It's All Fun and Games Until Someone Gets Hurt...

Posted by Alex Boyer on Thu, Feb 25, 2016

Are you COVERED for the HOVER?

hoverboard

Hoverboards are the latest craze this year, but what happens when something happens?
 
By policy definition, hoverboards are considered motor vehicles on nearly all homeowner policies and excluded for personal liability.

Here are a few claim scenarios we thought of... 
  1. Boy (or girl) Wonder is riding their hoverboard down the road and suddenly darts out in traffic, causing a car to swerve and hit a pole, or, heaven forbid, a pedestrian. No liability coverage on the homeowner policy.
     
  2. Girl (or boy) Wonder is riding their hoverboard in the park.  They fall off into passing jogger or bicyclist, causing them injuries.  No liability coverage on the homeowner policy.
     
  3. Your child leaves his or her hoverboard in your neighbor's garage.  Sometime during the night it catches fire (we've all seen the You Tube videos!) The neighbor's car and garage are severely damaged.  No liability coverage.

We cannot always fix and insure every situation.

But, as your professional insurance agent we need to bring to light areas where you may be at risk.
 
Thank you for allowing E & K Agency the opportunity to service your insurance needs.

Tags: Insurance, Liability, auto insurance, Car insurance, parental liability, homeowners liability, hoverboard, personal liability, motor vehicle

Plan Fiduciary Liability

Posted by Alex Boyer on Tue, Dec 15, 2015

If you are the Trustee of a 401(k) Plan, you may be interested in the article below, presented here courtesy of our good friends at Advanced Pension Designs in Wall Township, New Jersey.

Many of E&K’s clients sponsor a 401(k) Retirement Plan for their employees. This article outlines some of the fiduciary responsibilities of 401(k) Plan Trustees.

As a Plan Trustee, you may have obtained the federally required “ERISA Fidelity Bond” in the amount of 10% of your Plan Assets. While required by law, this bond does not protect you from potential Fiduciary Liability as a Plan Trustee. Please review this article and call your insurance counselor at E&K to learn more about the difference between ERISA Fidelity Bonds and Fiduciary Liability Insurance which we can secure on your behalf.

As always, thank you for giving E&K the opportunity to service your insurance needs.

A Plan Fiduciary's Responsibilities

Many employers establish retirement plans without being fully aware of their fiduciary responsibilities. It is imperative to know whether you are a fiduciary and, if so, what your responsibilities are because there are risks for the unwary. A fiduciary that breaches any obligation or duty can be held personally liable to make good any losses incurred by the plan resulting from the breach, even if the breach was made unknowingly. Pleading ignorance or inexperience will not be adequate defense.

The Employee Retirement Income Security Act of 1974 (ERISA) imposes rigorous standards for fiduciaries—those who manage a retirement plan and its assets. Therefore, it is important that all fiduciaries be aware of their responsibilities and understand and comply with ERISA's fiduciary provisions.

Following is a general overview of who the plan's fiduciaries are, their required duties and steps to limit liability.

Who or What is a Fiduciary?

You become a fiduciary under ERISA by title or by action including the following:

  • Being named in the plan document or being appointed as a fiduciary;
  • Exercising discretionary authority or control over plan assets and/or the management of the plan; or
  • Providing investment advice for a fee.

Every plan must have at least one fiduciary named in the plan document (either a person or an entity). Many times the plan sponsor is the named fiduciary. If the plan sponsor keeps some or all of those duties, its officers or principals who perform those duties are ERISA fiduciaries.

Further, the appointment of a fiduciary is itself a fiduciary act. So, whoever appoints the officers or committee members has a duty to prudently select those persons and to periodically review their work to make sure they are doing their job. Typically, it is the board of directors or corporate president who appoints the fiduciaries. As a result, the board members or the president are also fiduciaries.

In general, professional service providers offering legal, accounting/auditing or third-party administration services are not considered fiduciaries because they do not exercise discretion or control over the plan.

