPA-filtered vacuums are required.
  • Written Exposure Control Plan: All employers covered by the standard must develop and implement a written exposure control plan. Written exposure control plans describe workplace exposures and ways to reduce those exposures, such as engineering controls, work practices, housekeeping methods, and restricting access to areas where high exposures occur.
  • Competent Person: The employer shall designate a competent person to make frequent and regular inspections of job sites, materials, and equipment to implement the exposure control plan. Employees MUST know the identity of the competent person.
  • Medical Surveillance: Employer must provide medical surveillance to all employees required to use a respirator for 30 or more days a year.

We firmly believe in the proper protection for employees but we also believe in the need for a fair balance between this regulation and the employer's ability to accommodate. This is a very brief overview of the full OSHA silica rule that spans hundreds of pages. As always, if you have specific questions regarding the rule or how it might apply to you please feel free to contact myself, OSHA, or your insurance representative.

Ryan Kagarakis
Property & Casualty Consultant
Brown & Brown Inc.

Mobile: 562.290.9051| Office: 916-625-4616
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com



Action Over!!

June 19, 2018 | Ryan Kagarakis

Although “Action Over” sounds like the name of an exciting movie you might go see in theaters it is, in fact, a serious coverage issue all construction companies face. “Action Over”, or sometimes known as “Third-Party Over-Action” claims usually arise when a general contractor hires a subcontractor and an employee of the subcontractor gets injured. In an action over claim an injured employee, after collecting workers’ compensation benefits from their employer sues a third party for their negligence or contribution to their injury.

Here is how it could affect general contractors:

If a general contractor utilizes subcontractors it is commonly assumed that they are responsible for the safety of the entire job site since it is “their project”. If the subcontractor’s employee gets injured on the job site their sole remedy for indemnity and medical payments will be the employer's workers’ compensation policy. In California, workers’ compensation is the exclusive remedy if an employee is injured on the job; this means that the benefits from workers’ compensation for that injury is the only compensation that will be afforded by their employer. If the employee feels like it was the fault of the general contractor for not maintaining a safe work environment they have the option to sue them for their negligence that led to their injury. The injury to a third party is typically covered under a general liability policy, however, there are certain insurance companies that put Action Over Exclusions on their policy. Some insurance carriers specifically add an action over exclusion that modifies coverage so that an injury to a third party’s employee at the job site is excluded. If the injury to a subcontractor was in ANY way the fault of the general contractor and the liability policy has this exclusion there is NO COVERAGE.

What about subcontractors?

If you are a subcontractor working for a general contractor you could be in the line of fire for this type of claim as well. Numerous risk transfer methods are used to allocate and spread risk on a construction job site. A general contractor will usually have the subcontractor sign an indemnification (hold harmless) agreement where the subcontractor agrees to protect the general contractor if their actions result in a lawsuit. Let’s take the situation above: a subcontractor’s employee gets hurt, collects workers’ compensation, and sues the general contractor for job site negligence. If an indemnity agreement is in place the general contractor will pass along that lawsuit BACK to the subcontractor citing the indemnity agreement that is already in place. What this essentially means is that the subcontractor is paying TWICE for the same claim… once for the workers’ compensation injury and a second time for the negligence lawsuit that was originally meant for the general contractor.

The action over exclusion, however, does not exclusively impact the liability policies of general contractors. If you are a subcontractor using the services another subcontractor for part of your work this dangerous exclusion applies to you as well.

So what can be done?

  • First and foremost, consult with an insurance professional to make sure that your general liability policy DOES NOT have an Action Over Exclusion, a Third Party Over Exclusion, or any exclusion limiting injury to the employees of others.
  • Consult with your attorney to make sure that the contracts that you enter in to include indemnifying language that is favorable to your organization.


Ryan Kagarakis
Property & Casualty Consultant
Brown & Brown Inc.

