High risk with sub-standard products

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High risk of sub standard products

In recent weeks the news media in Australia has reported many examples of inferior products being used in the building industry. The reports document the use of non-compliant products, such as cladding, cabling, wiring and lighting being installed in domestic and commercial buildings. Some suspect installations have resulted in serious damage with ongoing fire investigations but all products reviewed by authorities have been exposed as potential risks to either cause fire or act as an accelerant.

Trends in consumerism is to make a product cheaply for a shorter shelf life knowing it can be replaced cheaply in a ‘buy and replace’ purchase cycle. For building products however, we also want the assurance that our houses are long term secure in their construction and internal fit-out.

The cause of these building material risks can be traced back in some cases to inferior products being imported that are not meeting Australian Quality Control measures. An added problem is that designs are specified with materials which are then replaced with a replication of the intended original material or product. In a lean economy the temptation exists to look for cheaper alternatives to combat narrow profit margins.

This may also muddy the water with the rating of insurance premiums. Property risks are calculated on the materials of construction so it does have a bearing if the materials are combustible, mixed or of inferior construction. This must be assessed, declared accurately and obviously, if a fire risk is increased, it must be addressed.

Australia’s reliance on offshore manufacturing has caused the transfer of responsibility to manufacturers with various importers and distributors proving difficult to supervise and monitor to appropriate standards.
The manufacturer / importer has a responsibility not only as a measure
to sustain a reputable business, but also as a community responsibility to put stringent measures in place which would prevent property loss and worst case scenarios.

Industry and Australian Standards exist and have individual rating codes for applicable products. The importer must have a testing protocol and recall procedure that can be demonstrated. Associations such as Master Builders, Master Electricians, Housing Industry Association etc., also provide a forum for the members and the public to highlight issues and all are proactive in raising concerns and bringing problem cases to light.

The risk exposure would also be assisted by having adequate Product Recall insurance to cover incurred costs which are not limited to the product, but may also include advertising, recall notifications, repairs, loss of profits and rehabilitation. 

Across the Claims Desk

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Offbeat, unusual claims that cross insurers desk‘s everyday!

SPLASH OF PAINT

Unrestrained items in the back of a vehicle can cause more damage than a collision. The claimant driver of a car had a minor collision resulting in tins of paint on the back seat moving freely around the inside of the vehicle, flipping their lids and coating the upholstery with an attractive but unwanted colour scheme. The cost of replacement of the interior resulted in the car being uneconomical to repair.

Outcome: Car written off. Claim accepted.

PLASTERED!

Dinner at home was an interesting occasion for one family when parts of the ceiling fell in on them. It seems that the glue holding the plasterboard ceilings in their older home did not have a lifetime serviceability.

When their house was built, ceilings were held in place by both screws and glue and if there was a shortage of screws, the ceiling fixing would rely on the glue, which can deteriorate over time.

Generally, unless there has been a contributing factor e.g. water ingress, these repairs tend to be excluded under ‘wear and tear’ gradual deterioration exclusions.

Outcome: Claim rejected.

UNBROKEN… BUT REPLACED ANYWAY

With the recent replacement of many hail damaged roofs in the Brisbane area, it is interesting to note that whilst many solar panels survived the impact of the hail, some had to be replaced anyway because were not fire rated.

Outcome: Claim accepted.

Work Experience Liability

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Differences in Liability

When employers provide work experience to school age students and unemployed people there are distinct differences with liability issues between the two groups.

With school students the employer is normally indemnified by the school that the student attends, together with relevant State Government authorities indemnification, in respect of any injury sustained by the student during the course of work experience.

That situation isn’t the same when it comes to providing work experience to unemployed persons to help them gain future employment in the workforce. Authorities such as WorkCover Queensland specifically exclude coverage for ‘non paid’ employees, other than full time school students, under the employers normal WorkCover Queensland Policy.

Employers should advise their insurance broker of their work experience engagement practices so that the existing Broadform Liability Insurers are made aware of the circumstances and can extend their Policies accordingly to note the inclusion of unpaid labour.

Employers should also advise the ‘unpaid worker’ of the potential exposures should they suffer a workplace accident or incident that results in their own injury. Consideration should be given to other policy coverage.

