Business Coverage

Business Insurance Registration In Raritan Township, Hunterdon County

Until recently, there was no requirement under New Jersey (or Federal for that matter) law requiring a business owner to purchase Liability Insurance. This changed when New Jersey Governor Murphy signed P.L. 2022, c.92 on August 5, 2022. Under this new state law, it is now illegal for any business or owner of a rental unit not to have liability insurance. The New Jersey law has left the implementation and enforcement of this new law to the local municipality.

Flemington Borough in Hunterdon County, New Jersey introduced their local ordinance to implement this registration provision last fall. If you own a business or a rental unit(s) in Flemington Borough, you need to complete a registration and provide them with proof of insurance.

Recently, Raritan Township in Hunterdon County, New Jersey has issued regulations for their local ordinance to implement the State law. For Raritan Township, you will need a certificate of insurance and to register with the Township. They have an online portal to upload your certificate, complete your registration, and pay your $20 registration fee.

Because of the overlap in zip codes and mailing addresses between the Borough of Flemington, Raritan Township, and parts of several other townships, we are unable to quickly identify our clients located in Raritan Township.

If you are located in Raritan Township and own a business or own rental units (of any kind), please contact us so we can provide you with an insurance certificate that you can use for your business registration.

Please call us at the office or reach out to us here. We need to know the following information to issue these certificates:

• The name of the business (or owner of the rental unit).
• The location or address of the business or rental unit.
• The township or borough where the unit or business is located.

We are here to help you manage your business and personal insurance program. Please feel free to contact us anytime if you have questions regarding the matters discussed in this article or on any aspect of your insurance plan.

by Pete

Business Insurance Registration Required in New Jersey

Until recently, there was no requirement under New Jersey (or Federal for that matter) law requiring a business owner to purchase Liability Insurance. This all changed when New Jersey Governor Murphy signed P.L. 2022, c.92 on August 5, 2022. Under this new state law, it is now illegal for any business or owner of a rental unit not to have liability insurance. The New Jersey law has left the implementation and enforcement of this new law to the local municipality.

Flemington Borough in Hunterdon County, New Jersey is one of the first municipalities to act on this new law. They have issued an ordinance which requires businesses and owners of rental units to register with the Borough, pay a $15 fee, and provide the Borough with proof of liability insurance.

The following entities must register and provide proof of insurance:

• Businesses, which shall mean, any person intending to sell or dispose of or to offer to sell or
  dispose of any good, wares, merchandise or render any services for fees within the Borough.
• Owners of single rental dwelling units
• Owners of multiple dwelling rental units
• Owners of multi-family homes that include rental units, even where one unit is owner-occupied

Flemington Borough is sending out notices to those properties affected. If you do not receive one, we
have copies for you.

How much insurance is required?

The New Jersey law now requires the owner of a business or a rental unit or units to carry liability insurance of no less than $500,000. The owner of a multi-family home which is four or fewer units, one of which is owner-occupied, is required to carry limits of no less than $300,000.

How to Provide Proof of Insurance?

While the Flemington registration form asks you to attach a copy of your liability policy, the State law requires you to file a Certificate of Insurance. We believe that in general, it is a bad idea to share your insurance policy with anyone other than your mortgage company. A Certificate of Insurance is a more concise and efficient way to share proof of your liability coverage without disclosing other personal information. For example, your insurance policy may include a schedule of valuable property, like jewelry or artwork that is specifically covered by your policy.

We are happy to issue a Certificate of Insurance for your business or property for the Borough of Flemington. Of course, there is no charge to you for this service. To order a certificate of insurance, please call our office or send a request to stacey@newborninsurance.com. We will need to know the name of the business, the location address of the business or property in question (many of our clients have different mailing addresses than the location of their business or rental units).

If you are in a municipality other than Flemington Borough that enacts a registration requirement, please let us know and we will send you a Certificate of Insurance. We are here to help you manage your business and personal insurance program. Please contact us anytime if you have questions regarding the matters discussed in this article or on any aspect of your insurance plan.

by Pete

What is an Additional Insured Endorsement

It seems an almost normal course of business these days to be asked to name a contractor, vendor, landlord, or other business associate as an additional insured on your liability insurance policies.  This article will delve into the details of the additional insured endorsement, how you do this, and the relative merits and risks of giving this status to your business associates.

Who is an Insured Under Your Policy?

