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Fraud and embezzlement in the workplace has become an epidemic, costing American businesses an estimated $400 billion a year (6% of total revenues), according to The Association of Certified Fraud Examiners. Smaller firms are particularly vulnerable, because they're less able than their larger counterparts to afford extensive safeguard or to absorb the losses. What's more, one in four workers who rip off their employers have been with the company more than ten years.

Although you have insured the business property on your premises, this protection does not extend off site - unless you carry Inland Marine insurance.

• A truck carrying designer handbags for an upscale department store is hijacked at a rest stop.
• A hailstorm damages bulldozers on a machinery dealer's lot.
• A fire at a dry cleaners scorches customers' clothing.
• A defective sprinkler system in a "big box" store warehouse soaks dozens of TVs.

You need Employment Practices Liability insurance (EPLI) to protect you from lawsuits filed (justly or unjustly) by anyone who you employ, have employed, or even considered employing.

1. Who is insured? This should include the company as an entity, along with officers, directors, and every type of employee (full-time, part-time, temp, leased, loaned and seasonal). The importance of this becomes clear if you're ever sued for a sexist slur made by temporary receptionist to a job applicant.
2. What claims does the policy cover? You want coverage for every eventuality: monetary damages, all types of legal proceeding from criminal to regulatory, settlements, judgments, lost pay, defense fees and punitive damages.
3. How does the policy define "wrongful employment practices" beyond the obvious (sexual harassment and racial discrimination)? Make sure that you have coverage for violations of federal, state, local and common law on employment discrimination;, deprivation of career opportunities; defamation; retaliation, negligent job evaluation, and failure to have an acceptable written employment policy.
4. What does the policy exclude? EPLI should include wrongful practices that might have taken place before you bought coverage - so you don't have to worry about a suit by that disgruntled vice president you fired three years ago for pilfering paperclips.

You're facing a deadline to complete work under a major contract - when a voltage spike surges through your electrical lines, burning out computers and telephone equipment. How would you pay for replacing or repairing the damaged equipment, taking the steps needed to get back in production, and replacing lost income?

• Reimbursement for the cost of repairing or replacing damaged equipment (Some policies also cover green construction, disposal and recycling methods)
• Replacement of income lost from downtime ("Business Interruption" or "Service Interruption" coverage)
• Assistance from your insurance carrier, ranging from maintenance guidelines and checklists and crisis planning templates to identifying sources for repairs, unusual parts, or replacement equipment that can be obtained quickly.

• Bodily Injury Liability pays the cost of bodily injury to others from accidents for which you are responsible. If you're sued, it also pays your defense and court costs.
• Property Damage Liability picks up the tab for property damage to others for which you are responsible, as well as defense and court expenses.
• Personal Injury/Medical Payments usually covers medical and funeral expenses for bodily injury from an accident that involves an insured vehicle.
• Collision pays for a covered vehicle that is damaged by a collision with another vehicle or object.
• Comprehensive Coverage pays for a covered auto that is stolen or that is damaged by causes other than collision or reckless driving.
• Uninsured/Underinsured Motorists covers injuries and, in some cases, property damage, when you're involved in an accident with another person who either doesn't have Auto Insurance or carry enough coverage.

Before you purchase or renew your Commercial Auto Insurance ask yourself these questions: 1) how much Liability Coverage you should buy, and 2) how large of a deductible should you choose?

In today's increasingly complex and litigious business environment, your corporate officers and board of directors - the brains of the company - need protection against personal financial liability arising from their corporate activities.

• Providing inaccurate or unlawful advice.
• Fraud and malfeasance.
• Misrepresentation of company assets.
• Failure to comply with workplace laws.
• Poor hiring decisions. (A Towers Perrin survey found that 40% of all reported D&O claims involved flawed employment practices.)

Product Liability Insurance helps protect your company from damages for losses related to manufacturing or selling products or other goods.

1. Manufacturing or production flaws that create an unsafe defect in the product. For an example, just recall the recent claims against Chinese manufacturers for using dangerous chemicals in their products.
2. Design defects that make the product inherently unsafe. (The series of lawsuits against Toyota vehicles for defective acceleration controls during the past two years comes to mind.)
3. Inadequate warnings or instructions, such as failing to label a product properly or advise consumers about potential risks. A famous example is the McDonald's "hot coffee case."

Business Property insurance protects your building and property against loss or damage from theft, accident, and a variety of other causes. The policy will pay for replacing or repairing covered property or providing compensation for irreplaceable items.

If you don't own your building you'll still need to cover its contents: fixtures, furniture, office equipment, inventory and the supplies stored at your location or off-site.

