Before you click to the next article or just close your eyes for a snooze; I promise that this will be short, painless, and as exciting and informative as possible.
All of the following coverage’s apply to all facilities, Level 1 through Level 4; however, the manner in which the policies are underwritten varies greatly from one facility to the next, even within the same Level. Remember that no literature should dictate your insuring decisions; rather all questions should be answered by a licensed insurance agent with a strong knowledge of your industry. Insurance is one of those topics that business owners love to talk about. Being in the industry, I can’t tell you how often Recovery Residence owners and operators approach me to ask questions about insurance related topics. At trade shows, networking events, over the phone, and in person it is so rare that a facility is confident in what insurance is needed and what insurance they actually have. This short article will outline what the primary suggested coverage’s are and the basics of what those coverage’s offer once and for all. I will follow up with more detailed explanations of specific coverage’s as the requests are made – think of this as a roadmap to give you the information needed to put confidence back in your insurance strategy (or the push to make a change).
This is the building block of almost every insurance program, no matter the industry. This policy provides coverage for Bodily Injury and/or Property Damage Liability to a third party due to your negligence. This policy offers no coverage for wrongful acts or for failure to provide the service you have been paid to provide. Unfortunately, this is often where Recovery Residences begin and end with their insurance strategy, mostly due to their insurance agent not properly understanding the exposure and partially due to the facility not knowing what to ask of the agent. This is also the only coverage most landlords require of their tenants for those operations who have not yet purchased their own property.
This is the policy where coverage for “wrongful acts” is provided. When the facility fails to perform the duty they were hired to perform this policy provides both coverage for defense and damages. The recovery industry is unique in the sense that the primary product is a successful and healthy individual in recovery; any deviation from that intended result could lead to a claim in this area. Indemnification through contracts is a great start; however, if a suit arises from a covered cause of loss your insurance provider will be hiring lawyers instead of you as long as this coverage in in place.
Abuse & Molestation:
This coverage is almost always excluded from the General Liability, can sometimes be included in the Professional Liability, and often times has a sub-limit – meaning 1/10th or even 1/20th of the limits stated on the Professional Liability policy. Some insurance programs offer full limits on a standalone policy. This policy is important to all facilities, not just co-ed. The resident’s truth is the only truth, so even if an Abuse or Molestation event did not occur, the resident can still believe or feel that it did occur. Some of the worse lawsuits originate from this area; if coverage does not exist, then the duty of the insurer to “defend” does not exist – it would not be a covered cause of loss and no coverage would be provided, defense or otherwise.
Stop, do not skip this section just because your facility does not own a vehicle, because I promise you, your facility does operate a vehicle. This topic really does require a detailed explanation and some time to truly understand. The quick and dirty of it is; your vehicles and those of your employee’s and volunteer’s become the facilities Non-Owned vehicles when on company business. That may involve going to the office supply store for paperclips, taking a trip to an art studio for a motivational poster, or even to court for a hearing. If the vehicle (driver) causes bodily injury or property damage to a third party while on company business the vehicle owner’s policy will have the primary responsibility; however, if the claimant’s lawyer does not feel those limits are enough (as most employees and volunteers will be carrying insufficient limits) , your facility will be sought out for damages. This coverage exists in most situations and is available for very little expense for those ask for it.
Different states have different employee thresholds for when Work Comp is required. The state of Florida for example requires this coverage once there are four or more employees. The W-2 / 1099 argument is often brought up as is the question if volunteers are considered employees. The answer is; work comp is a very important coverage that pays for medical expenses and lost wages in the event of a job related injury that the employer would be responsible for if the coverage did not exist. I know it’s not an answer to the question; however, the important concept about this coverage is that the facility is not off the hook for medical expenses and lost wages even if it is not required to carry the coverage according to the state. In addition, if the state does consider the facility to be of the size that this coverage is required, but the facility does not have the coverage at the time the state does their investigation, the facility will be subject to hefty fines.
“When will the coverage’s end?” Almost there. This one is simple, based on the insurance program a facility chooses, this policy provides an additional layer of coverage. Meaning, in the event of a major claim where the limits of the general liability, auto, professional liability, abuse & molestation, or other coverage’s are exhausted then this layer of coverage steps in, up to the limits of this policy. This policy can have limits as low as $1,000,000 and up to 100’s of millions, based on the size of the facility and exposure.
As you can see the Recovery Residence as well as the entire Addiction Treatment and Behavioral Health underwriting process is involved and takes a deeper understanding of coverage than a business in a different industry. What has been outlined above are the building blocks to a better understanding of the casualty side of a proper insurance strategy. As any product or service, you get what you pay for, but now I hope you can better determine where your dollars are going and why insurance agents asks soooo many questions. You owe it to your facility and your residents to be confident in your insurance program as it is a way to transfer risk to an institution that knows how to manage detrimental scenarios. Challenge your agent, ask questions, and be confident – you are protecting what you built.
Best of luck and continued success!
Lee M Goldberg, MBA, CIC
BB Insurance Marketing, Inc.
954-452-4900 ext. 317