LATELY THERE HAVE BEEN SEVERAL ARTICLES popping up on AdvisenFPN’s1 daily email that this or that insurance company is trying to avoid paying a claim.
Insurance companies, being in business to make money, go strictly by the contract. An omission from the contract, or if all the Is are not dotted and all the Ts are not crossed, the insurer is off the hook.
ADVISEN IS FOCUSED on insurance and the companies that write it. It is not particularly in the Enterprise Risk Management Business (ERM) except as it touches on insurance.
Insurance is – or at least should be – a major issue for ERM. Every comprehensive plan (read “Enterprise” plan) must include insurance coverage; it’s common sense (even if “common sense” is not so common anymore).
The more specific the coverage, the more critical the “small print.”
It is the ERM practitioner’s job to make certain the client/employer understands exactly what the insurance contract covers … and, more importantly, what the contract DOES NOT cover.
Who is qualified to know what is and is not covered?
Insurance rarely is within a CEO’s or COO’s expertise.
Perhaps the CFO or whomever is charged with contracting with an insurance carrier?
In many cases, it takes a team of experts to review a policy before the organization commits on the bottom line.
Who should be on this team?
At a minimum,
- A lawyer well versed in insurance litigation
An independent insurance adjuster
A person or persons within the organization who is thoroughly knowledgeable about the organization’s operation
And, last, but not least, the ERM practitioner who also should have an understanding of all risks to business as usual
The time to adapt the insurance policy to the needs of the organization is BEFORE the policy is signed.
There is never a guarantee that there won’t be a dispute that ends up in litigation. No one – neither the organization nor the insurer wants the expense of a court proceeding – but if the organization’s insurance “committee” has done due diligence, the likelihood of litigation is greatly reduced, while the likelihood or prevailing in litigation is greatly enhanced.
Not only is insurance a part of a comprehensive ERM plan, it’s common sense at its best – providing the policies are carefully reviewed by an insurance committee (ibid.) before the policies are bought.
Insurance is both a risk and a risk mitigation factor.
Experienced ERM practitioners recognize that.
What coverage should an organization consider? As a start,
- Business interruption insurance
Directors and Officers insurance
General liability insurance
Life insurance (for critical personnel)
Personal injury insurance (for employees & guests)
Product liability insurance
Property (fire, etc.) insurance
Worker Compensation insurance
The list is NOT “all inclusive.”
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