Author: N.P. James Insurance Agency

Electronic Equipment Maintenance Insurance

If your Electronic Equipment Maintenance costs exceed $20,000 each year, there are some interesting new products on the market which can save you up to 20-25% in annual fees. One stand-alone insurance-based product pays first dollar equipment repair costs, while also administering your service and repair expenses. You save 20-25% on direct costs and save additional administrative expenses! It is expected that you retain your current equipment repair vendors when you transfer these costs to a single expense/administrative entity.

Contract Terms are Challenging

The sign of a robust economy is the number of contracts we are asked to review for our clients. Boston is genuinely a hub of global technology services, contracting with some of the world’s largest enterprises.

Our review of clients’ contracts involve both advising on adequacy of limits, as well as specific comments on policy terms and clauses. Privacy & Security coverage is commonplace now, provided by specialty cyber-liability policy forms.

Some specifically troubling areas are clauses that stipulate that the entire client/vendor contract be an insured contract on the vendor’s policy, and clauses requiring the continuation of insurance for a number of years, usually three, following completion of the work.

The “insured contract” issue could easily run six figures in cost since intellectual property indemnification is standard in every contract and IP insurance is expensive. Contractual requirements for “continuation of insurance” are risky since there are no guarantees of insurability beyond the expiration of this year’s policy.

Being in non-compliance with your insurance requirements could be thorny should disputes arise over other aspects of your service.

Avoiding that requires advice, negotiation, and securing adequate coverage for compliance.

“Social Engineering” Crimes & Insurance

Most crime insurance policies exclude coverage when an employee is tricked into transferring money or property to an unauthorized party.  This is considered to be willingly transferred, and is commonly known now as a “Social Engineering” crime.  Social Engineering is not within the scope of most existing crime policies, which are intended for crimes such as holdups, robbery, or computer hacking by an outsider.  Willingly parting with money or property is also a standard exclusion on crime policies.

Social Engineering occurs when a party disguises themselves as an “authorized” party and instructs an employee to transfer money to them.  We are generally familiar with emails which appear to be from a known entity, but when we hit “reply” the responding email address is different.  The same type of disguise is used by social engineers, who pretend to be a known party to the victim.

What is difficult in these cases from an insurance standpoint is that an employee is actually responsible for the theft, but has not knowingly committed a criminal act.  Thus, the terms of an “employee theft” claim will not be met; such terms require a criminal complaint naming the employee.

Social Engineering is becoming commonplace.  Company management should wisely conduct training as well as impose strict controls on wire transfer authorization.

Crime insurers have introduced additional coverage forms to include social engineering losses on their policies.  It is prudent to review both procedures and risks to this type of crime.

N.P. James Insurance Agency sponsors Concord Carlisle High School Students In Control “Skid School”

Students Learn Driving Skills for Hazardous Conditions

Nancy James, owner of the N.P. James Insurance Agency in Concord, announced that she is sponsoring Concord Carlisle High School driver education students for In Control’s “skid school” advanced driver training program. The N.P. James Agency’s scholarships offer reduced fees for important additional hazardous condition driving techniques. With this advanced steering and speed control experience, youthful operators better understand roadway risks and defensive techniques, as well as experiencing the consequences of speed.

In addition to hazardous condition driving, the course covers a topic near and dear to youth – cell phone use and texting while driving. Drivers learn the real-life consequences of texting and
driving which are devastating. While the Junior Operator Law prohibits JOL operators from cell phone use when driving, the ongoing dangers of any distracted driving are reinforced in the class.
James, who has been addressing parents of new drivers “Teen Driver Safety” programs at CCHS for over two decades, spreading the message that there seems to be no room for error on our roadways. Even to the most seasoned driver can often be caught unaware. “Both the basic driver education, offered through Concord Carlisle High School, and advanced driver training programs are crucial during the first very vulnerable driving years,” James remarked.

CCHS Driver Educations students seeking sponsorship scholarships should inquire of Courtland Booth, program director or

Is Outsourcing Right for You?

by Barbara Dove, Sickle Brook Services, Inc.