Your basic liability policies define quite specifically who is insured under the policy.  The definitions are typically broader than you think but vary from policy to policy.  Typically, liability policies include coverage for the entity that is shown on the declarations page as the named insured.  If you operate under several different entities, all of them should probably be listed as a named insured.  For example, if you operate your business as a corporation where you are the sole or majority shareholder out of a building that is owned by a Limited Liability Company (LLC) in which you are the sole or majority owner, both the corporation and the LLC should be named in the declarations page as the insured.  You, as an individual are also covered by the definitions in the policy as respects your ownership of the entity.  It is also typical that corporate officers, and employees are also insureds under the policy in respects to their duties as such.  In an automobile liability policy, any driver of an insured vehicle is also an insured if they are driving the vehicle with permission.

It is customary but not necessary to have trade or fictitious names – sometimes called a doing business as name, listed as an insured on the declarations pages as well.  This would generally be descriptive in nature and not affect your coverage as long as the business name is fully owned by an entity that is named on the policy.  Getting the names on the declaration page correct, is the first step in making sure that your liability coverage is providing you what you need.

What is an "Additional Insured"?

Adding someone as an additional insured on your policy is the process of you sharing your coverage with that additional insured.  By sharing your coverage, you are diluting your limits of liability.  In other words, if you share your coverage, there is less coverage left for you.  The endorsement typically adds the additional insured to the list of entities who are insured under the policy.  Keep in mind that liability insurance is third-party coverage.  This means that the insureds are covered for allegations that through their negligence, they have caused injury (bodily injury or property damage) to another person or entity.

Why are You Being Asked to Name a Business Associate as an Additional Insured on Your Policy?

This is a technique of risk transfer where one party is obtaining protection through another for liabilities that arise, presumably through their business interactions.  It is customary for a landlord to require as a provision in a lease a tenant to indemnify, defend, and hold them harmless for liabilities that arise from the tenant’s occupancy of the premises.  In this case, the terminology, “indemnify and defend” could be stated as “name as additional insured on your insurance policy.”  Some leases contain both of those requirements.  It is also routine for a General Contractor to require additional insured status on the liability insurance policies of a Sub-Contractor.  I am not saying that these requirements are good or bad; they are just normal practices within those industries.  

How do You Add Additional Insured Coverage To Your Policies?

There are many different endorsements and techniques that do this, and we try and find the method that makes the most sense for each specific situation.  We can break the types of endorsements for adding additional insured status into two categories.

Blanket Endorsement

A blanket additional insured endorsement is quite common these days.  Under this method, your policy contains language that grants additional insured status to any party requiring such status under a written agreement.  The premium charge for this coverage is likely built into your policy and you do not pay for each party that is granted such status.  It is important to remember that there must be a written agreement between the two parties for the additional insured status to be in effect.  While this is a common method, there are problems with this technique and often insurance requirements in specific contracts and agreements cannot be satisfied with a blanket endorsement.

Specific Endorsement

This is an endorsement added to your liability policy that specifically names the additional insured and outlines the scope of coverage that applies to the additional insured.  Insurance companies may charge a premium for these endorsements each time they are added to your policy. There are many diverse types of additional insured endorsements with varying levels and degrees of coverage for the additional insured.  

Other Related Requirements

When you are required to name a business associate as an additional insured, it is common that you may also be asked for other coverages such as:

• Primary and Non-Contributory: This is an endorsement that makes your policy primary over insurance that the additional insured may purchase for themselves.  
• Waiver of Subrogation: This is an endorsement that prevents your insurance company from seeking recourse from the additional insured even if they are responsible for the loss.  
• Cancellation Notice: Your policy provides legal requirements of notification if the insurance company is going to cancel or non-renew your policy.  This endorsement makes the insurance company for notifying the additional insured about a pending cancellation as well.  Keep in mind when you add this endorsement to your policy, your business associate will get a notification from the insurance company if your payment is late which leads to a pending notification of cancellation of coverage for non-payment.

We spend a significant amount of time each week reviewing the insurance provisions of agreements for our clients and advising them what is required to meet those requirements.  It works best if we review the agreement before you have completed negotiations on the project.  Our experience tells us that some of these agreements are not negotiable – but many are.  Helping you assess the risk you agree to assume through business agreements seems logical to be part of the service a competent insurance advisor provides.  We are happy to be that advisor for you.

by Gary Newborn

Ten Tips for Proper Cyber Hygiene

I like lists. Lists help me stay organized and help me break big, overwhelming things into bite-size pieces I can get done.

One of the big, overwhelming things facing business owners these days is cybersecurity. You don’t have to be an IT person or software expert to gather that we are in perilous times when it comes to cybersecurity, data safety, and protecting your business information.

Just a few months ago, insurance companies were eager to “add on” cyber coverages to any policy for a minimal amount of additional premium, where now they want to underwrite this exposure (to make sure that you don’t really need it before they agree to sell it to you).

