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When a plan participant or beneficiary has Medicare and other health insurance, such as group health plan insurance, retiree coverage, or Medicaid, there can often be confusion as to which insurance pays first on claims. Coordination of benefits (COB) rules, which are specified in plan documents or insurance policies, decide which insurance pays first. One plan is considered the primary payer that covers most expenses, while the secondary plan covers any remaining allowable expenses not covered by the primary plan. The COB allows health plans to provide health or prescription drug coverage to individuals receiving Medicare to determine their payment responsibilities. This helps ensure that the total amount paid by all insurance plans does not exceed the total costs of the health care expenses for Medicare-covered services and items. This article provides a general overview of COB rules under Medicare. How does Medicare coordinate with other insurance? There are many important facts to remember regarding how other insurance works with Medicare-covered services and items, such as the following: The primary payer pays first and up to its coverage limits. The secondary payer only pays if there are costs the primary payer doesn’t cover. The secondary payer, which may be Medicare in certain situations, might not pay all the uncovered costs from the primary payer. If a group health plan or retiree coverage is the secondary payer, the individual may need to enroll in Medicare Part B before that insurance would pay. If a Medicare-covered individual’s other health insurance is the primary payer and fails to promptly pay a claim, typically within 120 days, that individual’s doctor or service provider may bill Medicare. Medicare can make a conditional payment for the individual’s claim, recovering any payments the primary payer should have paid at a later date. What's a conditional payment? A conditional payment is a payment Medicare makes for services for which another payer may be responsible. Medicare makes this payment, so the plan participant or beneficiary won’t have to pay the claim. The payment is conditional because it must be repaid to Medicare if the Medicare-covered individual receives a settlement, judgment, award or other payment later. Who pays first? When an individual has Medicare and other insurance, there are rules for whether Medicare or the other insurance is the primary payer for Medicare-covered services and items. Medicare is typically the primary payer for Medicare-covered services and items in the following circumstances: An individual is covered by only Medicare and Medicaid. An individual covered by Medicare refuses group health coverage. Medical services or supplies are not covered under a group health plan but are covered under Medicare. A Medicare-covered individual is covered by a group health plan but has exhausted their coverage under the group health plan. A Medicare-covered individual is 65 or older and covered by a group health plan (because the individual or their spouse is still working) offered by an employer with fewer than 20 employees. A Medicare-covered individual is 65 or older and covered by an employer group health plan after retirement. A Medicare-covered individual is 65 or older (or disabled) and covered by Medicare and the Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage. A Medicare-covered individual is disabled and covered by a large group health plan offered by an employer with fewer than 100 employees. A Medicare-covered individual has end-stage renal disease and is enrolled in a group health plan or COBRA (after 30 months of eligibility or entitlement to Medicare). A Medicare-covered individual has only Medicare and TRICARE coverage unless the individual is on active duty and receives services and items from a military hospital, clinic or other federal health care provider. For a complete list of situations where Medicare is the primary payer, visit Medicare.gov or review the Centers for Medicare and Medicaid Services’ guide, Medicare & Other Health Benefits: Your Guide to Who Pays First. How does Medicare know if an individual has other coverage? COB permits an individual’s Medicare eligibility information to be shared with other payers and sends Medicare-paid claims to secondary payers for payment. The Benefits Coordination and Recovery Center (BCRC) does the following on Medicare’s behalf: Collect and manage information on other types of coverage an individual with Medicare may have. Determine whether an individual’s other coverage pays before or after Medicare. Pursue repayment when Medicare makes a conditional payment. Medicare doesn’t automatically know if a Medicare-covered individual has other health insurance; however, insurers are required to notify Medicare when they’re responsible for paying first for Medicare-covered services and items. In some instances, the individual’s healthcare provider, employer or insurer may ask them about their current coverage so they can report that information to Medicare. Additionally, insurers must report coverage changes to Medicare. Summary Understanding COB rules is vital to ensuring that a Medicare-covered individual’s claims are paid correctly. While COB rules can be complex, they can help Medicare plan participants and beneficiaries make the best use of their healthcare coverage. For more healthcare resources, contact Cottingham & Butler today.

The manufacturing sector consists of businesses that utilize raw materials to generate finished products. Due to the range of items this industry plays a role in producing (e.g., food and beverages, textiles, apparel, wood products, chemicals, plastics, metals, electronics, machinery, and furniture), it contributes significantly to the overall economy. Further, this sector has experienced considerable growth in recent years, largely brought on by rising production demand for various items amid the COVID-19 pandemic. Looking ahead, certain factors indicate the manufacturing industry is poised for continued growth in the future. Professional services firm Deloitte projects the sector’s gross domestic product (a monetary calculation of the market value of goods and services generated and sold during a set period) will increase by 2.5% in 2023. Additionally, several federal initiatives that debuted in 2022—namely, the CHIPS and Science Act and the Inflation Reduction Act—have the potential to help keep costs under control and boost resiliency across the manufacturing sector, therefore fueling long-term industry growth. Yet, some sector developments could pose challenges in the coming months and years, including labor shortages, supply chain struggles, economic issues, technology shifts, and environmental concerns. This article provides more details on manufacturing industry trends to watch. Labor Shortages The past few years have been met with labor shortages across industry lines. Furthermore, the pandemic motivated many employees to reevaluate their job expectations and priorities, thus prompting additional workforce shifts and compounding such shortages. The manufacturing sector is no exception to this trend. According to the U.S. Bureau of Labor Statistics (BLS), job openings in the industry remained near record highs in 2022, fluctuating between 750,000 and 850,000. In light of these labor shortages, businesses within the manufacturing sector have implemented various strategies to help attract and retain talent, such as: Promoting a diverse workforce—The latest BLS data shows women make up less than one-third of the manufacturing workforce, whereas Black, Asian, and Latinx employees account for an even smaller proportion. As such, some manufacturing businesses have made an effort to attract these untapped demographics and expand their available talent pools by bolstering their diversity, equity, and inclusion (DEI) measures. Common DEI measures include creating workplace policies that foster an inclusive culture and offering mentorship and career-advancing programs for diverse employees. Leveraging upskilling initiatives—Upskilling refers to the process of enhancing employees’ skills and promoting continuous learning by providing ongoing education, training and professional development opportunities. Especially as manufacturing businesses hire a greater proportion of new or inexperienced employees to fill labor gaps, upskilling can make all the difference in motivating these employees to keep improving upon their abilities. Offering greater flexibility, pay, and benefits—In response to employees’ shifting job expectations, some manufacturing businesses have adopted more competitive workplace offerings. These offerings may include flexible hours, remote or hybrid arrangements (if possible), higher pay, improved benefits and additional well-being resources. Supply Chain Struggles Apart from exacerbating labor shortages, the pandemic has also contributed to supply chain struggles over the last few years. This trend has made it increasingly difficult for manufacturing businesses to secure the raw materials necessary to conduct their operations, often resulting in production delays. To combat these concerns and ensure supply chain resiliency, manufacturing businesses have utilized several tactics, including: Strengthening relationships— By building strong connections with their suppliers, manufacturing businesses are more likely to receive additional support when navigating supply chain issues. Specifically, businesses with solid supplier relationships may benefit from solutions such as modified shipment routes and prioritized access to high-demand materials as they become available. Diversifying suppliers— Instead of relying on a small selection of primary suppliers, some manufacturing businesses have added redundancies to their supply chains by investing in multiple suppliers for the same materials. With these diversifying strategies in place, businesses can increase the likelihood of maintaining access to essential production materials even if their primary suppliers are experiencing disruptions. Forming local partnerships— In addition to diversifying their supply chains, some manufacturing businesses have also begun engaging in nearshoring, which entails selecting local or domestic suppliers rather than international alternatives. This way, businesses can minimize their risk of being impacted by global shipment delays and associated supply chain disruptions. Leveraging technology— To enhance supply chain visibility, some manufacturing businesses have implemented additional workplace technology. Examples of this technology include work instruction software and digital ecosystems, which are capable of actions such as streamlining supply chain workflows, ensuring frequent communication with suppliers, providing