Outsourcing a non-core function can save you time and lower your costs. It can give you access to added expertise, and can provide you with a valued partner in your business as the outsourcing relationship grows. In summary, here are reasons to outsource and reasons not, as well as how to get started:


  • Broader expertise — outsourcer specializes in areas you don’t want to
  • Lower costs and personnel work-time
  • No benefits, vacations, or sick days are covered
  • Outsourcer has broader experience in other industries to bring to the table: outsourcers may see the bigger picture

Why not?

  • Your IP assets may be at risk
  • Your company’s philosophy and outsourcer’s don’t mesh: you have different value sets
  • What you think you can outsource may in truth be a core competency


  • Decide what you want to outsource and assemble the key players in your company who will have input to the decision.
  • Brainstorm the 7 criteria you want the outsourcer to meet – for example:
  • How do they treat their own employees?
  • Their financial status (how likely are they to be in business as long as you need them?)
  • Do they have the expertise you require?
  • Can they cover the hours you need?
  • Pricing is very important, make sure their service fits your budget.
  • Validate your value system against the top three candidate companies. Do they match? Are there any warning signs?
  • Choose the best company and set regular meetings; more frequently at first to evaluate the progress. Set goals as you would with any department.

Barbara Dove is the President of Sickle Brook Services, Inc., an Outsourced Helpdesk Provider for small and medium sized businesses. With offices in Lexington center, she can be reached at 781-862-8855,

Complex Risk Issues To Consider

Business rationale being key to your decisions regarding outsourcing does not preclude a close examination of your associated risks.

Outsourcing as separation of risk: For many Massachusetts small and mid-sized manufacturers, there exists a single business site for all operations. Fire or storm damage at your location means an inevitable interruption of operations with associated loss of revenue and possibly customers. Outsourcing parts of the manufacturing or support operations suggests the possibility of more rapid recovery in the event of a disaster. Analysis and planning along those lines is an important part of the outsourcing decision process.

Outsourcing as loss of control: Included in your business decision checklist should be the physical viability of the outsourced operations. If your key component, tool, or mold is housed away from your site, what are the exposures to a loss resulting in a long rebuild time? Not only the integrity of your propriety design, but also the safety and security of your property need to be considered. Be sure that either your outsourcer or you have insured your capital equipment and inventory at the outsourced site.

Risk review: A narrow set of core competencies done with exceptional precision makes for a competitive product or service. Innovation of design is also key in generating and maintaining market share. Months of restoration can leave a fast-paced industry leader trailing as competition rages forward. Careful analysis and understanding of your and your outsourced partners’ risks and recovery framework are key to maintaining viability and corporate health.

N.P. James Insurance Celebrates 25th Anniversary

Nancy James, principal, celebrates by underwriting the publication and distribution of the Concord Carlisle Regional School District Adult & Community Education catalog.

Concord, MA, April 2, 2007 – The N.P. James Insurance Agency is celebrating its 25th year in business in 2007. Nancy James, principal, specializes in technology risks and has positioned the agency to serve the global market so important to Massachusetts technology manufacturers and software developers. A professional team of trained staff assists clients in identifying risk, planning solutions, and handling claims.

In recognition of her 25 years in business in Concord and to thank the town for all it has done to make the agency a success, Nancy James has underwritten the publication and distribution of the Concord Carlisle Regional School District Adult & Community Education catalog. Every household in Concord, Carlisle, Sudbury, Bedford, and Lincoln received the 32-page booklet, containing information on more than 150 courses and programs for the winter semester.

“It’s a major gift for us, and we couldn’t be happier,” says Jim Saltonstall, chairperson of the Adult & Community Education Advisory Board. “It gives us renewed confidence that we can keep the schoolhouse doors open in the evening so that everyone can benefit.”

Nancy James, who wrote the first cyberspace liability policy in the U.S., applies her depth of technology product knowledge and her earlier professional background of more than a dozen years as a computer systems designer to help technology clients manage risk. A frequent author and speaker in the US and Europe, James covers issues related to technology exposures for identification of the complex, global risks in technology.

The agency also has a personal lines department experienced in handling complex personal assets for individuals’ home and auto insurance needs necessary to suburban clientele.

