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Insurance Buyers’ News

Insurance Buyers’ News • July/August 2012 Volume 23 • Number 4 Higginbotham News

This Just In

O n any one day in 2011, U.S.

staffing firms employed an average of 2.8 million workers, re- ported the American Staffing As- sociation. During the course of the year, more than 12.9 million tem- porary and contract workers found work through staffing firms.

Temporary and contract staffing is growing, increasing 6.6 percent between May 2011 and May 2012.

This trend is likely to continue as the economy continues its tepid re- covery, making many employers re- luctant to bring on permanent staff.

The U.S. Bureau of Labor Statistics projects the employment services industry, which comprises employ- ment placement agencies, tempo- rary help services, and professional employer organizations, is project- ed to add 631,300 jobs, an annu-

continued on next page continued on next page

Higginbotham Welcomes Benefit

Specialists to its Group of Companies

H ig ginbotham

and Bene- fitSpecialists announced in May the merger of their op- erations in Houston. With 17 offices statewide includ- ing two in Houston, Higgin- botham is one of the largest independent insurance firms in Texas. BenefitSpecialists, an employee benefits bro- ker in Houston, will align ca- pabilities with Higginboth- am to offer a single source solution for insurance, risk management and employee

benefits services.

BenefitSpecialists opened in 1988 to provide employee benefits brokerage and con- sulting to mid-sized employ- ers in Houston. Led by Bill Fisher, the firm will move in September from its location at 820 Gessner Road to Hig- ginbotham’s office at 5151 San Felipe.

Higginbotham’s Presi- dent/CEO Rusty Reid said,

“BenefitSpecialists shares our business philosophies and customer service model.

They’re a welcome addition

to our South Texas group, which since we established a presence there in 2008, has quickly replicated the growth and success we’ve had in North Texas for many years.”

Managing Director of Higginbotham’s Houston employee benefits practice Jim Ledbetter said, “We can offer an all-encompassing insurance solution by shar- ing resources with Higgin- botham’s other local offices.

Bill and his team can draw from our lot to better serve

www.higginbotham.net

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Insurance Buyers’ News • July/August 2012

This Just In Risk Management

al rate of increase of 2.1 percent, and reach 3.3 million by 2020, placing this industry among those with the largest projected employment growth.

In addition to temporary and con- tract workers, independent contrac- tors comprise a significant portion of the U.S. workforce. The U.S. Bureau of Labor Statistics estimated there were 10.3 million independent contractors in the U.S. in 2010.

Nontraditional work arrangements can create unexpected risk exposures.

For more information, please see the article on page 1.

their clients, and they bring added ex- pertise to our group as well.”

“This partnership greatly expands our product and service portfolio,” said Fisher, who will continue a leadership role as managing director. “Now we can offer enhanced employee benefits services such as wellness, communica- tions and compliance. Plus, we can add value to our client relationships by in- troducing business insurance and risk management services.”

Higginbotham Helps Habitat Build a Dream

I n March, Higginbotham’s F.O.R.C.E. (Family of Responsible Caring Employees) volunteered with Trinity Habitat for Humanity for its “Building on the Dream, Spring 2012” campaign. The project gave Adriana Aguirre, a single mother with 15-year-old twin sons, the means to purchase an affordable, reliable home.

Adriana’s dream was “to live in a neighborhood where my children can play outside and be safe; where we can plant a tree and watch it grow for years to come; where my family and I

can make memories that will last for generations.”

Higginbotham helped fulfill her dream by donating capital and volun- teer labor for three days of construc- tion on the home. This is the ninth consecutive year Higginbotham has contributed to the Trinity affiliate of Habitat for Humanity.

Volunteers’ lunch was graciously donated by Fort Worth eateries Jason’s Deli, Alonti Café & Catering and Reata Restaurant.

Higginbotham’s F.O.R.C.E. (Family of Responsible Caring Employees) volunteers

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Insurance Buyers’ News • July/August 2012 Administration

continued on next page

Understanding Surplus Lines

When model Heidi Klum insured her legs for $2.2 million and guitarist Jeff Beck insured each of his fingers for $1 million, you can bet a standard insurer didn’t cover those risks. These celebrities turned to the surplus lines market. Although your organization probably won’t need to insure body parts, you might need the services of the surplus lines market.

