Business Newsletter – May 2019


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"Serving you, your business and your community since 1956"

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Vol. 27 No. 3

Terrorism Risk Insurance: Is Your Business Covered?

On April 15, 2013, two bombs exploded near the finish line of the Boston Marathon, killing three people and injuring nearly 300. In addition to the human casualties, many businesses near the blast site—small shops, restaurants, and bars—were closed for more than a week and lost income. Some business owners also suffered building damages, while perishable inventory had to be discarded.

For a period of time, there was uncertainty if the bombings were officially considered a terrorist attack. For businesses, a lot rides on whether the bombings are officially designated as a terrorist act. If deemed a terrorist attack, companies that did not purchase a special insurance rider would lose insurance payouts for damage and lost income. (If it is not classified as a terrorist attack, the business' standard property and casualty policies would apply). In the aftermath of the Boston bombings, companies across the country are rethinking terrorism insurance. Is your business covered by terrorism risk insurance? If not, should it be?

An Evolving Threat risk

Prior to the September 11, 2001 terrorist attacks on the United States, most insurance providers did not exclude or have a separate charge for terrorism risk coverage; rather, insurance coverage for acts of terrorism fell under general commercial insurance policies. That changed in the wake of 9/11 as insurers realized enormous losses, totaling approximately $40 billion (in current dollars).

Some insurers dropped terrorism risk coverage altogether after 9/11, and those that did offer it did so at a higher rate. To help ensure that terrorism risk insurance was both available and affordable to commercial consumers, Congress passed the Terrorism Risk Insurance Act (TRIA) in 2002. With TRIA, the Federal government shares some of the losses with private insurers. Initially slated to be a three-year program, it was amended and extended in both 2005 and 2007. In early 2015, President Obama signed H.R. 26, the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) into law, which extends the TRIA program through December 31, 2020 and reduces the Federal role in the program.

Although insurers must make terrorism risk coverage available to all commercial policyholders, policyholders are not required to purchase it. Business owners may choose to opt out of the coverage.

Terrorism Risk Insurance Program: How Is It Structured?

The major provisions of the TRIA program include the following:

  • Definition of Terrorism. A terrorist act is defined as being, "committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States government by coercion." The Secretary of the Treasury, Secretary of Homeland Security, and Attorney General must jointly certify that an act of terrorism has been committed. Note: There is no specific timeline for officially declaring an event an act of terrorism.
  • Amount of Losses. Losses must be in excess of $5 million.
  • Triggering Event. Federal funds will be paid out in the event that the terrorist act causes total insurance industry losses exceeding $140 million in 2017, $160 million in 2018, $180 million in 2019, and $200 million in 2020.
  • Program Cap. The program is capped at $100 billion per year for losses. Once that threshold is met, there is no Federal coverage, nor are insurers required to provide coverage.
  • Insurer Deductible: 20% of an insurer's direct earned premium for the previous year.
  • Federal Loss Share. A percentage of an insurer's losses exceeding the applicable insurer deductible: 2017 83%, 2018 82%, 2019 81%, and 2020 80%.

Although the coverage can be fairly inexpensive, many factors determine the cost, including the size and location of the business.

The best time to prepare for an unexpected event is before it happens. Obtaining the proper insurance is essential to help protect your business from financial loss. Please contact us to discuss whether having terrorism insurance is appropriate for your business.


Employee Fraud: Costly Problem, Low Cost Solutions

Is your company susceptible toemployee fraud? Small-to-mid-sized businesses may be especially vulnerable because they tend to place more trust in employees who have access to company assets, and they generally have fewer financial and security controls in place. The most commonly targeted assets are cash, tangible assets, intellectual property, and time. fraud

Cash. Funds are often stolen through forgery, check manipulation, or purchasing fraud. For instance, a bookkeeper may insert checks made out to himself or herself among the legitimate checks presented for signature. Or an employee could conduct business with an outside company in which he or she has a financial interest, or favor a particular vendor in exchange for regular gratuities or kickbacks. In one kind of scam, an employee creates a fictitious company and embezzles funds by submitting phony invoices.

Tangible assets. Equipment, inventories, office furniture, and supplies are valuable commodities. All are susceptible to theft when inventory control systems are inadequate or security is weak.

Intellectual property. Intangible assets, such as customer lists and pricing policies, are also important to a company's success. Confidential material, including computerized data, can be stolen when companies fail to establish and enforce appropriate safeguards.

Time. Time theft occurs when employees simply waste time on the job. Employees also steal time when they improperly punch their time cards, thereby overstating their hours on the job. A less obvious situation involves time lost due to fraudulent workers' compensation claims.

Tips for Prevention

To help minimize the chances of employee fraud occurring at your company, consider the following low-cost tactics:

  • Conduct thorough background checks on prospective employees. Verify all résumé information, and request an explanation for any unaccounted time. To protect against false references, don't rely solely on the résumé for the telephone numbers of previous employers.
  • Create a code of ethical conduct. Defining acceptable standards of behavior can be an effective deterrent in preventing employee fraud.
  • Institute financial controls. Require employees to disclose all employment and business relationships. Be sure to separate financial functions such as writing and signing checks, recording receivables, and making deposits. To prevent employees from concealing misconduct for extended periods, require short-term rotations or periodic vacations for those who handle cash. Conduct annual independent audits, including reviews of outside vendors to ensure they exist and that the company is paying market rates for goods and services. These controls should apply to everyone, including family members and long-time employees.
  • Establish security systems to protect tangible assets and intellectual property. Show employees that the building and grounds are monitored. Let them know that the inventory of equipment, products, and supplies is routinely audited. Change computer passwords monthly, and limit access to computer systems from outside the office.
  • Create a safe channel for employees to report suspected fraud. Set up a toll-free telephone number, post office box, or locked suggestion box to allow employees to report misconduct anonymously.