The N. P. James Insurance Agency of Concord, MA, founded in 1982, specializes in high technology risks, exposure analysis, and insurance. James, a licensed insurance advisor, is currently serving as co-president of the Massachusetts Society of Licensed Insurance Advisors.

She is a member of The Boston Club, Association for Corporate Growth, Concord Business Partnership, and the Concord Chamber of Commerce. James also serves on a number of non-profit boards. For more information, please visit or call 978-369-2771.

Questions on Every CEO’s Mind

I have been operating profitably with no losses for 5 years and my insurer is non-renewing? Why? And more importantly, what can I do about it?

Maurice “Hank” Greenberg, CEO of AIG the largest insurer in the world, stated: “Market share in the risk business is a bad idea!” Also known as “drive-by” underwriting, it has come back to bite insurers.

So insurers are taking the fastest way back to a conservative, solvent posture by slashing risks from the books. Any perceived exposure is a target, especially when insurers are unable to “lay off” risk to a dwindling pool of reinsurers.

What to do? The insurance industry needs opportunists right now. Back office marketing goals still need to be met; new business booked. There are insurers out there looking for quality business at reasonable prices. A risk management specialist in the industry keeps pace with “hungry” markets.

What should I do about Directors & Officers coverage?

Volumes have been written in every professional journal about the details of the hard-ening D&O market. In my opinion, Sarbanes-Oxley has raised the bar for all operating entities. Inevitably, higher expectations have now been set for private and even non-profit organizations. A higher level of management oversight will be expected from everyone. The Sarbanes-Oxley dust needs to settle before we will have a better idea of constituent expectations and our exposures. In the meantime, fasten your seatbelts.

What to do? You need to undertake a total corporate strategy. With D&O costs increasing exponentially, front-line non-insurance risk solutions must be considered. A braced, defensive posture is necessary until the market relaxes.

Insurer insolvencies are being blamed for my limited insurance choices. What is this all about?

These times are like a 3-legged stool with all 3 legs broken. The bottom of a 10-year soft insurance market cycle, a falling stock market, and 9/11 have all hit the insurance industry with crippling losses. 40% of our reinsurers are gone; capacity is severely limited.

In the technology sector, several markets, one of them being Kemper, have gone under. Remaining technology carriers just do not have the capacity to absorb all of those risks given the greatly dimin-ished reinsurance capacity. Recent earnings reports from some major insurers indicate a return to profitability, at least in the short-term. This severe reaction in the last 2 years will end; when is a prediction I cannot make now.

We offer over 20 years experience in risk management and the technology insurance marketplace. Call us to help. We will be honored to serve you.

IT as a commodity: The Premise

Let’s look at a few interesting facts:

  • Robert Weisman’s editorial in 4/30/05 Boston Globe argues a shift of IT from asset to commodity.
  • Nicholas Carr’s May 2003 Harvard Business Review article titled “IT Doesn’t Matter” (referenced by Weisman 4/30/05) looking at the staggering in-creases in IT spending.
  • The February 2002 Newsletter editorial article teasing readers with my opinion that hardware and software has never been worse!
  • My (Nancy James) September 2004 Newsletter describing a greater and greater dependency on sub-assemblers and outsourced services.

A Review:

Nicholas Carr in his 2003 HBR article cites some staggering statistics regarding US capital expenditures on IT: 1965 = 5%, 1980’s = 15%, 1990’s = 30% and 2000 = 50% (NPJ comment: remembering that Y2K remediation was part of the millennium’s expenses).

I have maintained in my newsletters for the past several years that legacy systems and legacy processes have been updated with new hardware but obsolete methods. Low-cost processing workers have been replaced with high-cost IT professionals. As a consequence, corporate leaders, with Y2K remediation systems still not functioning, are understandably reluctant to invest in new technologies. Thus, the current drag on our business costs and economy.

We also see a trend by manufacturers to outsource work to precision assemblers for board and component assembly. In fact, precision parts manufacturing more and more defines the Massachusetts technology corridors.

“Small business solutions” suppliers from IBM to local providers offer outsourced support to harried executives tired of IT headaches. For example, among small business outsourcers is a local Waltham provider, New England Data Services (NEDS), providing solutions to the disruptions caused by in-house supported networks. Craig Brenner, CEO of NEDS, stated: “We offer a wide range of outsourced services designed to remove the headaches of complex IT structures, security, and reliability from client’s facilities. With NEDS support our customers can return to their business’s core competencies.”