Policies such as Personal Accident & Illness or a similar product may then indemnify the ‘unpaid worker’ against injury or illness.

In all cases it’s prudent for any insured person or business to advise their insurance broker of any material changes to their business operation so that
the Insurers are made fully aware and coverage can then be tailored accordingly. 

Good Staff

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How Do You Keep Them?

The common misconception is that all you have to do is pay well. Many studies have found that this is simply not the case… in fact, it generally comes in around third or fourth on the employee list of ‘job satisfaction’ priorities. Paying a fair and reasonable salary is expected but of high priority is the need to provide a great company culture. What that really means is provide a great company atmosphere. Make it a happy place to be and strive to create a culture where everyone gets along and helps fellow employees – cultivate real team spirit. Also have a company-wide rule – ‘always do the right thing by our clients’. Maintain a positive ethos at all levels of the business and recognise the value of good humour.

Doing as much as you can to create a great atmosphere at work goes a long way to retaining quality staff.

On the relationship building and work side of things, here are more suggestions to help develop the desired culture in your business:

Get to know your staff: Although you need to be mindful of privacy considerations, try to find out what drives them…. different people have different triggers and finding out what they are will help in your relationship.

Develop their skills: Training is a critical factor, as it not only provides benefits for your business but also identifies a career path for them and can help develop their aspirations.

Engage them in the business: If people feel connected with the values and direction of the business, they will be comfortable putting forward their views. By having the opportunity to ‘have a say’, they see that their work and they themselves are important to the business. It takes appreciated, valued employees to ensure long-term success for any business.

Provide feedback: Not just the traditional annual Performance Review and measuring of KPI’s… it’s an ongoing position of providing feedback; positive and appreciative feedback when it’s due and swift course correction in areas that need improvement.

Remember, times change, so don’t expect to keep good staff forever. It’s unlikely that you will be able to offer the flow of opportunities that the really good ones will be seeking. But they will contribute their energy and passion while working with you, provided you fulfill your side of the relationship.

Tougher transport laws

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Penalties to Hit Harder

Recent changes to transport laws now hold more individuals and companies in the transport chain accountable for breaches.

The Heavy Vehicle National Law (HVNL) commenced in 2014 and applies in all States of Australia except Western Australia. The legislation applies to all vehicles that have a GVM (Gross Vehicle Mass) or ATM (Aggregate Trailer Mass) of more than 4.5 tonnes.

The HVNL makes complying with transport laws the responsibility of everyone in the transport chain, not just drivers and operators. This approach recognises that actions, inactions and demands made by off-the-road parties play a role in road safety.

Under the chain of responsibility provisions of the HVNL, consignors, packers, loaders, schedulers and consignees must all take reasonable steps to prevent breaches of laws in relation to mass, dimension, loading, speed and fatigue. As well, an ‘executive officer’ of any party in the chain can be responsible for a breach of the law by another party if they knowingly authorised or permitted the conduct or if they knew or ought reasonably to have known that there was a substantial risk that an offence would be committed.

The potential penalties under the legislation are significant. For example, the maximum penalty for a single offence involving a critical breach of the fatigue regulations is $15,000 for an individual and a five times multiplier (making the penalty $75,000) can be applied if the offender is a corporation. The offence of tampering with a speed limiter attracts a penalty of $10,000. Similar fines apply for offences such as severe overloading or speeding. The law also provides for heavy penalties to be imposed on parties who enter into contracts that encourage or provide an incentive for any party in the chain of responsibility to speed.

In addition to fines and penalties, the legislation gives the courts power to impose penalties that reflect the commercial benefits that an offender has derived from offences. Persistent offenders can also be subject to intervention orders and prohibition orders banning them from being involved with the transport industry for up to one year.

Pollution Liability Insurance

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A Must-Have For Many Businesses

Many business owners are unaware their standard business package insurance will not cover pollution remediation. It’s likely that contractors and other professionals working on major infrastructure and construction projects will have appropriate cover, but the cover is not just for heavy industry. Businesses with high risk include dry cleaners and hair salons due to chemicals they store and use. Service stations are vulnerable because of the potential leakage from underground storage tanks and pipes corroding over time.

