Mitigating Inland Marine Losses

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

Inland marine insurance can sometimes be a forgotten line item in some construction companies’ insurance portfolio. This insurance covers your materials, equipment and tools once they are in the field or in transit. Sometimes insured’s feel they have coverage through their property insurance but once the equipment, materials or tools leave your premises, inland marine is the line of insurance that covers you.

Historically, inland marine coverage had fewer losses than other lines of coverage and this type of insurance had not seen a change in premium. However, this has changed in recent years with bolder criminals stealing larger equipment and materials from jobsites, breaking into work trucks to take higher valued tools and vandalism. What are some ways you can cut down on cost and help insulate yourself from losses?

By utilizing new technology to track where you are storing your materials and equipment overnight and investing in security measures, you can help prevent claims and reduce premiums. With theft on the rise, it is a good time to make sure you are storing your materials and equipment in the best way possible. Placing air tags or similar GPS tools on larger equipment is extremely helpful in recovering stolen items and tracking where they are being stored. If leaving equipment at jobsites, removing batteries is also helpful but if possible, try to not leave equipment at the jobsite. Train your employees to properly secure and store equipment if they are taking it home in their work truck. Most theft or vandalism are crimes that are a result of convenience or opportunistic. The harder it is to commit crime because of preventative measures, the less likely the crime will happen.

Ensure you have proper limits for your equipment and materials with your carrier. In reviewing and insuring your tools and equipment, it is important to understanding what is considered miscellaneous tools. Typically, this might be tools with a value less than $2,500, thus necessitating the need to “schedule” equipment above that value. Often times, we see insureds who have aggregate miscellaneous tools limits much higher than needed and then also including those tools or equipment on the scheduled equipment list.

When insuring the materials that will be used on a job, it is important to distinguish between a transit, jobsite and temporary location limits. These limits should be specific to your actual needs and not necessarily always the same values, that is another common mistake we see in auditing insurance portfolios. These vital discussions can help you save on premiums and ensure you are properly insulated from exposures.

While inland marine insurance isn’t typically one of your largest expenses in your insurance portfolio, it is something you need to monitor so costs do not creep up over time from frequency of losses. With rising costs in both auto and property insurance, it is becoming more important to make sure you are insulating your company from risk as much as possible to keep your controllable exposures down.

Discussing your inland marine coverage with your insurance broker regularly can help keep premiums and losses down. If you have questions relating to inland marine or any other of your insurance coverage, please reach out to me at ccraig@ranchomesa.com or (619)438-6900.

Utilizing Your CPA's Expertise with Nick Balaity

Author, Andy Roberts, Surety Account Executive, Rancho Mesa Insurance Services, Inc.

Andy Roberts, Rancho Mesa's Surety Account Executive, is joined by Nick Balaity, CPA with ⁠Aldrich CPA + Advisors⁠, to discuss the tax law outlook for 2025 and offer insight on contractors’ business decisions in the coming year.

Andy Roberts: Welcome to StudioOne™, I’m Andy Roberts, a surety account executive here at Rancho Mesa and joining me today is Nick Balaity, who is a CPA and partner at Aldrich CPA and Advisors.  Thank you very much for joining me in the studio today.

Nick Balaity: Yeah, thanks for having me, man. I've never done a podcast before so this is pretty exciting for me.

AR: Yeah, it's going to be fun. And we have a few really great topics that we're going to get diving into. But before we get started, Nick, why don't you give us a little background about yourself and what you do at Aldrich?

NB: Yeah, thanks. Yeah, so I've been working with contractors on the accounting side for probably 13 years or so at this point. The last eight of which I've been with Aldrich been a partner there for about four years. Getting to work with contractors is pretty awesome just because they're mostly salt to the earth people and blue collar guys and gals and so they're really easy people kind of to work with for the most part.

But Aldrich is a West Coast based firm. Primarily our big offices are in San Diego and Portland, Oregon. And then we organized by industry group. So I'm in our construction group. I head up our California group. And then we have other industries that, you know, manufacturing, real estate things like that. So yeah, I focus just on contractors. I'd say 85% of what I do is just working with contractors.