As our technology becomes more complex, focused solutions are needed. Commoditization may not be a bad resolution!

The Issues:

So now your processing functions as well as some hardware is scattered locally or widely. What do you do with respect to fire, theft, security, privacy, and other protection?

  • Your outsourcer’s contract will disclaim any direct or consequential damages. You can expect that!
  • Your own property/liability insurance policy will be your corporate location site specific, with only limited coverage at any other location.
  • The privacy of your internal and client data is now way out of your control (even while you hold your provider harmless!).

As a business you are now a part of a complex web of communications movement and storage. What you gain in service capability and reliability, you lose in direct control.

The Solution:

Be sure your insurer understands your new operational configuration and has solutions within at least the same boundaries as before you outsourced. You will need to consider all outsourced services as branches of your own offices and operations. Coverage for each function should be analyzed and insured by you if not by your outsourced service provider.

Contracts, Risk, and Your Insurance

Gone are the days of Digital, Wang, Prime, Cullinet, Apollo, Data General, among other technology giants; the current profile of Massachusetts’ technology business is smaller components manufacturers, software shops, middle industry parts and service providers. With local tech companies on the short-end of the contract stick, managing risks and exposures is increasingly important. A review of both your contracts and increased risks should be undertaken, with strategies to limit those risks. If contractual limitations are impossible, other means, such as transfer to your insurer, should be fully utilized.

Insurance Response

Your commercial insurance program probably does cover:

  • Waiver of subrogation against your landlord — your lease is usually covered under “Limited Contractual” coverage
  • General liability obligations required under most contracts for standard limits (including Bodily Injury and Property Damage)
  • Workers Compensation coverage for most contractual obligation language
  • Most “hold harmless” clauses found in leases.

Your commercial insurance program probably does NOT cover:

  • Intellectual property infringement indemnification
  • Pollution
  • Employee non-disclosure agreements
  • Indemnification for your landlord’s building contractors
  • Most “any and all causes” clauses
  • “Your insurer will honor all the terms of this contract” language provisions

RISK is a 4-Letter Word

With the economy in turmoil, businesses are looking for every means of survival.  While assuming additional risk is a common practice during economic downturns, this current global crisis is responding to risk ultra-cautiously.  Many view those people who played fast and loose with risk as primarily responsible for our economic woes.

Thus, you need all the more caution with risk for survival and ultimate success.

But how does that work with operational dollars stretched so thin?  Let’s look at issues involving risk transfer and how it might draw added value toward you and your products.

  • Liabilities assumed with your product should always be transferred!  Be sure that you are not only covered for your US sales, but also your global product distribution is insured for product failure causing injury or damage.
  • Beware of the language “Coverage is global for suits first brought in the United States,” which will not respond if someone brings suit against you in a foreign court.
  • Shipments FOB your loading dock still need to have transit coverage in place for the circumstances where your customer has not placed coverage and refuses to pay you for a damaged or lost (undelivered) shipment.
  • Be careful to understand standard exclusions for aircraft-related products, hazardous material, and financial injury due to faulty products.  You can secure coverage for risks at reasonable prices.  These are not risks you want to overlook.
  • Use the expertise of your insurance professional, accountant, and attorney to help you minimize risk to maximize value. Each perspective can help you assess and manage exposures to identifiable loss potential.

Internet Data Security

Data security is currently the number one technology challenge. Insurance programs can cover statute risks such as:

  • Fidelity (losses from employee acts)
  • Intruder Theft
  • Computer Virus
  • Malicious Acts
  • Extortion
  • Credit Card Transaction protection
  • Credit Injury
  • Virus Clean Up
  • other e-commerce related exposures

E-Commerce and Web Site Liability

Your web site has drawn gratifying interest and you want to expand its services.

  • If you are a manufacturer you plan to provide your customers with on-line order capability.
  • If you are a software provider you offer your clients upgrades and products to download from the web.
  • If you provide consumer product reviews and recommendations, you plan to provide, under manufacturer’s agreement, limited products for purchase directly from your web site.

