Clearing House Insurance

A clearing house is a company that simplifies the medical insurance claims process by providing electronic submission and translation services between doctor and dentist offices and insurance companies. Although doctors and dentists are not required to use a clearing house to submit claims, clearing houses help speed up the process because they prescreen submissions so that mistakes can be corrected more quickly.

Background
The medical insurance clearing house industry was established in the 1990s when doctor and dentist offices started submitting claims to insurance companies electronically instead of by mail. There are now dozens of regional and national clearing house companies. The first standard form that clearing house companies used to submit electronic claims was called the National Standard Format. The Health Insurance Portability and Accountability Act -- better known as HIPAA, which provides health care privacy protection -- includes a privacy rule implemented in 2003 that affects clearing houses. The rule established a new standard form for electronic health care claims that all clearing houses must use.

Submitting Claims
Doctor and dentist offices fill out claim forms and email them to the clearing house, usually in large batches. The clearing house sorts, formats and translates the information into the insurance company's required format. It also checks the claims for errors before processing them for payment. The insurance company notifies the clearing house whether the claim was approved or rejected, and then the clearing house notifies the doctor or dentist office of the claim's status. If the insurance company accepts the claim, the doctor or dentist office could receive payment in as few as 10 days.

Fees
Although there are no standard fee structures that clearing houses use to charge doctor and dentist offices, possible fee structures include startup fees, monthly flat fees and per-claim fees that are based on the office's volume. Monthly fees to doctors and dentists average between $85 and $125. Clearing houses also charge insurance companies a flat monthly fee rate or a per-claim fee basis based on the insurance company's volume.

Additional Services
Many clearing houses also offer other services such as eligibility verification to determine the patient's insurance coverage limits prior to treatment and patient statement services that automatically send statements to patients so the doctor's office or insurance company does not have to. Other additional services may include claim status reports, rejection analysis, transaction summaries and secondary billing services. Some clearing houses include the additional services in their base coverage, while others provide them at an additional cost. Some clearing houses also offer services for doctor and dentist offices that still mail in paper claims.

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Who Has Priority Shareholder or Creditor

Corporations raise funds for short-term and long-term projects by selling debt instruments known as bonds. Additionally, publicly listed corporations can also raise funds by issuing stocks or shares. In the event a company goes bankrupt, the creditors rather than the shareholders have the first claim on the assets of the failed firm.

Owners
When you buy a share in a company you become an owner. Major companies issue millions of shares, and most of the shareholders have voting rights, which enable them to have some control over the direction of the firm. Many companies disburse profits in the form of dividend payments to shareholders. Some shareholders rely on these dividend payments as a form of supplemental income. Additionally, shareholders also can make money when the value of company stock rises. However, when a company files bankruptcy, the stocks no longer hold any value. Liquidators reorganize the company's assets, and the shareholders can file claims for a share of the company's liquidated assets.

Seniority Of Claims
Under federal law, liquidators who reorganize a failed corporation have to settle claims made on the company's assets in a particular order. First, wage claims are settled, then taxes are paid. Next, creditor's claims are satisfied, and finally claims of shareholders are addressed. In many instances, the sale of the firm's assets does not raise enough capital to settle all the claims. Because of the seniority of claims, stockholders are the people who most frequently end up with nothing, although bond holders often receive only a portion of the funds they are owed.

Bonds
Before a company's reorganization plan takes effect, bond holders are given the opportunity to review the plan, and bond holders vote whether to accept or reject the proposal. Crucially, stockholders do not always have the opportunity to vote on a reorganization plan, which means the owners of the company have less opportunity to protect their interests than the company's creditors. Secured debts are tied to some form of collateral, while unsecured debts involve no collateral. The claims of secured debt holders are settled before unsecured creditor's claims are addressed, so not all bond holder's claims are addressed equally.

Shareholders
Many companies issue both common stock and preferred stock. Common stock holders have voting rights, so they have a greater say in the running of the company than preferred stock holders. However, preferred stock holders receive fixed dividends, and common stock holders only get paid dividends after the dividends that preferred stock holders are entitled to have been disbursed. When a company goes bankrupt, the claims of preferred shareholders are settled before common shareholders claims are reviewed. Therefore, some company owners have a better chance than others of getting their money back in the event of a corporate bankruptcy.

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Aggregate Endorsement on Umbrella Policy

An unimpaired aggregate endorsement on an umbrella policy is an extremely narrow provision in the umbrella policy. Generally, the unimpaired aggregate endorsements means that the umbrella insurer will not pay for a claim, or defend a claim, if the situation underlying the claim happened while you had general liability insurance but before you purchased your umbrella policy.

Umbrella Policy
An umbrella policy is basically additional insurance coverage beyond general liability insurance. Most liability insurance policies have coverage limits, so if a damage claim exceeds the liability limits, the liability insurer will not pay for damages exceeding that. However, if the insured also purchased an umbrella policy, then that policy will kick in and cover the damages, up to the coverage limit of the umbrella policy, that exceed the general liability policy limits. An endorsement is a specific provision in, or addition to, the umbrella policy.

