May 2008 Articles  ·  back

- Exclusion for Other Structures more...
- Split Limit vs. Single Limit more...
- For the Business Owner - Risk Alert more...

Exclusion for Other Structures
Homeowners Insurance
By Jimmy Ruiz

One of the most common questions we are asked is "What does the "Other Structures" cover? The Other Structures coverage is designed to provide coverage for structures that are not attached to the residence. This can include a garage, shed, shop or a deck. The Other Structures coverage is automatically included on most Homeowners policies at 10% of what the Dwelling limit is on the policy. If the dwelling limit on your Homeowners policy is $500,000, your Other Structures limit would be $50,000.

No Coverage?
Coverage for your "other structure" may be listed on your policy as explained above, but if you use your "other structure" for business or as storage for business property, most insurance contracts take away the coverage by excluding coverage for other structures used for business.

For example, if you have any business property in your unattached garage or you have your business office in your garage, your garage is not covered by your Homeowners policy.

What to Do
Depending on the type of business, you may be able to purchase coverage for your other structured used from business on your Homeowners policy for an additional premium. You may also be able to purchase coverage for the unattached structure from the company providing your business insurance.

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Split Limit vs. Single Limit
By Jimmy Ruiz

Most of us have endured the daily weekday task of driving in rush-hour traffic as we drive to and from work. You move ahead a few hundred feet and then you stop suddenly. Then, you move ahead again and as quickly as you began moving, stop again. This pattern continues until traffic clears up or you reach your destination.

Two years ago, one our client's was in typical, rush-hour traffic. The rush-hour pattern had been repeated several times. Then suddenly, traffic stopped and our client was not able to stop in time.

The other driver was taken to the hospital complaining of back pain. Two years later, the insurance company is still making bodily injury payments to the other driver.

In this situation, our client had a 'Single Limit" of liability and enough insurance to cover the expected 6-digit total for the other driver's medical bills. How would the same situation play out with the limits that you have on your policy.

Single Limit
If you currently carry split limits on your auto insurance, your limits look something like this:

$250,000 per person, $500,000 per occurrence, $100,000 property damage

Let's say you have the limits listed above and you cause a serious accident. The other driver is seriously injured and ends up with $400,000 in medical bills. Even though you have an accident limit of $500,000, your limit for each person is only $250,000. Your insurance carrier will pay the $250,000 and you will be responsible for the remaining $150,000. If you expected you insurance company to cover the entire loss, this situation would be devastating.

Combined Single Limits
If you have a combined single limit of liability, you limit will look like this:

$500,000 each accident

Rather than having three limits, you have one combined, single limit. In the tragic example listed above, a combined single limit policy would pay the full cost of the accident.

Umbrella Policy
What if the total cost of medical bills would have exceeded the $500,000 each accident limit on your auto policy? You end up with another devastating situation, right? Not if you have an umbrella policy. Umbrella policies are liability policies with limits starting at $1million. The umbrella liability limit will respond to tragic losses involving your home, autos, boats and more when you carry the required amount of insurance on those policies.

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FOR THE BUSINESS OWNER - RISK ALERT:
Fiduciaries are personally liable for mistakes within a retirement plan.
By Jimmy Ruiz

On February 20, 2008, the U.S. Supreme Court issued a unanimous ruling in LaRue v. DeWolff, Boberg & Associates that allows individual defined contribution plan participants to sue for breaches of fiduciary duty. Historically mistakes in administration had to impact the plan as a whole, but now mistakes that affect individuals will most likely create greater litigation for plan sponsors.

Section 409(a) of ERISA specifies that fiduciaries are "personally liable".
The Fiduciary of a plan is most often the owner of the company, but often this responsibility is unknowingly accepted by the CFO or other decision maker within the organization. Delegating the investment decisions to employees, 401k providers or third party administrators does not absolve the Fiduciary from the ultimate responsibility of the plan administration. Unlike other corporate litigation the Fiduciary does not have protection of the corporate veil or the insurance typically purchased by the corporation and exposes their personal assets when they serve as the Fiduciary of a retirement plan.

What can be done to protect the Fiduciary?

1. Identify the fiduciary of your plan and make them aware of their responsibilities
2. Review the organizations "Investment Strategy" with your financial advisor.
3. Be proactive in the administration of the plan
4. Obtain appropriate fiduciary insurance coverage to protect plan fiduciaries from claims for breaches of fiduciary duty

Acting in a decisive and proactive manor can insulate your Fiduciary from litigation, where as inaction will create a weak position and increase litigation and settlement costs for the organization.

If you have additional questions please contact our office and we can provide more information to help you protect your Fiduciaries.

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