In addition to the “Cyberspace Risks” I have covered in past newsletters, you are now becoming a product sale entity, thus:

  • subject to strict consumer protection statutes
  • subject to federal trade restrictions
  • considered the original manufacturer, possibly, for non-US produced goods.
  • open to fraud and complex data security issues (see “Internet Data Security” article in this issue).

Make sure your insurer is prepared to defend you for any related claims against you.

Certificates of Insurance

Our clients frequently request certificates of Insurance. Certificates are often a source of confusion. In an effort to shed some light on this illusive document, I have outlined a few keys points pertaining to certificates of insurance.

What is it?

A document that verifies your insurance for specific coverages [for example Property, General Liability, Auto Liability or Workers Compensation] and coverage limits with your insurance company’s name for a stated period of time [the policy period]

Who requests them?

  • Landlords
  • Clients/Customers – companies, people or organizations you agree to perform a service for or provide a product to
  • Owners of leased equipment
  • Banks/Financial Lenders

Cancellation Notice:

The Insurer/Agent will try, but is not legally obligated, to notify the certificate holder in the event of cancellation of coverage within the stated amount of time [normally 10 to 30 days].

Certificate Holder vs. Additional Insured:

Certificate Holder:

The Certificate states to the Certificate Holder that the Named Insured (you) has the specific coverage and limits listed on the certificate. It does not grant insurance coverage to the certificate holder. It only states that you have the specified coverage.

Additional Insured:

An Additional Insured is an entity that is not automatically included as an insured on the policy. Therefore, the Certificate extends a certain degree of insurance coverage to the Additional Insured on your insurance policy. A contract or lease number is generally referred to on a certificate to specify the reason the Certificate Holder is named as an Additional Insured (i.e. “Certificate Holder is named as an Additional Insured with respect to the leased premises at 123 Main Street, Anytown, USA.”)

It is important to have your agent review the insurance sections of your contracts or lease agreements prior to signing the agreement to be sure that the insurance requirements in the document coincide with your company’s insurance policy coverage. The Certificate of Insurance clearly states that the “certificate does not amend, extend or alter the coverage afforded by the policies.”


The Need for Software Insurance

Software in the 90’s is a “tangible”, a “good”, and no longer considered an intangible, or service. The insurance implications for software professionals are ominous!

Any software specialist having been insured under a $250.00 comprehensive property, liability, and lost income package saw that program disappear as well known cases like Magnetic Data, Inc. v. St.Paul Fire & Marine Insurance Co.1 begin to alert wary underwriters.

In the Magnetic Data case, the consequences and insurance provisions responding to an accidental erasure of data were under consideration for the first time.  Property Damage provisions of a basic small business package described above might have been forced to respond to a situation never contemplated for the premium charged.  While Magnetic Data never ultimately did decide the tangibility matter, Retail Systems, Inc.v. CNA Insurance Companies2 did declare software as tangible. Thus ended an inexpensive insurance vehicle for the software industry!

1 442 N.W. 2d 153 (Minn.1989)
2 469 N.W. 2d 735 (Minn. 1991)


Unexpected Losses

Indirect Income Loss

Problem: A greater risk for “indirect” income loss exists as more Massachusetts manufacturers rely upon assemblers for production of their boards, cabinetry, and parts for finished product. You may have millions of dollars of product moving through assemblers, where you have no control over plant safety or security.

Solution: We take great care to understand the flow of your product from parts through finished goods to your customers. We help you secure adequate on-site and off-site property protection.


  • Review your assembler contracts for capital equipment and inventory loss responsibility
  • Ask your insurer to place coverage where needed
  • Get updated certificates of insurance from your assemblers’ insurer

Shock Loss

Problem: Your outgoing $75,000 computer is dropped on Logan Airport’s tarmac, sustaining visible damage to the cabinet. Fearing hairline cracks in your boards resulting in possible systems failure, you declare a total loss to your insurer. After the insurance adjuster has an engineer test the unit, your insurer offers to settle for the cabinet damage only, $6,500. A $68,500 gap!