Timing
Sometimes the insured purchases a general liability policy that has effective dates that differ from the effective dates of the umbrella coverage. For example, the general liability policy may run from Dec. 31 to the following Dec. 31, while the umbrella policy effective dates run from June 30 to June 30, so the two policies only have concurrent coverage for about six months out of the year. The unimpaired aggregate endorsement on the umbrella policy only becomes relevant when the effective dates vary from one another. As long as the general liability policy effective dates are the same as the umbrella policy limits, then the unimpaired aggregate endorsement will have no effect.

Aggregate
The term aggregate means total claims and payouts during the effective term of an insurance policy. Each policy generally includes both specific occurrence limits and aggregate limits. For example, the policy may cover up to $1,000,000 for each occurrence, with an aggregate limit of $2,000,000. This means if you have one claim for $1,500,000, followed by another claim for $1,000,000 during the policy term, the policy will only cover $500,000 of the second $1,000,000 claim. The maximum the insurer will ever pay out to the insured is the aggregate limit.

Unimpaired
Impairment refers to whether the aggregate limits on the general liability policy have been "impaired" because of a previous payout. For example, if under a $2,000,000 aggregate liability policy the insurer has already paid a $1,500,000 claim, then that liability policy has been impaired to the tune of $1,500,000. If you purchase an umbrella policy after your general liability policy has already been impaired, then the unimpaired aggregate endorsement kicks in. The umbrella insurer will deny coverage until the insured has first paid the amount of the impairment. So, in the example where a $2,000,000 general liability policy has already been impaired by $1,500,000, the general liability insurer would pay the remaining $500,000, then the insured would have to pay the first $1,500,000 in additional claims, before the umbrella policy will kick in and provide any coverage.

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Insurance Cover Embezzlement

Business owners who entrust employees with large sums of cash or expensive inventories are often vulnerable to embezzlement. Though most employers usually perform thorough background checks and choose their staff members wisely in such scenarios, there is really no guarantee that an employee is honest. The best way to protect your business -- and in some instances, clients -- is to make sure you carry the proper insurance policies to cover embezzlement and the right amount of coverage.

Types of Embezzlement Insurance
Insurance agencies use a handful of terms to describe the type of coverage that covers corporate embezzlement. This type of policy is commonly referred to as "employee dishonesty insurance," "crime coverage" or "fidelity bonds." Crime coverage and employee dishonesty insurance -- essentially the same thing -- cover the risk of theft from the company and clients who fall victim to theft at the hands of your employees. Fidelity bonds provide the same type of coverage, but extend beyond employees to include thefts committed by third parties. Many businesses add fidelity bonds as a rider to their existing business insurance policies. However, crime and employee dishonesty insurance plans are also obtainable as standalone policies.

Coverage
The type of business you're running, the amount of cash and value of property handled by your employees will determine the amount of theft insurance you'll need; and how much you pay for it. When you've established the amount of funds that are at regular risk of embezzlement, this sum is the amount of your bond coverage. For instance, if you own a currency exchange where employees typically have access to $750,000 in cash, checks and money orders, you'll require $750,000 in coverage and will pay a corresponding premium. Premiums vary considerably, depending on the number of employees included in the policy, the amount of coverage requested and company history.

Acquiring Embezzlement Insurance
Many business insurance policies already include crime insurance as riders on existing policies. Check with your business insurance broker to see if your business insurance includes dishonest employee and crime coverage or a fidelity bond. If it does not, your insurance agent should be able to attach such a binder with a corresponding premium. Another option, is to contact your department of state or local city council to locate a government endorsed fidelity bonding agency. In some regions, local governments provide such programs to local businesses. Complete all necessary paperwork and applications. This generally includes background checks on your business and employees. You should receive a letter of approval in no more than four weeks and coverage begins as soon as the premium is paid.

Policy Duration
Generally, bonding insurance policies that protect against embezzlement are valid for six months. Your policy will cover your employees from their first day of work, providing they have passed criminal background checks. After the six-month period has expired, you must renew the policy for continued commercial fidelity bond insurance.

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Deep Pocket Insurance

In litigation, "deep pocket" refers to a person or company that is worth suing because they have a lot of money or are insured for a great deal. Deep pocket insurance is used in business to protect wealthy board members -- sometimes called "deep pocket" board members -- corporate officers and the business itself from lawsuits. There are several types of deep pocket insurance, each designed to protect businesses and their owners from liability in the event of a lawsuit.

Deep Pockets Rule
Companies need insurance to protect them from lawsuits because of a legal doctrine called the "deep-pockets rule," or joint and several liability. This rule states that businesses and people that are found to be partly at fault for damages caused by things such as negligence or fraud can be held liable for the entire amount of any court judgment. This allows plaintiffs to sue a business owner for the entire amount of damages, even if that person was only 1 percent responsible for the damages. For example, if four people are equally responsible for manufacturing a faulty product that caused $1 million in damages, but only one of those people has money, the victim could sue the one person with money for the entire $1 million.

Types of Insurance
Because of the deep pockets rule, some businesses and business owners may need insurance to protect them from liability claims. The exact type of "deep pocket" insurance a business or owner needs depends on the types of risk they have. Most businesses carry liability insurance, which covers a company in the event that its negligence causes an injury or financial loss. Some companies, and nonprofit organizations, also carry director's and officers (D&O) insurance, to protect board members against lawsuits brought against them personally. This type of deep pockets insurance may be extended to protect some employees, and may not cover employment-related actions or actions where the plaintiff is not asking for a monetary award.