Fiduciary Duties

The primary duty of all ERISA fiduciaries is to act in the sole interest of the plan and its participants and beneficiaries. You must:

  • Act with the care, skill, prudence and diligence of a prudent person who is familiar with retirement plan matters;
  • Follow the plan documents;
  • Pay only reasonable plan expenses;
  • Diversify plan investments; and
  • Avoid conflicts of interest and self-dealing in directing plan transactions.

Expertise in a variety of areas is required of fiduciaries. Fortunately, you can act to limit potential exposure by relying on competent outside advisors to assist with complicated matters. Your obligations do not end with the selection of a service provider because ERISA imposes an ongoing duty to monitor with reasonable diligence the providers in order to ensure that they are meeting the plan's expectations.

Consequences of a Fiduciary Breach

In addition to being held personally liable for a fiduciary breach, you may be personally liable to restore plan losses resulting from violations as well as forfeit any realized profits. The DOL will also assess a civil penalty against you and, in extreme cases, you may be subject to criminal penalties.

You can be held liable for both your direct actions or for the actions of co-fiduciaries. If you become aware of an improper action on the part of a co-fiduciary and do nothing, you also become liable for that breach.

Regardless of how well the fiduciaries in a plan perform their duties, it is inevitable that mistakes can be made. Several self-correction programs are available for correcting errors. However, self-correction is not available for all violations.

Steps to Limit Liability

There are actions that can be taken to demonstrate that your responsibilities were carried out properly as well as other ways to limit liability which are described below.

Documenting Decision-Making Processes

In order to demonstrate that you acted prudently, you should fully document in writing the process used in making fiduciary decisions.

For example, an Investment Policy Statement can provide important documentation that demonstrates you are meeting your responsibilities regarding plan investments. It is a written guideline which outlines the process for selecting, reviewing and changing the plan's investments. Although ERISA does not specifically require an Investment Policy Statement, it is one of the first things that the DOL will ask to see when they audit a plan and will want proof that it was followed.

Monitoring Plan Expenses

The prudent fiduciary must understand what expenses are being charged and what services are being provided for those fees. Thanks to the fee disclosure regulations, you are no longer in the dark about how much compensation plan providers are receiving from various sources, directly or indirectly. It's a great thing because you have the duty to only pay reasonable expenses and that was often hard to analyze when the plan providers didn't have to disclose their fees.

The problem is that with this added information comes added responsibility. So it's not important enough to get the fee disclosures—you have to benchmark your fees to determine whether they are reasonable. You are not required to pay the lowest fees, but you have to determine whether the fees you are paying are reasonable for the services you are provided.

Letting Participants Direct Their Accounts

Another way to limit liability is to allow participants to direct their own accounts. ERISA Section 404(c) allows fiduciaries to transfer investment responsibility to participants who direct the investment of their accounts. Generally, you are not liable for losses resulting from the participant's exercise of investment control if all of the ERISA 404(c) rules are satisfied. However, you retain responsibility for the selection and monitoring of the investment alternatives that are made available to the participants.

Much of the recent litigation in this area has involved the fiduciary's failure to monitor investment menus after initial selection. Therefore, you should review the menu on an ongoing basis and document your actions in the same way the initial selection was documented.

There are a number of 404(c) requirements including offering a broad variety of investments so the participant can diversify; giving the participants sufficient information to make informed decisions about their investments; and participants must be able to transfer money between options at least quarterly.

There are also very specific disclosure requirements including general plan information about how to manage and change their investment options and full disclosure on any plan administration and/or individual expenses that might be paid out of their account.

Avoiding Prohibited Transactions

ERISA prohibits fiduciaries from engaging in a variety of transactions that are inherently tainted by conflicts of interest. Specifically, you may not engage in transactions with the plan in which you use plan assets for your own interest, act for a party whose interests are adverse to the plan or plan participants or receive compensation from a party dealing with the plan.

Bonding and Insurance

ERISA requires that every fiduciary of the plan and every person who "handles funds or other property of such a plan" are required to be bonded. The amount of the bond is 10% of the amount of the plan's assets as of the beginning of the plan's fiscal year. Unless the plan holds company stock, the maximum amount of the bond is $500,000. The bond protects the plan, not the fiduciary, against loss by reason of acts of fraud or dishonesty on the part of persons required to be bonded.