AR: Yeah, that's fantastic. I know we've worked together on a few and you guys always do just a wonderful job. So, you know, let’s dive into what we're going to talk about first, which I think is a really important topic, especially with, you know, administration changes or some uncertainty. So we're going to dive into some tax law updates and strategies and kind of discuss what might be coming next year. As I'm sure you're probably sitting down with your clients and doing some tax planning, to figure out what 2026 might look like, what changes might come.

NB: Yeah, it's a funny year to do it because, you know, we go into these meetings at year-end tax planning and we're kind of telling them, “Hey, this is the strategy for this year, but it might be different next year.” So, the 2018 Tax Cuts and Jobs Act that went into place when Trump was last in office, those provisions are set to expire at the end of 2025. And so the question is like, what will change if those expire?

 So the kind of the big things that'll change that people should be aware of is the overall the rates are going up. So, like your top federal rate is going to go from 37% to 39.6%. Not a huge jump, but definitely noticeable, especially if you're at the higher levels. And so the qualified business income deduction also expires. So if you have any pass through entities, so like S Corps, partnerships, LLCs, you were getting and still are getting a 20% deduction on your federal taxable income. So if you had an income of a million bucks, you'd be getting a $200,000 deduction to bring it down to $800,000. That got us to what are effective top rate of 29.6%. You know, 37% minus the 20%. So 29.6% kind of was the top tax rate, which was great. That's kind of some of the lowest rates we've ever seen in recent memory. That's all set to expire at the end of 2025 and going into 2026.

 So really, the question has been, what is the Trump administration going to do when it comes in, especially now that the Republicans control both sides of the House and the Senate? And so I think what we've seen so far from the administration is they are looking to extend most of those provisions and make them permanent, is kind of what they want to do. Really, it becomes a question of budget reconciliation, what they can do, but we're anticipating that those will get extended.

 I think there's a section of our clients that are like, “Are taxes going down?” Maybe, I don't know if there's an appetite to actually cut it again. It feels like there's more of an appetite within Congress to just extend what we currently have. So, but the other provision is bonus depreciation, that's been coming down. It's been going down 20% percent every year and that's going to go to zero. They want to bring that back at 100% as well and make that permanent too. So yeah, so I mean, if all that happens, you know, we'll be kind of looking at kind of the same as we have, but if not, which we'll get an idea of, you should be reaching out to your CPA and starting to look at what strategies you can do as you go into 2026.

 AR: I mean, that's what makes it really important to have a resource like yourself if you're a contractor and an owner to talk about this kind of stuff when you're sitting down so you can plan for your business. What do you think the timeline looks like for when we might have a finalized answer on some of this stuff and what they're going to do? Just best guess.

 NB: Yeah, if they're going to do something, they'll have to do it within the first few months, I would think, for it to be effective. I mean, there have been retroactive tax law changes. Everything I've read is they're going to make it all effective, 01/01/25. So if they're going to do that, you would think they would do it in 2025. But man, Congress is typically a jumbled up mess. So it's very hard to know exactly when it's going to happen.

 AR: If they do a retroactive to 01/01/2025, do you have to go back and amend returns?

 NB: As long as those changes are in place before we file the 2025 return, which would be like, you know, February through April of 2026, yeah.

 AR: Yeah, it's good information right there. That's a lot of work on your guys as well.

 NB: Yeah, for sure. You know, a lot of just keeping our ear to the ground.

 AR: Yeah. So, with those, now that we've kind of talked about that, so let's kind of look at what some strategies contractors can do, you know, when they're doing their taxes for what they, you know, to decrease their income and stuff. So let's look at some pros and cons of maybe like cash basis versus percentage of completion on your end.

 NB: No, that's always like one of the first things we do when we meet with a client or a potential client, a prospect is figure out what their method of accounting is for tax and just try and evaluate if that's really the best fit for them. A lot of times it can be, "Hey, we're already on this method," and so to switch might not make sense. It might cost us a bit in the short run, but generally what we see a lot of is, you know, smaller contractors that are first starting out and growing will be on cash basis.