Solution: We can solve this discrepancy by stating in the policy application that any shock loss is declared a “total loss” by your QC standards. (Pricing will reflect this higher loss agreement.)


  • Review your Quality Control standards with your insurance broker
  • Determine the most cost effective method of risk management and coverage

Shipping Loss

Problem: You always ship F.O.B. your loading dock. But what happens when your customer reports “shipment has arrived damaged — please replace” and — your customer did not place shipping coverage on the incoming goods?

Solution: We can provide for this contingent loss possibility at a fraction of the standard shipping insurance rates.


  • Be sure you have an annual cargo insurance policy in place for any incoming and outgoing loss


Stranded At Sea

Guest article by Gustav Widmayer

Let’s face it, when the winds die down, no company has any business braving the high seas. So, what should you do when bookings are scarce, billings are down, and backlogs are depleted? This captain is scouring his ship from stem to stern.

I have taken my company, OX3 Corporation, through half a dozen downturns since 1980. I’ve learned that the key to success is to batten down the hatches and wait for the good winds. The current recession in the semiconductor sector is being called the worst in thirty years. Orders didn’t drop — they stopped. Things have gotten so bad so quickly that layoffs, rollbacks, reductions and write-offs have been swift and deep.

In the business of protecting semiconductors during handling and transport, a company has to be registered by an international quality standards board in order to demonstrate its ability to meet strict customer requirements. As sales dropped, my managers devoted hundreds of hours to writing and re-writing work instructions, procedures and manuals, activities that are the backbone of any ISO system for maintaining quality control. On August 1st of this year, OX3 received ISO9001-2000 certification.

Instead of sitting around wondering when our next order is going to come in, my staff and I are busy developing plans for a new facility. We are on schedule to break ground on November 1 of this year. Experiencing down time is also giving us the ability to more thoroughly train our staff. My managers now have the time to review tasks and work instructions, analyze trends and sharpen their skills.

My brother-in-law, a church deacon, reminds me of precedence in the Bible at Ecclesiastes 3:1-7: “there is an appointed time for everything: “A time to plant, and a time to sow . . .A time to tear down, and a time to build up . . .A time to be silent and a time to speak.” During the past quarter, I had the unenviable job of letting workers go and rolling back the hours and salaries of those who remain. At the same time, I’ve had to talk about shared values and the importance of hard work and ingenuity. Strangely, I seem to be succeeding. My message of sharing sacrifice has been accepted by my staff.

Each month I participate in a roundtable discussion with a group of other entrepreneurs owning tech companies with revenues of at least $1 million. At one of our recent gatherings, I suggested that I would not be asking every available employee to grab an oar and row after new customers. Not all agreed, but most found the argument to be sound. I believe that the course I have taken will make my company stronger when the current recession in the high-tech sector ends. When it does, and it will, my ship will be lean, clean and ready to sail past the competition.

Our guest, Gus Widmayer, is native to Boston, Massachusetts. A graduate of the University of Notre Dame, he manages Orion Park, in Ayer, Massachusetts, ( and owns OX3 Corporation ( He is passionate about writing, history and investing and is currently writing books on the history of villages in Falmouth and Boston. He has been a customer of N. P. James since 1995.


Manufacturing Risks In The Global Economy

Technology manufacturing is the backbone of our New England economy. Our Massachusetts manufacturers have long exported nearly 1/3 of our technology products, making Massachusetts an important part of the global economy. Risks of the international marketplace naturally follow.

Products liability cases have become more prevalent in the EU markets, as noticeable shift from the non-litigious culture so long distinct from our U.S. culture. Cases of product performance (Errors & Omission), product safety and worker/employee protections in important overseas markets directly affect our local manufacturers. With overseas markets being seen as a crucial element to local economic vitality, risk identification and minimization is important.

Remember, your U.S. insurance policy probably provides:

  • Defense for “worldwide” liability only if the case is first brought in the U.S. No Workers Compensation benefits to any employee traveling outside the U.S.
  • No funding for returning home an injured employee from overseas.
  • No coverage for a laptop lost or stolen outside the U.S.
  • Coverage for (cargo) transit only under special transportation forms.
  • No coverage for Internet related material, intellectual property, trade or domain names, etc., connected with your web site. (Your web presence makes you global whether or not you export product.)