status updates on material shipment processes, and delivering notifications regarding possible disruptions. Economic Issues The combination of labor shortages and supply chain struggles has significantly driven up the cost of goods and services in recent years, posing widespread inflation issues across all sectors of the economy. As it pertains to the manufacturing industry, inflation issues have resulted in rising costs for many raw materials, as well as their associated shipment expenses (e.g., labor and transportation costs). Consequently, most manufacturing businesses have encountered price hikes throughout their supply chains, thus exacerbating overall production expenses and forcing them to raise the costs of their finished products to ensure profitability. As inflation issues press on within the sector, it’s important for manufacturing businesses to curb consumer frustration regarding rising product costs by being transparent about the reasons behind these price hikes. Maintaining open communication about the impact of inflation on production expenses and providing frequent updates on how their price tags will continue to fluctuate can help businesses maintain customer trust and loyalty during these difficult times. To help minimize overall inflation concerns, the Federal Reserve (Fed) has steadily been hiking up interest rates. Economic analysts predict that the Fed’s efforts will eventually pay off during 2023, with inflation slowly subsiding throughout the year. However, some economic experts have forecasted that rising interest rates and prolonged labor market challenges could lead to a potential recession—a prolonged and pervasive reduction in economic activity—throughout the United States in the near future. To prepare for a potential recession, it’s best for manufacturing businesses to consider practices such as establishing concrete financial plans, scaling back certain operations, promoting steady cash flow, ensuring proper debt management, fostering strong connections with stakeholders and leveraging effective marketing strategies. Above all, businesses must maintain ample insurance in a recession and secure financial protection against possible losses. Technology Shifts To help offset increased expenses and productivity concerns brought on by current sector trends, a growing number of manufacturing businesses have begun utilizing smart factory initiatives. These initiatives focus on improving operational efficiencies and mitigating production costs with various technology solutions. Common technology solutions introduced by smart factory initiatives include 5G, the cloud and edge computing systems. These solutions are intended to help increase network capacity, reduce delays in network communication and enable greater volumes of data to be processed at higher speeds. Such solutions often permit manufacturing businesses to minimize downtime on the production floor and elevate operational performance. In addition to implementing smart factory initiatives, some manufacturing businesses have also started leveraging disruptive technology offerings, such as augmented reality (AR), artificial intelligence (AI), the Internet of Things (IoT) and blockchain. Both AR and AI can be used to automate production processes, enhance customer service capabilities and make data-driven decisions. On the other hand, IoT and blockchain can help manufacturing businesses closely monitor their supply chains, record essential transactions, conduct predictive maintenance on production equipment, utilize advanced analytics, track inventory and assets, and detect potential safety concerns. In any case, both smart factory initiatives and disruptive technology can pose additional cybersecurity risks. With this in mind, manufacturing businesses that leverage such technology should review their digital exposures and make adjustments as needed to mitigate possible cyber losses. Environmental Concerns The environmental, social and governance (ESG) landscape continues to evolve, with both consumers and regulators placing additional pressure on manufacturing businesses to ensure eco-friendly and sustainable practices. Specifically, current ESG trends in the manufacturing industry center around: Decreasing carbon emissions—According to the latest industry research, the manufacturing sector accounts for nearly one-third of total greenhouse gas emissions. As such, it has become increasingly important for manufacturing businesses to aim for carbon neutrality. Some government agencies have even started requiring businesses to disclose information regarding their carbon emissions. Common emission-reducing measures include electrifying fleets, using clean power sources (e.g., wind and solar) and implementing energy-efficient smart devices on the production floor. Reducing operational waste—Many manufacturing processes generate substantial waste, thus damaging the environment. Fortunately, proper waste management practices and certain types of production technology can help mitigate these concerns, promoting eco-friendly operations. Conclusion Overall, there are several trends currently impacting the manufacturing sector. By staying on top of these developments and taking steps to mitigate their associated exposures, manufacturing businesses can effectively position themselves to maintain long-term growth and operational success. Contact us today for additional risk management guidance. This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice.

The construction industry consists of companies that construct, maintain and repair buildings and other structures (e.g., roads, bridges and utility systems). This sector plays a vital role in the U.S. economy by keeping residential areas, commercial facilities and local infrastructure in good condition, thus supporting the safety and welfare of communities across the nation. In recent years, the construction industry has faced various ups and downs, largely brought on by fluctuating consumer behaviors, material procurement struggles and project delays amid the COVID-19 pandemic. Yet, the sector has still managed to promote economic growth. According to the latest industry data, the construction sector saw approximately $1 trillion in total gains during 2022, representing a 17% increase from the prior year. Looking ahead, industry experts anticipate a slowdown in such growth as higher interest rates limit property owners’ abilities to invest in new construction projects, particularly in the residential space. However, recent federal initiatives such as the Infrastructure Investment and Jobs Act and the CHIPS and Science Act are intended to help maintain economic stability within the construction sector by funding a range of future projects, especially in the commercial segment. Regardless, several industry trends could pose concerns in the coming months and years, including labor shortages, ongoing material challenges, economic issues and technology shifts. As such, construction businesses should monitor the latest sector developments and adjust their risk management practices as needed. This article provides more information on construction industry trends to watch. Labor Shortages The past few years have been met with labor shortages across industry lines. The pandemic motivated many employees to reevaluate their job expectations, exacerbating such shortages and prompting additional workforce adjustments. The construction sector is no exception to this labor trend. According to the Associated Builders and Contractors, the industry is currently short 650,000 workers. Additionally, a recent study conducted by management consulting company FMI Corporation revealed that the majority (89%) of construction firms consider the scarcity of labor to be the top challenge facing their operations. What’s worse, a growing proportion of construction employees are nearing retirement, creating more job openings as these workers exit the sector. In fact, the latest data from the U.S. Bureau of Labor Statistics (BLS) found that 1 in 5 construction workers are age 55 or older. As labor shortages persist, construction businesses may resort to employing a higher number of new or inexperienced workers. Yet, without proper safety education and skills training, these employees may contribute to increased worksite accident and injury rates, rising insurance claim frequency and severity, extended project delays and compounded operational expenses. Thus, construction businesses must take steps to combat labor shortages and invest in measures to attract and retain sufficient and qualified talent. These measures may include increasing outreach efforts at community events (e.g., high school job fairs and trade school forums) to encourage a new generation of construction workers; leveraging upskilling and reskilling initiatives to continue educating existing employees and build upon their professional abilities; providing ongoing safety training to workers of all ages and experience levels; offering more competitive wages and benefits packages; and attempting to bring employees who recently left the industry back to work with various incentives (e.g., flexible arrangements and career advancement options). It may also benefit construction companies to explore unrepresented demographics to further expand their talent pools. For instance, BLS data shows that women account for just 11% of the construction workforce, highlighting substantial recruitment opportunities within the sector. Additional demographics to consider may include veterans and formerly incarcerated individuals—also known as “second-chance workers”—who can provide evidence of rehabilitation. Material Challenges In recent years, widespread supply chain disruptions and associated material challenges have occurred across the construction sector. Specifically, inconsistent demand for numerous building materials amid the pandemic, transportation bottlenecks and geopolitical uncertainties (e.g., the Russia-Ukraine conflict) have made many construction materials increasingly difficult to obtain, driving up operational expenses and causing significant project delays. Total construction material costs increased by more than 17% between 2021 and 2022, according to the National Roofing Contractors Association. Materials such as steel, iron and lumber have seen the biggest price hikes. In particular, the cost of lumber has fluctuated between $500 and $1,500 per 1,000 board feet since the start of the pandemic. With this in mind, it’s no surprise that a survey from the Associated General Contractors of America reported nearly three-quarters (73%) of construction companies had listed rising material expenses as a major concern in the year ahead. While these trends may slightly ease moving forward, many industry experts anticipate that material challenges will press