 Cash basis can be really advantageous as you're growing your business because as we know, construction is a very capital intensive business and so the more cash you can retain, the better. So typically as you're growing, your AR balance is also growing. You have more and more accounts receivable outstanding and cash allows you to defer that income on that AR until it's actually received. And so as you're growing, it keeps more cash in the business. As you flatten out, you know, if you reach that kind of cruising altitude, it'll, you know, you'll be deferring, you know, that AR, but then it'll be coming back into the next year and you're typically deferring a similar amount. So it kind of gets, it should in theory level out to kind of closer to where book would be, but you're still managing that all the time. So a lot of times we'll see clients switch over to percentage of completion method or they'll be forced to do that when they go over $30 million roughly-- it's an inflation adjusted number of gross receipts on a three-year average. The advantages of that is it's just way your plan around, you know, you're not, you're not sitting there on December 30th, and, and saying, “How much cash do I have in my account? What's my AR? What's my AP?” You're really able to manage that kind of just through your whip, you know, so you're able to kind of look at and see, okay, whatever my book income is, typically my taxable income is going to be pretty similar.

 AR: Yeah, well, it's, I mean, it's a good thing to talk about too, because we were always on our end looking at percentage of completion for what we want to see from your guys on that part, but that's different from on the tax side.

 NB: Yeah, and that's one of the advantages though, of being on cash is you can still be showing really nice profits, but you're not picking up that income yet until you actually do. So there can be a pretty big divide between taxable income and book income when you're on cash basis.

AR: So one last thing to touch on this one would maybe be, for contractors looking to buy equipment, should they buy it? Should they not? What are the advantages, disadvantages?

 NB: Yeah, I feel like it's the question we get very frequently at the end of the year, because I think, you know, there's been enough TikToks and Instagrams out there talking about, “Oh, I just bought this Escalade and now I get to write it off.” And while that is true…

 AR: You got that big cash balance in your bank account, what do you want to do to bring that down a little bit?

 NB: Right. And so, buying equipment is the question we get a lot. And kind of my two cents on this is, it never makes sense to spend a dollar to save 30 cents, you know, like if you need the piece of equipment, you should buy it.

 AR: Absolutely.

NB: If you're looking at buying it in Q1 or Q2 of the next year, maybe we say, “Hey, maybe it makes sense to accelerate that purchase and go ahead and do it now to go ahead and capture that deduction.”

 But really, there's impacts to it, right? So if you're paying cash, then you're reducing your working capital because you're exchanging a current asset for a long-term asset. If you're financing it, that'll have a little bit less of an impact on working capital because you'll have just a current portion of that debt that'll be on the books. And so it's really something to just kind of evaluate, you know, bring in your surety broker, bring in your banker, especially if it's a big piece of equipment and kind of let them know what you're thinking about doing, work with your CPA, what the impact would look like and just make sure that it's going to affect anything on your credit side or your bonding side.

 AR: Yeah, well, I mean, especially on our end where, you know, we love to see cash in the bank. You know, when we do a submission, we send in, like, we'll often send in like a vehicle list. But that's not going to give you a ton of surety credit. That's nice to show the underwriter, like, “Hey, this is where they have invested in their business,” but we also, you know, if it's going to tank that cash balance, that's going to have a direct effect on the credit you're going to get and lead to a lot more questions from underwriting as to what happened to that money because they would always rather see it sit in the account in case something happens.

 NB: Yeah, it's our CFO said this to me recently that I really like this saying; if you come to me early with a decision like this, you have a partner, you come to me after you have a judge.

 AR: Oh man, that’s great.

 NB: Yeah, I think that's really kind of the same thing here with you let your partners know what kind of types of moves you want to make and they can help guide you along the way and really help you with that. You come to them after, what's done is done, and now we're just kind of stuck with the result and we got to kind of manage around it that way.

