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Monthly Archives: July 2017

Coverage Extensions to Enhance D&O Policies

While standard directors and officers (D&O) policies are designed to protect a wide array of risks, they have their limits. Coverage extensions are used to address these limits, fill gaps and provide organizations with additional protections outside the scope of traditional D&O agreements.

Coverage extensions solve a wide range of problems and can be continually improved to address the changing landscape of D&O liability. This Coverage Insights details a number of D&O extensions you should consider.

Advancement of Defence Costs

One extension that can prove invaluable in the event of a claim is the advancement of defence costs extension. In essence, this extension requires the insurer to forward defence costs to policyholders throughout a defined period of time.

Without this extension, an organization or its executives may be required to fund their own defence costs until an insurer can assess the claim and reimburse them. This is typically a time-consuming process and can take months or even years.

This extension is particularly important, as legal costs can get expensive, and most organizations lack the upfront resources to pay for such services. It should be noted that, if it is determined that a claim is not covered, the policyholder would be required to repay any defence cost advancements.

Retired Directors and Officers

Under many D&O policies, in order for an incident to be covered, organizations must have an active policy when a claim arises. Because some claims may take years to arise, a company’s retired executives can be left unexpectedly exposed. To make matters worse, retired directors and officers typically have no control over an organization’s insurance once they have left the organization. Accordingly, they cannot ensure their former organization will purchase the proper D&O insurance.

To remedy this issue, policyholders can protect their former directors and officers by including an extended reporting period in their D&O coverage. An extended reporting period allows organizations or retired executives to report a claim to the insurer even if the organization no longer carries an active policy.

Outside Directorship

In some cases, directors and officers serve on boards of outside organizations. This often occurs when an executive takes a leadership position for an external non-profit.

Standard D&O policies may not offer sufficient enough protection in these instances, and outside directorship coverage may be needed. This extension is particularly useful, as it ensures that executives will be covered in the event that their non-profit’s insurance is insufficient or completely exhausted.

New Subsidiaries

When an organization purchases a new subsidiary, it is possible that the executives of these acquired operations could be open to D&O exposures.

The new subsidiaries extension is meant to address this concern, automatically covering any new subsidiaries and providing them with the same protection as the parent organization.

It should be noted that coverage only applies to claims that arise following the date of an acquisition. Automatic coverage may also be subject to the size of the acquired entity, and an endorsement may be required.

Spouses, Heirs and Legal Representatives

To protect themselves in the event of a claim, some executives transfer ownership of their assets to a third party. This often includes husbands, wives or guardians.

While this might be a sound legal strategy, it can also leave these third parties open to claims. The spouses, heirs and representatives extension is designed to protect third parties and the executive’s assets.

While this extension protects a third party from the actions of an executive, it does not protect them from the consequences of their own activities.

Other Common Extensions

In addition to the extensions above, there are a number of less common, but important, extensions to be aware of. The following are just some examples:

  • Civil or bail bonds. This extension can help cover the cost of civil or bail bonds, allowing a director or officer to be released from custody.
  • Public relations expenses. Following a D&O claim, companies may have to rebuild or protect their reputation. A public relations expenses extension covers the cost of engaging a public relations firm to improve public opinion.
  • Deprivation of assets. This extension gives executives funds for housing, utilities and personal insurance services. This coverage is especially useful if an executive’s funds are frozen.
  • Extradition costs. This extension covers the defence costs associated with opposing an extradition proceeding, including any bail process and subsequent trial.
  • Joint ventures. This extension provides coverage for claims arising from joint venture operations.

For more information about these and other D&O extensions, contact your insurance broker.

©  Zywave, Inc. All rights reserved.