on for the foreseeable future, therefore continuing to affect lead times and overall project profitability among construction businesses. To help reduce the impact of material challenges within the sector, construction companies may want to consider boosting their supply chain resiliency, revising their inventory management protocols and adjusting their project bidding strategies. This could entail preordering certain materials and holding them in secure storage areas; working with local suppliers rather than overseas alternatives to uphold timely deliveries; building strong relationships with suppliers to ensure prioritized access to high-demand materials; obtaining multiple suppliers for the same materials through contingency agreements; requesting contract clauses with stakeholders that limit the financial ramifications of supply chain disruptions; and reassessing project pricing models to better protect profit margins. Economic Issues Inflation concerns have impacted virtually every industry in the last few years, evidenced by skyrocketing costs for various goods and services. As it pertains to the construction sector, inflation will likely continue to compound already rising material costs and total project expenses, motivating some companies to increase the prices of their services to maintain profitability. The Federal Reserve (Fed) has steadily been hiking up interest rates to help minimize overall inflation issues. Economic analysts predict that the Fed’s efforts will eventually pay off during 2023, with inflation slowly subsiding throughout the year. However, some economic experts have forecasted that rising interest rates and prolonged labor market challenges could lead to a recession—a prolonged and pervasive reduction in economic activity—in the United States in the near future. During a recession, consumers may opt to cut costs and invest in fewer projects and services, potentially lowering demand and taking away business from the construction industry. Consequently, construction companies without substantial revenues, excess reserves and the additional capital necessary to offset extended periods of loss could be more likely to have to make difficult financial decisions to avoid issues such as bankruptcy or insolvency in the months ahead. To prepare for a potential recession, construction businesses should follow practices such as establishing concrete financial plans, scaling back certain operations, promoting steady cash flow, ensuring proper debt management, fostering strong connections with stakeholders and leveraging effective marketing strategies. Further, construction companies must maintain ample insurance in a recession and secure financial protection against possible losses. Technology Shifts Some construction businesses have begun implementing more advanced industry technology in their operations to help boost productivity levels, combat labor shortages, promote employee safety and offset elevated project expenses. For example, technology such as robotics, artificial intelligence and the Internet of Things (IoT) may help automate certain construction tasks, improve project efficiency, and provide greater visibility of essential worksite inventory and equipment. On the other hand, wearable safety technology and drones can permit construction companies to closely monitor their employees’ behaviors on the job and detect hazardous situations before they cause accidents or injuries. Additionally, construction businesses can utilize 3D printing to generate building components and—in some cases—entire properties or structures by layering materials such as concrete, metals or polymers in established templates or designs. This technology not only minimizes the need for physical labor and allows for projects to be completed at more efficient rates but also promotes sustainable building practices and reduces total operational expenses. According to the latest industry research, construction companies that leverage 3D printing can experience cost savings of as high as 40%. Despite these benefits, it’s important to note that implementing advanced industry technology can also lead to elevated cyber exposures for construction businesses. For instance, security firm SonicWall reported that IoT-based cyber incidents (e.g., data breaches and ransomware attacks) increased by 77% during 2022, making companies that utilize this technology increasingly vulnerable. What’s more, a recent survey conducted by IT company Forrester found that at least 75% of construction firms have experienced cyber incidents over the past year, totaling nearly $6 trillion in losses. Considering such findings, it’s imperative for construction businesses that leverage advanced industry technology to review their digital exposures and make adjustments (e.g., providing enhanced employee training on common cyberthreats and installing updated security software) as needed to mitigate possible cyber incidents. These companies should also consider purchasing dedicated cyber insurance to ensure financial protection against potential incidents and related losses. Conclusion Overall, there are several trends currently impacting the construction sector. By staying on top of these developments and taking steps to mitigate their associated exposures, construction businesses can effectively position themselves to maintain long-term growth and operational success. Contact your Cottingham & Butler representative for additional industry-specific risk management guidance. This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice.

At Cottingham & Butler, we have a dedicated team of problem solvers in the form of a Claims Advocacy team. The primary goal of our Claims Advocacy team is to work with insurance company adjusters to negotiate and resolve tense or complex claim situations. Much of our problem-solving involves leveraging our relationships with insurance companies to get our clients fair and timely claims outcomes. From day one, our team works to identify what may be impeding a claim to then remove the impediment. Depending on the claim scenario, we may persuade insurance adjusters to decrease claim reserves to help with the policy renewal process or follow up for regular status updates on the claim to maintain forward momentum to resolution. These kinds of advocacy activities, while not necessarily measurable from a financial standpoint, contribute to the idea that “time is money,” meaning that anything that can be done to speed up the claims process should result in some kind of cost savings. While there are many different types of claims advocacy that we do for clients, our Claims Advocacy team at Cottingham & Butler likes to be able to advocate for clients in such a way that it is measurable on the company’s bottom line. This tends to be in the form of successfully challenging claim valuations, overturning coverage denials and adverse liability determinations, and pursuing recoveries against negligent 3rd parties for out-of-pocket expenses incurred by clients. In 2022 alone, our Claims Advocacy team saved and recovered nearly $4 Million on behalf of our clients. Of this amount, $1.25 Million was attributed to recoveries while the remaining $2.75 million or so was attributed to savings. The average savings per claim was $36,625, with the largest savings being $325,000, earned from overturning a coverage denial. The average recovery per claim was $13,245, with the largest recovery being $117,000. See below to view additional results from clients and learn how our Advocacy team was able to positively impact their claim resolutions. 2022 Brokerage Claim Savings 2022 Brokerage Claim Recoveries If you have questions or would like to learn more about our Claims Advocacy program, contact your Cottingham & Butler representative today.

In June of 2022, a California jury awarded a verdict of $464.5 million to two men who claimed that they were forced out of their jobs after complaining about sexual and racial harassment. In August of 2022, a Georgia jury awarded $1.6 billion in punitive damages against Ford Motors for a defect in the roof design causing a wrongful death suit. You also might remember the $26 billion lawsuit against 4 of the largest U.S. corporations in the pharmaceutical industry in February 2022 related to the opioid crisis. The term “Nuclear Verdict” is defined as a verdict over $10 million. Increased “Social Inflation” (claims which exceed the increase of general inflation) and the continued attack on Corporate America contribute significantly to the increase in Nuclear Verdicts. Attorneys also continue to increase their use of “Reptile Theory”, playing to jurors’ emotions and appealing to their safety and survival tactics. Other contributing factors include: Perception of the value of money has changed/increased income inequality Media outlets & social media impact on public opinion Erosion of caps on punitive damages for pain & suffering Erosion of tort reform (time limit to file a lawsuit) Nuclear verdicts are growing, not only in frequency but in severity Since 2010, there have been over 1,400 nuclear verdicts; an average of over 115 verdicts above $10 million dollars each per year! Between 2015 and 2019, the average nuclear verdict has more than tripled, from $64 million to $214 million[1]. As you can imagine, these jaw-dropping numbers make it difficult for insurers to assess risk. How does this impact you? Nuclear verdicts don’t only impact those directly involved in a lawsuit; they also have cascading effects on all buyers of insurance. Every bad verdict drives up the cost of future cases, causing underwriters to increase rates on certain lines while simultaneously losing their appetite for certain classes of business altogether. The most prevalent impact is in claims related to professional/product liability, commercial auto, directors & officers, and employment practices liabilities. Because underwriters have no way of predicting or preparing for verdicts of this size, the increasing number of nuclear verdicts is causing a significant amount of unexpected and catastrophic losses. We anticipate these dynamics to cause even more pain for buyers in an already hard market. As the difficulty to underwrite legal risks increases, so does the chance of liability insurance becoming out of reach for businesses. What can you do? The best claim is a claim that never happens. By prioritizing risk management efforts and working with your insurance partner and legal counsel to leverage data and trends, you can take proactive measures to minimize the likelihood and reduce the impact of nuclear verdicts. A few ideas: Scrutinize contracts and use best practices when it comes to third-party risk transfer: Utilizing specific language, requiring certain limits, and reviewing who is responsible for what when working with third parties is crucial in today’s “it wasn’t us” environment. Analyze claims history: Past claims may be indicators of problem areas or lawsuits that are just waiting to happen. Getting in front of these and being aggressive early on is the key to avoiding drawn-out and large lawsuits. Enlist the right team of experts: Certain teams with an understanding of your specific class of business or types of risk can drive drastic differences in both mitigation efforts and claims outcomes. Assess alternative program structures: Having a backup carrier is important as we start to see limiting coverage language and less interest in tougher classes of business. [1] National Law Journal’s 2015 and 2019 editions of the Top 100 Verdicts studies