By the way, “not needing it” is where you want to be. Cyber insurance should be for a freak occurrence that you do not expect rather than a method to deal with sloppy or non-existent cyber standards and procedures.

Top Ten List for Proper Cyber Hygiene

I did some research and produced a Top Ten list for proper cyber hygiene. Hygiene is a great word to use for this because you need to have consistent standards and procedures that you incorporate into your operations to make sure that you have good cyber health and well-being.

If you have questions, or want to discuss your cyber hygiene, call us.

10. Install Antivirus and Malware Software

First, use a reputable company that is highly rated. Keep up with the expiration dates of your software programs and purchase a package that fits your business needs. If you schedule routine upgrades, do not skip them.

9. Keep Your Hard Drive Clean

Delete old and unused programs. Also, reformat your hard drive on a scheduled basis.

8. Use Network Firewalls

Firewalls can be an important method to prevent unauthorized users from accessing your website and other online data. Don’t cheap out when you install your firewalls.

7. Back Up All Systems Regularly

Back up your files and programs offline, to an external hard disk, or to the cloud. Do this on a schedule that fits your business operations. If you have a security breach, you can use your backup to create a “clean” data set to resume your operations. From a physical perils point of view, make sure that your external hard disk is stored or kept somewhere other than the same room as your server or computer.

6. Update Software Regularly

Make sure that all your programs have the most up-to-date versions, especially any security software that you use. You want to have the latest protections that are added to each program.

5. Use Multifactor Authentication Wherever Practical

This creates another layer of security and makes your data harder to access. A multifactor authentication procedure adds a second password or code to be entered to access a program or portal. You may even be able to add biometric devices to particularly sensitive programs or data.

4. Employ Device Encryption

Look into encryption of email, other communication programs, and how you connect to other devices such as laptops, and remote users.

3. Do Not Open Suspicious Emails, Links, or Attachments - Think Before You Click

More than any other cyber threat you may face, problems are caused by not thinking before you click. Hackers and cyber evildoers are constantly refining their techniques to get you to divulge sensitive data or unknowingly install malware on your computer. The best defense is never open suspicious email, attachments, or links. Constantly reinforce this to your employees and staff.

2. Use Strong Passwords and Change Passwords Frequently

It sounds so simple, but this is one of the easiest methods to protect your data. Have a schedule for changing your passwords and take the time to make them complex and difficult to guess. Do not use the same password all the time! There are systems you can install that do some of this for you, such as Password Manager from Google. Check with your IT consultant to see if any of these are a fit for your business.

1. Purchase Cybersecurity and Data Breach Insurance Coverage

Even with an excellent hygiene plan and dedicated implementation and monitoring, you may not be fully protected. Here, your fallback plan should be a strong insurance program. We’re here to help you evaluate your needs and find the right insurance to meet those needs. Contact us now!

by Gary Newborn

Risk Management For Contractors and Business Owners

What Is Risk Management?

Risk Management is the process of dealing with potential loss by a business or operation. The scope of Risk Management goes beyond purchasing an insurance policy as there are many areas of loss that may not be addressed by any specific insurance policy.

The phases of the Risk Management Process typically include:

• Identifying exposures (possible losses)
• Measuring those exposures
• Developing a plan to mitigate, transfer, or fund the potential losses (an insurance policy is a funding method)
• Implementing the plan
• Reviewing the effectiveness of the plan and making any necessary adjustments

This is a never ending analysis that must be adjusted constantly to meet the pace of a dynamic business and the environment in which the business operates.

As your insurance agent, we can be an integral part of your risk management team. Along with your tax advisor, attorney, safety coordinator, and executives, we can help you review all aspects of risk for your business and help you coordinate an integrated Risk Management Plan.

Most contractors and small business owners do this intuitively every day as they measure their risk-versus-reward for every activity, project, bid, and job that comes up. We can help you formalize this process which can be a key factor to allow for the growth of the business.

A Good Way to Start Risk Management

If you are not ready to do a formal plan that includes all the steps in the risk management process, phase in a plan by focusing on the largest categories of risk that most businesses face. We can divide your largest exposures to loss in the following categories:

Property

Your business may own various types of property. How would a significant loss to your business property affect the future viability of your business?

• Buildings
• Personal property in your building or elsewhere
• Tools and equipment that may be at your premises, in transit, or at a job site
• Property in your care or custody that is owned by others
• Property in transit – Are you shipping goods to or from your premise? How are they shipped and who is responsible for that property?
• Loss of use of property – Both buildings and other property (In these days of supply flow concern this may be a much larger factor to your business operations than in the past.)

Human Loss

Your key employees may be the unique advantage that makes your company successful. Yet we spend very little time thinking about them as a critical piece of the business and protecting the business from the various losses that can happen to our “human assets”.