 AR: Yeah, and we have to deal with whatever terms are going to come from that as opposed to putting a plan in place or at least putting the options out there and be like, “Well, if you do this, this is what happens or here's what happens on this side,” and let them make the decision from there, and, you know, whatever repercussions might come from it.

 All right, next thing, which I mean, I know I've been seeing a lot more and I'm sure you have as well are business transitions. I know there's a few different methods. Let's start with, you know, we were talking about what an internal buyout looks like. I mean, that's pretty self-explanatory that it's coming from like the inside, but do you see that pretty frequently or…?

 NB: Yeah. It's a timely topic. It's kind of been a big thing I feel like for the last five or 10 years as this large baby boomer generation is getting closer to retirement, you know, they're looking at, “How do I get the final value out of this business?” Or for some, it's not even about getting that final value, it's about, “How do I leave a legacy behind and a company that'll keep going on and have people there to run it?”

 AR: I feel like a lot of people are very proud of the name that they've built and they want to see it keep going.

 NB: Totally. And they should, especially some of the ones we've seen that are local that have grown to be $100 million contractors. You should be proud of that. So yeah, internal buyouts are probably the most common we're seeing right now where maybe you have a kid—a son or a daughter—that's coming into the business that has been working with you and wants to buy you out or maybe you just have some key employees that you would like to hand over the keys to the kingdom on. Really the biggest thing there is like the financing for those tend to be based on the company's profits. And so there may be some debt that comes into place related to that. And so how's that going to affect the company kind of bringing it back kind of the surety piece of it is like, you know, if we put on this big debt, what's going to happen? Also, if we, you know, if our main shareholder who probably at this point in their career has nice personal net worth is in, you know, is on the indemnity, is there someone else who's going to take that over? Are they going to stay on? How's that going to impact the bonding capability or even the bank, right? Yeah, you know, your lines of credit probably have some personal guarantees in there as well.

 AR: Well, I mean, that's like a big question we usually ask too, because typically the, you know, the son or the younger generation that might be buying the company are definitely not going to have as developed a personal financial statement as the current owner who's been doing this for 30 plus years. So like if they're willing to stay on and indemnify, that really helps our case a lot if they're going to be bringing on some debt, because just to know that there's someone else there backing the company, as these people come in.

 NB: And I mean, I would say, man, I feel like I deal with in five or six of these almost every year, where we're just trying to figure out how to make this work. So there's a thing you can get really creative. And so it's not something people should be afraid of. But they should reach out to their CPA, they’ve seen a lot of these go on and there's a lot of different ways we can skin this cat and come up with a solution that's going to work for everyone.

 AR: No, it's always I mean, it's super important to trust your advisors or your partners and make sure you're utilizing all the resources that you have around you when you're making a big important decision like this.

 NB: Yeah. And I think getting everyone as involved as possible and then also just looking at what are you trying to get out of it, right? So if we're trying to maximize cash, internal buyout might not be the best, maybe an external buyout would be better and we can kind of transition talking about that.

 AR: Yeah, let’s do it.

 NB: External buyouts, there's a bunch of different ways that can kind of look. You can sell to a competitor, or maybe someone more upstream that's trying to vertically integrate, those tend to be some of the faster moving deals that get done because they know your industry really well. They kind of already have an idea of the types of projects you do.

 You can also go private equity; which private equity has been coming into construction space more and more. It used to be they were really only interested in companies that had more of like a repeat service component or repair. You know, so, it would be like HVAC, or maybe like plumbing or in some cases electrical, but some of those don't even have service component to them. And so recently they've gotten more aggressive and there's definitely been more of a push into some more niche or specialty areas. And so they're not quite going after general contractors yet, but I can see a world where eventually they do.

 AR: I mean; we're definitely seeing it more too.

 NB: Yeah.

 AR: Like, I mean, it's happening more and more frequently.

 NB: Yeah. And so the biggest thing to know about with private equity is it's going to come with some-- it's probably going to be one of your highest offers you will get; you'll maximize value that way. But there probably will be a three or five-year period where the owner or key management are going to have kind of golden handcuffs, where they need to stay on. So it's not going to be a quick exit where you might be able to get that more with an internal buyout or potentially having a competitor come in and buy you out. Typically, private equity is going to want key management to stay on board for a little bit. So it's something to consider.