Who Needs Insurance
All businesses should carry liability insurance. Without it the business and its owners are personally responsible for any negligence claims that may arise. People are more likely to sue companies and people who have money, so the greater your assets, the more insurance you may need -- a single claim can bankrupt a small business and its owners. For small businesses, other types of deep pockets insurance, such as D&O insurance, may not be necessary. If the company and its owners have few assets, they are unlikely to attract lawsuits that do not arise from negligence. For example, companies with a small, friendly staff may not be at great risk of lawsuits related to employment issues, such as unfair dismissal.

Fair Share Acts
More than 40 states have enacted some type of fair share legislation, in which the defendant can only be made to pay for the damages he is actually responsible for. In 2011, Pennsylvania became the 41st state to pass a fair share law. As in other states, defendants can still be forced to pay for the entire judgment if they intentionally caused the damage or if the damage is related to violations of the liquor code or to hazardous sites cleanup. Fair share legislation is intended to keep costs down for businesses by reducing the need to take out deep pocket insurance.

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Equitable Subrogation Limitations Florida

Florida law sets a limit on the length of time a person can be sued for a debt or other claim, called the statute of limitations. The time limit imposed by the statute of limitation varies depending on the type of debt or claim involved. Equitable subrogation is a type of claim recognized under Florida law that is generally subject to a four-year limitation period but is only three years if the claim is against the state or other political subdivision.

Equitable Subrogation
Equitable subrogation means acquiring the legal rights of another person by paying for damage or debt caused by someone else. For example, an insurance company typically acquires subrogation rights when it pays its insured for damage caused by a third party. The insurance company can sue the third party on the same claim the insured could have, in effect putting the insurance company in the shoes of the insured. However, this also means that the insurance company is subject to all legal defenses the third party may have against the insured.

Statute of Limitations
The statute of limitations protects a debtor from old debts. Once the statute expires on a particular debt, the debtor has a legal defense that will preclude the creditor from obtaining a judgment on the debt despite the fact that the debt might otherwise be valid. However, the defense of the statute is not automatic. If the debtor is served with a lawsuit filed by the creditor, the debtor must file a response with the court asserting the statute. If the debtor fails to assert the statute, the court can enter a judgment on the creditor's claim.

Florida Law
Florida Statute section 95.11 sets forth nearly all the statute of limitations that apply to lawsuits in Florida and range from as long as 20 years (e.g., action on a judgment) to as short as one year (e.g., action for specific performance of a contract). The four-year limitation period under subsection 3(k) applies to an "equitable action," which includes equitable subrogation. Florida case law indicates that the four-year limitation period on an equitable subrogation claim begins to run from the date payment was made on the claim. A notable exception to the four-year limitation period applies to claims against the state or other political subdivisions. Florida statute section 768.28(6)(a) limits all claims in this situation to three years.

Florida Insurance Guaranty Association
Although a claim for equitable subrogation is widely used in the context of insurance, subrogation claims are prohibited by the Florida Insurance Guaranty Association (FIGA). When an insurer becomes insolvent, FIGA is generally responsible for paying the remaining claims attributable to the insolvent insurer's policy holders. However, Florida statute section 631.54 excludes certain types of claims from FIGA's responsibility, which includes claims for equitable subrogation.

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General Liability Partners Payroll Limitations

When you purchase general liability insurance in connection with your business operations, the cost of your insurance premium depends in large part on the level of business you conduct each year in addition to the type of work your business performs. Those involved in high-risk industries such as construction or excavation typically pay more. To ensure you don't pay more than you have to, it's important to understand general liability payroll limitations for partners and owners.

General Liability Insurance
General liability insurance is a standard insurance policy many business owners choose as a means to protect themselves and their businesses. A general liability policy protects against possible financial losses which may occur as a result of litigation brought on by error, omission or negligence on the part of the business owner or employees. You may obtain a general liability policy whether you are self-employed as a sole proprietor or the head of a multimillion dollar organization.

Payroll Limitations
For the purpose of determining premium, the insurance provider calculates the amount of business income or total wages paid during the coverage period. These totals help the insurance company gauge the level of business conducted during the coverage period and assign a level of associated risk. Most insurers allow a payroll limitation by excluding the salary of business owners, sole proprietors, executive officers and partners from payroll totals, according to insurance and risk management adviser, International Risk Management Institute. The limitation amounts vary depending on the state and the nature of the business.

Partnerships Defined
A partnership is an arrangement between two or more individuals and may be an informal verbal agreement or it may be filed as a legal entity through the Secretary of State's office, by a local business attorney or a public notary. The IRS notes partnerships must file annual returns documenting income and losses, and each partner must report a share of the partnership's income and losses on his personal tax return. Each partner's payroll is eligible for exclusion up to the maximum allowed by state law for general liability insurance.

Verifying Payroll Limitations
Businesses must maintain adequate record of the payroll allocated to each partner throughout the year. Many insurance providers conduct routine audits to verify the level of payroll during the policy period. Maintaining accurate records helps facilitate a smooth audit process and may help guarantee your partnership qualifies for the full payroll limitation.