Recently there was a $300,000 clean-up claim from a contractor that had serviced pipes at a petrol station. An explosion at a sewerage plant, some kilometres away, was traced back to the service station, and it was discovered that pollutants had flowed into the water table.

Pollution incidents are not confined to heavy industrial sites, they can also be caused by small businesses or individuals such as contractors or subcontractors – for example, due to a failure to install proper sediment controls while undertaking earthworks.

Independent contractors need to protect themselves against any claims of damage caused by the work they do or have done. One type of cover that may be suitable is pollution liability insurance. This cover protects an entity against liability from damage caused by hazardous waste materials. The reality is that environmental clean-up projects can cost millions of dollars.

It’s too late to buy cover if you cause an incident and you should be aware that pollution liability is not covered under a general liability policy. Some policies may provide coverage only for sudden and accidental events, but exclude gradual pollution events and the cover may specifically exclude clean-up costs.

Mould, Legionella, noise and odour are also considered pollutions and may be covered by an environmental insurance policy.

If you think you may have a risk of hazardous waste exposure in your business operations, it is a good idea to consult with your insurance broker about the need for pollution liability insurance.

Underinsurance

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Weather Events Demand a Closer Look

Following on from the previous article in the last edition of Brokerwise, we continue to focus on the impact of Co-Insurance or “Underinsurance” as it is more commonly known.

The importance of considering and selecting appropriate and adequate Insurance Policy Limits or sub limits of liability are paramount and should always take into account any possible ‘Underinsurance’ potential impact.

The latest weather perils that have impacted Queensland and Australia generally over the past few months highlight the need to look at various points that require consideration. These are:

  1. Current relevant Laws
  2. Replacement Material Costs
  3. Removal of Debris.

Point 1: There have now been changes to both State and Federal Laws regarding the required ‘wind rating’ of roller doors used in commercial buildings. Following the various cyclones and storms, insured clients discovered that because they had ‘old’ roller doors that didn’t comply with the new building laws, they didn’t have an adequate sum insured to pay for replacement with new ‘legally compliant’ doors.

Point 2: Both local and imported building materials have risen in cost due to demand after the various weather events. As such, insured clients have experienced first hand the impact of not ‘setting’ an adequate Sum Insured only to find that they were sometimes grossly underinsured, and as such, had claim payments and settlements considerably reduced. Consideration also needs to be given to both the a) extra time and b) extra costs related to imported materials.

Point 3: In this scenario, the Removal of Debris limit becomes applicable. As there are many buildings that still have varying degrees of asbestos sheeting or materials as part of their overall construction there is large cost associated with both the a) removal of debris (following an Insured loss) and b) the replacement of the damaged area. Further, there can be a ‘flow on’ effect where Increased Cost of Working Policy sub limits may also be required to be utilised following this kind of loss.

Your insurance broker can advise on policy coverage and adequate Limits of Liability required for your circumstances. Following your broker’s advice will result in better outcomes during the claims process.

Closing your Business?

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Don’t Cancel Your Cover

The business has closed, it’s no longer trading, no more parts or products being manufactured or imported. No more installations or maintenance. No goods for sale.

So, time for retirement or a change in direction. We just need to cancel the insurance.

Well, not exactly. There is an element of insurance risk for a business once they have ceased trading. For a tradesman it would be the work they have installed and maintained which may cause an incident at a later date. An example would be a switchboard that causes a fire due to faulty wiring. The loss may cause subsequent damage to a building or worst case, death or injury. The time of loss is determined to be the occurrence date, therefore cover may have existed when the switchboard was installed but it should have still been in force when the incident occurred.

For the manufacturer of goods, their products may be discontinued but the element of risk remains if they cause damage or injury at a later date. So how long do you maintain run off cover?

Ideally, up to seven years is the industry standard. But not all businesses need cover for that long. For example, a restaurant would know within days or weeks of potential claims rather than years. Various States have their own legislation requirements and these would need to be addressed to clarify your situation.