 So one of the things, you know, we talk about a lot with clients is trying to plan in advance for this. When you're starting to say, "Hey, I think I'm five years out from wanting to retire and be out," that's the time to start kind of planning, "Okay, how do we want to do this? Should we get a valuation of the company to kind of see what's it worth and figure out, you know, what's our retirement plan? Is that going to be enough? Do I need to stay working a little bit longer to make sure I have enough for my nest egg?” And so it's just kind of a, there's a whole bunch of different conversations need to happen. And then also, if we're going to look to external, how do we position the company to sale, right? So how do we make it look as attractive as possible to an outside buyer?

 I think kind of the last option that's become a lot more popular recently is ESOPs. So if you don't know what an ESOP is and it's an Employee Stock Option Plan. And basically it’s where a trust gets set up, and not to get too into the weeds, but a trust is owned by what’s essentially a 401k plan, and they own the stock of the business. And so it’s a way that you can get the ownership of your business to your employees, which is really actually a pretty cool legacy you can leave if you’re basically selling the company back to all your employees, not just key employees. But they are expensive, they cost quite a bit to run every year. There's evaluation that has to happen. There's an audit that has to happen. There's actuaries that get involved and things like that. But it can be a great way to cement that legacy and let it live on and really reward your employees who've been loyal to you over the years with ownership in the business. All this stuff just takes a lot of planning. Like my key thing that I say to every contractor is whenever you think you want to start looking at this, you know, we just need to make sure we have a runway to kind of build out that plan.

 AR: Yeah. How often do your clients come to you with the five-year runway versus like the one-year?

 NB: Pretty rarely, I would say. You know, I have a couple, clients that just really look ahead. I think it's one of those business, construction's hard when you're, especially when you're the sole owner or primary owner, you know, all that stress, you feel it. And so it can be really rewarding, but it can be really challenging just on yourself. So a lot of times we get contractors that come to us and are just like, "I'm done. I need to get out." And we can absolutely help through that situation. But in an ideal world, we would say, "Hey, let's start looking three to five years out so we can get you positioned and ready and we have your plan set up and all that."

 AR: Do most of the time when they come to you with this plan, do they have an idea already; do they want to do external versus internal? Because I know external, there's more options. Do they kind of have an idea of what they want to do?

 NB: Most of the time they do. They'll come to us and they'll say, “Hey, I do have a key employee or a son or daughter that wants to take over the business. And that's the way I really want to go because I feel strongly about that.” Sometimes they do come where they're like, “Hey, I think I

want to do an internal buy-out but I'm not sure that they're going to be able to afford it.” I just had that conversation with a client the other day and we went through process, we got a valuation done for them and they saw what it's worth. And the question was, "Hey, do I want to take a haircut and make it so that it can be bought internally or do I want to go external?" And in this case, they wanted to go external because they didn't want to leave that much money on the table, which is totally fair. You know, you built up that company, that's your value and you choose what to do with it. So, yeah, I would say most of the time they have an idea of what they want to do. My job I feel like as an advisor to them is to make sure they're aware of all the options that are out there to them and what those, how much money could be on the table.

 AR: Now, kind of circling back on like private equity because, I mean, we're seeing a bunch of that, just like you are. And I mean, it can have a pretty big effect on your financials and your balance sheet that really can actually hurt your bonding capacity, and I think a lot of people aren't totally aware of that going into it because they see this big number coming from PE, and they think it's fantastic if they just have to hang around for three to five years, but they don't understand what bringing on some of this debt or goodwill and these kinds of things to do to your balance sheet and your financials and what they can do to your surety program.

 NB: Yeah, it's one of those things that you really want to model out, right? So before that deal closes, before you sign that purchase agreement, you want to make sure that you've looked at, okay, this is the number, this is the debt, this is how the working capital is going to look post transaction. And then also like, you know, is the private equity firm going to be willing to take on the indemnity that maybe the primary shareholder was taking on?