• Losing a Key Employee by sickness, death, retirement, or to the competition – Do we have a plan to help the company survive each of these possibilities?
• Business Perpetuation and Continuity – What happens to the business if one partner/owner gets sick, becomes disabled, or dies?
• Employee Care – Do you have an employee benefits plan that is valuable to the employee? What other employee retention program is in place?

Liabilities

What risk do you face from injuries to others?

• Bodily Injury – To employees, contractors, bystanders, or those who use your products or services. Can you mitigate this risk?
• Property Damage – What potential risk to property do your operations face? Don’t forget operations of automobiles, trucks, and equipment which may by your single largest exposure to a catastrophic liability loss.
• By Contract - Each day you may sign agreements under which you assume liability. Are you reviewing these agreements to make sure that loss is acceptable or at least covered by your insurance? (We can help you with this.)

Environment

Think beyond “environmental” to the full scope of the social and business environment in which you operate.

• Social Risk – Are you keeping pace with important changes in society that could increase your exposure to loss? This goes beyond “political correctness” and is a growing threat to all business owners.
• Regulatory Risk – Do you take part in industry associations to keep up to date on potential threats to your business or industry from regulations or laws that may threaten your ability to do business as currently made up? Are you current with all regulations and statutes?
• Competitive Risk – Are you paying attention to changes in society that could affect your business? What (or who) are the business disruptors in your industry?

G. S. Newborn & Associates Can Help

We have experience working with business owners in developing a Risk Management program. We can coordinate with your other advisors to do a full risk analysis for your company, or we can focus on whichever area of the process you feel will most positively affect your business.

For many of our clients, we perform the following services, which are steps in mitigating risk and part of a good Risk Management Program for any business:

Contract Review

We are always available to review a contract or agreement to give you an analysis of how the agreement fits with your insurance program. From a lease agreement to a proposal contract, we will let you know what liabilities you may assume under the agreement and how your insurance policy matches the insurance provisions and requirements of the agreement.

Subcontractor Agreements & Certificate of Insurance Program

If you use subcontractors, you should have an agreement where you transfer reasonable risk and liabilities to the subcontractor working on your behalf. You also must require them to have adequate insurance. We can help you develop these agreements & requirements and administer them to you so you know all subcontractors are meeting your requirements.

Employee Benefits Review

Having a meaningful employee benefits plan is not only critical in terms of expense, but it can be a centerpiece in your employee retention program as well. Not all plans are equal, and in your quest to manage expenses, you may cause increased employee turnover and dissatisfaction.

Let our experienced benefit advisor help you develop an employee benefits plan that maximizes your expenditures so you get the most bang for your buck from your employee benefits.

Other

We can customize programs that are unique to your business or industry. We think outside of the box to find the best way to protect your business.

What Do These Services Cost?

We provide the above services to our clients with no additional charge. We think an informed client is a better client!

Can you afford not to have a Risk Management Plan? Let’s talk…

- Gary S. Newborn

by Gary Newborn

Surviving Your Workers Compensation Audit

If Benjamin Franklin were around today, he might change his famous quote to, “In this world, nothing is certain but death, taxes, and a workers compensation audit.”

Why Is Your Policy Audited?

The premium for workers compensation insurance is based on the payroll to employees and the cost of uninsured contractors during the policy period. At the beginning of the policy term, your policy is set up based on a projection of your payroll. It makes sense that at the end of the policy term, an adjustment will then be made. It'll be either up or down based on your actual payroll.

Another way to think of this is that payroll is the unit that the insurance mechanism uses to measure your exposure to loss in workers compensation insurance. A payroll audit must be done to make sure that your small business does not pay the same premium that a much larger company would pay.

What Information Is Required?

The insurance company will ask you to produce certain documentation so that your payroll levels and cost of sub-contractors can be validated. Here is a list of the most common items that you will be asked to produce.

• A payroll report (from your payroll service, if possible) showing a summary of gross wages by employee for the policy period. The summary should include regular time wages and overtime wages.
• Copies of your Federal payroll tax filings—941 Forms and your State payroll tax filings—and WR 30 Forms that correspond to the quarters that encompass most of your policy period. Don’t worry if your policy dates do not match the quarters perfectly as that is normally the case.
• The insurance company will typically ask for evidence of your gross sales for the policy period. You can provide this with a balance sheet/profit-and-loss statement that matches the policy period (if you can generate this internally). If you cannot do a policy period statement, do the closest year end statement that you can. While your gross sales are not used in determining your premium for workers compensation, they will ask for this as a check on the overall size of your business.
• Statement of sub-contractors used during the policy period. The best way to do this is to track these expenses during the year in your accounting system and to print a report that shows each sub-contractor and the checks written to them during the policy period. The entry should show a date of the check and the amount of the check. If you cannot show a report for the use of sub-contractors, the insurance company will ask to see your general ledger or your checkbook. They'll then search for all expenditures to sub-contractors during the policy term.
• Copies of Certificate of Insurance for each sub-contractor shown on your sub-contractor report.
• Copies of your 1099 report for the most current year end.