As technology costs become a greater part of corporate expenses, product performance expectation increase. As attention to business security matters is heightened, technology manufacturers are expected to provide complete consumer confidentiality as well as the most current product security and firewalls. As reliance on technology becomes more vital to the critical path of corporate operations survival and continuity, technology performance is held accountable.


Lessons Learned – Off-Premises Property

Your losses may not be covered

One lesson often learned very painfully is loss of property stored somewhere other than at your office premises. Be sure to keep your insurance broker advised if you move property, or if a client has not taken title to an expensive piece of equipment. These are the types of situations which should trigger your memory to call your insurance agent:

  • Warehousing, even temporarily, of any valuable property
  • Demo equipment at a client’s site (and you still own it)
  • Equipment/property on approval for a lengthy period at a client site
  • Property storage at any employee’s home
  • Lending or rental of equipment (and you still own it)

Many insurers offer some nominal amount of “unscheduled location” coverage ($10,000 is customary). Often we are called for large theft or water losses from a location about which we were never advised. That location of loss is then deemed “unscheduled” and only the incidental value of $10,000 can be collected.

Keep your agent in the loop.

Scheduling Specific Property

What to do – what not to

While jewelry and silver are the most frequent property losses by theft, those are usually from residential homes and not businesses. Computer equipment is the most frequent commercial property stolen, including boards, parts, and components. Value versus weight makes electronics an attractive target.

The principles of scheduling coverage are the same in your home as in your business, however. What should be specifically named and valued (with appraisal or receipts) and what should be designated as general “contents”?


Any property that moves around a lot, traveling from business site to clients or tradeshows, etc. Gemstones, high-valued products samples and like items.

What not to schedule:

Most of your business premises contents should not be specifically scheduled. Coverage will respond for full value of lost property on site for fire, storm, smoke, theft, vandalism (terrorism maybe), and the usual perils.

How insurers handle electronics in 2002.

  • Your computers are customarily categorized in a lump under “Computers” with a single total value of coverage. You will be expected to send your insurer a complete inventory of all computer hardware and software at least annually in order to support value as well as to facilitate later claims adjustment.
  • Laptops at this time cannot be specifically scheduled. But you should list them on your inventory. Most insurers are now insisting on a $2,500 laptop deductible; they simply do not want to be insuring these high loss items. Laptops are disappearing with some rapidity.
  • Computers in transit are getting harder to insure as theft claims are dramatically on the increase.

Value Your Insurance Coverage As You Value Your Product

If your hardware product promises a high level of performance, your Quality Control procedures should guide your loss settlement clauses. If one of your computers falls out of an airplane (they do that a lot, you know), your QC may mandate complete destruction of the product. Your insurer on the other hand, may put it through some rigorous stress tests and find it to be performing, resulting in what may be a sizable gap in insurance recovery.

If your QC will be taking a hammer to any product sustaining even a bench drop, you should ask your insurer to honor those standards. “It is hereby agreed and understood between Client and insurer that the following types of losses will be considered ‘total losses’…..” should be conveyed at the beginning of your policy term.

Four Lessons Learned

  1. Keep property inventory lists, especially computer inventory and software licenses, off-site.
  2. Be sure all the locations where you have property are listed on your insurance policy.
  3. “Schedule” all mobile property for broader territorial coverage.
  4. Agree with your insurer about loss valuation as part of your policy terms.


A word on possible exclusions to your policy. You have been reading in the press about insurers difficulties with terrorism. The World Trade Center tragedy was a $70 billion loss to a $300 billion industry. Insurers can’t take too many of those. The federal government is considering being the insurer for terrorism losses, much as they are for flood losses. [The consequences of not having terrorism insurance coverage would be creating ghost towns of America’s largest cities!]

What does that mean to you?

Depending on your location and the magnitude of your property values at risk, your insurer may be adding terrorism exclusions to one or more of your policies. We will keep you informed.

Risk Management In Uncertain Times

The peril of a $70 billion loss to a $300 billion industry has made insurers wary. That, exacerbated by an only slightly hardening market following a decade of dropping rates and premiums, has created a capacity (ability to renew existing property value limits) problem not seen since the mid-1980’s. At that time in the mid-1980’s, courts were “rewriting” insurance policies to create pollution protection for municipalities where none existed per the policy exclusions.