 AR: Usually that's a no.

 NB: Yeah, exactly. It's almost always a no. So it's like, okay, are they going to infuse more capital in to make sure that the bonding is going to stay there? And so I think that's why you've seen a little bit less interest in public works contractors for PE because there is kind of that hook that they got to sign on for. And so you're seeing it a little bit more and more than ones that do private construction projects.

 AR: No, definitely. I feel like too, there's been some PE firms that I've just been reading about and stuff that they don't totally understand what they're getting into when they buy that company, when it comes to the bonding aspect, because maybe it's not major, but it's sizable and then you

present them with, “Oh well, we either need you to put a bunch of money in or someone on over there needs to sign,” and they don't want to do it.

 And you're like, “Well, then you're going to lose that aspect of the business.”

 NB: Totally, and it comes back to every time, like the best advice I can ever give a contractor is before you do any significant transaction or anything you need to be bringing in all of your outside advisors: the bank, the surety broker, the CPA, your attorney, making sure that everyone's on board and knows what's going on and we can work through all these things kind of before the transaction happens. Because it can kill a transaction too.

 AR: Yeah, it kind of goes back to what you were saying about how you need to utilize all your resources, whether it's banking, CPAs, your surety agent, your insurance agent too, what that kind of does with your policies to make sure there's, you know, you're not significantly impacting your business. You know, because I think you guys will handle like some benchmarking and some of that type of stuff.

 NB: Yeah, yeah, so we'll do benchmarking with clients. We get really good data just from our own client groups. I mean, we serve, gosh, I want to say like 400 contractors across our firm, you know, between all of our geographies. So we have a lot of internal data and then there's also external data points out there like CFMA, Construction Financial Management Association does an annual survey that's broken out by company size, geography, trade. It's really an incredible survey they put out. You can benchmark yourself against that. But then also it's just like the kind of intangible knowledge of working with a lot of contractors. What have I seen be successful? Same with your surety broker. What have they seen to other contractors that you could leverage off of, that experience that you guys have with other folks? So yeah, there's a lot of great opportunities for your CPA or bonding agent to come in and provide knowledge from kind of the outside, just from what we're seeing in other places.

 AR: Yeah, that's great. And I mean, I think the kind of last thing to kind of, you know, from my perspective to kind of input on here for, you know, any contractors listening is, you know, having a great CPA relationship is something that's invaluable to your business. So, you know, I know you and I have gotten to work a lot together over the last few years since I've kind of come into the industry. And It's always nice when we see a review from you guys that says Aldrich on the front. So yeah, no, I appreciate that.

 NB: And likewise, Andy. And Rancho Mesa has been a great partner with us too. And so to me, it's the more you can get your advisors talking together as a group and not isolated, the better, because we can come up with solutions as a group that kind of come to think about all the different angles, right? So like, I know a lot about the tax side. I know a lot about the financial side. I know a little bit about, you know, the bonding program, but that's where your expertise comes in and you can kind of give your expertise and your specialization there that you have and kind of advice on impacts, you know.

 AR: Well, and it's super nice because anytime someone's like, "Oh, well, let's talk about what's this going to do tax-wise," I'm like, "Oh, I'm not the guy for that, but I know someone that can help you there.”

 NB: Yeah, right, exactly, exactly. So, yeah, I mean, that's the biggest thing is, just keep everybody in the loop.

 AR: Yeah well I think that was a lot of really great information on this this episode so Nick, thanks very much for joining me.

NB: Yeah happy to happy to join you and thanks for including me.

Five Tips to Protect Your HVAC and Plumbing Vehicles from Break-Ins

Author, Matt Gorham, Account Executive, Rancho Mesa Insurance Services, Inc.

Contractors’ vehicles have long been a preferred target for thieves. Due to their distinct shapes and often eye catching branding, contractors’ vehicles are generally easy to identify, and they often contain thousands of dollars’ worth of tools, equipment, and materials.