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Actuarial Equivalent Calculation

Actuarial equivalence is the technique of applying a single measurement to two separate benefits plans. These plans can include health insurance coverage, worker's compensation insurance policies or retirement plans. Actuarial equivalence allows plan managers to see how closely the benefits of the two plans match up together. Each type of plan has its own factors and its own calculation tools. Actuarial equivalence calculators use the components of each plan -- such as interest rates, payout rates and policy terms -- to ensure fair comparisons between various benefits plans. Some benefit plans, such as life insurance plans, have online actuarial calculators available that let buyers compare plans side-by-side.

Uses for Actuarial Equivalent Calculation Tools
A corporate benefits plan manager can use actuarial equivalent calculation tools to choose between two company-sponsored life insurance plans. The factors for choosing between the two plans can include average employee life expectancy, return on plan investments, current interest rates and average employee compensation rates. However, the "equivalence" calculations can only serve as rough estimates. The calculations also rely on a wide range of assumptions based on current conditions. These conditions can change from year to year, so plans that appear roughly equivalent one year can undergo major changes the next year.tml

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Recovery of Overpayment of Insurance Benefits

Proper administration of insurance benefits is key to preventing the difficult process of recovering overpayments. Recovering overpayments takes a number of legal steps on the part of the company. It can be a financially and psychologically challenging experience for the recipient. There are different processes for different types of insurance benefits.

Health Care Overpayments
To a company or government insurer, overpayments equal bad management or bad debt. This can happen when a benefits provider pays a claim that should have been denied. It also happens when a serviced is overvalued. Each is a loss if not recovered. If the overpayment went to the patient, the insurer can write a demand letter asking that the amount overpaid be returned. If this does not work, hiring a collection agency or attorney experienced in recoupments can help.
Physician pay is another source of insurance overpayments. Once an insurance company has record of a physician being overpaid it should send written notice to the physician and give him 30 days to return the payment before taking any further action. The law varies by state, but there is normally a statute of limitations on claims against physicians.

Unemployment Insurance
For unemployment insurance, an overpayment is defined as the receipt of more money than the individual is eligible to receive. Overpayments can happen because of fraud or an employer's reporting error or other oversight. States disburse unemployment insurance, but most will adjust overpayments by reducing future payments. Benefits recipients may also voluntarily repay the overage amount. Those in dire financial straits have the option of asking for a waiver of overpayment liability. If one is granted, no benefits will be reduced, but they will continue at the rate for which the individual is eligible.

Social Security and Other Benefits
When the government administers benefit plans, the process for collecting overpayments is more systematic. Government insurance programs include Social Security, Medicare and Medicaid. These program administrators can withhold benefits to make up for the overpayments, go through the IRS to recover overpayment from income tax refunds or garnish wages. They can also use more traditional means like debt collection agencies.

Employee Benefits
Federal employees who receive benefits and overpayments are subject to the Federal Employee's Compensation Act. This act requires any overpayments of insurance or other benefits to be returned to the employer within a reasonable time. As with Social Security, Medicare, Medicaid and other government insurance programs, individuals with financial problems can request a waiver of liability for the overpayment. Private employers must request voluntary repayment from the employee. If the two agree to have the overage amount deducted from payroll, the employee must give his written consent.

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Job of Unemployment Adjudicator

Adjudication is the process used to resolve unemployment questions and issues. A claim may need adjudication if there are questions regarding how a claimant left a job or other eligibility issues. In some cases the adjucator may be able to make a decision after a conversation with a claimant. In other cases, information from other sources, such as the employer, may be needed.

Identifies and Reviews Issues with Unemployment Claims
When an unemployment claim is filed, an issue may be identified that may affect eligibility. Some issues may be identified as a result of how the claimant left employment. Other issues may be caused by situations involving the willingness or ability of the claimant to seek and perform full-time work or the claimant's availability.The unemployment adjudicator examines claims on which such issues have been identified to determine whether or not the issue would make the claimant ineligible to receive unemployment benefits.

Investigates and Identifies Facts
In some instances, additional information is required before the adjudicator can make a decision regarding a claim. In these instances, the adjudicator gathers documentation, investigates and reviews the claimant's employment history, contacts employers, union officials and other state agencies to gather pertinent facts to assist in determining eligibility.

Explains Processes and Decisions to Unemployment Claimants
The adjudicator provides claimants with explanations regarding the disposition of their unemployment claims, their rights and the procedures for appeal in cases where the decision is unsatisfactory to the client or where benefits are being terminated.

Prepares Written Decisions and Opinions
When an adjudicator makes a substative decision regarding an unemployment claim, the decision is recorded in writing. Each issue is resolved with consideration of unemployment law, codes and procedures, as well as the circumstances of the individual case. It is the responsibility of the adjudicator to prepare a written statement that identifies the decision made and the basis for making the decision.

Performs Research Regarding Policies and Regulations and Serves as an Expert Witness
Adjudicators perform research to determine what policies and regulations guide decisions and may make appropriate recommendations for corrective action when errors are discovered. An adjudicator may also act as an expert witness at unemployment insurance hearings to testify and provide technical expertise regarding contested decisions.