Mobile: 562.290.9051| Office: 916-625-4616
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com



How Employee Benefit Packages Can Impact Hiring & Retaining Top Talent

May 18, 2018 | Ryan Kagarakis and Gabriel DeAnda

Under the ACA (Affordable Care Act), companies with over 50 FTE (Full-Time Equivalent) employees are required to offer Health Insurance to their full-time employees. A full-time employee is now considered anyone that works 30 hours or more per week on average. This change forced many large employers to offer health insurance to employees that wouldn’t normally receive those benefits. It was a major hit to the bottom line for most medium-to-large businesses.

But what impact did it have on small businesses (under 50 FTEs)?

Initially, the ACA didn’t have any major impacts on small businesses because it didn’t require them to offer health insurance to their employees. Many small businesses were seeing a deficit in the talent pool available and a lot of employees were going to large employers that had to offer coverage. This shift in the market is forcing small businesses to re-evaluate how they recruit and retain their top talent. Many are starting to voluntarily offer health insurance while at the same time contributing 50%+ of the employee’s premiums. This is a big expense to any company, but in many cases, it can be less painful than losing their top talent.

Is it worth it to offer Health Insurance to your employees when you don’t have to?

With costs rising in almost every area of business (wages, workers compensation, liability insurance, etc.) most employers don’t want to think about adding another line item expense. Most employers, however, aren’t evaluating another important cost factor…employee turnover. A CAP study done in 2013 estimated that employee turnover in low-mid paying jobs cost the company about 16-20% of the lost employee’s annual earnings. These estimates are actually low compared to some of the numbers put out by SHRM. Even so, a $10/hour employee could cost the company about $3328-$4160 to lose. KFF did a survey in 2015 that showed the annual cost of single coverage health insurance on average was $6,251. Most employers will cover 50% of those premiums, which would be about $3,126/year for the company.

So now the question is, would you rather pay to lose your best people or pay to keep your best people?

Offering a competitive benefits package for your employees can make you stand out as an employer of choice to available talent in the marketplace. It might also make your employees appreciate you more and be happier with their total compensation package.

A sample of recommended best practices include:

  1. Evaluate your annual turnover %
  2. Benchmark your wages/salary/benefit packages with competition in a similar market
  3. Work with your Benefits Broker to develop a strategic benefits package that can give you an edge over your competition
  4. Disclose total compensation package information to employees so they understand the full investment that the company has in them
  5. Conduct exit interviews to understand why you are losing people

In the recent years, Human Resources has become a much more strategic effort and businesses are realizing how much these issues can financially impact them. It takes initiative and forward thinking leadership to make sure these challenges are combated with solutions that will give you a positive ROI to prevent the company that you have built from being destroyed.


Ryan Kagarakis
Property & Casualty Consultant
Brown & Brown Inc.

Mobile: 562.290.9051| Office: 916-625-4616
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com



Gabriel DeAnda
Benefits Consultant
Brown & Brown, Inc.

Mobile: 209.679.1065| Office: 209-465-5671
gdeanda@BBSTOCKTON.COM
www.bbsacramento.com


Workers’ Compensation Experience Modifications: How They Work and What You Need to Know

March 14, 2018 | Ryan Kagarakis

Isn’t workers’ compensation experience rating fun?! Employers with workers’ compensation coverage understand that claims can inflate their rates. Visa versa, the absence of claims usually leads to lower rates. The more payroll an employer has the higher their premium generally is. The workers’ compensation insurance providers are in the money making business and the rates they provide are based on the profitability of an account and their history of claims. Further complicating the matter, the Workers’ Compensation Insurance Rating Bureau (WCIRB) provides an Experience Modification rate based on the employer’s history that further impacts what they pay.

The WCIRB calculates the experience modification rates by looking at the payroll and claim history from the past four years. The bureau does not consider the expiring term as it has not been completed yet so for ease of use in this article years 2, 3, and 4 are the timeframe for determining the modification rate. For example, a 2018 modification would not consider the 2017 policy and it would use 2014, 2015, 2016 for their calculations. The WCIRB uses the audited payroll from each of the years within the rating period to calculate what the expected losses SHOULD be. Injuries do happen so there is an expectation that any business can incur a claim which varies by classification code.