Sub-Contractors and Workers Comp

An insured sub-contractor does not add any premium to your workers compensation policy. However, an uninsured sub-contractor will generate a charge just as if it was payroll. This is a double penalty because your cost of sub-contractors includes labor and materials.

It is very important that you collect insurance certificates from all sub-contractors. We recommend that you have a written agreement with all sub-contractors to outline the coverage that is required, as well as including indemnification, hold harmless, and additional insured requirements.

G.S. Newborn & Associates, Inc. Adds Value To Your Insurance Program

We can help you institute a certificate management and a sub-contractor agreement program, and are happy to help you administer this program. You should never have to pay a premium for an uninsured sub-contractor! We include this service for our commercial clients at no charge to you.

Do Your Audit Promptly

The insurance company is not going to chase you to do your workers compensation audit. Under a new regulation in New Jersey, an unaccomplished audit results in an estimated audit with a much higher premium level than your projection. So, if you do not complete your audit in a timely manner, you will receive a large additional premium audit invoice based on an arbitrary payroll level increase.

We urge you to respond right away to an audit request. If you cannot reach the auditor, please contact our office and we can intercede for you.

After The Audit

Once the audit is complete, you will receive an audit endorsement to the expired policy. There are three possible results: no change, additional premium, or return premium.

If you owe additional premium, the insurance company will send you an invoice for that premium. Keep in mind that this premium will be billed in one installment. Most of our carriers will agree to spread out this premium over two or three months depending on the size of the audit premium. You just need to contact us to arrange this for you.

If they owe you a return premium, you will receive a credit or check for this amount from the carrier.

When your audited payroll levels were much higher than your projected payroll, you will obviously have an audit premium due. Most insurance companies will also adjust the payroll levels on your current policy, which has already been issued, which will generate an additional premium invoice as well. This is a bit of a double hit so we suggest you try to make your payroll projection for your policy as accurate as possible since understating your payroll can do a number on your cash flow.

G.S. Newborn Is Here To Help

We are available to help you with all phases of this process. Please contact us if you have any questions about your workers compensation audit or any aspect of your insurance program.

by Gary Newborn

Why Businesses Should Consider Cyber Liability Insurance

Our lives are increasingly digital. A year ago, who even knew what a “Zoom” was and now it may be the single largest gathering location. More and more of us are working from home, or at least, not in a traditional setting with a greater reliance on computers and devices than ever before. We do not know what long-range effects any of this will have on society, but one thing that we know is that we must deal with a whole new range of security and safety issues.

What is Cyber Liability?

In the insurance field we call this new area of concern, Cyber Liability. A Cyber Liability insurance policy can provide a wide range of coverage (and often services) to help you avoid some of the more common cyber security issues. This is an issue for businesses and individuals. These policies have not yet been standardized, so each insurance carrier develops their own policy with different coverage, terms, and conditions–there can be tremendous differences in these policies. This is one reason you may want to work with an independent insurance agent who has many options to help you develop a coverage plan that meets your specific needs and concerns.

First-Party Cyber Liability Benefits

Most Cyber Liability insurance policies include what we call first-party benefits and third-party benefits. A first party benefit is insurance that you purchase that provides coverage for your own property. Some first party features you may need in a Cyber policy include:

• Data Restoration–this is an insurance benefit that you use to recreate lost data because of a breach or extortion threat.
• Loss of Income and Extra Expense provides funds to help you recover your lost income or extra expenses due to a targeted or accidental cyber attack.
• Cyber Extortion is a common cyber security concern, especially for small businesses.
• Notification Costs–provides funding for your responsibilities under various State and Federal laws to notify those affected by a breach.
• Crisis Management provides funds and/or services to help you navigate these waters and mitigate the long-term damage to your business.

Third-Party Cyber Liability Claims

When someone else sues you because of a cyber attack or data breach, that is considered a third-party claim and these policies provide coverage for these suits and allegations as they are not covered under your General Liability policy (which is typically limited to bodily injury and property damage). Examples of third-party situations may include:

• Network Security and Privacy liability suits.
• Electronic Media Liability–may be a situation where you inadvertently cause libel or slander of another party.
• Regulatory Proceedings–you may be held responsible for damages under State or Federal statutes and regulations.