5 Types of Cyber Attacks That Threaten Small Businesses

Because news surrounding data breaches often highlight major companies like Target or Yahoo, it’s easy to think of cyber attacks as a big business problem. However, small businesses are just as much at risk and could have to front $46,000 or more per cyber security event. As such, it’s important to be aware of the following five common cyber attacks that threaten small businesses:

  1. Denial-of-service attacks (DoS). A DoS attack occurs when a cyber criminal sends a large amount of data from multiple computers in order to overwhelm your system and shut it down. This attack can result in a direct loss in revenue, as your website could be down for extended periods of time.
  2. Inside attacks. Cyber attacks don’t always come from outside sources. In some cases, a disgruntled employee who has access to your system can hijack your critical data and hold it for ransom.
  3. Malware is any malicious software that can be used to gain access to your system and cause damage. Typically, malware refers to worms, viruses and ransomware.
  4. Password attacks. Password attacks are when hackers crack your password and gain access to your system. This type of attack can be difficult to defend against because it doesn’t always require a malicious code or software.
  5. Phishing is a cyber attack in which a hacker disguises him- or herself as a trusted source in order to acquire sensitive information. This can be accomplished via email or other direct forms of online contact.

To protect themselves from all types of cyber breaches, small businesses should consider evaluating their systems for exposures on a regular basis. In addition, it is important to train workers on cyber security and ensure that antivirus and other protective measures are up to date and operational.

© Zywave, Inc. All rights reserved

Common Hazards for Distilleries

While owning a distillery can be a rewarding and profitable undertaking, it’s not without risk. The process of making hard alcohol like whisky, gin and rum is not easy and often involves large, potentially dangerous equipment. What’s more, those that manufacture alcohol often have to deal with dangerous fumes and other harmful factors.

To protect their business, employees and customers, distillery owners must take a proactive approach to identify and mitigate the unique exposures that affect their operations.

Carbon Dioxide

In order to create alcohol, carbohydrates like starch and sugar must be converted through fermentation. During this process, yeast eats carbohydrates and creates carbon dioxide—an odorless, colourless and toxic gas.

The following is a breakdown of how different concentrations of carbon dioxide can impact your employee’s health:

  • 1,000 parts per million (ppm) – Prolonged exposure can affect concentration.
  • 10,000 ppm – An employee’s rate of breathing increases.
  • 30,000 ppm – The employee will begin breathing at twice the normal rate and may experience dizziness, a faster heart rate, headaches or hearing impairment.
  • 40,000-50,000 ppm – The employee’s breathing increases four times the normal rate, and he or she will experience signs of poisoning after only 30 minutes of exposure.
  • 50,000-100,000 ppm – The employee will quickly begin to feel tired and will experience laboured breathing, headaches, tinnitus (a ringing in the ears) and impaired vision. After a few minutes, he or she will likely lose consciousness.
  • 100,000-1,000,000 ppm – The employee will lose consciousness quickly. At this concentration, asphyxiation and death may occur.

Your workers could be exposed to carbon dioxide through inhalation. Thankfully, you can minimize these hazards by properly venting your fermentation area. Because carbon dioxide is heavier than air, you will want to ensure you take special care to vent the lower levels of your work areas.

If your distillery uses a converted chest freezer as a fermentation chamber, it should be noted that carbon dioxide can collect at the bottom of the cabinet. To address this, periodically prop the lid up and use a fan to introduce fresh air.


Distilleries can be a fun work environment, especially if you or your staff members are passionate about creating alcohol. This environment can sometimes create a loose work atmosphere where staff members are allowed to drink on the job.

This is ill advised, as alcohol can affect an individual’s perception and reaction time. What’s more, alcohol can negatively impact your worker’s judgment, potentially leading to dangerous mistakes or accidents.

And, when you’re working with large, expensive equipment, mishaps can be costly or even fatal. Avoid adding unnecessary hazards by banning alcohol consumption during work hours.

Fires and Explosions

Ethanol vapour is highly flammable and is one of the main fire and explosion hazards at distilleries. Ethanol can be released from leaks in tanks, casks, transfer pumps, pipes and flexible hoses.

Common ignition hazards to control can include the following:

  • Open flames
  • Torch cutting and welding operations
  • Sparks (static, electrical and mechanical)
  • Hot surfaces
  • Heat from friction
  • Radiant heat

In addition to being mindful of ignition sources, you can protect your distillery by keeping a dry powder or carbon dioxide fire extinguisher readily available. Ensure that any sprinkler systems you have meet industry and regulatory standards.