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Cross Liability & Severability of Interest

Cross liability and severability of interest are clauses in commercial insurance contracts. These clauses mean that the insurance policy applies separately to each insured party. However, the total policy coverage usually applies collectively to all the insured parties. Insurance policies may also contain severability clauses for directors and officers to limit their collective liabilities if there is a claim against one of them.

Cross Liability
A cross-liability clause provides insurance coverage for claims of one of the insured parties against another. For example, if there is a conflict between the two founding partners of a business and one decides to sue the other, cross liability in their company's insurance coverage should protect both partners. This clause is usually standard in a commercial general liability policy. However, some policies may contain insured-versus-insured exclusions that eliminate certain types of situations, such as one director suing another, internal disputes and lawsuits brought by a company against its directors.

Severability of Interest
A severability-of-interest clause stipulates that the insurance policy clauses apply separately to each insured entity. It is similar to the cross-liability clause in that a claim by one of the insured parties against another is covered. The International Risk Management Institute explains that some insurance policies may specify separate coverage limits for each insured party. For example, a chief executive officer may have a different, and possibly higher, insurance coverage than any of the other executive officers or board members.

Severability for Directors and Officers
Severability clauses exclusively for directors and officers protect them from liability if one of them knew that the application for insurance coverage contained material errors. In other words, this clause means that when a company applies for insurance coverage for its directors and senior executive officers and one of the officers or board members knows that the financial data provided with the application is materially false, the insurer cannot bar the other directors and officers from coverage.

Severability of Exclusions
A severability-of-exclusions clause means an exclusion that applies to some insured parties under an insurance policy does not necessarily apply to others. For example, an insurance policy for directors may contain exclusions for fraudulent and other criminal acts, which means that if a director commits one of these acts, he loses coverage. The severability-of-exclusions clause indicates that exclusion would not automatically extend to the other directors on the board.

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What is Unemployment Remanded

Unemployment insurance benefits aren’t themselves “remanded.” Rather, decisions regarding unemployment insurance claims may be remanded, which simply means that a claim or case is sent back to the original decision-making body for further review. An unemployment benefits remand typically occurs during the appeals process. A claim is filed, a decision is made, and one of the parties involved — usually the losing party, either the employee or employer — decides to appeal the decision. At that point, the state’s unemployment commission has several options, including affirming the case, reversing the case or remanding the case for further review.

Unemployment Insurance
The federal-state unemployment insurance program is a state program administered under federal guidelines. Each state establishes its own criteria for eligibility, benefit amounts and payment durations. The federal government requires only that recipients be unemployed through no fault of their own, although even that caveat is left to the states to interpret. Most states fund an unemployment-benefits pool through taxes on employers, and each state has its own eligibility requirements for filing a claim.

Unemployment Insurance Claims
Each state has its own procedures for filing unemployment insurance claims. Most states not only provide online filing services, but many actually require that you file online. Regardless of the mode of filing, most states require certain information, such as your Social Security number, driver’s license or state ID number, and other documentation.

Appealing Decisions
If your claim is denied — or, if you’re an employer and an employee’s claim is awarded — and you want to appeal the decision, each state has an appeals process for you to follow. Both parties to the claim are usually required, or at least invited, to attend appeals hearings. An attorney usually can be present if you so desire. Telephone hearings also are conducted, often more so than face-to-face hearings, as in Arkansas. After your case is presented, the state board, commission or other decision-making body will determine the outcome, generally within 60 days. Typical verdicts include affirming the original decision, reversing or modifying the decision, or remanding the case for further review. If remanded, the case is returned to the state unemployment board or commission for further review or the introduction or additional evidence.

Reasons for Remand
Claims are remanded for several reasons. Some states, such as New Mexico, will remand a case if you didn’t attend the original appeal hearing and can show good cause for missing the hearing. The remand in this case is simply a rescheduling of the original hearing. Another reason for a remand is that the reviewing body feels that there wasn’t enough evidence presented at the original appeal hearing to render a decision. In addition, a claimant — or the employer — may have additional documentation or witnesses that weren’t introduced or allowed to be introduced at the appeal hearing. In such a case, the evidence from the original hearing remains in force and additional evidence may be presented. Other procedural errors at the original hearing also can result in a remand. The outcomes of remand hearings may be appealed anew.

Court-Issued Remands
Some unemployment insurance claims reach the civil-court level, usually district court. This normally occurs after all state unemployment commission hearings and appeals have been exhausted.

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Self Insurance & Captive Insurance

Insurance premiums can make up a large portion of administrative expenses in certain industries, and small businesses can find themselves in a position where insurance is not readily affordable. Self insurance and captive insurance offer two alternatives to traditional insurance contracts, opening up additional possibilities for protecting your business from financial loss. They provide fundamentally different approaches to financial protection, and each has its own set of advantages and drawbacks.

Self-Insurance Basics
Self insurance is the act of systematically setting aside money to insure against specific risks. Self insurance can take a variety of forms. A small business can establish a savings account specifically to cover cash shortages caused by nonpayment by credit customers, or a real-estate lessor can set aside cash each month to cover the cost of potential damages due to natural disasters. Almost anything covered by insurance can conceivably be covered by extensive savings, and that is the philosophy behind the self-insurance concept. Some states require employers to meet certain conditions before using self insurance to cover legal insurance requirements, such as workers' compensation. In these cases, the right to self insure is generally granted to larger, more financially stable companies.