The more payroll an employer has the more losses they are expected to have. If the employer has very few claims or none at all their modification will be lower than industry average resulting in more credits applied to the policy.

The goal for every employer should be to keep employees safe and have very few claims if any. The reward for doing this is paying less for workers’ compensation rates, a legally required coverage which can often be one of the highest expenses in the monthly budget.

Here are some things to know about experience modifications:

  • The experience modification is reevaluated every year that an employer is eligible and is effective for the upcoming policy term.
  • In 2018 the qualifying threshold to be eligible for an experience modification is total expected losses of $10,300 for the 3 year rating period.
  • Expenses such as attorney costs to do not count against the employer for the experience modification calculation.
  • Experience modifications effective 1/1/2019 will exclude the first $250 of every medical claim from the calculation.

Particularly in construction, the experience modification rate is important to the overall competitiveness and profitability of a business. It is critical that employers who qualify discuss their experience modification with their insurance broker every year in advance of the renewal. Checking the experience modification for accuracy can help avoid higher rates if the bureau made a mistake. Furthermore, forecasting the modification can help prepare the employer of potential changes in rate for an upcoming term. Knowing how the experience modification works, and what to expect in the upcoming year will give the employer a better idea of what they will be paying in workers’ compensation rates and will better let them know if adjustments are needed when calculating labor costs for bids.


Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.

Phone: 916.625.4616 | Direct Fax: 800.761.6733
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com



2018 New Year’s Legislative Changes

February 12, 2018 | Ryan Kagarakis

A new year brings many resolutions and changes to our society. People generally want to be healthier and achieve more when the new year starts. The California legislation also brings in new laws and bills when the clock strikes midnight. Below are a few bills that went in to effect on January 1st :

Assembly Bill 1008 – “Ban the Box”

This new law now prohibits private employers with five or more employees from inquiring about the criminal history of an applicant during the interview process. Employers cannot include any questions that seek the disclosure of an applicant’s conviction history before the employer makes a conditional offer of employment. Any questions or “boxes” that ask about criminal history must be eliminated. Employers are allowed to advise the applicant that an inquiry in to their criminal history may be performed after a conditional offer is made. If an inquiry in to an applicant’s background uncovers criminal activity the employer must notify the applicant in writing if they are to pull the offer. The employer must offer an individual assessment to the applicant and give them a chance to refute or contest the findings. The employer must analyze whether the conviction has an adverse impact on the job duties. If the employer decides to rescind the offer of employment after the assessment they must notify the applicant in writing.

Assembly Bill 168 – “No Salary History Inquiries”

Starting in 2018 employers are no longer allowed to seek salary history information from an applicant as a condition for employment. Employers cannot rely on salary history as a factor in determining whether to offer employment or what salary to pay. Furthermore, an employer must provide pay scale information to an applicant upon reasonable request. If an applicant voluntarily offers salary history the employer can consider that information in determining salary but cannot use it when considering to offer employment.

Senate Bill 306 – “Retaliation “

This bill provides “injunctive relief” in employment practices cases. Injunctive relief is a court order that forces an employer to reinstate an employee while the case against them is pending. Essentially, if an employee is fired and then sues for retaliation they can get an injunctive relief and continue to work and be a negative influence around other employees until the matter is resolved. Furthermore, this bill lowers the burden of proof by making the requirement for an injunctive relief to be “reasonable cause”. This will likely increase the amount demanded in a settlement since the plaintiff’s attorney can now threaten to reinstate the employee while the case is pending.

These bills along with the public attention from recent scandals in Hollywood are more than likely to increase the number of claims made against employers. We are urging employers to be proactive in their approach to employment practices and take extra precaution when making hiring, firing, and disciplining decisions. As always, we recommend addressing any specific questions or concerns that you may have regarding this topic with an insurance professional and/or an attorney specializing in labor matters.

 


Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.

Phone: 916.625.4616 | Direct Fax: 800.761.6733
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com


General Contractors Now in the Line of Fire for Subcontractor’s Unpaid Employees

January 4, 2018 | Ryan Kagarakis

With the holiday season in full swing we are reminded of the things that we should be thankful for. This holiday season, employees in the state of California are thankful for our government’s continued efforts to pass legislation heavily favoring them vs. their employer. If you are general contractor in our state, you may not be singing the same tune.

