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It's crucial that businesses in all industries need to take steps to make the workplace a safe environment. Conducting safety orientations during onboarding for new employees can help accomplish this and prevent injuries by providing valuable information and resources. According to research, more than one-third of occupational injuries happened to workers who had been on the job for less than one year. There are several reasons why this may be the case, including: Lack of experience and knowledge—New employees may not have adequate experience or knowledge to complete the tasks in their new role safely. Additionally, new workers may come from companies that did not prioritize safety or provide resources to them to learn how to identify and mitigate potential workplace hazards. Inadequate prior training—Employers may falsely assume that new workers have had sufficient previous safety training to address industry hazards or that certain safety aspects of the job are “common sense” and fail to address these knowledge gaps. Unfamiliar environment—A new job comes with a new environment and related hazards. For example, new employees may not know how to handle dangerous materials or how to properly use personal protective equipment. They also may not know where to report safety concerns or how to respond to workplace accidents or emergencies. Desire to make a good first impression—New workers may be eager to make their new employer happy, so they may take on more tasks or tasks that are beyond their expertise. They may also be hesitant to ask questions or seek guidance for fear of appearing that they lack knowledge. Lack of supervision—New workers may not receive the same amount of oversight since they have lower levels of responsibility. Proper safety orientations during new employee onboarding can help address these issues and provide several key benefits, including the following: Improved safety—Comprehensive safety orientation can help prevent injuries to new employees. It can also bolster their safety awareness and provide them with vital safety knowledge and resources. Reduced expenses and increased compliance—Fewer injuries mean fewer workers’ compensation claims and related expenses and fewer work days missed. Additionally, holding safety trainings can help businesses comply with various state, local and federal regulations and avoid fines and penalties. Improved morale and retention—Safety education during onboarding can demonstrate employers care about workers’ well-being. This can lead to improved morale, which can increase productivity and retention. Although the specifics of orientations may vary, certain aspects can make them effective across industries and positions. This includes ensuring the information is relevant, including helpful resources (e.g., safety manuals, injury reporting protocols, return-to-work processes, incident response measures, and OSHA content) and keeping the presentation engaging (e.g., using visuals and hands-on training). Following up and gauging comprehension of the information is also essential. By holding effective safety orientations during onboarding, businesses can demonstrate their commitment to safety and prevent injuries. Contact us today for more information.

Mobile malware—malicious software designed to gain access to private data on mobile devices—is a growing threat to companies’ cybersecurity. As companies embrace remote work and more employees use their personal devices for work-related tasks, cybercriminals are finding more opportunities to exploit these vulnerable and often unsecured devices to access corporate servers and sensitive information. The consequences of these cyberattacks can be devastating for organizations. According to Verizon’s Mobile Security Index, 33% of security professionals have reported a security compromise involving a mobile device. In addition, 47% said remediation was “difficult and expensive,” and 64% said they suffered downtime. Cybercriminals can deploy mobile malware in a variety of ways, including through malicious apps, network-level attacks, and even by exploiting vulnerabilities within the device and its operating systems. This article provides more information on mobile device security threats and steps businesses can take to prevent related losses. Mobile Security Threats As cybersecurity threats become more frequent and severe, organizations must take the time to understand the potential risks of allowing employees to use their personal mobile devices for work-related activities. The following are common mobile device security threats: Phishing and smishing—Phishing and smishing scams are the number one security threat to mobile devices, according to IBM. While phishing uses emails and smishing uses text, both strategies involve sending messages that contain malicious links to infect devices with malware or trick victims into sharing account details or business information. Social engineering is often used in phishing and smishing scams by weaponizing key attributes of a victim, such as where they work, their job status and their recent posts, to gain trust and get important information out of them. Malicious apps—Official app stores like Apple App Store and Google Play have many checks and balances in place to prevent malicious code, but malicious apps may still get through these processes. Once a malicious app is installed, hackers can steal or lock data stored in the mobile device or spread more malware. Insecure Wi-Fi and network spoofing—When an employee uses a compromised or public Wi-Fi network, their device instantly becomes vulnerable to cyberattacks. Cybercriminals can conduct man-in-the-middle attacks—when communication between two systems is intercepted by a third party—while remaining undetected by the user through insecure Wi-Fi and network spoofing. Insecure Wi-Fi, such as open or free Wi-Fi hotspots, can allow cybercriminals to intercept device network traffic. Network spoofing entails a hacker impersonating a network’s name to trick users into signing in, allowing them to access user data. Outdated operating systems (OSs) and apps—Older OSs and apps may contain vulnerabilities that can be exploited by cybercriminals. While software patches and updates are often released by developers to address security vulnerabilities, any delay or avoidance in updating an OS or app could put data stored on the mobile device at risk. Mobile Device Threat Prevention The consequences of mobile device security breaches can be devastating to an organization, potentially resulting in a loss of profits, data, reputation and compliance. To minimize mobile device security threats, organizations can take the following precautions: Train employees. Employees are the first line of defense for protecting mobile devices against malware. Therefore, cybersecurity