You can obtain fiduciary liability insurance that provides coverage for expenses such as legal defense or monetary judgments. These policies differ based on features such as deductibles, exclusions, etc., so it is important to work with a property and casualty agent who understands the nuances of ERISA fiduciary liability.

Administrative Responsibilities

Fiduciaries are responsible for overseeing the administration of the plan and should be familiar with the plan's terms, loan policy, etc. There are many aspects to plan administration including:

  • Enrolling and covering the right employees;
  • Timely correction of problems with regard to testing failures or operational issues;
  • Authorizing distributions and loans;
  • Timely deposit of employee contributions; and
  • Complying with reporting and disclosure requirements.

Timely Deposit of Employee Contributions

Deposits must be made as soon as they can reasonably be separated from the company's assets, but no later than the 15th business day of the month following the month withheld. The 15th business day of the month following withholding is not a safe harbor and many times funds can be segregated within days of being withheld. For plans with under 100 participants there is a "safe harbor"—if the deposits are made within seven business days of withholding, they are considered to be timely.

Reporting and Disclosure Requirements

Fiduciaries are subject to a number of reporting and disclosure requirements. One is the annual filing of Form 5500 with the DOL. Form 5500 is a government mandated return comprised of a main document and, in some cases, multiple schedules that report information relating to the plan and its operation.

Other disclosures must be made to the plan participants. A summary plan description (SPD), which is a "plain English" summary of the plan's provisions, must be provided to new participants and, in general, every five years. After the SPD is distributed, you must continue to make participants aware of material changes to the plan through explanations called summaries of material modifications. Also required is a summary annual report which is a snapshot of the financial schedules attached to Form 5500.

Conclusion

It is important for fiduciaries to focus on all aspects of maintaining the plan including the selection and monitoring of investments and service providers; paying reasonable expenses; and overseeing the administration of the plan. Decision-making processes should be put in place and actions documented in writing demonstrating that these processes were followed.

Fiduciary duties are myriad and complex. Fortunately, you can seek guidance from competent outside advisors who have experience with these complex rules.

This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.

©2015 Benefit Insights, Inc. All rights reserved.

Tags: E&K Insurance, Insurance, fiduciary, plan fiduciary insurance, ERISA

Winterization and Preventing Ice Dams with MAPFRE Insurance

Posted by Alex Boyer on Sun, Dec 13, 2015

Winter's on its way, so make sure you're prepared to winterize your home with some help from our friends at MAPFRE Insurance. Be sure to take their Winter Challenge at mapfreusa.com! #prep4winter

See the full PDF version here.

Also see how to prevent frozen pipes this winter.

ice_dams

Tags: Homeowner Insurance, E&K Insurance, House, Insurance, home, winter, Homeowners insurance, ice dams, winterization

Halloween is Past, but the Mischief of Kids Continues: Why You Need a Personal Umbrella Policy

Posted by Alex Boyer on Mon, Nov 16, 2015

Real-World Case Study: Don’t Let this Nightmare Happen

kids


umbrella_policy

Zack couldn’t believe his luck: Discovering leftover Fourth of July fireworks in the garage just in time for Halloween. He couldn’t wait to tell his best friend, Fletcher.

While their parents were soundly asleep on Halloween night, the inseparable pair snuck out to give the neighborhood a midnight treat. Suppressing giggles, Zack lit the inaugural bottle rocket — it zoomed off-course and landed underneath their neighbor’s car.

The friends rushed over to try to kick it out, but they were too slow — the car caught on fire in moments and as they looked on in disbelief, the tree in the yard and the home followed. By the time firefighters were at the scene, extensive damage was already done.

Because of “vicarious parental liability,” Zack’s parents were on the hook for his actions, even though they weren’t present and didn’t know what he was up to.

After their homeowners liability limit was exhausted, their standalone personal umbrella policy covered the rest of the damage.

