COVID-19 has pushed remote work 10 years in the future in just a matter of months and we're all struggling to keep up. As of April, 2020 nearly 50% of businesses have at least part of their employees working remotely.
Remote work brings a whole new set of challenges and one of those is making sure your Commercial Insurance program is extending coverage and protection for your business while your employees are working remotely.
It is important to first understand that an employee’s personal homeowner's insurance policy is not designed to cover business exposures. It is there to cover property owned by the homeowner and their residents (not their employer) and protect them in the event someone were to get hurt on their property from normal “personal” usage. Most home insurance policies also have specific business exclusions included as well to further clarify that the policy is intended to protect personal risk and not business risk.
So what insurance coverage do businesses need to make sure the company is protected while employees are working remotely?
In a previous article, I explained that every business needs liability. This is no different for a business that employs remote workers. General liability insurance protects your business from unforeseen incidents that could potentially harm people or property.
In addition, if anyone other than your employee is injured in their home office, the business could still be held liable for bodily injuries or damaged property. For example, if a client comes in to the employee's home to pick up a product and gets hurt, the business could be held responsible.
In most cases, general liability insurance follows you and your employees wherever the business is occurring. However, there are some instances where coverage is limited. A relatively common policy endorsement to watch out for is a “Designated Premises” endorsement. This basically means liability only applies to locations listed on the policy, so coverage wouldn’t extend to a remote office unless it was specifically listed on the policy.
If you have never discussed remote working and how your general liability policy responds, it is a conversation you need to have with your agent.
With remote workers, we aren’t concerned with buildings, but instead the business equipment employees use, like company-owned computers or phones.
Insurance carriers differ somewhat in how they classify computers and computer-related equipment. Some consider it business personal property while other carriers consider it electronic data processing equipment, which can include the hardware (equipment) and software (data).
It is important to discuss the differences in policy wording and coverage with your insurance agent thoroughly. In the event of a loss, you don’t want to end up in an argument with your insurance carrier that your employee’s stolen laptop isn't covered because it wasn't classified correctly.
With either coverage, when the property is not at a location specified on the insurance declarations (Dec) page, it is considered “property off-premises” and will typically have a small limit of coverage included in the policy. Those with numerous remote workers will likely need to increase this limit.
It may be tempting to keep this limit lower than the actual value you have out in the field to reduce insurance costs. But it’s important to make sure the limit accurately reflects the value of the remote equipment you have out there.
In most cases one damaged laptop may not be worth submitting a claim since it’s a relatively small loss. However, if you have numerous employees in a close area, the maximum probable loss is higher. For example a tornado could easily damage multiple employee remote work stations. That would all be considered as one claim and then whatever the maximum limit is would apply, so pay close attention to your limits.
Hired & Non-Owned Auto Liability
If an employee runs out of batteries for their computer's mouse and drives up to the store to buy more and causes a car accident, who is liable? Your employee’s personal autopolicy should cover their personal liability, but would not extend liability for your business. Hired & Non-Owned coverage is needed to protect your business for any owners or employees driving a rental or personal vehicle for business reasons. Just because your workers may be working remotely, they may still have occasion to drive for business. It is an easily overlooked and relatively inexpensive coverage to keep in mind.
Workers' Compensation is required whether employees are physically in the office, working from their homes, or working from the local coffee shop.
Employers do their best to remove on-the-job hazards to reduce employee injuries. This is much easier to control in the office than when employees are working remotely. If an employee is hurt at home during business hours, and the injury is related to their job duties, then that injury will typically be covered under Workers Comp.
If your employees live in a different state than the business is located in, you may need to add additional states to the policy as well. Each state has its own Workers Compensation laws and programs, so talk to your agent or visit the U.S. Department of Labor’s State Workers’ Compensation Officials website to learn more about how different state’s rules may apply.
It is also a good idea to establish policies and procedures to minimize and avoid injuries while working remotely or from home which helps reduce potential Workers Comp claims. Hartford Insurance put together a great reference guide for businesses with remote employees.
Cyber Insurance is critical!
Instances of cybercrime appear to have jumped by as much as 300 percent since the beginning of the coronavirus pandemic, according to the FBI. With that, your insurance company wants to see that you’ve got policies and procedures in place to reduce the chance of a breach or hack. The first step in cyber coverage starts with protection. Forbes has some great tips for cybercrime strategies that your cyber insurance carrier would be happy to see you adopt.
However, necessary as cyber insurance is, it is also complicated. There are no standard insurance forms for cyber coverage (unlike property or general liability policies for example). Your agent should review the cyber policy form carefully to make sure your business is covered properly for what your employees are actually doing and the devices they are using for their jobs.
Some common potential problems…
If employees are using their personal devices (their own cell phones for example) for business purposes, the cyber policy needs to cover personally owned devices within the definition of "systems" covered for cyber attacks.
Some policies contain exclusions that limit coverage to devices owned by the company. So an incident that stems from a remote employee using a personal device may be excluded, even if it ends up impacting the whole company network.
Personal device exclusions could affect third-party coverage as well. If a breach occurred because an employee allowed outside access, the company is liable for the regulatory fines, notifications and other costs regardless of whose device it was. With this exclusion in the policy, the business could be paying these costs out of pocket.
Another exclusion to watch out for is regarding unencrypted devices. Many cyber carriers are starting to require devices be encrypted in order to qualify for cyber coverage. While in the office this is much easier regulated than with remote access as many personal devices and home computers are not encrypted.
Is it out of the realm of possibility that they could transmit sensitive information over unsecured email to print something at their home printer? Do they shred personally identifiable information after writing it down at home? These are real scenarios that happen every day and could potentially be excluded without review.
Directors and Officers Liability
Any business decision made by a board of directors has the potential for negative consequences. Directors and Officers Liability (D&O) is there to protect board members for the decisions they make for the company.
Remote work itself doesn’t necessarily increase triggers for claims, but it does increase the potential for allegations of mismanagement, or poor policies and procedures relating to remote operations and security. Your business should confirm that comprehensive D&O coverage with adequate limits is in place to respond to these types of claims.
A Note About “Other Insurance”
All policies contain “Other Insurance” clauses which specify the order of which policy pays if more than one policy responds in the event of a claim. In the case of a stolen laptop for example, it could potentially trigger the property, crime, and/or cyber policies.
It is important to make sure your insurance agent coordinates the Other Insurance clauses in these policies as overlapping coverage could create problems in the event of a claim. You want the right policy to respond with the coverage intended.
Communicate With Your Agent
It is always a good practice to review your insurance with an independent agent at least once a year, but now that is more important than ever. Talk to your agent about remote working and what that looks like in your business now and in the future.
It is also a good practice to ask the agent to review it specifically with the insurance carrier’s underwriter and get their answers in writing to make sure everyone is on the same page.
Insurance companies are trying to keep up just like the rest of us and may need to make some changes to make sure proper coverage is there. The last thing you want in this pandemic is to get hit with out of pocket expenses for a claim that would’ve been covered had it happened at the office.
Remote working is here to stay, make sure your commercial insurance program keeps up!