Employee fraud can be costly for your business. Even the most trusted employees may be subject to temptation and lapses in judgment. So be sure to establish practices and procedures that prevent employees from having the opportunity to commit fraud in the first place.

For Your Information

Smart Growth

The Smart Growth Network (SGN) is a partnership of government, business, and civic organizations exploring alternative development strategies to boost the economy, protect the environment, and enhance the community. The SGN raises public awareness of how growth can improve community quality of life; shares information, innovative policies, tools and ideas; and advances opportunities for smart growth, addressing any barriers to development. To learn more about programs and services, go to

Veteran Loan Initiative

The U.S. Small Business Administration's (SBA's) Patriot Express Loan Initiative is for veterans and members of the military community wanting to establish or expand small businesses. The SBA and its resource partners are focusing additional efforts on counseling and training to augment this loan initiative, making it more accessible and user-friendly. The loan can be used for start-up, expansion, equipment purchases, working capital, inventory or business-occupied real-estate purchases. For eligibility criteria, visit

HUD-dle Protection

The U.S. Department of Housing and Urban Development (HUD) says loan fraud is a problem that affects many people each year. On the upside, learning to protect yourself from a dangerous lender may only take a few minutes. The HUD website,, contains tips for identifying predatory lenders, being a smart consumer, and contacting a housing counseling agency in your area.


Guidelines for Employment Recordkeeping

Good recordkeeping can help minimize your risk in the highly regulated arena of employment. Federal and state regulations specify how long certain records must be kept in order to protect an employee's privacy, meet auditing standards, and serve as documentation in the event of a lawsuit. With an organized approach, you can minimize the time spent on paper work and ensure you are complying with standard employment practices.

Apart from Federal regulations, an employer needs to consider whether to keep records for a longer period of time than required, in case of a lawsuit. The Supreme Court case of Anderson v. Mt. Clemens Pottery Co. (1946) illustrates the importance of employer recordkeeping. In this historic case, employees alleged that they worked hours for which they were not compensated, but the employer could not produce hourly work documentation. The court ruled that although the burden of proof lies with the employees, the procurement of such records may be beyond the employees' capabilities. In addition, the court reasoned that "if the employer fails to produce such evidence [of the hours worked by employees], the court may then award damages to the employee . . ."

Complying with state and Federal regulations regarding employment recordkeeping can help protect your company's interests. Here is a list of suggested employment-related records and retention periods for you to consider:

Keep These Employee Records Five Years or More

  • Employee benefit plan summaries and documentation
  • Employment-at-will policies
  • Equal employment policies
  • Expired contracts
  • Occupational Safety & Health Administration safety forms
  • Personnel files for terminated employees

Keep These Employee Records Three Years

  • Collective bargaining agreements
  • Contracts
  • Employee applications
  • Employment records
  • Employer policies
  • Information related to the Family and Medical Leave Act
  • Form I-9 (employment eligibility verification form)
  • Job descriptions
  • Merit and seniority system documentation
  • Payroll records
  • Wage rates
  • Information regarding promotions, demotions, and transfers

Keep These Employee Records One Year

  • Physical exam results
  • Résumés

Note that workers compensation regulations vary by state, so check with the appropriate state agency for more information on full compliance.


Did You Know?

Reliance on Customer Data Detracts

According to a recent study from the CMO Council, 42% of marketers believe "marquee experiential brands" are not just developing better relationships, but are more effectively leveraging customer experience as a driver for profitability and growth. They look at "omni-channel" engagement to guide and inspire customers on a journey. However, 41% of marketers admit that focusing on the relationship versus the campaign, has been a challenge for their business. In fact, almost 33% admit that they sometimes forget that their "targets" are human beings.

Overall Emergency Preparedness

Rave Mobile Safety, released key findings from its 2019 Workplace Safety and Preparedness Survey to examine employee perceptions on workplace safety and current trends shaping corporate emergency preparedness. The study found almost 50% of respondents have experienced a severe weather emergency, though over 47% rarely or never tested emergency drills to be better prepared for these events. The study also found that mobile communication is becoming the communication method of choice in an emergency.

Disconnecting from Emails

Robert Half Technology surveyed IT leaders and office workers to see if they could ignore their inboxes after hours. The study found that 66% of tech leaders believe they could adhere to a ban, but 41% of office workers surveyed don't think their manager would follow that rule, and only 46% of employees were confident they could resist the temptation to check emails.


Copyright © 2019 Liberty Publishing, Inc. All rights reserved.
The content of this newsletter is taken from sources that are believed to be reliable.
However, this newsletter is not intended as a substitute for legal, financial, or professional counsel.


2205 Point Blvd. Suite 200 | Elgin, IL 60123 | p 847.741.1000 | f 847.428.8857