Since 2017, the market has been in one of the hardest cycles in recent history. The decade leading up to 2017 experienced an influx of capital into the insurance market, which increased competition, drove down rates, and encouraged poor underwriting standards as carriers ‘bought’ their way into the marketplace. It was a fantastic buyer’s market for many years. However, the insurance market, as with every other free market, ebbs and flows. In 2017, the HIM losses (Hurricanes Harvey, Irma, and Maria) changed the capital markets perspective of insurance as a diversification hedge and subsequently exited the “insurance investment class” en masse, resulting in the supply-demand curve to shift drastically in the opposite direction and kick-off this current hard market cycle. Finally, in early 2022, we witnessed a plateauing in the market and a glowing light for insurance buyers started to show at the end of the tunnel…that was short-lived. How Hurricane Ian Is Impacting the Market Early estimates from Hurricane Ian damage surveys indicate it was one of the costliest storms in U.S. history, with insured losses of $53 billion to $74 billion. To put it into context, Katrina reached $85B when adjusted for current inflation. Possibly more importantly, the cost and frequency of extreme-weather disasters have increased substantially in recent years and the frequency of billion-dollar weather disasters is now about one event every 18 days, compared to one event every 82 days between such disasters in the 1980s. This turmoil continues to exacerbate the hard property market cycle and the event frequency and severity continue to wreak havoc on reinsurance balance sheets and profitability. We anticipate seeing multiple small to mid-sized carriers with exposures in Florida going out of business in the coming quarters, and have already seen other regional carriers close their doors in the past several months due to poor profitability and inability to navigate the ever-changing and very costly treaty reinsurance marketplace. Why This Matters for Insureds As of mid-year, rate increases on non-CAT desirable classes of business started to plateau with single-digit rate increases, and in some cases rate decreases, while tougher classes of business had still experienced significant rate increases. With the ongoing Derechos (what we have started to define as an inland hurricane) and increasing frequency and severity of catastrophic-related events, the reinsurance marketplace is in chaos, incurring a significant amount of unexpected losses. We anticipate these dynamics to further deepen and lengthen the current hard market cycle, which will equate to more pain for many buyers of property insurance in the coming quarters. You may ask: “I don’t have exposure in Florida, or Wildfires in California (etc), or Midwest hurricanes… so why does this affect my property insurance?” Great question…it does indirectly because the reinsurance that the carriers bought to insure their portfolios of risk (called a reinsurance treaty) may be the same reinsurers that insure your carriers’ book. In short, the market is highly correlated at the top of the food chain (capital markets and reinsurance) so this pain will continue for the foreseeable future. What to Be On the Lookout For Many standard markets are tightening their underwriter guidelines, some due to executive action, and others due to their treaty reinsurance terms. Through October and November 2022, carriers are submitting their expected losses from Hurricane Ian. Analysts will be closely scrutinizing these figures and playing a large role in establishing what rate increases the reinsurance marketplace will seek in January when most of the reinsurance treaties renew. Throughout mid/late Q4, we should start to have a stronger pulse on the general direction of rate increases, but until then there is an apparent ‘quiet before the storm’ feeling, and frankly, we’re already seeing the storm coming faster than expected. To help our insureds remain proactive and less beholden to the market changes, here are several fundamentals to prepare for: Ensure valuation adequacy within your Statement of Values (SOV) – this is one of the most important topics that underwriters are scrutinizing harder than ever before and a primary focal point when they open a submission. Obtain and act upon loss control reports in advance – third-party or carrier engineering and loss control reports are immensely helpful in elevating your submission to the “top of the pile”. While assisting our insureds with this, we have found that many loss control firms are backlogged so we recommend planning in advance. Scrutinize terms and conditions – we are seeing many carriers trying to restrict critically important terms and conditions on short notice; it is imperative that price not be the only focal point when negotiating the renewal. Analyze alternative program structures – the limits that many incumbent standards and E&S carriers can provide at renewal may be severely limited; we believe in building backup options and “courting” other carriers throughout the policy term to ensure sound contingency capacity. The above is a brief snapshot and overview. We would be happy to talk in greater detail about the strategies we’ve successfully developed to help navigate this hard market and ease the pain. We remain committed to answering any questions that may arise and we will stay in touch as we monitor the marketplace.

What is Builder's Risk and Why is it Important? Builder's risk insurance is a specialized type of property insurance that is intended to protect buildings and structures that are under construction. Builder's risk typically covers property damage of “work in progress” occurring from fire, lightning, hail, explosions, theft, vandalism, and acts of God (such as hurricanes). This coverage protects project owners, general contractors, and subcontractors. Additionally, builder's risk policies can be written to include coverage for loss of income and additional expenses. This would apply if the completion of a project is delayed due to property damage caused by a covered loss. It is important to note that there is no standard form of builders risk insurance, meaning the policies can vary between insurance companies. These coverage terms can be negotiated. Builder's risk is critical to contractors, as it protects you from detrimental property losses during a project. Market Forecast As mentioned, builder's risk is a specialized type of property insurance. The property market has been in one of the hardest (increasing rates) cycles in recent history. After the events of Hurricane Ian, damage surveys indicate it is one of the costliest storms in U. S. history, with increased insured losses of $53 billion to $74 billion. In recent years, the frequency and cost of extreme-weather disasters is now about one event every 18 days, compared to one event every 82 days between such disasters in the 1980s. Another challenge to consider with these property losses are inflation pressures when rebuild time comes into play. Costs of materials continue to be on the rise into 2023. As a result of poor losses arising from difficult types of projects, especially frame and CAT-prone construction projects, market conditions are declining which means rates are expected to further increase for all construction types. Generally speaking, rates fluctuate depending on the exposures of the project and job site (construction type, location, construction hard/soft cost, etc.). We anticipate these dynamics to further deepen and lengthen the current hard market cycle, which will equate to more pain for many buyers of property insurance in the coming quarters. You may ask: “I don’t have exposure in Florida, or Wildfires in California (etc), or Midwest hurricanes… so why does this affect my builder’s risk/property insurance?” Great question…it does indirectly because the reinsurance that the carriers bought to insure their portfolios of risk (called a reinsurance treaty) may be the same reinsurers that insure your carriers’ book. In short, the market is highly correlated at the top of the food chain (capital markets and reinsurance) so this pain will continue for the foreseeable future. To help you drive the best Builder's Risk outcome, follow the below suggestions: If you have a Master Builder’s Risk policy, do not use the rates from that policy if your project will exceed the maximum value provided by the policy. Rather, contact your agent who should provide you with rate indications that you can use for bidding. Keep your agent/broker in the loop, both during the bidding process (to obtain rate indications) and when you know you will need a policy placed. Prior to securing builder's risk coverage, complete a detailed inventory of all potential exposures that may arise during a project. Be prepared to gather more information to secure a builder’s risk quote. With tight underwriting standards come requests for more information than has been required in the past. Keep in mind the following list of insurance items typically needed for any sizeable project: Completed application Construction budget: if your project has phases it may be more cost-effective to break out policies by phase, so please provide hard and soft costs broken out by phase. Statement of Values split out for all the buildings of every phase (if applicable) Gantt chart. Project drawings/architectural renderings & the name of the firm that provided the services Site plans. Site photos. Geotech reports. In Conclusion The 2023 Insurance Market Forecast for builder's risk is anticipated to further harden. Considering the unique characteristics of the policy and project is necessary. There is no standard builder's risk policy, so it is important to know what is covered in your policy. We recommend partnering with an insurance broker who understands the construction industry – allowing you to maximize your understanding of the coverage and complete projects with a piece of mind. For any additional information or questions please contact your Cottingham and Butler representative.