Today we have the national threat of catastrophic losses due to terrorism. Not since the War of 1812 has the continental United States been attacked within our own borders. Rates and premiums have been actuarially set based upon natural disasters, never the threat of deliberate destruction. But enough of historical perspective.

What do we do?

This is the time to check and review:

  • Your plant’s disaster recovery plan. Review it. Practice a simulated shutdown.
  • The creation of a “virtual” back office, making you less site-sensitive in the event of disaster. Be sure that computer records are backed up, stored off site, and available for reloading at any temporary location.
  • Communication lines restoration or replacement capability at several temporary sites.
  • All contracts for transfer of risk or your assumption of risk.
  • Force majeur clause review in all contracts to prevent risk assumption during times of catastrophic events.
  • Overseas facilities, employees, and travel plans to assess risk and costs of travel to your personnel and business survival.
  • and don’t forget that you still have cyberspace liability:
  • Privacy issues with Internet transactions
  • Customer expectations with respect to security of data
  • Customer expectations with respect to security of data
  • Global intellectual property exposures regarding your web site

We have been abruptly reminded of the need for careful risk management. Don’t leave it for another time.

Unreliability of Hardware and Software

Businesses are noticing their insurance costs. Two years ago, at the bottom of a 10-year soft market cycle, costs were virtually insignificant, repre-senting only .0015 percent of gross revenues. Steeply rising costs now dictate very close attention to premiums and coverage.

This article will examine something that has been unnecessary for the last decade: hard choices in insurance coverage to keep premiums under control in a slow economy. Following are fundamental principles of insurance that help risk managers decide where premium dollars can best be placed.

As an editorial observation by this author looking back over 30 years of professional work in technology, I am compelled to draw some provocative conclusions. In the old days, when we re-wired boards to run IBM 80-column cards, we’d call Chris when things got tangled up. Then the generation of DEC (we called it Digital at the time) and running reliability came. IBM raised reliability to meet the DEC challenge. In recent years, however, I have observed that both hardware and software are being released long before bugs are identified and corrected. In part due to its complexity, I have probably never seen such unreliable hardware and software. So what are we doing? We’re calling Chris again.

Exacerbating this unreliability of hardware and software is a traditional tendency to automate existing functions and processes, rather than develop new technology-based business processes. Corporate America is now burdened with legacy systems, unlinkable, unavailable for e-business applications. Very costly to link, re-link. Low cost processing personnel have been replaced by high-end and scarce IT professionals. The weight of legacy systems may ultimately buckle and cripple our economic growth. Compound that with a blame-the-victim mentality, and experienced business executives will continue to suspend critical judgment to pour more resources into unexamined technological solutions.

All this adds to:

  • the cost of doing business.
  • the cost of economic recovery.
  • customer dissatisfaction and intolerance.
  • litigation.

All this at a time of great national threat to peace and security at home.


Sharing the Risk – This Is Not A Test

In the wake of September 11th’s tragedies, insurers are quietly making good on their annual promises to pay losses. Interestingly, all policies exclude war related losses in a very broad way. However, America’s insurers are stepping up to the plate in the biggest way they ever have, declaring these losses as “terrorist acts” and not excluding coverage. Does that affect you? Absolutely!

The whole principle of insurance is to spread the risk among those parties at risk. Even the largest multinational insurance companies use reinsurers to further distribute the loss potential by “laying off” a portion of every account limit. Reinsurers have already suffered significant losses in the past several years. Those costs are passed back to your insurer in higher rates. This will continue in a noticeable way. You will have your chance to help.

Electronic Equipment Maintenance Insurance

If your Electronic Equipment Maintenance costs exceed $20,000 each year, there are some interesting new products on the market which can save you up to 20-25% in annual fees. One stand-alone insurance-based product pays first dollar equipment repair costs, while also administering your service and repair expenses. You save 20-25% on direct costs and save additional administrative expenses! It is expected that you retain your current equipment repair vendors when you transfer these costs to a single expense/administrative entity.