Requirements and Guidelines for Insuring and Protecting Your Business

Transcription

1 Requirements and Guidelines for Insuring and Protecting Your Business Having enough insurance is essential for any business to protect against unanticipated events ranging from accidents to lawsuits. It s important to understand your insurance coverage so you can make informed decisions and comply with your Franchise Agreement. The HouseMaster Franchise Agreement contractually requires that you have: General Liability: insures your day-to-day business operations, including facilities, and equipment. Professional Liability (Errors & Omissions): a type of policy for businesses that provide a service to customers. E&O policies provide protection for the business and its employees if client files a claim related to the services provided. Automobile insurance: protects against losses sustained by business owners or their employees. Workers Compensation (in Canada, this is sometimes referred to as Workplace Insurance ): protection for employees who are injured on the job. Employment Practices Liability Insurance: addresses employee allegations of discrimination and the like. Note: All the information provided is subject to change and can be updated at any time. It is important that you regularly review Bulletins or other material distributed or posted on the Info Ex for up-to-date insurance information. Basic Insurance Requirements for Franchisees Your Franchise Agreement states that you must meet minimum insurance requirements for HouseMaster Franchisees. Some states have home inspector laws with specific insurance requirements that may either exceed or be less than the minimums identified in the Franchise Agreement. You must comply with the Franchise Agreement as well as any applicable laws or regulations. The Franchise Agreement requires you get insurance coverage for your corporation and you individually. You must name DBR Franchising, LLC and HI Training, LLC. d/b/a The National Institute of Building Inspectors - NIBI as additional insureds on all policies. The following are the current minimum contractual insurance requirements for HouseMaster Franchisees: Professional Liability (Home Inspector Errors & Omissions Insurance) - $500,000 Per claim, and $1,000,000 Aggregate - $500,000 Bodily Injury General Liability* - $500,000 General - $500,000 Bodily Injury - $500,000 On-Site Coverage

2 Automobile - $500,000 For each person injured - $500,000 Property damage - $500,000 Aggregate Workers Compensation/Workplace Insurance - in amounts required by applicable law. Employment Practices Liability Insurance - in amounts required by applicable law. Additional Insurance Considerations You may want to consider other forms of insurance that are available through a comprehensive business policy. Each business is unique, so Franchisees should contact a qualified local insurance broker to discuss individual business insurance needs. When you meet with an insurance broker, review all aspects of your business. Be sure to address issues related to bodily injury coverage, off-premises coverage, automobile insurance, and Workers Compensation/ Workplace Insurance that is required by law or otherwise applicable. A local insurance agent should also be able to help you address any locally required or recommended coverage. Common options include: Fidelity/Employee Dishonesty Bond -- Addresses allegations of inspector theft onsite. Umbrella -- Expanded coverage and limits options, most often available through a General Liability policy. Compliance Documentation Each Franchisee is responsible for keeping documentation of all contractual or legal requirements at your franchise business location. These records must be available for submission to DBR on request including all insurance records. DBR typically arranges for a group Errors and Omissions Programs ( Group Program ) as a convenience to Franchisees. Franchisees may opt to buy this insurance independently through another agency or underwriter. You must purchase all other insurance individually. If you buy E&O coverage outside the Group Program, you must forward proof of E&O insurance to DBR immediately when you first get it, renew your policy, or change the provider. As part of the DBR Quality Assurance Program, DBR may randomly contact offices for verification of compliance with insurance or other contractual requirements. Despite these administrative efforts, DBR does not assume any duty to verify your compliance with any contractual requirements. Securing and maintaining the required insurance is solely your responsibility. Note: Promotional materials, including the Web site may discuss E&O insurance. If you fail to operate your business in compliance with these advertisements, you are in violation of your contractual requirements while subjecting all parties to risk for liability associated with unethical business practices (among other concerns). General Liability Insurance The DBR Franchise Agreement requires Franchisees to have a General Liability policy. General Liability policies provide protection against certain types of losses sustained by business owners or their employees. General Liability insurance insures your business operations, facilities, equipment, and must be broad enough to cover all aspects of your day-to-day business and to protect against events such as fire, theft, etc. You and any inspectors should also have coverage against property damage and bodily injury that can occur off of your office premises, such as at