Just about every business today maintains or collects some level of personal information in a digital format, leaving them vulnerable to cyber attack, data breach, and regulation. With more of our employees possibly connecting to our important data through less secured networks and connections, we are perhaps less secure than we were before the pandemic.

Get Cyber Liability Insurance for Your Business Today

If you have questions about your cyber security and would like a quote on cyber liability insurance, contact us today.

by Gary Newborn

Health Insurance Open Enrollment: Group Medical Plans

Did you know that open enrollment for group medical insurance plans may help you improve your health insurance coverage?

There is a lot of discussion nationally about health insurance open enrollment these days.  The one thing that we can all agree on is that it seems to get more expensive each year to provide quality health insurance to our families and employees.

Factors that Impact Group Medical Plans

The best benefits/pricing combination for health insurance is often found in group policies.  These are employer-sponsored plans that provide benefits to eligible employees.

In New Jersey, there are several important provisions in qualifying for a small group plan (under 50 full-time equivalent employees).

• The employer must contribute to the cost of the plan for each employee. The minimum contribution is 10%.
• 75% of eligible employees must participate in the plan or be covered by another plan (such as one from their spouse’s employer, or under a parent’s policy).  So, if you have 10 employees (and the owner does not count), you must have at least 8 of those employees enroll in the plan or provide a waiver that shows that they have coverage through a spouse or parent group policy.
• To qualify as a “group” you must have at least one eligible employee and the business owner does not count in that calculation nor does the business owner’s spouse.

However, and this is an important exception, January 1st is open enrollment for small group plans.  This may be the only time of year small employers are not subject to the participation/contribution requirements.

Client Example

For example, we have a client who has over 20 full-time employees.

Most of those employees are laborers who make close to minimum wage, and many of them are covered by low cost or subsidized health insurance or not covered at all.

It is difficult for these employees to afford any premium contribution.  The employer certainly cannot afford to pay most or all the premium, so for years, they had no group plan.

We were able to set them up on a group plan with an effective date of January 1st, with only one employee enrolled in the plan.  This employee happened to be a relative of the owner who works in the company in a management capacity.

Since the participation requirement is waived, this group is eligible, and the owner can participate as well.

This open enrollment exception allowed the company to provide excellent health insurance to the owner and his family and a trusted, high-level employee, while all the other employees chose to opt-out of the coverage.

This could not be done at any other time of the year.

We're Here to Help

If you are a business owner without an employer-sponsored group benefits plan, contact us to see if a January 1st date opens opportunities for you to access better, and less expensive health insurance.

Please note, these plans must be submitted to the carrier between November 15 and December 15.

We can help you with a full range of retirement and employee benefit plans including qualified and non-qualified retirement plans, group medical, group dental, group life, group disability, voluntary benefits, payroll, human resource consulting and outsourcing and more.

by Gary Newborn

Who Needs Farm Insurance in NJ & Why it's Important

Who needs farm insurance?  While this sounds like a simple question, we find that many folks who need farm insurance have no idea that this is something that they need, and more importantly – do not already have.  This creates a tremendous gap in their insurance coverage...

If you raise crops, vegetables, trees, or animals used for food – you need farm insurance.

If you live on a farm and rent the land to a farmer or get a farmland tax assessment on your property – you need farm insurance.

If you have children who raise animals for a hobby or as a lifestyle choice – you may need farm insurance.

If you live on a property that once was used as a farm and have outbuildings that were originally used for or designed for farming – you may need farm insurance.

The Coverage Gap

Most homeowner insurance policies exclude from liability coverage any business activities or pursuits.  By definition and in common law (court precedent), farming is a business activity.  This holds even if farming is not your primary source of income and even if you lose money or make very little money at it.  Here is a common situation:

The Smiths live in a renovated farmhouse situated on twelve acres.  Most of the land is wooded, but there is a five-acre field that they arrange to be farmed by a neighbor.  The farmer gives them a small amount of the hay that they use for their children’s pet goat.  The Smiths get a farmland assessment on their property tax statement every year.

The Smiths post their land with 'No Hunting' signs and do not give anyone other than a handful of family and friends permission to hunt on their property.  On the back end of their land, there are trails that the local teens sometimes use to ride their quads (of course without the Smith’s permission).

In this situation, The Smiths have a farm exposure which qualifies as a business that is excluded from coverage on most regular Homeowners Policies.  You may argue that they are not really farmers since they do not do the actual farming, but each year they receive a benefit from the farming of their land which is a business activity.  By getting a farmland assessment they are establishing that they have a business operation on their property.

Without special farm liability coverage added to their policy (if that coverage is available), the Smiths are vulnerable to a declination of coverage arising from any liability claim that arises from their business operations.  In this case, this could be from anything that happens on their property!

