The Merriam Insurance Agency

The Coronavirus situation is on everyone’s mind. We are receiving calls asking “how will my policy respond?” We know many more of you have similar questions. Here is a brief primer on how insurance will likely respond and what your organization can do to prepare. The two policies under primary consideration regarding a Coronavirus outbreak are Business Interruption insurance and General Liability insurance. Business Interruption insurance pays if your business is shuttered or reduced due to a Covered Cause of Loss and the organization cannot continue to generate the same level of revenue. General Liability insurance pays if there is an allegation of bodily injury, such as someone getting sick due to your negligence. Business Income (BI) coverage is only triggered when there is “direct physical loss” to your property. Since Coronavirus does not cause physical damage to tangible property, it is unlikely a standard BI policy would respond. Even if it did, many policies carry an exclusion for property damage caused by “Virus or Disease.” However, there is an additional BI coverage – the Civil Authority additional coverage – that offers an extension of coverage. Civil Authority coverage applies when the physical area around your place of business is closed-off by a governmental authority due to damage in the area by a Covered Cause of Loss. This action must be due to “dangerous physical conditions resulting from the damage.” For example, a client collected on a claim when their campground was ordered to be closed for several weeks due […]

It is common amongst shelters around the country that residents are offered the opportunity to work, or put more succinctly, are expected to contribute to the ministry with labor as part of their discipleship and the shelter’s stewardship. It is a beneficial arrangement and allows not only for a repayment, of sorts, for the otherwise free services they receive from the shelter or mission programs, but also allows for the regular work that is part of a structured lifestyle conducive for what the community at large expects of its citizens. Where trouble can result from this arrangement is in the classification of what the resident may become in the eyes of the Department of Labor (DOL). That is, are they volunteering to the point where they may decline to do the work, or are they employees who work for an employer and are therefore subject to statutory labor laws, including being covered under the Workers’ Compensation statutes? This problem is further compounded when the ministry gives a stipend in exchange for the services provided making it rather clear the resident is not a volunteer—even a housing allowance may be defined as “remuneration,” and therefore, evidence that an employer-employee relationship exists. It should be noted that there is no universal agreement amongst the states as to what constitutes an “employee” nor what benefits they are entitled to receive if they are injured in a “job-related” injury. But employers will be held exempt from liability in exchange for Workers’ Compensation (WC) insurance […]

I have heard it argued that a mission or shelter is better off having no written procedures than to have them and not adhere to them. This argument maintains that a court of law would, therefore, be unable to prove that the staff and/or volunteers did anything inconsistent with the organization’s procedures since there is nothing in writing. In essence, this is to suggest that the staff and/or volunteers would lie to a court of law and insinuate that the negligent behavior was acceptable since there was no written procedure in place to propose otherwise. This reasoning would not hold up in court as the question would merely be asked if the behavior had ever been exhibited before and, if so, was it acceptable to the leadership of the mission. More importantly, would be the question of whether the behavior was negligent in and of its own merits, regardless of what procedures are in writing. So, is it beneficial to have written procedures at all? Absolutely! Procedures should be in writing, both in the form of an Employee Manual and an Operational Manual. The Employee Manual should include such information as the mission or shelter’s terms of employment: when is payday, how many sick days are allowed, hours of operations, anti-harassment policies, benefits provided, proper dress attire, and all matters related to the terms of employment as well as behavior that may result in termination. An Operational Manual should include as much of the “why’s”, “how’s, and “where’s” of your operations as […]

Legal Hairsplitting or an Unknown Exposure that Threatens your Ministry? I am ever impressed with the many exposures that threaten ministries and even more impressed with the determination of trial attorneys to find ways to sue them. One of the lesser known areas of susceptibility of ministries stems from the exposure they create from a benign source: the providing of employee benefits for staff. When ministries mature, they seek to attract and retain their human talent by providing such diverse benefits as health insurance, life insurance, disability income protection and even retirement benefits, such as 403(b) plans. While it is certainly a great benefit to offer such plans for the protection of ministry staff, these offerings also create exposure of errors and litigation from current and past employees. In order to address these exposures, the insurance community offers two distinct, but similar-appearing, tools that may cause confusion to ministry controllers as well as their insurance counselors: Fiduciary Liability and Employment Benefits Liability insurance. These are designed for different purposes, and their distinctions should be understood so that the correct form is chosen. The Fiduciary Liability form is designed primarily to provide coverage to fiduciaries who are sued for breaching duties imposed by ERISA. These requirements include discharging their duties solely in the interest of plan participants, defraying expenses in administering plans, acting with the care, skill, prudence and diligence that a prudent person in a similar situation would exercise, exercising the obligation to diversify investments to minimize the risk of […]

What do the second-largest bank in Chile and a homeless shelter in Midwest America have in common? Recently, Banco de Chile lost $10 Million in a cyber hack, and the homeless shelter, though losing quite a bit less than that, lost in excess of $10 Thousand to a similar scheme. In both cases, they were the victims of what is known as social engineering. Basically, the way this scheme works is that the perpetrator first poses as the intended recipient of a transaction, such as a vendor with whom your organization may have conducted business. They provide false wire information to you regarding future payment instructions, as if they changed banks and routing numbers. Then, they contact the vendor, posing as you, to state that that there will be a delay in sending payment; giving an excuse for delay, such as a change of your bank. This allows the perpetrator time to provide you with the new routing number. When you make payment to the perpetrator, in short-order, the receiving bank account is emptied and closed, leaving the vendor unpaid and your organization without the funds to make the legitimate payment. The difficulty with this deception is that, technically, it is not a theft. That is, because you voluntarily sent money, albeit to the wrong account, you sent it of your own volition, thereby negating the coverage trigger of most every cyber-crime policy the insurance industry typically offers. So, what can you do about this to avoid being the next […]

There are few greater joys for a mission Executive Director than receiving a letter from an attorney and finding that the mission is not being sued, but is instead, the recipient of a bequest. After many years of effort to raise money for a new dormitory, some person has now passed and willed a 30,000 square foot building that can reduce the fund-raising needs by a few million dollars! Praise God for His grace toward the mission’s ministry! Now comes the surprise: upon calling the insurance agent you are told that this building that cost the mission nothing, must now be insured for $6,000,000, the calculated replacement value. The conflict involving valuation is a complicated one. What a building is worth to someone is a function of utility. To the realtor, it is worth what an incentivized owner is willing to let it go for to an incentivized buyer; this is known as “market value.” To the Taxman, it is worth what the assessor’s office says it is worth, typically a percentage of predictive market value; this is known as “assessed value.” To the contractor, it is worth what it would cost to rebuild it with new components built by builders at prevailing wages; this is known as “replacement value.” To the person who recognizes its depreciated value and has no intentions to replace it should it be destroyed, there is the “actual cash value” defined as replacement value less depreciation. Lastly, there is the value that a building has […]