awareness training can help employees combat scams by teaching them to identify telltale signs of phishing, smishing and malicious apps, avoid public and insecure Wi-Fi networks, and keep their devices’ software up to date. Install a virtual private network (VPN). A VPN connection disguises online data traffic and protects it from external access. Unencrypted data can be viewed by anyone who has network access, but a VPN restricts cybercriminals from deciphering data. Activate multifactor authentication (MFA). MFA can prevent account compromises by requiring users to provide multiple security credentials to access a device or account. Examples of MFA include entering a code sent to a user’s email, answering a security question or scanning a fingerprint. Install zero-trust-enabled applications. A zero-trust security model evaluates access requests based on predefined controls. Legitimate access requests are permitted, and unauthorized requests are blocked and logged. With this strategy, installing zero-trust-enabled applications can reduce cybersecurity risks by restricting access to applications that aren’t permitted. Turn on user authentication. User authentication on mobile devices verifies a user’s identity through one or more authentication methods, such as passwords or VPNs, to ensure secure access. Develop bring-your-own-device (BYOD) policies. A company should develop and implement BYOD policies when allowing or requiring employees to use their personal devices for work-related activities. BYOD policies should address which devices and apps are permitted and outline security requirements. Create device update policies. Cybercriminals can infiltrate mobile devices through unpatched software. Therefore, a company device update policy should require employees to update their devices and apps as soon as a patch becomes available. Back up mobile data regularly. Regularly backing up data can help companies recover in the event a mobile device is lost, stolen or otherwise compromised. Backups can protect against human errors, hardware failure, virus attacks, power failure and natural disasters. Implement a password policy. A strong corporate password policy can ensure that systems and data are as secure as possible. Some best practices include encouraging employees to use unique, complex or long passwords; enabling MFA; and using password management systems. As mobile devices and their applications become increasingly utilized for work-related activities, companies must remain vigilant in their cybersecurity efforts to mitigate associated risks. For more risk management guidance, contact us today. Contact your Cottingham & Butler representative for additional guidance. This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice.

The Situation Our prospective client is an agricultural design-build general contractor who had been with their broker for 20+ years. After years of cold calls and requests to meet, the president of the company invited Cottingham & Butler in to review their program. He felt it was on auto-pilot and that a fresh perspective “would not be a bad thing.” Cottingham & Butler performed a comprehensive review of the existing Risk Management Program and uncovered the following: Ten insurance carriers had never received a submission for this insured (discussed with twelve carriers). $75,000 worth of annual opportunity was found in Captive Insurance; $100,000 of annual opportunity found in a Retrospective plan. 20+ program deficiencies were found within the current policies, most notably within the Professional/Pollution policy that contained an exclusion that removed coverage for "Design Services," despite that being the client's niche. Several critical recommendations were made to the subcontract agreement surrounding the indemnification and insurance requirements. Our Results A thorough exploration of the carrier marketplace resulted in a premium reduction of $126,355 (25%). Program design options were negotiated, including captive insurance, retrospective plan, and dividend options. All program deficiencies were corrected at no additional premium. A customized safety service plan was created and implemented.

It is a trend today for mergers and acquisitions to have more condensed timelines than they used to, which can lead to less time for performing a due diligence review. A rushed due diligence process increases the number of risks that could slide under the buyer’s radar when reviewing a seller’s past and current liabilities. The reason hidden liabilities are such an issue is that the buyer’s insurance typically doesn’t cover them. Usually, when a company is acquired, its liability coverages are terminated or turned into run-off coverage, which expires after a set period, depending on how the policy language is written. If these potential liabilities aren’t considered when the purchase price is decided and the contract drawn up, the buyer could find itself questioning the transaction down the road—when it is too late to take any corrective action. Taking on Liability During a merger or acquisition, the buyer takes on the liabilities of the acquired company. The extent to which liabilities are taken on is determined by the type of sale. If the sale is an asset sale, the seller retains possession of the legal entity and its liabilities. Only the seller’s assets and their accompanying liabilities are transferred to the buyer. Assets could include items like equipment, trade secrets, inventory, or licenses. Buyers typically prefer these types of purchases, as they reduce the likelihood of future contract disputes, product warranty issues, or product liability claims. In a stock sale, the buyer purchases the selling shareholders’ stock directly and therefore obtains ownership of the seller’s complete legal entity and all of its accompanying liabilities. Stock sales present more risk for buyers, who need to prepare for the possibility of future lawsuits, environmental concerns, employee issues or OH&S violations. These liabilities can be reduced to some extent through insurance policies and indemnifications. Still, performing thorough due diligence in a stock sale is crucial. Consider the following examples of hidden liability: A selling company purchased several other organizations in the past few years, all of which the buyer must now track down, whether they still exist or not, to identify all their associated liabilities. A selling company has legacy exposures, which are ongoing legal claims that arose against the acquired company many years ago. The buyer must research past cases and determine possible financial implications as well as their impact on its reputation and the possibility that similar cases could arise in the future. Organizing and Updating Existing Insurance Policies Depending on the circumstances, it may be wise for the buyer to