On Jan. 9, 2024, the U.S. Department of Labor (DOL) announced a final rule, effective March 11, 2024, revising the Department’s guidance on how to analyze who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). This final rule rescinds the Independent Contractor Status Under the Fair Labor Standards Act rule, which was published on Jan. 7, 2021, and replaces it with an analysis for determining employee or independent contractor status that is more consistent with the FLSA as interpreted by long-standing judicial precedent. The misclassification of employees as independent contractors may deny workers minimum wage, overtime pay, and other protections. This final rule aims to reduce the risk of employees being misclassified as independent contractors while providing a consistent approach for businesses that engage with individuals who are in business for themselves. General FAQS 1. What is the Employee or Independent Contractor Classification Under the Fair Labor Standards Act Final Rule? This final rule, announced on January 9, 2024, revises the Department’s guidance on how to analyze who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). Specifically, the final rule rescinds the 2021 Independent Contractor Rule that was published on January 7, 2021, and replaces it with guidance for how to analyze employee or independent contractor classification that is more consistent with the FLSA as interpreted by long-standing judicial precedent. The Department believes that this final rule will reduce the risk of employees being misclassified as independent contractors while at the same time providing greater consistency for businesses that engage (or wish to engage) with individuals who are in business for themselves. 2. When is this rule effective? This final rule is effective on March 11, 2024. 3. Why is the Department replacing the guidance it issued in the 2021 Independent Contractor Rule? The Department believes that the 2021 Independent Contractor Rule does not fully comport with the text and purpose of the FLSA as interpreted by courts. Specifically, the 2021 Independent Contractor Rule includes provisions that are in tension with long-standing case law and the Department’s prior guidance on independent contractor status, such as: Its designation of two “core factors”—control and opportunity for profit or loss—which are given greater predetermined weight in the analysis; Its consideration of a worker’s investments and initiative only as part of the opportunity for profit or loss factor; and Its prohibition against considering whether the work performed is central or important to the potential employer’s business. These and other provisions in the 2021 Independent Contractor Rule narrowed the economic reality test by limiting the facts that may be considered as part of the test—facts that the Department believes are relevant in determining whether a worker is economically dependent on the employer for work (i.e., an employee under the FLSA) or is in business for themself (i.e., an independent contractor). The Department further believes that leaving the 2021 Independent Contractor Rule in place would have a confusing and disruptive effect on workers and businesses alike due to its departure from decades of case law describing and applying the multi-factor economic reality test as a totality-of-the-circumstances test. 4. How will this final rule help workers and businesses understand their rights and responsibilities under the FLSA? The final rule provides detailed guidance on employee or independent contractor status that is not only consistent with the FLSA and the decades of case law interpreting it, but more robust than the Department’s earlier subregulatory guidance on the topic. The final rule’s analysis may be applied to workers in any industry and will be easily accessible in the Code of Federal Regulations (CFR). For these reasons, the final rule will provide helpful guidance for workers and businesses alike. 5. Does this final rule adopt an “ABC” test? No. The final rule does not adopt an “ABC” test, which permits an independent contractor relationship only if all three factors in a three-factor test are satisfied. Under the final rule, the Department will instead rely on the long-standing multifactor “economic reality” test used by courts to determine whether a worker is an employee or independent contractor. This test relies on the totality of the circumstances where no one factor is determinative. 6. Does this final rule affect the analysis for determining worker classification under other laws? No. The final rule only revises the Department’s interpretation under the FLSA. It has no effect on other laws—federal, state, or local—that use different standards for employee classification. For example, the Internal Revenue Code and the National Labor Relations Act have different statutory language and judicial precedents governing the distinction between employees and independent contractors, and those laws are interpreted and enforced by different federal agencies. Similarly, this rule has no effect on those state wage-and-hour laws that use an “ABC” test, such as California or New Jersey. The FLSA does not preempt any other laws that protect workers, so businesses must comply with all federal, state, and local laws that apply and ensure that they are meeting whichever standard provides workers with the greatest protection. See 29 U.S.C. 218. Substance of the Final Rule 7. What analysis guides whether a worker is an employee or independent contractor under this final rule? This final rule continues to affirm that a worker is not an independent contractor if they are, as a matter of economic reality, economically dependent on an employer for work. Consistent with judicial precedent and the Department’s interpretive guidance prior to 2021, the final rule applies the following six factors to analyze employee or independent contractor status under the FLSA: Opportunity for profit or loss depending on managerial skill; Investments by the worker and the potential employer; Degree of permanence of the work relationship; Nature and degree of control; Extent to which the work performed is an integral part of the potential employer’s business; and Skill and initiative. The final rule provides detailed guidance regarding the application of each of these six factors. No factor or set of factors among this list of six has a predetermined weight, and additional factors may be relevant if such factors in some way indicate whether the worker is in business for themself (i.e., an independent contractor), as opposed to being economically dependent on the employer for work (i.e., an employee under the FLSA). 8. Can a worker voluntarily waive employee status and choose to be classified as an independent contractor? No. Under the FLSA, a worker is an employee and not an independent contractor if they are, as a matter of economic reality, economically dependent on the employer for work. While businesses are certainly able to organize their businesses as they prefer consistent with applicable laws, and workers are free to choose which work opportunities are most suitable for them, if a worker is an employee under the FLSA, they cannot waive FLSA-protected rights (such as minimum wage or overtime pay). The Supreme Court has explained that permitting employees to waive their FLSA rights would harm other employees and undermine the Act’s goal of eliminating unfair methods of competition in commerce. 9. How is this final rule similar to the Department’s 2021 Independent Contractor Rule? This final rule has several similarities to the 2021 Independent Contractor Rule. For example, both rules advise that independent contractors are workers who, as a matter of economic reality, are in business for themselves, whereas FLSAcovered employees are workers who are, as a matter of economic reality, economically dependent on the employer for work. Both rules identify economic dependence as the “ultimate inquiry” of the analysis; both rules provide a nonexhaustive list of factors to assess economic dependence, and both rules caution that no single factor is determinative. Both rules also clarify that economic dependence does not focus on the amount of income the worker earns or whether the worker has other sources of income. 10. How does the final rule differ from the Department’s 2021 Independent Contractor Rule? This final rule differs from the guidance provided in the 2021 Independent Contractor Rule in several important ways. Specifically, consistent with the approach taken by federal courts, this final rule: Returns to a totality-of-the-circumstances economic reality test, where no single factor or group of factors is assigned any predetermined weight; Considers six factors (instead of five), including the investments made by the worker and the potential employer; Provides additional analysis of the control factor, including a detailed discussion of how scheduling, supervision, price-setting, and the ability to work for others should be considered when analyzing the nature and degree of control over a worker; Returns to the Department’s long-standing consideration of whether the work is integral to the employer’s business (rather than whether it is exclusively part of an “integrated unit of production”); Provides additional context to some factors, including a discussion of exclusivity in the context of the permanency factor and initiative in the context of the skill factor; and Omits a provision from the 2021 Independent Contractor Rule, which minimized the relevance of an employer’s reserved but unexercised rights to control a worker. With these features, the final rule’s guidance aligns with the analysis currently applied by courts, providing greater consistency for workers and businesses alike. 11. How does the final rule differ from the Notice of Proposed Rulemaking (NPRM) published on October 13, 2022 (87 FR 62218)? The Department received approximately 55,400 comments in response to the NPRM from a diverse array of stakeholders, including employees, self-identified independent contractors, businesses, trade associations, labor unions, advocacy groups, law firms, members of Congress, state and local government officials, and other interested members of the public. The Department carefully considered those comments and consequently made several adjustments to the analysis that was proposed in the NPRM, including revisions regarding the control factor and the investment factor. For example, the final rule states that actions taken by the potential employer for the sole purpose of complying with specific, applicable federal, state, tribal, or local law or regulation would not indicate “control.” The final rule also advises that costs to a worker that are unilaterally imposed by a potential employer are not “investments” indicative of independent contractor status. 12. Are any of the economic reality factors adopted in this rule more important than others when evaluating a worker’s employment status? No. Different factors might be more or less important in different cases depending on the facts of each individual case. For example, a factor leaning strongly towards one classification outcome (employee or independent contractor status) could be more relevant in the overall analysis for a particular worker than a different factor, which might be a closer call. However, this final rule does not categorically weigh certain factors more than others in every case like the 2021 Independent Contractor Rule. 13. How does the final rule explain “opportunity for profit or loss depending on managerial skill?” This factor considers whether the worker has opportunities for profit or loss based on managerial skills (including initiative, business acumen or judgment) that affect the worker’s economic success or failure in performing the work. The following facts, among others, can be relevant: whether the worker determines or can meaningfully negotiate the charge or pay for the work provided; whether the worker accepts or declines jobs or chooses the order and/or time in which the jobs are performed; whether the worker engages in marketing, advertising, or other efforts to expand their business or secure more work; and whether the worker makes decisions to hire others, purchase materials and equipment, and/or rent space. If a worker has no opportunity for a profit or loss, then this factor suggests that the worker is an employee. Some decisions by a worker that can affect the amount of pay that a worker receives, such as the decision to work more hours or take more jobs when paid a fixed rate per hour or per job, generally do not reflect the exercise of managerial skill indicating independent contractor status under this factor. 14. How does the final rule explain “investments by the worker and the employer?” This factor considers whether any investments by a worker are capital or entrepreneurial in nature. Costs to a worker of tools and equipment to perform a specific job, costs of workers’ labor, and costs that the potential employer imposes unilaterally on the worker, for example, are not evidence of capital or entrepreneurial investment and indicate employee status. Investments that are capital or entrepreneurial in nature and thus indicate independent contractor status generally support an independent business and serve a business-like function, such as increasing the worker’s ability to do different types of or more work, reducing costs, or extending market reach. Additionally, the worker’s investments should be considered on a relative basis with the potential employer’s investments in its overall business. The worker’s investments do not have to be equal to the potential employer’s investments and should not be compared only in terms of the dollar values of investments or the sizes of the worker and the potential employer. Instead, the focus should be on comparing the investments to determine whether the worker is making similar types of investments as the potential employer (even if on a smaller scale) to suggest that the worker is operating independently, which would indicate independent contractor status. 