M ost organizations can meet the majority of their insurance needs in the “standard” insur- ance market, which consists of “admit- ted” companies that are licensed to do business in specific states. The state insurance department regulates their coverages and rates. Surplus lines car- riers differ in that they are “non-admit- ted,” and they cover risks that admit- ted companies are unwilling to write.

Although surplus lines insurers are

“non-admitted,” that does not mean they lack regulation. Each surplus lines insurer must be admitted (licensed) in one of the 50 states and must meet that state’s financial solvency require- ments. The state of domicile becomes that insurer’s regulator.

Surplus lines companies are able to offer special coverages because they are largely free of rate and form restric- tions that make it difficult for standard

companies to write the risk. Their flex- ibility allows them to design policies that meet unique customer needs.

Flexibility from the Exotic to the Everyday

In addition to insuring a model’s body parts, surplus lines insurers also handle a broad range of more common business risks. NAPSLO, the National Association of Professional Surplus Lines Offices, Ltd., cites these examples of the types of risk commonly insured by excess and surplus lines insurers:

Y A developer re-building homes and businesses in hurricane-prone ar- Y A sports celebrity who wants to in- eas

sure his or her legs or hands Y A school district building a new high

school

Y A nonprofit that seeks to provide food, medical care and education in

Third World countries

Y A research lab working on a promis- ing, yet unproven new drug

Y A law firm specializing in intellec-

tual property work

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Insurance Buyers’ News • July/August 2012

Insurance Buyers’ News • July/August 2012 Administration

Managing the Contingent Workforce

For most companies, managing human resources will probably require more attention than any other aspect of your risk management plan. Workers’ compensation, safety, compliance with wage/hour laws and avoiding discrimination—

these responsibilities can keep one or more managers busy full-time. Using contingent workers can relieve your organi- zation of some human resource functions; however, it can create other risk management exposures.

O ver the past two decades, contingent work has moved into a wider ar- ray of occupations. Ac- cording to the Bureau of Labor Sta- tistics, by 2008, the types of clerical positions commonly associated with

temp work, such as secretary, typist, receptionist, data-entry operator and office clerk, represented less than a quarter of overall temp help services industry employment. Today, you can hire anyone from manufacturing help to a CEO on a contingent basis.

When you hire individuals on an in- dependent contractor basis, they act as their own employer, retaining respon- sibility for payment of any employ- ment taxes, workers’ compensation and insurance, including any profes- sional liability coverage needed. They Accessing Specialty Markets

Surplus lines companies sell their products through special brokers — called surplus lines brokers or whole- salers — and through managing gener- al agents (MGAs). MGAs (which can be individuals or business entities) hold

“appointments” from insurance com- panies, which give them the authority to solicit insurance applications from agents and negotiate coverage. MGAs generally specialize in particular types of risks and know which insurers are most likely to accept your risk.

The end customer has no direct ac- cess to those agents or to the non-ad-

mitted market. The good news is you do not need access. When we learn that you have an unusual risk, we dis- cuss it with you and then contact the appropriate wholesaler or MGA to ob- tain the coverage you need.

Regardless of your special risk expo- sures, the process of finding the right coverage is largely invisible to you. We place the coverage and you receive a policy, just as you do with your stan- dard property/casualty insurance.

Talk to Us

Sometimes a small change in your business strategy creates a need to ac-

cess the surplus lines market. For in- stance, if a contractor installs kitchen cabinets in rental apartment buildings, he probably buys liability coverage in the standard market. However, if he takes a similar job for condominiums, he will probably need surplus lines li- ability coverage. Why? Because his po- tential liability is greater. If there were a construction defect, the contractor could be sued by each condo owner, rather than just one building owner.

If your business activity has changed, give us a quick call, and we’ll let you know if we need to make any adjust- ments in your insurance program.

Risk Management

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Insurance Buyers’ News • July/August 2012 Risk Management

simply invoice the employer, often on a per-job rather than a per-hour basis.