combine the seller’s existing insurance policies with its own. For example, the seller might have its fleet insurance structured one way, and the buyer might have its fleet insurance structured differently. Multiplying policy discrepancies across various lines of insurance and keeping track of policy limits, exclusions, and deductibles becomes challenging. The buyer might find it more convenient, and more cost-effective, to insure all the risks for both companies together. In addition to convenience, consolidation of policies will allow the buyer to reassess insurance policies to make sure the seller’s limits are set at an appropriate value and deductibles are well-suited for the needs of the merged entity. A knowledgeable insurance broker is an invaluable asset during a merger or acquisition. Environmental Risks Every year businesses are faced with stricter environmental guidelines, meaning more environmental liabilities exist. Some types of environmental liabilities the acquired company could face in the future are pollution, mold, and hazardous materials in air, in water or on land. It’s important to pinpoint early any exposures for the company being acquired. Here are some ways to manage environmental risks: Environmental impairment liability insurance covers any vulnerabilities due to the void in general liability policies for pollution coverage. Risk remediation cost containment insurance can cover any cost overruns that weren’t expected during pollution cleanup. Premises pollution liability insurance covers the costs of both off-site and on-site cleanup and remediation, as well as third-party lawsuits brought on because of hazardous material exposure. D&O Risks Directors and officers (D&O) policies are typically structured as “claims made.” This means the insurance does not cover the company after the policy expires. If a claim is filed against the seller after the seller’s D&O policy expiration date, the seller will then be responsible for paying any charges in full. Depending on specific contract details, this could mean that the buyer is responsible for footing the bill since it now has those responsibilities. D&O policies are written with term limits, but claims may be brought up in the future after the term limit has passed. To combat this risk, the seller will often purchase a noncancelable, pre-paid policy for a specified period, which is called run-off or tail D&O coverage. Buyers will also want to consider that the directors and officers of the company being acquired—who may be slated to become executives of the acquiring company—will need to be added to the buyer’s D&O policy. The policy of the company that was acquired will provide coverage only for actions that transpired when those directors and officers were executives of the acquired company, before the merger or acquisition; new coverage is needed for any future actions that occur. Additional Coverages to Consider In addition to updating existing coverage, many buyers purchase legacy liability policies, also called tail liability coverage, which cover the risk of future claims from the seller’s discontinued products. Buyers also often purchase representations and warranties insurance to address any seller misrepresentations (intentional or not) that would impact the accuracy of the purchase price. Asking the Right Questions Asking questions, even when they are complicated or uncomfortable, and clearing up any confusion helps a buyer reduce risks and determine an accurate purchase price. Here are some questions that are not always asked, but should be: Are there legal and financial risks attached to this merger/acquisition, and if so, what are they? Do the acquired company’s insurance policies have term limits that can sustain future financial liabilities, and any others that might pop up from past activity, before the transaction occurs? Does the acquired company face any environmental liabilities at present time, and if so, what are they? Is the acquired company in need of environmental cleanup in the future? How often? What are the specific terms and conditions in the D&O policy of the acquired company? Does the D&O policy have any statute-of-limitation clauses? Does the company’s post-transaction risk summary look different from how it did prior to the purchase? Managing the hidden risks during a merger or acquisition may seem like a daunting task, but with the right information and support it can be done smoothly and thoroughly. Talk to Cottingham & Butler's M&A t for further insight into your potential risks and the measures that would best protect your company. The above article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or a member of Cottingham & Butler's team directly for appropriate advice.

A 3rd generation family-owned and operated commercial egg-laying operation in the Pacific Northwest was continually seeing rate increases year after year. Cottingham & Butler completed its in-depth Risk Management Assessment (RMA) and uncovered numerous opportunities for improvement, primarily as it relates to the current structure of the property placement in the short and long term. Our Results Year 1 - Short Term/30 Days In the initial year, our team secured a remarkable -13% renewal rate with new capacity, while also negotiating enhanced coverages to fortify the client's risk management portfolio. Year 2 Building upon the foundation laid in the first year, we began a strategic restructuring of the entire property placement process. By consolidating the client's coverage with a single carrier, we ensured comprehensive coverage for the total insured value (TIV), accompanied by a significantly reduced deductible of only one-third. This meticulous restructuring culminated in an impressive -52% net reduction in premium, yielding approximately $290,000 in savings when compared to the incumbent renewal program. Enhancements in Property Limits Previously, the insured had been constrained by purchasing a loss limit solely due to the cost implications of insurance. Leveraging our industry connections, we were able to secure a standard market option that facilitated the acquisition of full property limits. This transition marked an increase of approximately 67% in property limits, empowering the client with greater financial protection and risk resilience. Property Rate Optimization Through rigorous negotiation and analysis, we successfully decreased the blended property rate from $1.50 to $0.66 per $100 of value. This substantial reduction not only alleviated financial strain but also underscored our commitment to optimizing cost efficiencies without compromising coverage quality or client satisfaction. Our meticulous approach to restructuring the property program delivered tangible results, culminating in substantial cost savings, enhanced coverage, and fortified risk management strategies for our client.