Captive Insurance
The term captive insurance refers to insurance coverage provided by a carrier that is owned by one or several clients. Captive insurance operates according to principles similar to self insurance, but captive insurance is a bit more complicated and costly to maintain. A financial-services company, for example, can set up its own errors and omissions insurance carrier to serve itself exclusively, or a local group of farmers can create an insurance company to protect themselves from loss due to crop damage. In captive insurance contracts, owner companies pay regular premiums to the insurance carriers the same as a commercial insurance contract.

Advantages
Self insurance is essentially a fancy term referring to age-old financial wisdom. Setting aside money for emergency situations is a solid strategy for both personal and business finances. Some types of insurance coverage, such as comprehensive automobile coverage, can easily be covered with cash after a period of diligent savings, rather than relying on a commercial insurance contract.

Captive insurance has the benefit of resembling a commercial insurance contract in almost every way, while providing policyholders with the power to set their own prices and determine their own benefits. Prices and benefits are still subject to the laws of economics, but captive insurance providers do not necessarily have to generate any profit, allowing them to charge minimum prices for large benefits.

Disadvantages
Self insurance has distinct limitations. Some types of insurance, such as workers' compensation, can pay out benefits far exceeding a company's ability to put money aside, even after years of saving. Others, such as general liability, can be too unpredictable to rest assured that potential issues are covered by savings.

Captive insurance incurs a wide range of expenses not present in either commercial or self insurance. Costs such as business registration and licensure can make it challenging to justify the costs of maintaining a captive insurance carrier rather than simply buying a contract from a third party.

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Get Unemployment in Michigan

Under the Michigan Employment Security Act, a business owner, or someone who is self-employed, is typically not eligible for unemployment benefits. However, the courts have carved out an exception. At times, a person who sees himself as a business owner or independent contractor may, in actuality, have an employer-employee relationship in the eyes of Michigan courts, and may, therefore, be eligible for unemployment benefits.

Employer-Employee Relationship
There are various factors one must meet to qualify for unemployment insurance. One of them is to have worked in an employer-employee relationship. Business owners are usually self-employed, and, therefore, do not have an employer-employee relationship. However, Michigan courts have dictated that the actual work relationship, and not simply what the parties call it, is what matters. Using this standard, a self-employed business owner may have had an employer-employee relationship in effect and may be eligible for unemployment benefits.

Economic Reality Test
Michigan courts have indicated that the Michigan Unemployment Agency must look at the reality of the work situation, and not simply what the parties are calling it. Under this test, the agency must consider certain variables to determine this reality. The primary concern is whether the applicant for unemployment benefits was under the "direction and control" of another party. If the applicant is found to be under "direction and control," unemployment benefits may be available.

Factors Considered
The agency will ask whether the work performed by the applicant was an integral part of the business for which the applicant provided services. Also, if the applicant depended on the wages received for living expenses, this makes a difference. If the applicant provided all the materials for the job, it is more likely he was actually an independent contractor, and would not be eligible. However, if the recipient of the applicant's services provided these things, the applicant may have actually been in an employer-employee relationship, and may be eligible.

Example
The Michigan Unemployment Agency has provided a straightforward example of the difference between an independent contractor relationship and an employer-employee relationship. A business owner who claims to be self-employed as a painter, but actually works full-time for just one customer, and that customer provides all of the painting equipment and material, would likely have an employer-employee relationship and be eligible for benefits. However, if that same painter provided his own equipment and material, and worked for a few customers, he is likely an independent contractor and would not be eligible.

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Direct Loss Ratio & Net Loss Ratio

Insurance is based on the principle of assuming the uncertain risk of loss in exchange for certain premium payments. By assuming an insured's risk of loss, an insurance company allows the insured to anticipate his expenses, because he pays a specified amount each month to avoid the risk of incurring a large expense if a loss occurs. Insurance companies use two types of loss, direct and net, to determine its expenses involved in paying claims.

Losses
A direct loss is the amount an insurance company pays directly for a covered claim. For example, if your vehicle is stolen, and the vehicle has a cash value of $20,000, your auto insurance company would pay you $20,000, minus your deductible. Net loss represents the direct loss, plus expenses involved in investigating and paying the claim, such as adjuster's fees, legal expenses, and administrative costs.

Loss Ratios
Loss ratios reflect an insurance company's expenses for claims compared to its earnings from premiums. These ratios play an important role in evaluating an insurance company's continued solvency, or its ability to pay future claims. If income exceeds losses, the loss ratio also plays a role in determining the company's profitability. Direct loss ratio is the percentage of an insurance company's income that it pays to claimants. Net loss ratio is the percentage of income paid to claimants, plus other claim-related expenses that the company realizes as claim expenses.

Mitigating Direct Loss
An insurance company can improve its direct loss ratio by adding conditions and exclusions to its policy documents. Conditions and exclusions detail circumstances in which an otherwise covered loss will not be paid to a claimant. For example, an auto insurance policy may state that the company will not pay for damage you intentionally cause to your vehicle. A deductible, which is the portion of a loss the insured must pay out-of-pocket, can also improve the company's direct loss ratio.