One of the local teens hits a rock on the trail and is badly injured when she falls from her quad.  The parents bring a suit against the Smiths for not properly maintain the trail.

While cutting hay, the local farmer brings up a rock that hits a car passing by on the road adjoining the property.  The owner of the car sues the farmer and the Smiths for the damage to the vehicle and the mental anguish and pain and suffering suffered in the event.

One of the Smith’s pet goats escapes the pen and eats the neighbor's prized rose plants.  The damage to the flower bed is extensive.

In all these claim scenarios, the insurance carrier could decline liability coverage because of the business (farm) exposure and the policy’s exclusion for business operations and pursuits.  We are not saying that the Smiths would necessarily lose these cases, but if their insurance company declines to cover them, they will certainly have to spend their own money to hire attorneys, etc. to defend themselves from the allegations.

Property Insurance Issues Too

Up to this point, we have focused solely on liability insurance issues, but the farm situation may also cause property insurance gaps in coverage.  Many standard Homeowners Policies also have a business and/or farm exclusion for property.

This could apply to any other structure on the property that was originally designed for or is currently used for farming.  In the Smith Family example we have been using, this could mean that the old carriage house that is now used as a game room or two-car garage may not be automatically covered by the policy since it was originally designed as a farm building.

The same may be true of the small barn that is now used to house the pet goats and to store the hay that is cut from their property as this building could be considered to be used in the farming operations.

What is the Fix?

An experienced farm insurance agent (like us) has many tools to properly cover everything from a sophisticated farm operation to the smallest hobby farm.  We use specialized policies or endorsements that are designed to cover both your personal and farm liability and property exposures.

Contact us if you have questions on Farm Insurance.

by Gary Newborn

Do I Need a Workers Compensation Policy in NJ?

Written By: Gary Newborn, G. S. Newborn & Associates, Inc.

In New Jersey, the question, “Do I need a Workers Compensation policy” is not as simple as it may appear. If a business has employees, Workers Compensation is mandated by the State of New Jersey and it is a necessary and needed coverage. It gets a bit more complex when a business has no employees. Here’s the reason…

What is Workers Comp?

A Workers Compensation Insurance Policy provides benefits to workers based on each State’s statute. In New Jersey, the statute does not define who is entitled to these benefits other than the term, “employee”. The problem is that you may not know who exactly your “employee” is until after something bad happens and the court makes a ruling in your case. Of course, by that time, it is too late to purchase the coverage.

An Example of Workers Compensation

Let’s say that you are a small business in NJ that does kitchen remodeling and renovations. You are doing a project for a good customer that includes new cabinets, appliances and more. You hire a sub-contractor, George, to do the tile work for the kitchen floor.

You have known George for many years, and he has done work for you often in the past. The day the tile work is scheduled, George’s brother, Harry shows up at the job, tells you that George is sick, and he does the tile installation. The work is fine, and you call George the next day to see how he is feeling. George tells you that Harry put his back out while doing the job and is seeing his doctor. You do not hear anything for several weeks.

Then you get a letter from an attorney representing Harry indicating that Harry was injured on the job and that you should submit the information to your Workers Compensation insurance carrier as they are petitioning for benefits under your policy. In this case, Harry was an occasional worker for George who did not carry a Workers Compensation insurance policy. Because you are the General Contractor in this case, NJ statute makes you responsible for the injuries to Harry (the employee of an uninsured sub-contractor).

The case goes to the special workers compensation court in NJ where they award Harry benefits under your policy. Do you have a policy? If you don’t, you are still responsible to provide Harry with the benefits that the court has awarded him (these will be out of your pocket if you don’t have a policy). In addition, you will face fines and penalties from the State for not having a policy.

This is just one situation where someone who you would never think of as your employee becomes your responsibility under NJ statute. Other situations would include a temporary or occasional worker, a relative who helps you out for the day, or a sub-contractor who is not covered under their own workers compensation policy.

Independent Contractors

This information may be very different than what you have been told by your bookkeeper or accountant. That is because there is a very real difference between an accounting relationship and a legal relationship. Just because you pay someone as a 1099 sub-contractor does not make them one under the various laws that deal with employer-employee relationships. For more about this subject, see our blog about Independent Contractors.

Type of Business Structure

The type of business structure affects your need for Workers Compensation as well. If you are structured as a Corporation, corporate officers are considered employees (even if there is no payroll involved) and are subject to the workers compensation statute. If you are structured as an Individual/Sole-Proprietor, a Partnership, or a Limited Liability Company (LLC), the owners (individual, partners or members of the LLC) are not considered employees and are not automatically eligible for workers compensation benefits under the NJ statute.