In the 1996 movie classic, “Twister,” Dusty runs out of the RV at the drive-in movie theater and yells to Bill, “It’s coming! It’s coming straight for us!” and Bill replies with an apprehensive and fearful look at the ominous, night sky, “It’s already here.” That scene reminds me of the property insurance world and the hard market.  The “hard market” isn’t coming—it’s already here! For those of you new to this terminology, a “hard” insurance market represents a period of rising rates, less capacity, and unfavorable terms mandated by insurance companies to the insurance buyer. Our team at Cottingham & Butler has been sounding the bell about the hard market, and dealing with a challenging property renewal is less about “if” than “when.” Ten years ago, a dozen admitted insurance carriers would insure property insurance for foundries—today there are less than five. This article is designed around what you can do to be prepared to manage upcoming insurance renewals. Let’s start with a brief overview of the current insurance market. Property insurance is no longer (and hasn’t been for a while) a regional issue. In today’s climate, what happens in Florida or California, affects us in the Midwest and vice versa.  We’ve dealt with wildfires, windstorms, snowstorms, hurricanes, and flooding. These natural catastrophes have caused many billions of dollars in claims costs to insurers. In 2022, natural disaster damages were over $115 billion and that follows $121 billion in 2021. Along with those disasters, the industry still manages the additional losses from less catastrophic but just as costly claims ranging from fires and explosions to broken water pipes. In response, insurance carriers and their insurance providers (known as reinsurance carriers) are increasing their rates, diminishing their appetite for risk, offering less favorable terms, and heightening underwriting scrutiny. In December 2022, Ernst & Young Global predicted reinsurance rates to rise 50% during the January 2023 renewals, setting the stage for further increases throughout 2023. Another factor impacting insurance costs is the valuation of assets and inflation. The material costs of construction (e.g., concrete, drywall, pvc pipes, etc.) are up as much as 53% year-over-year. Lumber cost is the one category that saw a reduction during 2022. With that in consideration, many property valuations on insurance schedules are likely undervalued versus their true cost. The cost to rebuild your facility is significantly higher than it was three or four years ago. When was the last time you had a formal appraisal of the cost to replace your building? Likely you haven’t and therefore insurance carriers are scrutinizing the cost per square foot much closer.   One final factor for the foundry industry is reputation. Google search “foundry fires” and “foundry accidents” and look at just the first results page. This is what underwriters and insurance company analysts see and use to formulate their opinions about foundries. Despite the fact that every day, 1,750 foundries are operating safely, historical events influence and cast doubt on the viability of a foundry as a good underwriting risk. These factors create the perfect storm for insurance companies to dictate purchasing terms in what we collectively call a “hard” market. In some cases, insurance companies are simply walking away from insuring what they consider “riskier” businesses. Metalcasting is one category that is considered high risk and unfavorable for underwriting.   From the graph in Figure 1, the property market is seeing continued upward pressure for the last six years with a substantial spike during the latter part of 2022.  The first quarter of 2023 rate increases so far have continued their upward trend. With that said, you can survive the hard market. It takes additional work and effort on your part and the part of your insurance broker, however. Here are some strategies on what we can collectively do to get through these challenging conditions:   1. Strategize with your broker and do it early! The standard approach taken by insurance brokers for the renewal process is to make submissions 90 days in advance of the expiration date with the likelihood of having the renewal finalized two weeks before your policies expire. That process works in a soft market but in the market we are in today, that process will fail. Instead, have your planning meeting five months in advance of the expiration date, update all underwriting materials, and make sure submissions go out early. Every insurance company is going to want loss control, every insurance company is going to question the values, and every insurance company is going to have to go to their reinsurance markets to build limits for your business. This takes time so use it to your advantage.  2. Decide on your risk tolerance. What deductibles can you live with? Does every structure need to be insured? Does the program need to be on replacement cost or would actual cash value suffice? These are questions many businesses are considering in order to lower their insurance premiums.  3. Update your values. When was the last time you hired an appraisal company to provide a true estimate on the replacement cost value of your buildings and equipment? When I ask that question, the answer is typically “It’s been years” or “Never.” Insurance companies are going to demand the values of your buildings be based on either a third-party valuation or another metric for you to justify why your 50,000-sq.-ft. facility is insured for $2.5 million when their data suggests it should be valued at $6 million. Higher values drive more premium, which insurance companies want; therefore, take control and tell them what your values are. If you don’t, they will dictate those terms to you, which could cost you tens of thousands of dollars.  4. Satisfy the loss control recommendations. This may be the most critical area for your team to review and the one area you can directly control. Remember when the loss control person from the insurance company visited your facility and then provided you a list of “recommendations” for improvements? You likely “filed” this and moved on with your day. No more! If those recommendations (let’s call them mandates) are not addressed or completed to the insurer’s satisfaction, there is a high likelihood that insurance carrier will non-renew your insurance policies.Key areas to review are: Fire protection: We all know we can’t have sprinkler systems over the pour floor, but insurance carriers will expect sprinkler systems everywhere else, especially your pattern and mold shops and storage areas. Hot work permit systems: I’ve seen this on almost every inspection report and the requirement to have a hot work scope of work and procedures written out in detail. Dust collection: More and more carriers will want to see updated dust collections systems with spark detection and fire suppression as part of the system. Flammables: Everything from 275-gallon solvent totes to 1 gallon paint cans need to be stored properly and away from heat and flame. I had one insurance carrier dictate they would only offer a quote if the foundry would build a separate building with sprinklers for the foundry to store all their placard flammable materials.  