As the population in California continues to grow the immediate need for affordable housing intensifies. With current housing inventory low the only way to meet the demand is to build more new homes. New homes are typically built by a general contractor who then hires specialty trade contractors to perform framing, plumbing, electrical, roofing, etc. These subcontractors also have employees working for them to help complete the work. The general contractor will then pay the subcontractors with the subcontractors’ workers being paid directly by their employer.

This all seems right and fair, correct?

However, with the recent passage of Assembly Bill (AB) 1701, if a subcontractor does not pay their employees, the general contractor is now legally responsible their wages. This will now force the general contractor to pay twice for the same work; once for the amount he has already paid the subcontracted company and again for the unpaid wage labor.

Furthermore, if the general contractor contests the allegation they now have to go to civil court to fight the matter. Consequently, if a civil action is brought against the general contractor it will then become public information and will likely show up on the California Contractor’s License Board website. If they choose not to respond to the allegation their license can be suspended for an “Unsatisfied Civil Judgement” causing more potential economic harm.

The legislation’s intentions were true as they tried to protect employees who don’t get payment from their employer. However, the consequence is that it puts more pressure on general contractors to scrutinize the trade contractors that work for them with the penalty being double paying for work they have done on a project. Furthermore, this now leaves the door open for frivolous lawsuits that general contractors now have to respond to or risk license suspension.

Here are some “best practices” tips for companies using subcontractors:

  • First and foremost: Consult with your attorney to ensure that all existing and future contracts will address AB 1701 and mitigate potential claims involving this matter.
  • Develop a plan to evaluate both existing and new subcontractors for financial stability and reliability.
  • Monitor certificates of insurance for all lines of coverage required within your contract. Continuous certificate review can identify if premiums are not being paid.
  • Update the indemnifying provision in the existing subcontractor agreement to address AB 1701 in the event of a claim.
  • Consider requiring wage bonds from subcontractors so that subcontractor’s employees have recourse if they are not paid.

As always, we recommend addressing any specific questions or concerns that you may have regarding this topic with an insurance professional and/or an attorney specializing in labor matters.



Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.
Phone: 916.625.4616 | Direct Fax: 800.761.6733
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com

In-home delivery creates liabilities for businesses, insurers

December 4, 2017 | Business Insurance

Some retailers are adding another what-if to their risk profile: slips and falls … in your home. Bentonville, Arkansas-based Walmart Stores Inc. and Seattle, Washington-based Amazon.com Inc. are among retailers piloting programs that not only deliver groceries and other goods to customers’ doors, but place packages inside the home and if needed inside the refrigerator, according to the Detroit Free Press.

The business model not only raises issues for homeowner insurers but also leaves the retailers open to new risks such as: What if a delivery person is attacked by a dog? Who pays if the keyless entry malfunctions and the home is burglarized? And then there’s the problem of slips and falls, the newspaper reported on Wednesday.

“In any of those situations, will Amazon be held liable or will the homeowner be at fault?” Michael Macauley, chief executive officer of Pleasanton, California-based Quadrant, which offers pricing analytics for property/casualty insurers, told a reporter. “Amazon Key is still in the early stages — there are so many questions surrounding liability if a problem were to occur during delivery.”

Source - Business Insurance

“How a Workers’ Compensation Claim Affects Your Rates”

December 1, 2017 | Ryan Kagarakis

Most business owners did not get in to their respective field of work to be an employer. Being an employer is the consequence (or perhaps benefit) of being a successful business person and needing the help of others to deliver the quality of product your customers expect of you. You may have expected or hoped for this success but you perhaps didn’t understand the significance of the “human aspect” of having employees. With that human aspect you are now relying on someone else to uphold the same level of care and safety you expect of yourself; and with that you are now faced with the possibility of employee workplace injury.