Examples of run off cover for classes of insurance would include Public and Products Liability / Professional Indemnity / Directors & Officers Liability (Management Liability). Advice from your broker should be sought in these cases as to which basis of wording applies and any interruption to cover should be avoided so a claim won’t be jeopardised.

When a business is sold, the risk of potential future claims may be transferred to the new owner but this can’t be assumed, it would be negotiated and details of the sale would need to be reviewed with legal opinion.

The good news regarding run off cover is that it does get cheaper year after year due to decreasing exposure, subject to no claims activity. You can also negotiate a number of years up front with an insurer. This is suggested if a sale of the business occurs or retirement beckons. Be sure to get both legal and insurance advice for peace of mind. You can then close the door with confidence.

How do you find good staff?

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For decades, the employment section of the newspaper was traditionally the way job seekers got connected with employers…but that doesn’t work anymore! Job seekers, especially young ones, just don’t bother looking there.

The job-hunting space has been taken over by web-based employment agencies such as Seek and myriad jobs boards in niche industries, colleges and universities. Social media in all its forms also offers opportunities for employers seeking staff. With some exceptions, 21st century technology has seen the demise of newspaper classifieds as the conduit between a job seeker and their next job.

On the upside, internet-based employee hunting is proving a cheaper and more efficient way of finding that ‘ideal’ person.

On the downside, it can mean that employers will receive a large number of applications from people who do not have the required skills or experience. Reducing the deluge of applications to a short list takes a lot of time and resources.

An alternative is the recruitment company. They have extensive databases of ‘good fit’ potential candidates which enables them to provide suitable applicants at short notice. Recruitment agencies can be costly, however, a benefit is the ‘suitability guarantee’ that usually comes with the successful candidate.

Another difficulty for employers, especially in very small businesses (2 to 5 staff), is the many hats that an employee in a small firm needs to wear. The ability to multi-task with reasonable efficiency is not everyone’s idea of a perfect job. Fortunately, there are many individuals who thrive on the stimulation of job variety rather than the fixed, clearly defined job role description that starts ‘here’ and ends ‘there’.

Generally, people who are comfortable multi-tasking and working across different roles, are the diamonds that small business is looking for to provide the necessary flexibility, so essential in small business.

Disaster Recovery

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There’s No Quick Fix

The Brisbane hailstorm event of late November 2014 led to more than 102,300 claims worth $1.08billion. The storm caused extensive damage to homes, businesses and vehicles as it ripped through the city at rush hour.

The event may have slipped from front-of-mind position for many of us but there is a stark reminder in the number of Brisbane houses still displaying tarpaulins and boarded up windows. The relative slowness of repair and recovery is testament to the storm’s severity. Even now, 3 months on, indications are that for many property owners, full recovery still has a long way to go.

The delay is not the fault of the insurers whose claims teams swung into action even before the hailstorm ice had melted. In fact, recent reports by CQIB members citywide have confirmed and applauded the speedy response by insurers to the avalanche of claims they received.

The problem is one of materials and labour – supply and demand. With so much damage and destruction following a major storm event, large numbers of tradesmen of all kinds are needed together with massive amounts of building materials.

For the owner of damaged property, the to-do list is long: finding tradesmen, obtaining quotes, scheduling repair work… all subject to availability of manpower and the necessary building supplies.

One industry provides an insight into the size of the problem – glass replacement.

O’Brien Glass reported that they have over 5000 repair customers to service and just 2 weeks after the storm had already replaced over 1900 glass panels out of an estimated total of 20,000. Adding to the O’Brien workload was the high number of older “Queenslander” style homes, often with high, above the ground wooden window frames requiring multiple glass panels, many of them unusual or colored glass not readily available and difficult to source.

Building industry trades of all descriptions experienced similar manpower and materials shortages. Motor vehicle insurers brought in interstate assessors to help handle the workload and one tow-truck operator collected over 600 storm-wrecked cars before Christmas.

It’s expected that owners of the more seriously damaged buildings may be waiting up to 18 months before they can re-occupy their premises.

Whether you escaped the November 2014 storm event or your property received major or minor damage, there’s no doubt the best defence is to have adequate insurance.

Review your policy to be sure the cover meets your expectations and the sums insured are enough to make things right if your property is in its path when the next storm hits.