Mitigating Net Loss
A deductible may help an insurance company control its net loss ratio because it discourages policyholders from making claims for small losses. This reduces the number of claims that the company's adjusters and administrative staff must handle, which decreases the company's costs for these functions. An insurance company can also reduce its net loss ratio by using independent adjusters instead of in-house adjusters, which decreases overhead associated with office space, payroll administration, and employee benefits.

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Liability Laws for Manufacturers

In business law, liability pertains to company's legal responsibility for selling a defective product or service. Strict liability refers to civil lawsuits where a faulty or poor-quality product has caused physical or mental harm to a customer. Strict liability cases require proof that the defective product caused the injuries, but they don't require proof that the manufacturer's negligence was directly responsible for those injuries. Strict liability has both advantages and disadvantages for manufacturers,

Positive Aspect: Higher Product Quality
Strict liability promotes the idea that manufacturers should check that their products are produced in a safe and consistent manner. When manufacturers know that their release of an unsafe product could lead to costly litigation, they likely will take extra care to ensure that their product meets safety standards. This idea fuels every stage of the product development process, from design and prototyping in automobiles to clinical trials for pharmaceuticals.Higher-quality products can improve brand loyalty and company reputation.

Negative Aspect: Higher Production Costs
All the additional safety considerations in the design and testing phases lead to higher production costs. The company incurs these costs from developing safety procedures, purchasing additional safety testing equipment and testing products before their release. Manufacturers may choose to pass these extra costs on to their customers in the form of price increases. The price increases could turn customers away from the safer product, which would cost the company in decreased revenue.

Positive Aspect: Higher Burden of Proof
Plaintiffs in strict liability cases are held to a higher burden of proof than in simple negligence cases. The plaintiff must prove that the company's actions when manufacturing the product contributed to its defects and that the defective product caused the plaintiff's injury when properly using the product. If the company can refute claims that their manufacturing process was substandard or that the plaintiff's injuries resulted from the proper use of the product, the company would not be held liable under strict liability laws.

Negative Aspect: Limits on Innovation
Companies that must cope with strict liability laws may be deterred from creating new and innovative products. This deterrence stems from fears of being targeted for lawsuits if the new products do not perform as expected. Investors may also be less willing to invest in companies that may be targeted by strict liability lawsuits. If a user of a new product suffers an injury from using the product, the company can be found liable for all negligent and non-negligent injuries suffered by the user.

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How to Carry Malpractice Insurance

Law firms often handle malpractice insurance for their attorneys. When an attorney decides to open a solo practice or start a new law firm, however, insurance coverage often represents a significant ongoing expense. The lawyer must identify the insurance rules in her state and decide whether to purchase professional liability insurance, as well as choose the desired amount of coverage. The chosen amount of liability coverage will often affect the premium to be paid.

Purpose of Malpractice Coverage
Attorneys and law firms buy malpractice insurance to provide coverage if former or current clients file lawsuits against them. A party might sue an attorney due to monetary losses stemming from a matter handled by the attorney. In addition, a party might file a lawsuit based on a lawyer's error or omission during legal representation. Malpractice insurance provides financial coverage to settle a claim or pay for a court-ordered award. An insurance policy often also designates a specific amount of money to be used toward the policy holder's legal fees in the event of a lawsuit.

State Bar Requirements
Some attorneys and law firms might be hesitant to pay for malpractice insurance due to the expense of the premiums. Insurance might represent a significant cost to a new attorney or a law firm experiencing financial difficulties. Whether an attorney must buy malpractice insurance depends on the licensing requirements and rules established by the bar association of the state or jurisdiction where the attorney plans to practice law or maintain a law license. If the state bar doesn't require professional liability insurance, the attorney may choose whether to carry insurance coverage. Some bar associations may allow lawyers to practice law without insurance, but they might need to inform their associations regarding the lack of insurance.

Required Disclosures
When a state bar doesn't impose mandatory insurance on its members, the bar association might set requirements for disclosures by attorneys who don't have malpractice insurance. The state bar rules might require reporting to the bar association in the event that the attorney's insurance coverage changes or ends. Some state bars also require disclosures to clients regarding professional liability coverage. The State Bar of California, for example, requires a written disclosure regarding lack of malpractice insurance to a client at the time of engagement if the lawyer reasonably foresees that the representation will require at least four hours of the lawyer's services.

Additional Coverage Options
When a state bar's licensing requirements include malpractice insurance coverage, the attorney must look to the bar association's rules to determine the amount of coverage that must be purchased and maintained. In addition to the required coverage amount, an attorney or law firm often has opportunities to buy additional coverage for further protection. These options include prior-acts coverage and extended-reporting endorsements in the event that the attorney changes insurance carriers or closes a law practice. While additional coverage can offer a measure of financial protection or peace-of-mind, an attorney may want to find out whether the state bar association specifically requires prior-acts coverage or tail coverage before making a decision.

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Get Liquor Liability Insurance

Working as a private bartender can be a fun and lively career that puts you in the company of social people at weddings, showers, holiday parties, corporate events, anniversaries and other private functions. But sometimes fun-loving people over-imbibe and, by a variety of wayward means, end up incurring bodily injury or property damage. Just as it would be foolish to drive a car without insurance, it would be equally foolish to launch a freelance bartending business without securing liquor liability insurance to protect you and your bartending business. After all, you are calling the shots in more ways than one.