5. Be thorough in your description of operations. Do your insurance underwriters actually know who you are and what you do and what makes your business different from all the other metalcasters they get submissions on?  Having a narrative or a “description of operations” on your business is an often overlooked part of the insurance marketing process, but if you don’t have one, then you are relying on an application and the Google search the underwriter will review to be the narrative. Again, take control and get your story told the way you want it told.  6. Know your insurance policies. I know you are working with your broker to be your advisor, but I would suggest educating yourself on what is in your insurance policy and what you are actually paying premium for. How is the business interruption and extra expense calculated? Is your policy a blanket or scheduled? What are the sub-limits? The key is to be an educated consumer so you can negotiate your options effectively.  7. Meet with underwriters directly (if this makes sense). This goes hand in hand with the description of operations discussion in that the underwriters need to know who you are and your business. Do you know many of the underwriters I speak with have never been in a foundry? Yet, we expect them to write the insurance for you! Work on getting your underwriter to come to your facility so they can see firsthand your operations and what you are doing to make your operations best in class. If you don’t feel your facility is ready for an underwriter visit, consult with your broker to uncover the steps to be prepared for this visit. The hard market is not going away anytime soon. In this market the insurance companies control who they will sell to and the terms of the sale. As buyers of insurance, the more educated we can be about the seller’s interests the better we can position ourselves for the best terms. Therefore, take charge of what you can control: Update the valuation of your assets. Conduct and document safety, site management, and basic housekeeping. Document and communicate facility upgrades and improvements. Create a clear description of operations. Partner with your insurance broker/agent for a renewal marketing plan. There are many things we cannot control, such as the facultative reinsurance market or if the insurance company “suits” decide they are pulling out of writing more foundries. However, focusing on what we can control and taking action will drive results. An adage around our firm is, “We can’t direct the wind, but we can adjust the sails.” As the storm continues to churn and winds blow, let’s adjust the sails and find calmer seas. JOHN LINK,   CPCU,CIC Vice President, Risk Management 563.590.0428 jlink@cottinghambutler.com

The construction marketplace is, once again, evolving. New construction in Residential, Warehouse, Manufacturing, and Office are down. Public Works, Medical/Pharmacom, Power/Utilities, and Data Centers are each up and trending higher. This evolution, combined with still problematic labor shortages and volatile pricing in the supply chain is creating some unique economic times. Many of these challenges aren’t new but having them combine is creating some instability. In unpredictable economic times, maintaining and increasing bonding capacity becomes crucial for contractors. Now is a good time to revisit some effective strategies to enhance bonding capacity, including methods for prequalifying subcontractors and vendors, optimizing job selection, and managing cash flow. Let's dive into these best practices. Increasing Bonding Capacity To bolster bonding capacity, contractors can consider the following methods: Strengthen financial health by reducing debt, improving cash flow management, and maintaining healthy financial ratios. Build strong relationships with your surety partners through regular communication and providing accurate financial information. Showcase professionalism and reliability by implementing efficient project management systems and completing projects within budget and on time. Maintain a solid safety record through comprehensive safety programs, regular employee training, and strict adherence to regulations. Prequalifying Top-rated Subcontractors and Vendors It’s critical to work with reliable subcontractors and vendors. Consider these prequalification methods: Conduct thorough background checks, including assessing their financial stability, past performance, and reputation. Seek references and testimonials from previous clients to gauge their reliability and quality of work. Evaluate their experience and expertise in handling projects similar to your requirements. Verify their insurance coverage and ensure compliance with industry standards and regulations. Optimizing Job Selection Choosing the right projects is vital during an economic downturn. Here are effective methods for job selection: Focus on projects aligned with your expertise and financial capabilities, considering factors such as size, complexity, and available resources. Evaluate the project's potential for profitability, cash flow stability, and long-term benefits. Consider public sector projects governed by bonding requirements, as they offer opportunities to expand your bonding capacity and don’t rely on bank-supported project financing. Assess the project's timeline and potential risks to ensure a realistic and achievable completion. Cash Flow Management Maintaining a healthy cash position is paramount during an economic downturn. Follow these strategies: Develop accurate cash flow projections, taking into account potential delays and payment cycles. Negotiate favorable terms with clients to accelerate payments or request partial upfront payments. Implement tight financial controls, including regular monitoring of expenses and rigorous invoice management. Collaborate with suppliers and subcontractors to negotiate extended payment terms or explore alternative financing options. By implementing these strategies, contractors can proactively navigate economic instability, strengthen your bottom line, and substantially impact your overall bonding capacity. Focus on financial health, build strong relationships, prequalify top-rated subcontractors and vendors, optimize job selection, and manage cash flow effectively. Remember, these best practices require consistent effort and adaptability to succeed even in challenging times. Stay resilient, and your bonding capacity will be well-positioned for future growth. Money still doesn’t buy happiness but it does buy you the ability to seize on new opportunities when they come your way. Ken Fontana, Surety Manager Cottingham & Butler’s Risk Management Division 563.587.6341 | kfontana@cottinghambutler.com Ken began his career in the insurance industry in 1996 at the corporate offices of Horace Mann Insurance. After relocating to Wyoming, he spent several years managing corporate safety programs, insurance, and claims as the RMO for a nationally exposed company engaged in numerous state and federal contracts including operations at three military bases, the Denver Federal Center, and HUD program management. He has been a licensed insurance agent for 20 years with the last 10 focused strictly on contract and commercial surety. Ken’s relationships with the nation’s top sureties and his experience give him a uniquely well-rounded approach to your overall surety, bonding, and subcontractor default insurance needs.

