What Risks to Consider Should an Elf Enter Your Life Lockton s Own Risk Elves Uncover Potential Pitfalls December 2016 Lockton Companies There are many movies that have made the short list for all-time holiday classics. Some that come to mind are Rudolph the Red Nosed Reindeer, How the Grinch Stole Christmas, or Frosty the Snowman, just to name a few. However, one movie that deserves to be on the nice list of holiday classics, is the movie Elf. While most can enjoy this movie for what it is worth, insurance professionals often find themselves analyzing risk exposures and determining if coverage applies to a given scenario. This movie incorporates laughter, holiday spirit, and a long list of risk exposures to get you thinking about appropriate insurance coverage during the holiday season. CONTRIBUTING ELVES Emmy Allen Bobby Bardin Alex Barth Neal Callahan Cheyenne Carson Cameron Crawford Brent Kiger John Reichmeier Branden Schoofs Chris Tuso With acknowledgements to Elf (2003) L O C K T O N C O M P A N I E S
Auto Claim Scenario Watch out! The yellow ones don t stop. As you may recall from the movie Elf, Buddy was struck by a vehicle while crossing a busy street full of holiday shoppers. While it remains unknown if the taxi driver who struck Buddy was distracted, it is clear that texting and other technology in vehicles is an ever-present threat that can increase accident frequency. The holiday season brings together family, friends, and fun getaways. The holiday season also brings throngs of holiday shoppers, both on the road and on sidewalks, rushing to buy the latest and greatest toys while checking their holiday shopping lists on their phones. And don t forget about those pretty holiday lights with sparkly decorations lining the streets look at that, they have multicolored glittery balls hanging from that tree! Do you see them? Quick, take a picture with your phone! Coverage Applicable: Auto Liability As we all know, a far too common correlation between auto liability exposure and losses is distracted driving. These ongoing distractions make auto liability coverage extremely important. If there are any questions about your program s coverages or limits, feel free to discuss this with your agent. However, as is the case with most risk, prevention is critical. The first line of defense for organizations with an auto liability exposure is a company policy that recognizes the potential for distractions on the road, but minimizes the risk through training and safety programs. 2
December 2016 Lockton Companies Workers Compensation Claim Scenario Tis the season for overworked Santa s elves and busy Lockton Associates. On Christmas Eve, Santa s Elves were in their workshop rushing to get toys completed before Santa s departure. It was urgent, and there was no time to waste! They were busy producing Etch A Sketches for the children on Santa s Nice List, but were behind quota due to Buddy s subpar craftsmanship. The other Elves had to pick up Buddy s slack by working overtime to produce his share of Etch A Sketches. With all of the Elves working around the clock to hit the quota, the potential for a workers compensation claim dramatically increased! Coverage Applicable: Workers Compensation The end of the year means things get crazy for home and work life. Christmas time is not only busy for the Elves, but it is also busy for insurance professionals all around the world preparing for January 1st renewals. With employees from many industries working longer hours and experiencing increased workloads, there is a higher potential for workers compensation claims. During the holidays, our clients have a greater exposure for employees being injured on the job trying to meet deadlines. For instance, a manufacturing plant might hire seasonal employees, and if they are not trained correctly on safety, there could be losses for the employer if something happens. If your client hires seasonal employees, it is a good idea to provide sufficient safety training to help protect the other employees and employer. At Lockton, we provide Loss Control specialists who can help create a safety training manual or safety class for seasonal workers. We have clients that could be placed on the Naughty or Nice list by looking at their loss history, rate and premium increase or decrease. By focusing on safety, hopefully we can help more clients transition to the Nice list. 3
General Liability Product Recall Claim Scenario To ensure that Santa avoids any liability stemming from the toys he gives to children, Santa puts all of his toys through extensive testing for quality assurance. Since Buddy has been deemed the least productive toy maker in the North Pole, he is demoted to product testing. While testing the jack-in-the-box toys, Buddy isn t able to focus due to his fear of clowns. This leads to many of the jack-in-the-boxes going largely untested, which causes thousands of jack- OUT-of-the-boxes to harm children on Christmas morning, thus resulting in many product liability suits being filed against Santa s workshop. Coverage Applicable: Products and Completed Operations Any client that is in the business of manufacturing products (especially toys) has a large exposure for products and completed operations liability. Santa s workshop has a large exposure to products and completed operations liability, specifically product recall. Since we all know that Santa provides toys for all of the children in the world on Christmas night, it could be very expensive for Santa s Workshop to incur all of the costs of withdrawing Santa s toys from the toy market. In order to reduce this exposure, he could endorse his general liability policy to include Limited Product Withdrawal Expense, which provides coverage for expenses associated with recalling products. If triggered, Santa s insurer would reimburse him for costs that include: notification, announcements, overtime to non-salaried employees, warehousing, hiring of consultants, and disposal. While it is important to have coverage for product recall expenses, it is critical for Santa to have a product recall program in place for situations like this. Having detailed instructions and procedures in place ahead of time makes conducting a successful recall all the more likely. 4
December 2016 Lockton Companies Employment Practices Claim Scenario North Pole Industries Buddy starts off working at the North Pole with all of the elves helping to make toys. Clearly, he is different from the elves and seems to be the only one to not know that he is different. There are times when he falls behind in his work and his coworkers are forced to pick up the slack. Angered by constantly having to pick up Buddy s slack, his coworkers begin to create a hostile work environment by pointing out his inabilities. Buddy could have a claim against North Pole Industries due to the constant harassment by his fellow elves. Coverage Applicable: Employment Practices Liability Today s Employers Liability policies can provide coverage for such atrocities. The standard Employment Practices Liability Policy provides coverage for wrongful acts that includes harassment and hostile work environment. To be safe, the policy should be endorsed to specifically state that bullying is included in the definition of harassment. In addition to bullying, Employers Liability policies typically protect a company from claims relating to discrimination that might be brought due to Buddy s obvious physical differences and capabilities. 5
Aviation Claim Scenario Cause there is no Christmas spirit, Santa s sleigh won t fly, enter the fleet of drones to take to the sky. Drone Dasher, Drone Dancer, Drone Prancer, take flight, to deliver the presents all through the night... With the Cringle 3000 out of commission, Santa had to utilize his fleet of drones to fulfill his deliveries. Although drone delivery is a viable backup plan, it presents Santa and his elves with a unique set of risks. Unfortunately, the Dasher drone flew straight into a power line, knocking out power for numerous businesses. The drone was severely damaged and the businesses were without power for an entire week. Coverage Applicable: Drone and Business Income Drone coverage has become a frequent topic for Lockton clients as commercial drones are being utilized more in our clients operations. It is important to ensure that this exposure is adequately covered, and, luckily, Santa had purchased a Drone policy earlier in the year. This policy covers the physical damage to the rogue drone, but the consequential business income loss is excluded on Drone policies. Therefore, the businesses had to call upon their property policies to cover the business income loss. Business Income is designed to insure the loss of income while a business cannot operate. That said, most property policies exclude the loss of off-site utility services and endorsements are needed to expand coverage for this exposure. 6
December 2016 Lockton Companies Conclusion The holidays are a special time of year. As the year comes to a close, we can be thankful for the good and learn from the bad. Businesses cannot always rely on a character like Buddy the Elf to save the day, as he did in the movie with his children s book. Lockton will be sure to enable our clients with coverage options that are applicable and affordable to protect our clients risk, even if an elf enters your life this holiday season. With acknowledgements to Elf (2003) 7
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