15. How does the final rule explain “degree of permanence of the work relationship?” This factor weighs in favor of the worker being an employee when the work relationship is indefinite in duration, continuous, or exclusive of work for other employers. This factor weighs in favor of the worker being an independent contractor when the work relationship is definite in duration, non-exclusive, project-based, or sporadic based on the worker being in business for themself and marketing their services or labor to multiple entities. This may include regularly occurring fixed periods of work, although the seasonal or temporary nature of work by itself would not necessarily indicate independent contractor classification. Where a lack of permanence is due to operational characteristics that are unique or intrinsic to particular businesses or industries and the workers they employ, this factor is not necessarily indicative of independent contractor status unless the worker is exercising their own independent business initiative. 16. How does the final rule explain “nature and degree of control?” This factor considers the potential employer’s control, including reserved control, over the performance of the work and the economic aspects of the working relationship. Facts relevant to the potential employer’s control over the worker include whether the potential employer sets the worker’s schedule, supervises the performance of the work, or explicitly limits the worker’s ability to work for others. Additionally, facts relevant to the potential employer’s control over the worker include whether the potential employer uses technological means to supervise the performance of the work (such as by means of a device or electronically), reserves the right to supervise or discipline workers, or places demands or restrictions on workers that do not allow them to work for others or work when they choose. Whether the potential employer controls economic aspects of the working relationship should also be considered, including control over prices or rates for services and the marketing of the services or products provided by the worker. Actions taken by the potential employer for the sole purpose of complying with a specific, applicable federal, state, tribal, or local law or regulation are not indicative of control. As examples of such compliance actions that are not indicative of control, the final rule identifies a publication’s requirement that a writer comply with libel law and a home care agency’s requirement that all individuals with patient contact undergo background checks in compliance with a specific Medicaid regulation. Actions taken by the potential employer that go beyond compliance with a specific, applicable federal, state, tribal, or local law or regulation and instead serve the potential employer’s own compliance methods, safety, quality control, or contractual or customer service standards may be indicative of control. For example, a home care agency’s imposition of extensive provider qualifications, such as fulfilling comprehensive training requirements (beyond training required for relevant licenses), may be probative of control. More control by the potential employer favors employee status; more control by the worker favors independent contractor status. 17. How does the final rule explain “extent to which the work performed is an integral part of the employer’s business?” This factor considers whether the work performed is an integral part of the potential employer’s business. This factor does not depend on whether any individual worker, in particular, is an integral part of the business, but rather whether the function they perform is an integral part of the business. This factor weighs in favor of the worker being an employee when the work they perform is critical, necessary, or central to the potential employer’s principal business. This factor weighs in favor of the worker being an independent contractor when the work they perform is not critical, necessary, or central to the potential employer’s principal business. 18. How does the final rule explain “skill and initiative?” This factor considers whether the worker uses specialized skills to perform the work and whether those skills contribute to the business-like initiative. This factor indicates employee status where the worker does not use specialized skills in performing the work or where the worker is dependent on training from the potential employer to perform the work. Where the worker brings specialized skills to the work relationship, this fact is not itself indicative of independent contractor status because both employees and independent contractors may be skilled workers. It is the worker’s use of those specialized skills in connection with business-like initiatives that indicate that the worker is an independent contractor. 19. When might “additional factors” matter in determining a worker’s employment status? Under the final rule, additional factors may be relevant in determining whether the worker is an employee or independent contractor for purposes of the FLSA, if the factors in some way indicate whether the worker is in business for themself, as opposed to being economically dependent on the potential employer for work. This guidance is identical to guidance provided in the 2021 Independent Contractor Rule and is consistent with judicial precedent. 20. Under the final rule, does a worker have to satisfy all the economic reality factors to qualify as an independent contractor? No. Under the economic reality test, no single factor (or set of factors) automatically determines a worker’s status as either an employee or an independent contractor. Instead, the economic reality factors are all weighed to assess whether a worker is economically dependent on a potential employer for work, according to the totality of the circumstances. 21. I have questions about this rule and/or worker classification. Who should I contact? For questions about this final rule, you may call the Wage and Hour Division’s (WHD) Division of Regulations, Legislation, and Interpretation (DRLI) at (202) 693-0406. For questions about the employment classification of a particular worker or group of workers, please contact your nearest WHD District Office, as displayed at https://www.dol.gov/agencies/whd/contact/local-offices.

The last months of the year are a great time for HR professionals to ensure they’re prepared for everything that needs to be done. It’s also an opportunity to evaluate which HR processes organizations want to take forward into the new year and which to leave behind. While certain HR compliance activities must be completed by the end of the year, HR professionals can also use this time of preparation to focus on tasks that will set their organizations on the right course for next year. This article provides an overview of general, compliance-related, and employee compensation and benefits activities HR may need to tackle at the end of each year. The activities outlined in this article are not exhaustive. Because an organization’s failure to comply with certain year-end requirements can result in significant legal and financial consequences, employers are encouraged to seek legal counsel to discuss any specific issues. General Activities The end of the year is usually a busy time for HR professionals. They must accomplish a lot in a relatively short period to close out the year and prepare for the upcoming one. These tasks may include: Completing annual performance reviews Asking employees to update their personal and contact information Backing up HR data and personnel files Establishing an annual budget and allocating resources Reviewing recruiting and hiring processes Creating plans for new hires HR can also create and update succession plans and job descriptions. The following tasks are general activities HR professionals should consider completing at the end of the year. HR Metrics Development The year’s end is an opportunity to review the year, analyzing what went well and where improvements can be made. This provides HR a chance to develop meaningful metrics for the upcoming year. These metrics may measure: Employee engagement and satisfaction Employee productivity Turnover rate, including new hire turnover HR growth compared to revenue Average time to fill open positions Offer acceptance rate Promotion rate Time to hire HR-to-employee ratio By aligning HR metrics to long-term organizational goals, HR can positively impact an organization’s growth and facilitate strategic decision-making. Workforce Analysis Workforce planning is a common year-end HR task. Such planning allows organizations to forecast staffing needs for the upcoming year. This also provides HR with an opportunity to review and analyze an organization’s workforce strengths. By engaging with leaders and managers, HR can help identify outstanding talent and ways to develop their capabilities. This allows an organization to maximize the full potential of its workforce. Value Alignment HR is generally responsible for an organization’s values. HR can have a positive impact on an organization by helping employees understand the significance of their contributions and how they align with the organization’s values. The year’s end is a great opportunity to review an organization’s core values and define employee engagement initiatives. HR can help engage and align employees with the organization’s purpose and values, which can positively impact an organization’s attraction and retention efforts. Employee Feedback The end of the year can be an opportunity to identify areas of improvement. Employee engagement surveys can give organizations meaningful feedback from employees about what is working and what isn’t. By soliciting employee feedback, organizations can gather insights to improve employee engagement and morale, boost productivity, strengthen retention, refine internal processes and meet organizational goals. With a better understanding of existing issues, HR professionals can not only identify areas of improvement but also implement changes that can positively impact the organization in the upcoming year. Employee Communications HR tends to receive an influx of employee questions at the year’s end regarding benefits, holiday schedules and tax information. Clear and frequent communication is essential to keep employees informed of year-end information and responsibilities. Communications can address topics such as required training or W-2 distribution. HR can even hold office hours to allow employees to ask questions. Compliance Activities Year-end is an excellent time to review how well an organization is complying with current laws and regulations. To ensure organizations follow all applicable laws and regulations, HR can conduct a compliance audit. Common items reviewed during a compliance audit include the following: Employee classification Personnel files Employee handbook Employment policies Employment and labor law posters As part of its audit, HR can review employee documents, such as tax forms or beneficiary designations, to ensure they’re completed properly and signed, if necessary. HR can also confirm employees have completed all required trainings and move terminated employee personnel files to storage. If HR uncovers issues during its audit, it can ensure they’re corrected before the start of the new year. For example, if HR discovers the organization’s employment and labor law posters are out of date, it can order updated posters. Many organizations are legally required to submit year-end reports or notices, such as an EEO-1 Component 1 data collection report, Medicare Part D notice or annual reporting under the Affordable Care Act for qualifying employers. Despite all that must be done at year’s end, HR must ensure these reports and compliance notices are prepared and submitted in a timely manner to avoid penalties and fines. These professionals must also update organizational documentation and policies yearly. Document and Policy Updates A full review of an organization’s policies and procedures may be necessary at the end of the year, as policies can quickly become outdated or need to be updated to address any legal or organizational changes. This allows adjustments to be made and processes to be improved so they run smoother in the new year. HR can verify that the most recent workplace policies are up to date and make any necessary revisions. This may include confirming employees have signed employee handbooks and forms for the code of ethics or conflicts of interest. In addition, each year brings new regulations and compliance standards that organizations need to follow. HR can help organizations prepare for these changes by researching new laws and regulations and implementing all applicable changes. Employee Compensation and Benefits Activities Organizations often review employee compensation and benefits at the year’s end. HR can compare employee salaries to the market average and consider making cost-of-living adjustments to stay competitive. It can also do the same for its benefits offerings. By conducting employee benefits surveys, organizations can learn what benefits employees want and value most and then update or tailor benefits packages to enhance their attraction and retention efforts. HR professionals should consider completing following year-end compensation and benefits activities. Employee Bonuses and Payroll To avoid potential payment issues, HR can review employee wage, tax and withholding information at the end of the year to ensure it’s accurate for the upcoming year. HR can also establish next year’s payroll schedule and prepare for the first payroll run of the new year. Many organizations distribute employee bonuses at the end of the year. HR needs to ensure that employees receiving bonuses have satisfied all requirements and that the payment amounts and information are accurate. Time-off Calendar and Balances Verifying employee time-off balances that will carry over to the upcoming year is a critical year-end HR activity. Carryover balances should be reviewed for accuracy to ensure time-off eligibility and carryover rules are applied correctly and employees are provided with accurate information. Any unused time off that can be paid out will need to be reviewed and added to the payroll. HR can also ensure next year’s calendar includes the correct dates for company holidays. This is a simple task that can prevent headaches in the upcoming year. Summary Year-end activities can seem limitless, which may leave HR professionals feeling overwhelmed, and some tasks can be easily overlooked. By preparing early, HR can wrap up this year properly and set their organizations up for success next year. For more HR-related resources, contact your Cottingham & Butler representative today. These above insights are not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.