A best-in-class processing equipment manufacturer had been seeing a decrease in their loss experience, yet they were not seeing a decrease in how much they were paying for insurance. They were curious to learn if there was a way to incentivize their increased focus on safety and best practices. Their current program was "off the shelf" and was not designed to meet their specific needs. After engaging with Cottingham & Butler's Risk Management Assessment (RMA) , they quickly learned that there was not only a better way to buy insurance, but that there were significant coverage deficiencies in their program. The company recognized the value of a customized loss-sensitive program, as well as having a broker partner who would advocate on their behalf for claims. Program Design Delivered a loss-sensitive program option, Horizon, that would allow the company to receive up to 50% of their premium back for good loss years. Identified 3 carriers that had never seen the account before, and had an interest in the business. Coverage Identified 20 coverage deficiencies in their existing program. Significant deficiencies include: Multiple sub-limits were inadequate compared to their operations. The policy was designed for Architect and Engineering Professionals, NOT for Manufacturers. Multiple exclusions related to the core business operations of the company were present. No flood/earthquake coverage in a high-risk area. Contractual Risk Transfer Highlighted areas of concern and how their current risk transfer methods were inadequate for their industry and line of work. Cottingham & Butler put together recommendations and corrected critical mistakes in policy language Stability After joining Horizon, the company experienced a large loss in its first year of implementation. Even after the loss, their spend was similar. By paying in guaranteed cost, they avoided the increases they would have seen in the standard market. Since then, the company has received $80,000+ each year for their good loss experience. Claims Advocacy While the company had great loss experience, they had not previously received any claims reviews or advocacy services. After being made aware of the impacts of delayed reporting, their claims reporting processes were improved and consistent claim reviews were scheduled with the team.

During a merger or acquisition, insurance policies and finances need to be scrutinized and the future of employees addressed. Cybersecurity is often put on the back burner, which is unfortunate, because this is a time when company data is at its most vulnerable. Data transfers must proceed without a hitch, or else the companies risk damaging their reputation, losing customers, and hurting future sales. Additionally, legal responsibilities must be upheld before, during, and after the data transfer process. Use the following checklist to ensure you’ve covered all of your cyber security bases: Identify all data assets that will need to be transferred. Gather and merge all data standards, policies, and processes from employees at both companies. Identify potential risks that could occur during data transfer. Before any data transfers, ensure data is backed up. Run background checks on any employee who will be involved in the data transfer process. Craft a business continuity plan to prepare for potential data loss or outages during the period when the transfer will be occurring. Assign one high-level person the job of overseeing all data transfers. They will have the task of dividing and conquering by assigning one person to each data asset that needs to be transferred. Legally transfer ownership of data assets as quickly and completely as reasonably possible. Host training sessions on new data standards, policies, and processes. Update disaster recovery plans, business continuity plans, and emergency plans to include newly acquired data assets. Update the risk profiles for newly acquired assets. Preparing for Data Transfer Planning for data transfer should begin as early in the merger or acquisition process as possible. It is wise to assign one person the task of overseeing all data transfers so that there is little room for miscommunication or error. That person can then delegate smaller tasks, such as identifying data assets, identifying potential risks during transfer, and making sure the data transfer complies with federal and state law, but the person in charge should be aware of the current status of all tasks at all times. This person should also manage the implementation of the interim business continuity plan so that daily operations are disturbed as little as possible. Keep in mind that if the acquired company has already completed portions of the data transfer or consolidation tasks, you should review the work to ensure accuracy. Consider relocating IT employees from the acquired company early so that they can help with the data transfer and risk identification process, as they will be more familiar with their data and systems. Sufficient time should be mapped out to allow any older data to be converted for use in newer software and programs. Finally, ensure that your system configuration records are up to date before any data transfers or consolidations. This will help isolate any issues that might occur and allow for an effective fix. Good Practices for Data Transfer Even if your company is completely prepared for the data transfer, it’s still possible that issues will arise during the process. Here are some good practices your company can utilize to minimize these risks: Try to avoid using any kind of removable media to transfer data from one place to another. If the only method you can use is removable media, then take extreme care to be sure all records are encrypted, especially if they involve personal information. If you have any data that isn’t getting transferred, you should dispose of it safely and completely to ensure it cannot be stolen. Do not try to move all data at one time. Set small goals to complete every day or week to prevent an overload on your system or large, messy mistakes. Consider halting some of your company’s cyber services until all data has been switched over to protect the services from being adversely affected by the transfer. Another option would be to run a similar service until data has been transferred. Increase protective monitoring systems to prepare for the possibility of a disgruntled employee. Mergers and acquisitions are scary, uncertain times for employees, whose roles are often modified or eliminated to accommodate a new company structure. Update all clearances and access capabilities for employees based on new roles. Safe and secure data transfer during a merger or acquisition is of utmost importance. Communication is crucial during this time and basic duties and responsibilities should be quickly laid out and assigned to employees before, during, and after the transition. Data transfer is not just about preventing and managing a compromise or interruption to services; you also need to keep your customers’ and stakeholders’ needs in mind and consider their concerns. Most importantly, ensure your new and existing clients know that you’re keeping their data safe. For additional cyber risk management guidance and insurance solutions, contact us today.

A middle-market landscape contractor— who was with an unspecialized broker for over 10 years— felt they were being under-serviced and were not aware of existing issues within their program. After engaging with Cottingham & Butler’s construction specialists, we were able to uncover several significant deficiencies and numerous opportunities for improvement. Cottingham & Butler identified 5 carriers with an appetite for their class of business who have not been approached in 5-plus years. Past marketing had been infrequent and disorganized, with carriers declining the account for a service they had not performed in several years. This was due to poor client representation and the broker not understanding the client’s operations. Our team's strategic marketing plan allowed us to secure several options to compare to their current program. This allowed their company to make a more educated decision on which program best fits their business objectives. The result was a 20%+ premium reduction. Upon further investigation, it was discovered that their policies, subcontractor agreement, and snow removal contract had several deficiencies and exclusions – residential work exclusion, deficient installation floater coverage, deficient pollution coverage, outdated contract requirements, lack of 3rd Party Risk Transfer, and more. Cottingham & Butler made the client aware of these issues and made corrections that resulted in no additional premium. Two claims were open with large reserves affecting their Mod factor. These were passed along to our in-house Claims Advocacy team, who developed an approach to drive better outcomes. We succeeded in lowering the reserves, which resulted in an improved Mod factor, and have since provided ongoing proactive claim advocacy and support.