The premium will depend on whether you choose to insure the replacement cost or actual cash value (ACV) of the property. Most Business Property coverage is written on a replacement-cost basis, which will reimburse you for replacing lost or stolen goods with new items at current market prices. This feature can help your business recover from the loss or theft quickly. (If you're leasing equipment, the leaseholder might require you to cover it at replacement value.) You'll need to revise your coverage when you acquire or dispose of property. Be sure to update replacement values over time; a computer worth $1,000 two years ago might cost half that today - on the other hand, the price of a desk might well increase.

Actual cash value coverage, which generally costs less, provides reimbursement for the depreciated value of covered property. If your business owns its own equipment, which you could replace easily with comparable goods at depreciated market value, the lower premium of an ACV policy might make it a more cost-effective choice.

As always, our agency's Business Insurance specialists stand ready to offer their advice on choosing the coverage that's best for you. Just give us a call.

Business Interruption (BI) insurance makes sense. Consider Allison Dorst, a New Jersey resident who operates three e-commerce web sites selling sportswear. Last fall, Superstorm Sandy brought a prolonged power failure that shut down Dorst's customer-service lines, causing sales to evaporate. She'll also see lower sales because of a month-long delay in the delivery of next season's styles. Fortunately, her Business Interruption coverage will reimburse the profits lost because of this lost revenue.

Although most middle-market business owners and managers understand the need for BI, they don't always have the information they need to choose the right coverage. Some companies don't have enough insurance to remain in business after they suffer a major loss, while other businesses might be buying more coverage than they need. When it comes time to renew your BI insurance, be sure to take a close look at the insured or reported values for the policy, as well as on the various coverage extensions that apply to your business, based on its operations. It also makes sense to consider additional coverages such as:

• Contingent Business Interruption
• Claim preparation fees
• Extended period of indemnity
• Expediting expense
• Service interruption/power outage, including overhead transmission and off-premises lines
• Extra expenses
• Ordinary payroll coverage
• Selling price of finished goods inventory
• Ingress/egress
• Loss of attraction
• Civil authority
• Sue and labor

We'd be happy to offer our advice, free of charge, in selecting the amount and types of coverage that can minimize your financial risk and keep you in business after disaster strikes. Feel free to get in touch with us at any time.

Any employer that's ever been involved in a sexual harassment suit can attest that the cost to settle or defend a sexual harassment lawsuit can be jaw dropping. The average award for damages in these types of lawsuits is around $650,000, and that isn't even including the secondary cost from workplace disruption, bad publicity, and those involved in the suit being absent from work.

What Constitutes Sexual Harassment? The first step in protection is understanding what is defined as sexual harassment. State and federal law prohibits behavior that involves an employee in authority basing professional expectations or decisions regarding a subordinate employee being willing or unwilling to exchange sexual acts. The following are examples of such behavior:

• Altering expectations of job performance when a subordinate repeatedly refuses advances for a date or sexual encounter.
• A superior demanding sexual acts in order for a subordinate to receive a raise or promotion.
• Disciplinary action, including termination, of a subordinate that refuses sexual advances or ends an existing romantic relationship.

Verbal, visual, physical, or written behavior that causes another employee to view the work environment as hostile, are unwanted, or focus on the sexuality or gender of another person may constitute as sexual harassment. Specific examples of such would be teasing, suggestive objects or pictures being displayed, and repetitively requesting sexual acts or dates verbally or in writing.

Protection with Employment Practices Liability Insurance (EPLI). After knowing what constitutes sexual harassment, businesses can further financially protect themselves with Employment Practices Liability insurance (EPLI). This is an insurance to protect employers when an employee makes the claim that their legal rights have been violated. Although policies vary, EPLI generally doesn't cover criminal or civil penalties and punitive damages. EPLI does generally cover settlements, judgments, and incurred legal costs arising from an array of incidences - wrongful termination, employment contract breaches, employment and promotion failures, wrongful disciplinary actions, wrongful emotional distress infliction, negligent employee evaluations, employee benefit plan mismanagement, discrimination, and sexual harassment.

Coverage is specific. So, before purchasing a policy, decide who should be covered. For example, should full and part-time employees, contracted persons, supervisors, department heads, subsidiaries, company divisions, and so forth be covered or not? One other note about EPLI is that it's mandatory for employers to report incidents within a reasonable amount of time. Some policies might feature an ERP (extended reporting period) or prior acts. The length, cost, and availability vary by carrier.

Purchasing EPLI has been challenging for small companies in the past. However, the 2004 rate increases have somewhat plateaued. Some rates have even decreased. Keep in mind that EPLI cost is figured based on the business type, employee numbers, and past lawsuits associated with the business.

Prevention of Harassment Lawsuits. Prevention is the cornerstone in decreasing the risk of a sexual harassment lawsuit. Prevention steps include the following key elements:

• If the business has EPLI, any incident should be reported immediately.
• Create, communicate, and enforce a zero-tolerance policy for workplace sexual harassment.
• Have an effective harassment complaint process in place and take immediate, consistent, and appropriate action when a complaint is made.
• Thoroughly document all complaints and the following investigation and actions.