However, you may elect coverage for this class of owners to provide coverage if desired. It is not unusual for a General Contractor to require all Sub-Contractors to elect coverage under Workers Compensation.

Contact us if you have questions on your need for a Workers Compensation Insurance Policy.

by Gary Newborn

Independent Contractor vs. Employee: Do You Have A Choice?

Many businesses in various sectors depend on the use of Independent Contractors to supplement their work force.

Deciding when a worker is an Independent Contractor vs. Employee has always been a bit of a sticky issue with varying government and insurance interpretations, and little consistency between Federal and State rules.  The rules regarding Independent Contractors and employees are constantly evolving.

However, in New Jersey due to recent court cases and a renewed interest in the subject by the State government, we have seen a general consolidation of the rules that give us a better view on exactly how the State, at least, determines who is an Independent Contractor and who is an Employee.

Why It Matters To Employers?

There are certain advantages for an employer to consider a worker an Independent Contractor vs. Employee.

Generally, in this type of relationship, the employer does not provide employee benefits, workers compensation insurance, or share in payroll contributions such as State and Federal taxes, FICA (social security and Medicare taxes) and unemployment insurance.  In addition, regulations for things such as Family leave, sick time, prevailing wages, overtime and other hour/wage issues are not in play.

Your Independent Contractor relationships can be overturned by the Federal government (IRS), a State government (Department of Labor), or by court ruling as a consequence of a legal action.  If this happens, the Employer could be responsible for past wages, benefits, overtime, and taxes along with penalties and interest payments.  At the end of the day, any time you set up an Independent Contractor relationship you want to know for sure that it is solid and could withstand scrutiny by the government and the courts.

New Jersey Making It Difficult

The trend across the nation is narrow on those eligible for Independent Contractor relationship.  New Jersey is a leading State in this effort.  In fact, this is a focus point of New Jersey Governor Murphy’s administration.

“Misclassification is an unfair business practice and it is illegal,” Murphy said.  “if you are a contractor engaging in these practices, we are either, A, going to bring you into compliance or, B, we are going to put you out of business.”  To fortify enforcement efforts in this area, the State has added new investigators and has trained Division of Consumer Affairs investigators in misclassification.

We have had numerous clients, mostly in the construction industry report that they have been subject to an inquiry by the State.

What Are The Rules?

Determination of the status of a worker in New Jersey will now likely depend on the ABC Test.

The ABC Test is taken from the New Jersey Unemployment Compensation Law and is now the primary test to determine Employee status with the State of New Jersey.  The test presumes that every worker is an Employee unless three standards are met:

1. The worker has been and will continue to be free from control or direction over the performance of the work both under the terms of the parties’ contract and in fact.
2. The work must be outside the usual course of the employer’s business, or, the work is performed outside of all places of the employer’s business
3. The worker is customarily engaged in an independently established trade, occupation, profession or business.

Control

If the employer (remember the State is presuming that everyone is an employee in these situations) directs the worker in any way, the worker is an Employee vs. Independent Contractor.  Things that illustrate control include directing the work, establishing start and finish times, and use of the employer’s tools, equipment, vehicles, materials or supplies.

Outside Of Usual Course Of Business

To be an Independent Contractor, the work done must be outside of the normal work done by the employer or the work is done away from any premises or job site of the employer.

This is problematic for any business who uses workers to do essentially the same jobs that are done by other employees in the company even for a short-term basis or for a specific project.  It is hard to see how an Electrical Contractor could ever call another electrician an independent or sub-contractor.

It is also difficult to see how a technology firm can utilize a contract programmer working remotely as an independent contractor if some or all their programming employees also work remotely.

Established Business

Part C of the test may be the most difficult, especially in the construction industry.  It is impossible to see how a worker who is only working for one company can ever be called an Independent Contractor.

Under this standard, the Independent Contractor would have business cards of their own, a sign on their truck if applicable, insurance coverage, would invoice the employer for work done rather than have the employer track their hours, and perhaps even have a proposal, purchase order or written agreement for the work to be done.

What To Do?

While this is an evolving area, it is clear that the State of New Jersey is serious about the issue of independent contractor vs. employees and will be stepping up their enforcement efforts.  It is also clear that the construction industry is a primary target for initial efforts.  We will probably see this spread to the health care, hospitality, and technology industries soon.

We strongly recommend that any company using independent or sub-contractors review their procedures, assess their relationships and consult with their attorney and accountant to make sure that they comply with New Jersey (and Federal) statues.

G. S. Newborn & Associates, Inc. can help you meet with an employment attorney to discuss these matters. Make sure to discuss with us the insurance implications of using Independent or Sub-Contractors.

by Gary Newborn