Workers’ compensation is a mandatory coverage in California for your employees. If you have experienced claims in the five most recent terms you may already be facing an uphill battle with rate increases. Often times, employers don’t understand why their rates are increasing and feel like they don’t have control of their workers’ compensation costs. I will now provide some insight as to what drives rate increases and the claim process itself.

What Insurance Carriers Look For:

  • Payroll History: How much payroll have you booked in the past five years?
  • Premium History: How much premium have you booked in the past five years?
  • Claims Severity: How much has been paid out for claims over the past five years and were there any significant losses.
  • Claims Frequency: How many different workplace injuries have there been in the past five years?

Why The Insurance Carriers Look For This Information:

  • Loss Ratio: A comparison of premium dollars paid into the system vs the amount the carriers have paid out in claims. Underwriters want to know if your account has been profitable.
  • Claim Frequency Issues: Have there been multiple claims? This could be a sign of a cultural issue with an employer.
  • Shock Losses: Have there been large claims? One big claim from an incident can be explained away (accidents DO happen) but multiple large claims could be a sign of poor safety controls.
  • Litigation: If the “injured” employee has an attorney this usually means the insurance carrier has also hired an attorney and expense costs can greatly affect future rates.

The only way to control workers’ compensation costs is to AVOID CLAIMS! Partnering with an insurance professional and carriers that encompass this same belief will be the key to long term sustainability of your business. While claims will happen, the actions of your agent during the claim process along with the pre-accident safety procedures will help mitigate exposure to shock losses and frequency issues.



Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.
Phone: 916.625.4616 | Direct Fax: 800.761.6733
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com

Construction Dual Wage Threshold Changes

November 13, 2017

Effective January 1, 2018 the wage threshold for the below construction classes have changed.

5190/5140 - Electrical Wiring – within buildings

  • Increased from $30.00 to $32.00

5201(1)/5205(1) - Concrete or Cement Work – pouring or finishing of concrete sidewalks, driveways, patios, curbs or gutters

  • Increased from $24.00 to $25.00

5201(2)/5205(2) - Concrete or Cement Work – pouring or finishing of concrete floor slabs, poured in place and on the ground, and concrete slab-type foundations, for other than concrete buildings or structural steel buildings of multi-story construction

  • Increased from $24.00 to $25.00

5403/5432 - Carpentry – including the installation of interior trim, builders finish, doors and cabinet work in connection therewith

  • Increased from $30.00 to $32.00

5446/5447 - Wallboard Application – within buildings

  • Increased from $33.00 to $34.00

5474(1)/5482(1) - Painting, Decorating or Paper Hanging – including shop operations

  • Increased from $24.00 to $26.00

5474(2)/5482(2) - Waterproofing – other than roofing or subaqueous work when performed as a separate operation not a part of or incidental to any other operation

  • Increased from $24.00 to $26.00

5474(3)/5482(3) - Painting – water, oil or gasoline storage tanks

  • Increased from $24.00 to $26.00

5484/5485 - Plastering or Stucco Work

  • Increased from $27.00 to $29.00

5552/5553 Roofing – all kinds

  • Increased from $23.00 to $25.00

5632/5633 Steel Framing – light gauge

  • Increased from $30.00 to $32.00

6218(1)/6220(1) - Excavation – N.O.C.

  • Increased from $30.00 to $31.00

6218(2)/6220(2) - Grading Land – N.O.C.

  • Increased from $30.00 to $31.00

6218(3)/6220(3) - Land Leveling – grading farm lands

  • Increased from $30.00 to $31.00

6307/6308 - Sewer Construction – all operations

  • Increased from $30.00 to $31.00

6315(1)/6316(1) - Water Mains or Connections Construction

  • Increased from $30.00 to $31.00

6315(2)/6316(2) - Gas Mains or Connections Construction

  • Increased from $30.00 to $31.00

For more information on 2018 and 2019 changes, please visit the WCIRB.

2018 and 2019 Changes Quick Reference

 

Navigating Marijuana's Legalization In The Workplace

November 7, 2017 | Ryan Kagarakis

Proposition 64 is a recently passed law that legalized the recreational use of marijuana for adults 21 and older in the state of California. What are the possible implications for employers?