Determine whether you can be covered under a wedding insurance policy, if you are working as bartender at a wedding. Such policies, which usually cover the cancellation of the event as well as damage that occurs if it does take place, are quite commonplace. You may automatically be covered under such a policy, or you may be given the option of taking out a rider.

Check with the venue that is sponsoring the event or is responsible for the property. In all likelihood, the venue already has a liability insurance policy in place. You may be able to “piggyback” on this policy and take out a rider, just as with a wedding insurance policy.

Call the insurance carrier who covers your home or car. If the carrier doesn’t offer liquor liability insurance, ask for a referral to a company that does. This tack alone can save you untold hours of potential research.

Consult liquor establishments in your community and inquire where they have gotten liquor liability coverage. Your local chamber of commerce also may be able to point you in the right direction.

Research liquor insurance companies online for liquor liability insurance policies. Be sure to scrutinize the coverage details, such as assault and battery and lawsuit coverage and policy limits. Many companies cater to small-business owners.

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Withdrawal Liability of Multi-Employer Pension Fund

A multi-employer pension plan is a retirement plan to which a group of businesses contribute. These types of plans are designed so that the businesses share the cost of administrating the plan and its benefits. Contributions are placed in an investment fund. In some cases, the plan accrues unfunded, vested benefits. That is, the value of the plan's portfolio is decreasing, and it will not cover the future benefits promised to the plan's contributors. If employers withdraw from the plan, they are still responsible for covering their portion of these benefits. Withdrawal liability is the cost employers must pay to cover their portion of the unfunded future benefits of such a plan.

Evaluate the situation. Consult with legal counsel to determine if you must pay withdrawal liability. If so, determine whether or not you qualify for the "de minimus rule" reduction. You may also apply for special rules if you are in certain industries and under specific circumstances. The de minimus rule excuses smaller employers from withdrawal liability or reduces liability in some cases. For instance, in some cases, employers with liabilities of $50,000 or less (or those that are responsible for less than 0.075 percent of the total unfunded vested benefits) can have that liability eliminated from the plan. The Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) also has special rules for the construction, entertainment, trucking, moving and warehousing industries.

Determine the total amount of the plan's unfunded vested benefits. According to Title 29, Part 4006.4 of the Code of Federal Regulations, a plan's unfunded vested benefits are the amount by which the plan's target future benefit exceeds the value of the plan's assets. Each of these variables depends on the situation, as many factors are involved. For example, say the target future benefit is $3 million, but the value of the plan's assetsis $2 million. The unfunded vested benefit would be $1 million in this case.

Determine your portion of the unfunded vested benefits. The simplest method is the "one pool" calculation (those in the construction industry cannot use this method). This takes a ratio of your contributions for the past five years to the total contributions for the past five years, as reported by the Segal Company. For instance, if your company contributed $400,000 to the plan for the past five years and the total contributions were $1.6 million, your portion would be 25 percent.

Multiply your portion by the total unfunded vested benefits to determine your withdrawal liability. As an example if your portion was 25 percent and the unfunded vested benefits were $1 million; your withdrawal liability would be $250,000.

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Business Liability Insurance

Employment-practices liability insurance protects against losses from wrongful discharge suits. Workers accuse employers of wrongful discharge when they believe they were illegally fired. General business policies often cover only companies and their directors and officers against legal action. But EPLI policies are written to cover all parties, including managers and employees.

Policies
Insurers generally write EPLI policies on a "claims-made" basis. This means that insurers pay claims that policyholders file while policies are in force, or when policy terms are extended. Events that prompt claims must occur on or after certain dates, usually when coverage begins. An event occurs when an employee files a lawsuit against his employer for being fired after, say, reporting a safety violation. But some insurers allow businesses to file claims retroactively by extending coverage or by agreeing to pay full coverage for events that occurred before a policy took effect.

Coverage
Most U.S. businesses are "at-will" employers. This classification allows them to fire workers for cause or no reason at all. However, state and federal laws protect workers from terminations based on discrimination or retaliation, the two most common reasons for wrongful discharge complaints. Title VII of the 1964 Civil Rights Act outlaws discriminatory firing on the basis of race, national origin, gender, age, disability, religion and genetic information. Some states protect workers from being terminated because of their sexual orientation or marital status. Firing employees for refusing to participate in unethical activities or for reporting workplace violations also is unlawful. EPLI typically covers charges of sexual harassment, libel and slander, contract breaches, mental distress, privacy invasion and benefits mismanagement. Most EPLI policies have deductibles.

Cost
Costs for EPLI coverage are based on a business's size, type and insurance risk. Insurers sometimes request companies' personnel files to determine premium rates, which are based on risk factors. A high number of wrongful discharge complaints could mean higher premium costs for a business. Policies offer as much as $1 million to $25 million of coverage.

Prevention
Although EPLI protects against losses from wrongful discharge complaints, businesses can take early preventive steps to lower their liability by reviewing workplace policies and procedures, and eliminating practices that tend to generate lawsuits. Businesses also can lower their liability by having employees sign releases, or agreements promising not to sue.

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