Mergers and acquisitions (M&A) have become an increasingly common business strategy. M&A transactions increased from $3.8 trillion in 2020 to $5.1 trillion in 2021, according to professional services network KPMG. Despite the increase in M&A activity, approximately 70% to 90% of M&A transactions fail to reach their expected strategic and financial aims, according to research from the Harvard Business Review. Often, M&A transactions can struggle to meet their intended aims due to people-related factors, such as mismatched organizational cultures and management styles, lack of communication and trust, loss of key talent, and ambiguous long-term goals. HR professionals can play a pivotal role in preventing these types of failures and ensuring a smooth transition for employees on both sides of an M&A transaction. Understanding HR’s role in M&A activity can be vital to ensuring a successful transaction. This article provides an overview of HR’s role in M&A activity before, during, and after the transaction. It’s not intended to be a comprehensive guide but explores general issues for HR professionals to consider. Understanding HR’s M&A Role The terms "mergers" and "acquisitions" are often used interchangeably, but they have important differences. Mergers combine two separate organizations into a single, new entity. However, with acquisitions, one organization takes over another outright and establishes itself as the new owner. In most cases, an acquisition is technically a merger, as the new entity will merge with an asset of the organization. Regardless, the common use of these terms can create some differences in how the activity might impact a workforce and HR’s role. Traditionally, most have viewed HR’s role in M&A deals as limited to advising management or deal-makers on HR-related issues, such as talent decisions and integrating HR practices. However, M&A deals create a myriad of people issues that must be resolved quickly and effectively. This is where HR professionals can have the greatest impact on M&A transactions. Leading up to and immediately following M&A transactions, employees start to consider their personal situation. If employees feel uncertain about their place in the new organization, it’s more likely they’ll look for new opportunities. Recruiters know this and will target key talent immediately following an M&A deal announcement. The loss of key talent can diminish the overall value of any M&A transaction. How HR operates before, during, and after M&A transactions is critical, especially when communicating with employees. Before the Transaction HR’s primary role before any M&A transaction is conducting due diligence. During a deal, HR professionals provide critical information to assist in evaluating the transaction and assessing potential risks and liabilities. HR evaluates the following aspects of a target organization: Talent Culture Employee benefits plans Compensation programs Employment contracts and policies Potential liabilities Reviewing retirement benefits can be particularly important before an M&A transaction to assess whether a target organization’s retirement plans are overfunded, underfunded, or vested improperly. HR usually works closely with legal teams to ensure organizations comply with federal, state, and local laws. Failing to conduct careful due diligence can result in organizations assuming significant liabilities during M&A transactions. HR professionals from both organizations need to determine whether the entities’ organizational cultures are compatible. This can include analyzing each organization’s growth and turnover rates, management styles, employee attitudes regarding embracing a new culture, and benefits programs. This can help to ensure a smooth transition and cultural integration of the organizations. For organizations being acquired, HR professionals typically partner with the other organization’s HR team to resolve potential issues and provide information and data related to due diligence. This may require HR professionals to review and comply with nondisclosure agreements, as much of this information is considered confidential. They also support employees impacted by the transaction and ease their concerns and doubts. Doing so can increase employee confidence in the deal and help employees to remain productive during the transition process. During the Transaction HR professionals play a vital role during an M&A transaction as they are typically responsible for completing various significant tasks. Due to the breadth of involvement, HR can help define the blueprint of all aspects of the new organization and assess the deal’s impact on employees. This section outlines some of HR’s key responsibilities during a transaction. Communicating with Employees Employee communication is a critical HR function during M&A transactions. How HR shares information with employees about the transaction, especially those most affected, can greatly impact the deal’s success. When done effectively, employee communication can improve the odds that the deal will be successful. Not only can communication provide employees with timelines and updates about the integration, but it can also provide employees with a shared vision of the new organization and help win employees over. M&A transactions can be difficult for employees, and some are likely to leave. HR professionals can reach out to employees and conduct interviews to help employees feel heard and valued. HR should be honest with employees about what’s happening, what’s planned and when key decisions will be made. By treating individuals whom the M&A deal may negatively impact with respect, HR can send a strong message to the remaining employees about how the new organization deals with and prioritizes employees. Integrating Cultures M&A transactions often can lead to a culture clash. Since culture issues can sink the success of any M&A deal, blending culture is a top HR priority. HR professionals must integrate and redefine the new organization’s culture and values. They can do this by establishing a shared organizational vision, mission and strategy. Checking in with acquired employees can provide valuable insights as organizations attempt to align cultures. Ensuring Legal Compliance Ensuring that organizations comply with applicable laws often falls on HR’s shoulders. Employees are often released as a result of M&A activity. Each organization’s HR professionals must ensure they follow all applicable laws and notification requirements when reducing staff. M&A transactions may result in organizations being forced to comply with new laws. For instance, if an M&A deal results in an organization acquiring non-exempt employees, it must comply with legal obligations for these new employees under the Fair Labor Standards Act. Additionally, to protect employees from losing legal protections, some regulations require employers to comply with laws even if they do not satisfy the legal requirements to be considered covered employers. For example, suppose a new organization is a successor in interest. In that case, employees from the previous organization cannot be deprived of their rights under the