Cyber incidents—including data breaches, ransomware attacks, and social engineering scams—have become increasingly prevalent, impacting organizations of all sizes and industries. Such incidents have largely been brought on by additional cyber threat vectors and growing attacker sophistication. As these incidents continue to rise in both cost and frequency, organizations must take steps to address their cyber exposures and bolster their digital security defenses. Doing so not only helps organizations prevent cyber incidents and associated insurance claims from happening, but can also help them secure adequate cyber coverage in the first place. After all, the heightened severity of cyber incidents has motivated most cyber insurers to increase their premiums and be more selective regarding which organizations they will insure and the types of losses they will cover. As such, many underwriters have begun leveraging organizations’ documented cybersecurity practices to determine whether they qualify for coverage —whether it’s a new policy or a renewal—as well as how expensive their premiums will be. With this in mind, here are 10 essential cybersecurity controls that organizations can implement to help manage their cyber exposures. Multifactor Authentication (MFA) While complex passwords can help deter cybercriminals, they can still be cracked. To help prevent cybercriminals from gaining access to employees’ accounts and using such access to launch potential attacks, MFA is key. MFA is a layered approach to securing data and applications where a system requires a user to present a combination of two or more credentials to verify their identity for login. Through MFA, employees must confirm their identities by providing extra information (e.g., a phone number or unique security code) in addition to their passwords when attempting to access corporate applications, networks, and servers. This additional login hurdle means that cybercriminals won’t be able to easily unlock accounts, even if they have employees’ passwords in hand. It’s best practice for organizations to enable MFA for remote access to their networks, the administrative functions within their networks, and any enterprise-level cloud applications. Endpoint Detection and Response (EDR) Solutions EDR solutions continuously monitor security-related threat information to detect and respond to ransomware and other kinds of malware. They provide visibility into security incidents occurring on various endpoints—such as smartphones, desktop computers, laptops, servers, tablets, and other devices that communicate back and forth with the networks in which they are connected—to help prevent digital damage and minimize future attacks. Specifically, EDR solutions offer advanced threat detection, investigation, and response capabilities—including incident data search and investigation triage, suspicious activity validation, threat hunting, and malicious activity detection and containment—by constantly analyzing events from endpoints to identify suspicious activity. Further, these solutions provide continuous and comprehensive visibility into what is happening in real-time by recording activities and events taking place on all endpoints and workloads. Upon receiving alerts regarding possible threats, organizations and their IT departments can then uncover, investigate and remediate related issues. As a whole, implementing EDR solutions is a critical step in helping organizations enhance their network visibility, conduct more efficient cybersecurity investigations, leverage automated remediation amid potential incidents and promote more contextualized threat hunting through ongoing endpoint data analysis. Patch Management Patches modify operating systems and software to enhance security, fix bugs and improve performance. They are created by vendors and address key vulnerabilities cybercriminals may target. Patch management refers to the process of acquiring and applying software updates to a variety of endpoints. The patch management process can be carried out by organizations’ IT departments, automated patch management tools, or a combination of both. Steps in the patch management process include identifying IT assets and their locations, assessing critical systems and vulnerabilities, testing and applying patches, tracking progress, and maintaining records of such progress. Patch management is necessary to ensure overall system security, maintain compliance with applicable software standards set by regulatory bodies and government agencies, leverage system features and functionality improvements that may become available over time, and decrease downtime that could result from outdated, inefficient software. From a cybersecurity standpoint, a consistent approach to patching and updating software and operating systems helps limit exposure to cyber threats. Accordingly, organizations should establish patch management plans that include frameworks for prioritizing, testing, and deploying software updates. Network Segmentation and Segregation When organizations’ networks lack sufficient access restrictions and are closely interconnected, cybercriminals can easily hack into such networks and cause more widespread operational disruptions and damage. That’s where network segmentation and segregation can help. Network segmentation refers to dividing larger networks into smaller segments (also called subnetworks) through the use of switches and routers, therefore permitting organizations to better monitor and control the flow of traffic between these segments. Such segmentation may also boost network performance and help organizations localize technical issues and security threats. Network segregation, on the other hand, entails isolating crucial networks (i.e., those containing sensitive data and resources) from external networks, such as the internet. Such segregation allows organizations to leverage additional security protocols and access restrictions within their most critical networks, making it more difficult for cybercriminals to penetrate these networks laterally. Both network segmentation and segregation allow organizations to take a granular approach to cybersecurity, limiting the risk of cybercriminals gaining expansive access to their IT infrastructures (and the vital assets within them) and causing significant losses. When implementing network segmentation and segregation, organizations must uphold the principle of least privilege—only allowing employees access to the networks they need to perform their job duties—and separate hosts from networks based on critical business functions to ensure maximum infrastructure visibility. End-of-Life (EOL) Software Management At some point, all software will reach the end of its life. This means manufacturers will no longer develop or service these products, discontinuing technical support, upgrades, bug fixes, and security improvements. As a result, EOL software will have vulnerabilities that cybercriminals can easily exploit. Organizations may be hesitant to transition away from EOL software for a number of reasons, such as limited resources, a lack of critical features among new software or migration challenges. This is especially true when EOL systems are still functioning. However, continuing to use EOL software also comes with many risks, including heightened cybersecurity exposures, technology incompatibilities, reduced system performance levels, elevated operating costs and additional data compliance concerns. As such, it’s clear that proactive EOL software management is necessary to prevent unwelcome surprises and maintain organizational cybersecurity. In particular, organizations should adopt life cycle management plans that outline ways to introduce new software and provide methods for phasing out unsupported software; utilize device management tools to push software updates, certifications and other necessary upgrades to numerous devices simultaneously; and review the EOL status of new software before selecting it for current use to avoid any confusion regarding when it will no longer be supported and plan for replacements as needed. Remote Desk Protocol (RDP) Safeguards RDP—a network communications protocol developed by Microsoft—consists of a digital interface that allows users to connect remotely to other servers or devices. Through RDP ports, users can easily access and operate these servers or devices from any location. RDP has become an increasingly useful business tool—permitting employees to retrieve files and applications stored on their organizations’ networks while working from home, as well as giving IT departments the ability to identify and fix employees’ technical problems remotely. Unfortunately, RDP ports are also frequently leveraged as a vector for launching ransomware attacks, particularly when these ports are left exposed to the internet. In fact, a recent report from Kaspersky found that nearly 1.3 million RDP-based cyber events occur each day, with RDP reigning as the top attack vector for ransomware incidents. To safeguard their RDP ports, it’s important for organizations to keep these ports turned off whenever they aren’t in use, ensure such ports aren’t left open to the internet and promote overall interface security through the use of a virtual private connection (VPN) and MFA. Email Authentication Technology/Sender Policy Framework (SPF) Many ransomware attacks and social engineering scams start with employees receiving deceiving emails, such as those from fraudulent senders claiming to be trustworthy parties and providing malicious attachments or asking for sensitive information. To protect against potentially harmful emails, it’s paramount that organizations utilize email authentication technology. This technology monitors incoming emails and determines the validity of these messages based on specific sender verification standards that organizations have in place. Organizations can choose from several different verification standards, but the most common is SPF—which focuses on verifying senders’ IP addresses and domains. Upon authenticating emails, this technology permits them to pass through organizations’ IT infrastructures and into employees’ inboxes. When emails can’t be authenticated, they will either appear as flagged in employees’ inboxes or get blocked from reaching inboxes altogether. With SPF, unauthenticated emails may even be filtered directly into employees’ spam folders. Ultimately, email authentication technology can make all the difference in keeping dangerous emails out of employees’ inboxes and putting a stop to cybercriminals’ tactics before they can begin. Secure Data Backups One of the best ways for organizations