When you hire temporary or leased employees, the agency acts as the em- ployer. The agency is responsible for screening employees, paying employ- ment taxes, providing workers’ com- pensation and, in some instances, pro- viding employee benefits. The agency pays the employee directly, invoicing your organization (at a marked-up rate) for hours the employee works.

Professional employer organiza- tions, or PEOs, are similar to temporary agencies, except they handle long-term relationships that involve all or most of a company’s employees. The National Association of Professional Employer Organizations (NAPEO) estimates be- tween 2 and 3 million people are cur- rently covered by a PEO arrangement.

Under a PEO arrangement, the company and PEO enter a contractual agreement to become co-employers and share or allocate employment re- sponsibilities. The PEO generally han- dles all human resource and benefit management functions. It hires work- ers, controls payment of wages, pro- vides unemployment insurance and other benefits, and handles employ- ment taxes. The subscribing company

retains some employer responsibili- ties, including supervision, to ensure the delivery of the company’s prod- ucts or services. Smaller employers in particular find advantages in PEOs and leasing.

Benefits of temporary employment or PEO arrangements include:

Y Expert human resource and benefit administration. PEOs and tempo- rary employment agencies can de- vote full-time, professional staff to these tasks.

Y Better benefits. Larger PEOs and agencies manage thousands of em- ployees, giving them more purchas- ing power than individual small em- ployers have.

Y Better safety. A PEO should have on-staff safety professionals, who conduct regular audits that could reduce injuries and costs.

Still, using contingent employees can create risk exposures, including:

1 Workers’ compensation coverage gaps. Some states permit PEOs to provide workers’ compensation for their clients. If yours does, ask the PEO for a certificate of insurance

as evidence of coverage. And make sure the PEO’s policy includes an

“alternate employer endorsement”

to cover employees injured while working for you.

Even if your PEO provides cover- age, you might want to keep a mini- mum premium workers’ compen- sation policy in place. A minimum premium policy will provide some protection if your PEO fails to buy coverage or stops making premium payments — just make sure your insurer agrees to cover leased em- ployees as regular employees.

2 Lawsuits from injured workers. Even if your PEO or lease arrangement includes workers’ compensation coverage, the worker can sue your company for negligence if unsafe or hazardous conditions led to the injury. Most commercial general li- ability policies exclude coverage for

“special employees,” such as leased employees or independent contrac- tors. You can remedy this coverage gap by adding the “coverage for injury to leased workers” endorse- ment.

3 Gaps in umbrella liability. Some umbrella policies require you to schedule the underlying employ-

continued on next page

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The information presented and conclusions within are based solely upon our best judgment and analysis. It is not guaranteed information and does not

Insurance Buyers’ News • July/August 2012

Insurance Buyers’ News

ers’ liability policy, which is part of your workers’ compensation policy.

If you have no workers’ compensa- tion policy in place, your umbrella might not respond to an employer’s liability claim. Having a minimum premium workers’ compensation policy could help eliminate this cov- erage gap as well.

4 An organization can still be held responsible for discrimination law violations when using a temporary agency or PEO. To protect your company, consider buying employ- ment practices liability coverage.

If you already have a policy, make sure it includes leased and special employees in its definition of cov- ered employees.

5 Employment tax liability. When you contract with a PEO, the IRS consid- ers it the “employer of record” for employment tax purposes. Howev- er, if you maintain too much control over the employees, the IRS could

consider your firm the employer and liable for withholding and So- cial Security. State laws on leased employees vary. Some states con- sider the PEO to be the employer, while others consider the PEO a co- employer.

Before entering into a PEO or leased employee arrangement, check the pro- vider’s qualifications and references.

The Employer Services Assurance Cor- poration conducts voluntary accredi- tation for PEOs. See their listing of accredited PEOs at www.esacorp.org.

You can also check whether a PEO’s risk management staff has earned pro- fessional accreditation at www.certifi- cationinstitute.org.

We can review your insurance pro- gram to help you manage any employ- ment-related exposures, no matter what type of employees your organiza- tion has. For more information, please call us.

Risk Management

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