3 the site of an inspection. General Liability policies are usually reasonably priced, but sometimes certain insurers opt out of the General Liability market for home inspectors. Premiums for standard policies usually start at less than $1,000, but will vary depending on the size of your business, extra coverage selected, and other reasons. Bodily injury coverage is a critical issue when you buy General Liability and Automobile Insurance. Automobile Insurance The DBR Franchise Agreement contains minimum requirements for Automobile Insurance for ALL vehicles used in the operation of your HouseMaster Franchise. The following explains these requirements: You must have Automobile Insurance coverage for any vehicle used in the operation of your business. This applies whether your vehicle is owned, leased, rented, or otherwise secured by either the Franchisee s corporation or the Franchisee personally. Any employee (salesperson, inspector, etc.) that uses their personal vehicle in connection with the operation of your franchise must also meet the same minimum requirements. These individuals must also have your corporation, you personally, DBR Franchising, LLC, and HI Training, LLC. d/b/a The National Institute of Building Inspectors NIBI as co-insureds on their personal automobile insurance policy. Any vehicle that Franchisee owns personally that is not used in the operation of your business does not need to meet these minimum requirements. These requirements are intended to protect everyone involved. It s important as a business owner that you verify that these procedures are met. Further, these are the minimum requirements. Insurance coverage with higher limits is preferred and recommended, and may be required by local law. Consult with your insurance agent for coverage recommendations. We also suggest that you ask about an umbrella policy that expands your liability limits. Bodily Injury As discussed earlier, always inquire about the bodily injury coverage when you are considering General Liability and Automobile policies. Bodily injury is different from personal injury. Bodily injury refers to physical damage or harm to an individual, such as a death, injury, or mental anguish. Personal injury refers to an act of slander, defamation of character, etc. Be certain that your General Liability, E&O, and Automobile policies specifically provide coverage for bodily injury. Personal injury coverage is usually provided with General Liability coverage. Bodily injury claims have increased in frequency during recent years and represent tremendous exposure. As a home inspector, you need bodily injury coverage for incidents that happen on the inspection site. As a business owner, you need bodily injury coverage for events at your place of business. Typically, E&O policies cover bodily injury; General Liability policy may or may not cover bodily injury. However, these policies will typically cover bodily injury for an optional, added premium. Your policy language may read as follows: bodily injury claims that arise out of or in connection with professional services or otherwise in connection with the business. To have enough bodily injury coverage, the General Liability policy language must be broad enough to cover events that happen at the inspection site. From the perspective of a home inspection company, bodily injury can be a concern in several situations. Coverage for the Inspector, Inspection Site, and Completed Operation must be handled a different way.

4 The first area of concern is bodily injury involving the inspector. If the inspector suffers any injuries during an inspection, your Workers Compensation/Workplace policy should cover the Inspector. Examples of this include an inspector who is injured after falling off a ladder or stepping through a ceiling. Your office should maintain sufficient Workers Compensation /Workplace Insurance coverage. In most cases, you must meet the requirements of local laws. Inspection Site (Off-Premises) Coverage An injury could happen to someone else at an inspection site as a result of the inspection process. For instance, a child may be injured trying to climb a ladder left unattended by an Inspector. If you do not have bodily injury coverage with your General Liability policy, this type of claim would not be covered. Your E&O policy would also not normally cover it. Completed Operations Coverage After the inspection is completed, bodily injury coverage would be implicated if someone were injured because of a failure of an inspected item. Examples include a client breaking a leg if a deck collapsed under them, or carbon monoxide poisoning due to blocked vents. Unfortunately, a claim can be made even if the inspector identified the defect that caused the injury. Of course, it is less likely that a claimant will win a judgment if the report thoroughly identified the problem. General Liability policies typically exclude this type of bodily injury claim because it is a result of an error or omission when providing a professional service. Requirements and Types of E&O Insurance Policies Current insurance trends have affected everyone in the insurance, real estate, and home inspection industries. Premiums are rising while the scope of coverage is reduced. Everyone in the home inspection business is affected including HouseMaster Franchisees. To help Franchisees with the insurance procurement process, DBR organizes a Group Program for Franchisees to obtain their E&O insurance. This Group Program provides insurance through an independent insurance company, which satisfies your contractual requirements. If you are considering coverage through another provider or insurance company, you should carefully review this section. It is a recap of your Franchise Agreement s requirements and addresses some E&O insurance basics that may help you decide about insurance. Franchise Agreement E&O Insurance Requirements As you review your choices for insurance, please consider that your HouseMaster Franchise Agreement requires you to have minimum professional liability (E&O) coverage and features. The major points are identified below: Limits of liability as previously identified apply. Franchisees must have continuous, uninterrupted E&O insurance for all services performed. Franchisee is solely responsible for paying premiums, deductibles, and any other associated costs; All policies must include Bodily Injury coverage for injury resulting from services performed; When the Franchise Agreement is terminated, expires, or is cancelled, the Franchisee must get a minimum of three years extended reporting period coverage (commonly referred to as tail coverage); Franchisee must indemnify Franchisor for all inspection and related services;

5 DBR Franchising, LLC, and HI Training, LLC, d/b/a The National Institute of Building Inspectors NBI(r) must be named additional insureds on your policy; You must obtain prior acts coverage if you conducted home inspections before signing the Franchise Agreement; If Franchisee engages an independent contractor for the Franchisee s business, the contractor must meet the Franchisee s minimum insurance requirements and add the Franchisee as an additional insured; You must keep proof of coverage at the franchise place of business; Franchisee is solely responsible for taking part in the defense of any claims whether the claim comes in while an active Franchisee or not; and, Deductibles must be paid when billed to ensure continuous defense of an active claim and coverage for future claims. Further, deductibles may need to be paid directly to defense counsel. Note: DBR reserves the right to modify insurance requirements as business conditions dictate.