to protect their sensitive information and data from cybercriminals is by conducting frequent and secure backups. First and foremost, organizations should determine safe locations to store critical data, whether within cloud-based applications, on-site hard drives or external data centers. From there, organizations should establish concrete schedules for backing up this information and outline data recovery procedures to ensure swift restoration amid possible cyber events. Incident Response Planning Cyber incident response plans can help organizations establish protocols for detecting and containing digital threats, remaining operational and mitigating losses in a timely manner amid cyber events. Successful incident response plans should outline potential attack scenarios, ways to identify signs of such scenarios, methods for maintaining or restoring key functions during these scenarios and the individuals responsible for doing so. These plans should be routinely reviewed through various activities, such as penetration testing and tabletop exercises, to ensure effectiveness and identify ongoing security gaps. Penetration testing refers to the simulation of actual attacks that target specific workplace technology or digital assets (e.g., websites, applications and software) to analyze organizations’ cybersecurity strengths and weaknesses. In contrast, tabletop exercises are drills that allow organizations to utilize mock scenarios to walk through and test the efficiency of their cyber incident response plans. Based on the results of these activities, organizations should adjust their response plans when necessary. Employee Training Employees are widely considered organizations’ first line of defense against cyber incidents, especially since all it takes is one staff mistake to compromise and wreak havoc on an entire workplace system. In light of this, it’s crucial for organizations to offer cybersecurity training. This training should center around helping employees properly identify and respond to common cyber threats. Additional training topics may also include organizations’ specific cybersecurity policies and methods for reporting suspicious activities. Because digital risks are everchanging, this training shouldn’t be a standalone occurrence. Rather, organizations should provide cybersecurity training regularly and update this training when needed to reflect the latest threats, attack trends and workplace changes. Conclusion In today’s evolving digital risk landscape, it’s vital for organizations to take cybersecurity seriously and utilize effective measures to decrease their exposures. By leveraging proper cybersecurity controls, organizations can help safeguard their operations from a wide range of losses and reduce the likelihood of related insurance claims. Furthermore, documenting these controls can allow organizations to demonstrate to cyber insurers that they consider cybersecurity a top priority, potentially increasing their ability to secure coverage. For more risk management guidance, contact your Cottingham & Butler representative today.

Consider the following scenario: A customer asks your company to manufacture a part according to certain specifications, which were outlined in a contract. He needs to add the part to his product and ship it to his customers by a set deadline. Your company creates the part, but due to an error that occurs during the production process, the part isn’t made to the customer’s specifications. He receives the part, realizes he can’t use it in his final product, and requests that the part be remade. The delay in production causes him to miss the deadline to ship the final product to his customers, so he files a lawsuit against your company for the financial loss. This scenario could expose your business to significant liability if you don’t carry the right insurance policy. Exclusions in General Liability Insurance You might assume that your Commercial General Liability (CGL) policy would cover claims such as the one in the above example. However, in many cases, it will not. Most CGL policies contain “damage to impaired property” and “property not physically injured” exclusions. That means that unless the manufacturing error results in bodily injury or property damage, the CGL policy will not cover the loss. The customer’s financial loss in the scenario described above would not fall into either of these two categories, so it would not be covered under a typical CGL or product liability policy. To protect your business from a product failure resulting in a third-party financial loss without bodily injury or property damage, you will need to add manufacturer errors and omissions (E&O) coverage. Manufacturers E&O Insurance Manufacturers E&O is professional liability insurance that covers a manufacturing mistake or negligent service that results in a third-party financial loss without bodily injury or property damage. E&O insurance covers damages that result from the following: Poor, incorrect, or faulty products that are manufactured, handled, sold, or distributed Errors and omissions caused by material defects, including property damage to the product, property damage to the work and property damage to impaired property Negligence or failure to deliver promised services If customers allege that your product failed or that you were negligent in performing services outlined in a contract, they will likely seek to recoup their financial losses through litigation. You could be saddled with significant legal costs, as well as potential damages if the case is lost. Even if the customer’s lawsuit is found to be frivolous, you could still incur the cost of defending yourself. That’s where Manufacturers E&O insurance can provide significant financial risk mitigation. Manufacturers E&O insurance will cover both the customer’s financial loss and your legal costs. Most E&O policies are “claims-made policies,” which means that in order for the claim to be covered, both the work in question must be performed and the claim must be made during the policy period. E&O premiums vary based on the type of product or service you need coverage for, your company’s financial stability, and the policy’s limits. Contact Cottingham & Butler at 563-583-7301 to learn more about adding this important coverage to your risk management portfolio.

At Cottingham & Butler, our success is defined by the remarkable individuals who bring their talent, dedication, and innovative spirit to our organization. Two individuals particularly stand out not only for their professional achievements but for their passion to make a tangible difference in the community. By founding the C&B Better initiative, Cris Houlihan and Lauren Czeshinski have spearheaded an initiative that embodies the company's ethos of continuous improvement and giving back. Finding C&B For Cris Houlihan, his journey with C&B began in 2011 when he stepped into the role of a summer sales intern. Drawn by the company's reputation and opportunities, he found himself immersed in a culture that fosters growth and development. Through mentorship and unwavering support, he transitioned into a full-time sales executive role, navigating the complexities of the transportation industry with unwavering drive. Lauren Czeshinski's path to C&B was just as serendipitous. Growing up in Dubuque, Lauren heard about the company, but it wasn't until she participated in a mock interview competition during her freshman year at Loras College that she discovered the potential of a career at C&B. Starting as a benefit sales intern, she swiftly made her way through the ranks to become a Senior Market Consultant, leveraging her expertise to drive impactful solutions for clients. Cultivating Growth and Innovation At C&B, the spirit of innovation thrives, empowering employees to explore new ideas and initiatives. Both Cris and Lauren found themselves at the forefront of this ethos through the concept of the C&B Better initiative. Inspired by a shared passion for community, they worked together to create a program that would channel the collective generosity of C&B employees towards meaningful causes. “I thought it would be exciting to actually hear from the non-profits on where they needed support and how the money would be utilized,” said Chris. “Our people are exceptional and I knew they would want to come together in C&B fashion to give back to non-profits doing incredible work, whether it be bettering brain health, combating hunger, improving access to education, or addressing homelessness. I sent out an email to some employees I was close with and nearly everyone supported the idea.” The genesis of C&B Better stemmed from a desire to make a difference, especially during challenging times like the onset of the COVID-19 pandemic. “He called me with this big idea of trying to create something that would bring C&B together to financially impact the communities that we work, play, and live in,” said Lauren. “It was like Christmas morning for me. We tossed around quite a few ideas and quickly realized this could be something very special and truly change the way we give back to the greater Dubuque community.” Through collaborative efforts and unwavering determination, Cris and Lauren transformed their vision into a formal program and grant, rallying their colleagues to contribute $100 per quarter. What started as a simple idea blossomed into a fully-fledged program, with over $130,000 donated to 14 different non-profit organizations to date. Lessons Learned and Future Horizons The journey of building C&B Better has been a transformative experience for both Cris and Lauren. Not only has it opened their eyes to the myriad of challenges facing the Dubuque community, but it’s underscored the profound impact that collective action can achieve. Through their involvement, they've witnessed firsthand the generosity and commitment of their fellow colleagues, reaffirming C&B's ethos of making a positive difference. “There are so many hardworking, passionate people in our community coming up with creative and innovative ideas on how to solve real problems,” reflected Lauren. “It’s incredible being able to give these organizations a platform to share the work they do and have a small financial part in moving them toward addressing the needs in our community.” Looking ahead, Cris and Lauren envision an even brighter future for C&B Better. With a steadfast commitment to growth and expansion, they aim to surpass the $200,000 mark and extend their reach beyond Dubuque, amplifying their impact across diverse communities. Their unwavering dedication serves as a testament to the transformative power of compassion and collective action.