Claim: $620,000

Contact E &K for a quote. Policies start at about $20 a month.

Thanks to our friends at personalumbrella.com for this real-world claim experience.

Tags: Homeowner Insurance, Liability, umbrella policy, umbrella liability coverage, Homeowners insurance, homeowner policy, personal insurance, parental liability, vicarious parental liability

Ride hailing: Income Lyft or Uber dangerous? If You Drive for Uber, Lyft, etc., You’ll Want to Read This.

Posted by Alex Boyer on Fri, Sep 04, 2015

Peer-to-peer ride hailing has exploded on the scene. It is either the next big innovation in the marriage between technology and social networking or it is the next big innovation since slap bracelets and Silly Bandz. Regardless of its future, ride hailing is here and, at least for the immediate future, it isn’t going anywhere.

Man driving female passenger

 

What's ride hailing? I thought it was ride sharing?

You might be thinking “A rose by any other name would smell as sweet” but there is a difference between the terms “ride sharing” and “ride hailing.” At its most basic level, ride sharing is carpooling. It is the act of sharing a vehicle with one or more people for the purpose of commuting to a desired destination. The goal is to share costs among all occupants of the vehicle, making the commuting more inexpensive than it would be if you were commuting alone. However, with the rise of peer-to-peer ride-sharing apps from Transportation Network Companies, such as Uber and Lyft, the traditional act of carpooling has taken on a more commercial quality. TNC apps connect a driver with a passenger for a fee, an act that resembles hailing a taxi rather than hitching a ride with friends to work. Thus the term ride hailing was born.

The devil is in the details

It might seem like a small distinction between ride sharing and ride hailing, but that distinction can make all the difference in the world when it comes to insurance coverage. Typically, your personal auto policy has what is known as a “livery exclusion.” This exclusion states that when an individual uses his or her personal auto as a livery vehicle (i.e., transporting passengers in exchange for a fee such as acting as a ride-hailing driver) the personal auto policy will not cover liability, medical payments, uninsured/underinsured motorists or physical damage for any accident that occurs while the vehicle is being used in that manner. This means you will not have coverage under your personal auto policy in the event you are in an accident while acting as a TNC driver.

Make sure you have protection

We have established that your personal policy will not protect you in the event of an accident, but will the TNC provide coverage? The largest TNCs have responded to the livery exclusion in personal auto policies by providing liability, uninsured/ underinsured motorist and comprehensive/ collision coverages to TNC drivers while they transport passengers for a fee. However, this does not solve the issue completely, as policies provided by TNCs typically are considered excess to the personal auto policies, which means they will provide coverage only if your personal auto policies denies coverage. This can create a situation in which the handling and settlement of claims related to a TNC accident can be a long and drawn out affair.

What are your options?

It is not all bad news if you wish to engage in ride hailing, though. The insurance market is always adapting and evolving. The Insurance Services Office Inc., an organization that develops standardized insurance policy language for the insurance industry, has recently proposed a form that would allow a driver to purchase coverage for the time that he/she is on a TNC app, but has not yet been matched with a passenger. Some insurance companies also are venturing forth with special policies intended for ride-hailing operators. In addition, state legislatures across the country are passing measures designed to remove some of the ambiguity that is associated with ride hailing and insurance coverage.

Tags: auto insurance, driving, Car insurance, uber, lyft, ride hailing, ride sharing

Could You Still Pass Driver's Ed Today?

Posted by Alex Boyer on Thu, Aug 27, 2015

car

If you had to take a driving test again today, would you pass? Our friends at Travelers Insurance have set up a fun quiz for you to take to see if you would still pass a driver's ed course today. Head on over to travelers.com to check it out! (And good luck!)

And don't forget to contact your E & K Insurance agent with any questions about your auto insurance coverage!

Tags: auto insurance, Teen Driving, driving, Car insurance

How to Prepare for a Hurricane

Posted by Alex Boyer on Tue, Aug 25, 2015

It's hurricane season, so we have some tips and information to get you prepared, courtesy of our friends at Travelers Insurance.