In addition, you will want to provide adequate ventilation in the distillery and ban smoking in and around the work area. Be sure to keep heaters and natural gas appliances at least 10 feet away from distilling areas.

It should be noted that dust formed from processing grain and chemical spills can also cause fires or explosions. As such, it’s important to practise good housekeeping to avoid the accumulation of combustible debris or liquids.

Physical Injury and Other Employee Hazards

Distilleries can be an unsafe environment for your workers if you fail to take the proper precautions. There are countless risks you will need to account for, including the following:

  • Chemical hazards. A variety of harmful chemical and cleaning products can be found in distilleries. To protect workers, it’s important to require personal protective equipment (PPE) like gloves, steel cap boots and liquid proof aprons. Be sure to clean up any chemical spills immediately.
  • Electrocution. Because distilleries require workers to handle large amount of liquids around powered equipment, electrocution hazards are common. To maintain a safe working environment, it’s important to never run power cables through pools of liquid. Whenever possible, avoid using extension cords, power boards or equipment with damaged plugs, sockets or cables. For added safety, ground equipment and use a ground fault circuit interrupter (GFCI) or residual current device (RCD). These tools automatically shut off power whenever they discover that a current is flowing along an unintended path, including through water or a person.
  • Injuries caused by heavy lifting. Working at a distillery requires employees to lift and move heavy kegs and other items throughout the day. This can cause repetitive strain and other injuries if workers aren’t trained to do the following:
    • Bend the knees, keep their back straight and lift with their legs.
    • Be aware of the weight of objects and don’t overexert themselves.
    • Practise team lifting or use back braces to assist with moving heavy loads.
  • Physical hazards. There are many dangerous items at a distillery that could harm your workers. You will want to ensure the work area is free of trip and slip hazards. In addition, noise from equipment, high-pressure tools, boiling liquids, hot surfaces and confined spaces pose a serious threat and will need to be addressed. Consider conducting safety assessments on a regular basis and address hazards as they arise.

Above all, stills should never be left unattended, and employers should set clear policies and procedures related to workplace safety.

Protect Your Investment

Owning a distillery can be a challenging, yet rewarding, experience. Taking into account the above safety tips will help ensure that the investments you have put into your business are not wasted following an injury or other mishap.

For additional protection, consider speaking to your broker about your insurance options. He or she will be able to discuss potential policies to address common distillery risks.

©  Zywave, Inc. All rights reserved.

Common Types of Fraud and Prevention Strategies

As a leader within your organization, you want to trust your employees and the people you do business with. However, the sad reality is that no organization is immune to the threat of crime and fraud. Making matters worse, the average time before an organization discovers that fraud has occurred is 18 months, long after the damage has already been done.

To protect themselves and their bottom lines, it’s important for businesses to understand the following common types of fraud:

  • Phishing scams. A phishing scam is a phony email or pop-up message that is used to lure unsuspecting internet users into divulging personal information, such as credit card numbers and account passwords. To protect your information, never open emails unless you are certain that the message is from a legitimate source. In addition, do not share personal or financial information via the internet unless the site is secure.
  • Extortion and ransomware scams. Ransomware is malicious software designed to block access to important software, files or systems until a sum of money is paid. Computers can become infected with ransomware in a number of ways, but it commonly occurs when malicious links or attachments are opened. To protect your business, be wary of pop-up ads, back up important files and investigate ransomware issues right away.
  • Office supply scams. Canadian businesses lose significant sums of money to fraudsters that pretend to be their regular suppliers. Be aware of unsolicited emails and contact existing partners before sending funds in order to confirm payment requests.
  • Employee fraud. During times of economic insecurity, normally honest employees may resort to theft or other fraudulent activities due to the increasing financial pressure they are feeling at home. To curb theft at your organization, communicate with your employees, maintain a positive work environment and educate your employees on acts of fraud and the consequences associated with it.

To further protect your organization, it’s important to have an anti-fraud policy in place. This policy should allow you to properly train your employees on how to recognize and prevent common types of fraud. If your business is impacted by fraud, it’s important to report it to your local law enforcement and the Canadian Anti-fraud Centre.

©  Zywave, Inc. All rights reserved.



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