Employers are still entitled to enact and enforce drug policies related to marijuana. You do NOT need to tolerate or accommodate marijuana use. Proposition 64 DOES NOT:

  • Affect/restrict employer’s rights to maintain a drug free workplace.
  • Require employers to permit or accommodate marijuana use/consumption/possession in the workplace.
  • Affect the ability of employers to have policies prohibiting use by employees or applicants, or prevent employers from complying with state or federal law.

Testing for Marijuana

  • Pre-Employment: You can only test following an offer of employment. In California you have the right to pull an employment offer if the applicant’s drug test comes back positive for marijuana. Currently, there is no duty to accommodate an applicant with a positive test.
  • During Employment: Random drug testing is generally not permissible since it can be seen as “targeting”. However, in a safety sensitive position (such as construction) testing for cause IS permissible. In order to test during the course of employment there must be “reasonable suspicion” that the employee was under the influence or intoxicated at the workplace. In the case of reasonable suspicion being present it is recommended to have documentation with witness statements.

Marijuana and Workers’ Compensation

The passing of Proposition 64 has created a gray area when it comes to workplace injuries with employees under the influence of marijuana. In order to drug test after a workplace injury happens two contingencies must be met:

  • The claim was the result of Employee’s own negligence
  • There is reasonable suspicion that the employee was under the influence. If there is, the employer must have witnesses and accounts that the employee either acted under the influence or appeared to be under the influence.

What Does a Positive Test for Marijuana Mean for Coverage?

In order for workers’ compensation benefits to be provided, California Labor Code 3600, Section 4 cites that “the injury is not caused by the intoxication, by alcohol or the unlawful use of a controlled substance, of the injured employee.” Although marijuana is no longer unlawful in California it is still considered a Schedule One drug under the federal Controlled Substances Act. However, the use of marijuana for private recreational use is not unlawful so this leaves the issue somewhat in limbo.

We recommend addressing any specific question that you may have regarding this topic with an insurance professional and/or an attorney specializing in labor matter.



Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.
Phone: 916.625.4616 | Direct Fax: 800.761.6733
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com

How IoT is inviting insurers into smart homes

September 27, 2017 | Source - Property Casualty 360

The Internet of Things is driving a sharp increase in all kinds of sensors producing data that flows into the cloud.

These devices offer new possibilities for greater convenience and safety for consumers, but they’re also creating valuable data that can lead to important new insights for insurers. In the property and contents insurance market, the rise of the smart home represents a major opportunity to engage with policyholders, prevent and mitigate risks, and collect useful data.

Consider that 51% of U.S. households with broadband internet find the idea of an IoT device that alerts them to smoke and fire highly appealing, and 41% feel the same way about devices that warn about water leaks, according to Parks Associates. The beauty of these devices is that they don’t just protect people and alert them to emergencies when they’re at home – they can also warn about a fire or a leak when they’re at work via their smartphones.

Engaging customers and boosting retention

The idea of discounted premiums in return for home monitoring has been around for decades in the shape of security systems. But the new wave of smoke and water sensors are much cheaper, easier to install, and can be monitored by the homeowner. The earlier a homeowner is alerted to an event, the better the chances of minimizing the damage, which means less disruption for them and fewer and less serious claims for insurers.

This isn’t just about the claims impact, though, it’s also a golden opportunity to engage with customers and present them with something tangible when they purchase a policy. As Bain & Company points out, it can be difficult for insurers to build loyalty because they will generally have fewer interactions with customers than, say a retail bank, so they must fight to get closer to customers. Smart home devices lead to more interactions, but they also create a sense of value and innovation that can boost customer loyalty.

Getting customers to think about fire safety and the potential risk of water leaks is an important first step towards changing behavior. There’s also scope to automate responses, so that a water leak, for example, might trigger an automatic valve shut-off, preventing damage instead of just mitigating loss. In the future, with sophisticated analysis of varied sensor data, it may be possible to dispatch service personnel to investigate likely issues before they can develop.