EK_content_full_width_prep_hurricane

Your level of preparation before a hurricane can determine how well you weather the storm and how quickly you recover from it. You should start preparing your home, inside and out, long before a storm is in the forecast. In the end, you can never be too prepared when it comes to protecting your loved ones and your property from extreme weather events such as hurricanes.

Know the Forecast

You may hear the terms "hurricane watch" and "hurricane warning" in your local forecast. Understanding the difference between them is essential to helping you prepare for a hurricane. As soon as a hurricane watch or warning is forecast for your area, it is important, depending on the type of alert, to immediately begin or complete your preparations.

A watch means hurricane conditions are possible within 48 hours. You should begin to stock up on emergency supplies in the event a warning is issued. If you live in a coastal area, you also should be prepared to evacuate.

A warning is more serious. Hurricane-force winds (74 mph or higher) are expected to hit your area within 36 hours. You should seek shelter or evacuate, if notified to do so.

General Hurricane Preparation Tips

  • Prepare a survival kit that includes items such as water and non-perishable food for everyone, including your pets; medications; a portable radio; flashlights; batteries; and battery chargers for your cell phones and other portable electronic devices, which can be powered by your car.
  • Plan your evacuation route and leave as soon as an evacuation order is issued. Also, fuel up your car before you leave.
  • Build a content inventory of the items in your home or at your business.
  • Secure all outdoor objects or move them inside. Close your home’s storm shutters and board up windows and glass doors as appropriate.
  • If possible, bring in gas or charcoal grills, but do not use them indoors. Also, do not store propane tanks inside the house or garage. Chain propane tanks in an upright position to a secure object away from your home.
  • Secure your boat or move it to a safer place.
  • Fill your emergency generator fuel tank, if you have one, and have spare fuel on hand. Store generator fuel in an approved container in a garage or shed, away from open flames, heat sources and appliances such as natural gas appliances.

Five Tips to Help Prepare Your Home for a Hurricane

1. Help Avoid Water Damage

Heavy rains have the potential to cause significant water damage. These tips can help you prepare your home.

  • Closing and locking all windows and doors and removing any window air conditioners.
  • Removing valuable items from your basement or elevating them off of the floor.
  • Clearing debris from exterior drains and gutters.
  • Repairing damaged gutters and downspouts to make sure water can drain away from your foundation.
  • Checking your sump pump and the battery backup to confirm they are working properly.

2. Monitor Your Trees

In a powerful windstorm, trees can be a hazard. Broken limbs or fallen trees – even uprooted shrubbery – could damage your home and fences, or your neighbor's property.

Routinely maintain the trees around your home:

  • Prune tree limbs within 10 feet of your home.
  • Check for cracking or splitting in trees.
  • Remove dead limbs and weakened trees.

3. Roofs, Doors, Windows and Skylights

It is important to keep wall openings, such as doors, windows and skylights protected. The roof, doors and windows of your house are especially vulnerable to wind damage. When houses are exposed to hurricane force winds, roofs are most susceptible to damage, followed by walls and openings such as skylights.

Strengthen doors and windows by:

4. Secure Outdoor Items

If you live in an area that experiences high winds, outdoor items around your property that are not properly anchored can become airborne and cause damage.

  • If high winds are expected in your area, move as many outdoor items indoors well before the high winds arrive. As mentioned earlier, do not store propane tanks in your home or garage.
  • Adequately secure any remaining outdoor items that cannot be safely moved to protected areas.

5. Strengthen Your Exterior Structure

During a windstorm, wind forces are carried from the roof down to the exterior walls and then to the foundation. Homes can be damaged when wind and wind-driven water gets under the building’s exterior walls if proper controls are not in place.

Strengthen exteriors by employing a contractor to:

 

To read more about prevention tips and storm preparedness, visit travelers.com.

Tags: Hurricane preparation, Homeowner Insurance, E&K Insurance, Safe, Insurance, safety, Homeowners insurance, prepare, storm damage

Some Insurance Issues Concerning Your Children

Posted by Alex Boyer on Tue, Aug 04, 2015

carkid

Driving Your Teenager's Car

"Our child has no assets, why worry about liability limits?”