Family and Medical Leave Act (FMLA) even if the new organization does not meet the FMLA’s covered employer requirements. M&A transactions are often legally complex, and this article only provides a few examples of the potential legal issues organizations must consider. Due to the complex nature of this activity, employers are encouraged to seek legal counsel to discuss any specific issues and concerns. Making Technology and Outsourcing Decisions HR may need to decide which systems or technology the new organization will keep, replace or eliminate. It may also need to consider which organizational processes or functions will be outsourced. While this may seem straightforward, it requires HR professionals to painstakingly assess the technology and systems of all organizations involved in an M&A transaction. Additionally, HR must act quickly to integrate technology and systems to avoid disrupting the new organization’s operations. After the Transaction Once an M&A transaction is completed, HR plays a key role in integrating the organizations. This can be particularly challenging and labor-intensive. HR professionals typically undertake the following tasks: Create new policies. After an M&A event, HR must create or merge employment policies, rules and guidelines to establish workplace governance and set employee expectations for the new organization. This may include creating attendance, paid time off, sick leave, drug testing, anti-discrimination and anti-retaliation policies. Manage talent. HR plays a critical role in determining which employees will stay, are replaced or are eliminated after an M&A event. This includes identifying employees that may be needed to ensure a smooth transition but aren’t critical to the long-term success of the new organization. HR professionals typically spend a great deal of time evaluating employees since most M&A transactions expect to increase organizational efficiency by eliminating redundant roles. HR assesses employee knowledge, skills and capabilities by interviewing and potentially testing employees. Once completed, HR takes steps to re-recruit and place employees. HR must also eliminate unnecessary positions by terminating individuals, offering early retirement or leaving roles vacant. Retain key talent. To ensure a successful M&A transaction, organizations need to retain key employees. This often means reaching out directly to these employees to discuss their career goals and address concerns generated by the M&A deal. HR needs to ensure there’s a place for key talent in the new organization and adequate career growth opportunities for them. Develop compensation strategies. HR creates cohesive compensation structures for the new organization, including executive compensation strategies. Typically, this requires HR professionals to unify the compensation structures and incentives of multiple organizations. Any new compensation structure must be clearly and effectively communicated to employees. Create employee benefits programs. Similar to creating compensation structures, HR may need to fit existing employee benefits programs into a unified plan for the new organization. If that’s not possible, HR professionals may need to establish new benefits programs for the new organization, which can be complicated and time-consuming. Again, communicating any new benefits programs to employees is critical. HR is essential to the success of any M&A transaction. By ensuring HR professionals have the necessary skills and resources to steer the integration effectively, organizations can help ensure their M&A deals reach their expected strategic and financial aims. To learn more, contact Cottingham & Butler's M&A team today. The above insights are not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.

Commercial drivers face a number of risks on the road, including accidents, severe weather, and equipment breakdowns. Trucking insurance can help cover carriers and drivers from these losses, but it can be easy to overlook another common risk— lost or damaged cargo. Because for-hire transporters don’t own the cargo they carry, standard trucking liability policies may not provide the coverage you need if anything happens to freight while it’s in transit. And since cargo can be extremely valuable, you could be responsible for expensive losses and damage relationships with your clients. All transporters should consider motor truck cargo insurance to cover their liability for the goods they carry. The FMCSA also requires vehicles to have cargo insurance for interstate commerce, and other federal and state laws may also apply. General Information Motor truck cargo insurance covers all of the liability for goods in transit if they’re lost or damaged due to events such as fires, crashes or collisions. These policies may also compensate you for charges such as removing debris from public roads, preventing further damage to cargo and legal defense costs. Because the price for cargo can vary significantly, the premiums and coverage limits for cargo insurance is largely dependent on the cargo itself. When buying a policy, insurers usually determine the cost based on the specific trucking operation, the number of vehicles used and the type of cargo. However, it’s also possible to purchase blanket coverage that’s priced based on gross revenue. This can be especially helpful when carriers need to use large fleets to complete an order or if cargo needs to switch between different vehicles frequently. Working with Clients One of the most important topics when considering cargo insurance is the party that actually owns the goods you’ll be transporting. Your clients may require you to purchase this coverage as part of your contract to protect their own interests, and any unexpected losses can severely damage your business’s reputation and relationship. Before you buy a cargo insurance policy, you should work with your clients to agree on a mutual value for the cargo. If any goods are damaged in transport and your policy doesn’t provide you with enough coverage, you could still be responsible for the remaining costs. You should also ensure that all of the client's cargo declarations are accurate since any significant errors could lead insurers to deny a claim. Common Exclusions Since cargo insurance is so common, policies are usually available for a wide variety of operations and cargo. However, most policies will exclude coverage for the following: Any goods kept in a transporter’s warehouse for over 72 hours Shipping containers These types of vehicles: Garbage trucks Passenger vehicles such as buses and limousines Hearses These types of cargo: Art Jewelry Money Paper Animals Contraband Pharmaceuticals Alcohol Tobacco Explosives Radioactive material Evaluating Your Insurance Needs Cargo insurance can be invaluable for any motor carrier and driver, as can other forms of coverage. Contact the Cottingham & Butler team today to look into other policies that can protect your business or to get more information on our trucking-specific resources. This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact a Cottingham & Butler representative directly for appropriate guidance.