The information available from smart home devices can allow insurers to provide products to each individuals homeowner's needs.

Harvesting valuable data

Another vital consideration with smart home devices is the valuable data that they create. Individual sensors and systems can show broad patterns, but when different sensor data is combined, there’s scope to get a granular view of exactly what coverage different households need. Smart home telematics could lead towards tailored insurance products that are based on individual risk profiles.

“We believe that with IoT, you will be able to start focusing on prevention and mitigation and bring that down to the individual home, the individual homeowner, the individual occupancy of that home, the individual characteristics of that home,” explained Roel Peeters, CEO of Roost, at the recent Property Innovation Summit. “Not only do that once at time of underwriting, but do that on a continuous basis.”

Gaining access to this data can prove expensive and fraught with difficulties, unless you establish a relationship that includes data collection from the outset. By offering water sensors or smoke detectors with new insurance policies, carriers can get in on the ground floor and use the data they collect to innovate new products and improve services.

It’s important that insurers seize on the invitation now, because soliciting customers after they’ve already installed their own smart home systems will not be easy. Working with manufacturers and service providers to drive these new innovations is also a great opportunity for carriers to steer the direction they take and bring their considerable experience to bear.

The bottom line for insurers

There were 80 million smart home devices delivered worldwide last year, up from 47 million in 2015. A compound annual growth rate of 60 percent will take us to 477 million devices by 2020, according to IHS Markit. This is an unprecedented opportunity for P&C insurers to build new bridges with their customers.

The initial investment offers returns on multiple fronts for insurers. First, there’s a reduction in the number and severity of claims because emergencies are discovered earlier than before. Second, there is greater customer engagement because policyholders are receiving something tangible along with their policy, increasing satisfaction and in turn boosting retention. Finally, all that data informs actuarial pricing models and ensures solid underwriting that’s profitable.

Source - Property Casualty 360

Employment Laws Direct Impact Business Owners

September 26, 2017 | Ryan Kagarakis

With summer officially over it’s finally time for the kids to go back to school. This means putting down the video games, getting your back to school supplies, and starting to prepare for Mr. Molinski’s famously difficult math class. In that same vain I wanted to touch on getting back to the basics of employment related claims in the workplace. Employment Practices Liability Insurance (EPLI) is often a misunderstood or unappreciated type of coverage so we wanted to dust off the text books and re-examine why it’s important.

“What are Employment Related Claims?”

Employment related claims are lawsuits or complaints that arise from damages an employee incurs during the course of their employment. Examples of employment claims can be allegations such as (but not limited to):

  • Discrimination
  • Wrongful termination
  • Sexual harassment
  • Wage & Hour Violations
  • Retaliation
  • Inappropriate employee conduct
  • Slander
  • Invasion of privacy, etc.

“Shouldn’t my general liability or workers’ compensation policy cover this?”

Unfortunately, these policies will not cover you for employment related claims. A common assumption is that wrongful termination, discrimination, and the like are covered by your workers’ compensation and/or general liability coverages but upon examination you will find that they are categorically excluded.

“Well, we have a great working environment and have never had any issues”

Lack of evidence of a risk does not mean that there is no risk. It is easy to fall into a pattern of allowing past experiences to dictate future behavior. Just because you have not been involved in a car accident in 10 years doesn’t mean your probability of getting in one today decreases. Insurance works the same way; just because there hasn’t been a claim doesn’t mean the likelihood of one goes down. According to the Equal Employment Opportunity Commission (EEOC) there were a total of 91,503 employment related charges filed in 2016 which is a 17% increase from 2006. In 2016 California alone accounted for 5,870 of those charges (6.4%). 41% of all EPLI claims are brought against smaller employers with 15 to 100 employees.

“What is the Solution?”

To cover wrongful acts arising from the employment process an EPLI policy is needed. This is a separate policy that is specifically designed to cover employment related claims. This is a great coverage and we highly recommend that any type of business consider exploring solutions. All policies however are not created equal and many insurance companies can get away with offering a lower price by excluding commonly reported claims. Here are a few endorsements/