Auto insurance is expensive and many parents are looking for ways to save money. While putting your teenager on a separate policy with lower liability limits may seem to be a good answer, it can create several problems.

  1. If you occasionally drive your teenager’s car, in the event of an accident you would be covered with their lower liability limit, not the higher limit that you have chosen to protect your assets. Your child’s car would be considered “available for your regular use” and, therefore, excluded from your policy.
  2. If your teenager maintains the proper liability limits on their policy, your personal umbrella (excess liability) policy can be written to protect your child above their own policy liability limits. Please call E & K to make sure coverage is properly coordinated among your household members’ policies.

grads

Income Continuation & Expense Coverages

“Are they ever going to leave the nest! ???”

Your personal auto policy provides Personal Injury Protection (“PIP”). In addition to the basic medical portion of this coverage, additional PIP is available to cover Income Continuation, Essential Services, Death and Funeral Expense Benefits. Typically, an auto policy provides these coverages for the named insured and spouse. What about the kids? Income continuation may not seem a big deal while they are students, but many are not leaving the nest when the college years are over. Often, adult children are living in your household, on your auto policy, and working full time. They can be included for additional PIP (for a premium charge), and be afforded the same financial protection you have purchased for yourself. Also, this may be a good time to discuss life insurance with your adult children.

skateboard

Your Child’s Belongings at School

“Is my child insured while away at school?”

Your child’s temporary residence while at school is covered, regardless of it being a dorm room or an apartment. The key word is temporary. Your student must maintain permanent residence in your home to be considered an insured. The policy provides 10% of your contents limit for personal property at another residence.

Tags: E&K Insurance, Insurance, auto insurance, Teen Driving, driving, umbrella policy, umbrella liability coverage, Car insurance, injury, coverage, personal insurance

Have a Safe and Healthy Independence Day!

Posted by Alex Boyer on Thu, Jul 02, 2015

Happy 4th of July from everyone at E & K. We hope you have a happy and safe Independence Day holiday!

As a reminder, all E & K offices will be closed on Friday, July 3, in observance of the holiday.

Fourth_of_July_fireworks

Tags: E&K Insurance, Safe, Holiday, safety

Rental Car Coverage

Posted by Alex Boyer on Wed, Apr 29, 2015

car

Most states have a financial responsibility law that requires registered vehicles to have a minimum amount of liability insurance. Depending on the law in the state the car is rented and the wording of the renter’s personal auto policy, the minimum coverage is likely to be provided by the rental car company. Renters are given the option to purchase additional limits from the rental car company or use the automatic excess personal auto limits available on their own policy.

Personal injury protection—medical and disability benefits coverage for injuries sustained in auto accidents— is one of the state’s more unique auto insurance provisions. Remember that PIP coverage follows the driver. A New Jersey operator of an out-of-state rental car still will have these benefits when operating a rental car, regardless of where they drive it.

Unfortunately, the discussion gets more complicated when we consider damage to the rental car. While the renter’s personal auto policy may cover damage to the rental car, its coverage has limitations. Personal auto coverage for a rental car is conditioned on the renter having at least one owned vehicle insured for its damage on the policy. Moreover, typically the rental vehicle must be a replacement vehicle for one of your cars that is in for repairs. If covered, there will be a deductible and payment will not exceed the repair or actual cash value of the rental car, along with a small amount for the rental car company’s loss of use. Rental car contracts can hold the renter responsible for expenses that go beyond the coverage in a personal auto policy, which may include administrative fees, additional loss of use expense or diminution of value. Rental drivers who want to avoid risk will be inclined to buy the “collision damage waiver” offered by the rental car company.

It’s a lot to think about as you embark on a trip. Give E & K a call before you leave, so the decision will be easy at the rental counter.

Tags: E&K Insurance, NJ, Insurance, Liability, auto insurance, driving, New Jersey, Car insurance, injury, coverage, rental car