Heating, ventilation, air conditioning (HVAC) and plumbing business owners that allow their employees to drive their work vehicles home face an especially difficult challenge to keep their tools and equipment safe. And, the cost of a vehicle break in goes far beyond the financial cost of replacing what has been stolen.

Being the victim of a vehicle break-in will lead to delays in your operations, it can cause frustrated customers, and the affected employees can suffer psychologically, especially if they have had their own personal tools stolen.

Here are the top 5 tips to help navigate the risk of vehicle break-in’s at an employee’s home:

1. Have clearly defined policies and discuss them with your employees.
Before allowing employees to drive their vehicle home, ensure that they understand what is expected of them. Having policies to avoid or minimize losses are only effective if the driver is held responsible for actually following them.

And drivers are more likely to follow the policies if they:

• Are aware of them

• Clearly understand them

• Are accountable for implementing them

2. Leave expensive equipment, tools, and materials at the shop.
While it may be inconvenient for your techs to unload their trucks at the end of the day, creating and reinforcing a habit of securely storing expensive equipment at the shop is much more likely to prevent theft of that equipment.

If taking the equipment home is unavoidable or impractical, discuss with them if it is preferred to bring the equipment inside their home overnight.

Capreece Serna, Senior Safety Services Consultant with Sentry Insurance, offers an important reminder: Anything that is kept in the truck should be placed out of sight from the outside, and do not leave the keys in the ignition, on the seat, or tucked in the visor. Leaving electronics, keys, garage door openers, security badges, wallets, purses, or expensive tools in plain sight to potential criminals can encourage them to break into the vehicle.

It is also important that your techs know what is on their trucks. Having them conduct a quick inventory check at the start and end of their shift can help increase security of your tools and equipment, as well as theirs.

In the event that you ultimately experience a vehicle break-in, having an inventory of what was on the truck will help expedite the process of getting tools and equipment replaced.

3. Lock your vehicles and set your alarms.
This may sound basic, but locks are one of the most effective ways of securing your vehicle. Keep in mind that many technicians are getting in and out of their trucks repeatedly throughout the day, often times without locking their vehicles. This can lead to a false sense of security and unconscious habit of leaving a vehicle unlocked overnight. Having security bars or grates on the interior of the windows or doors will provide little security if the doors themselves are unlocked.

It is also important to recognize that there are different types of locks available. While not fail safe, aftermarket locks can provide an added layer of security on either the exterior or interior of a vehicle. As an example, puck locks are commonly found on the exterior, while cable locks or chain locks can be used in the interior to secure tools, tool cases, or equipment to mounted shelving.

Having an alarm system installed on each vehicle that gets driven home can be another effective deterrent. Would-be thieves are much less likely to target a vehicle with an alarm. However, if they are undeterred, the attention that an alarm system attracts in the event of a break-in can substantially reduce the amount of time they have to find and take anything.

4. Be aware of and monitor surroundings.
There are a number of environmental factors that employees can leverage or put in place to increase the security of the company vehicle. Serna offers the following suggestions whenever possible:

• Parking inside the employee’s garage or behind a security gate,

• If in the driveway, backing up to the garage door to prevent the vehicle doors from opening fully,

• If in the street, parking in a well-lit area or using a physical obstacle to limit door access,

• Making use of motion activated lights or cameras pointed at the vehicle,

• Placing a camera inside the vehicle facing tools and equipment.

5. Review coverage for tools, equipment, materials, and employees’ tools with your insurance broker.
Each of the above tips will help reduce the risk and severity of break-ins. However, eliminating the risk of a break-in altogether is impossible.

Serna points out, “When thieves decide to commit their crime, they are looking for the biggest payoff with the lowest potential for getting caught. The focus of your practices should be to minimize the appeal of your vehicles to thieves, which will also minimize the loss to your business.”

Talk with your insurance broker to develop a coverage strategy that aligns with your appetite for risk and have the carrier take on the remaining risk.

A unique advantage for Rancho Mesa clients is their access to the SafetyOne™ mobile app. Within it, business owners are able to make their vehicle policies available to their employees digitally, as well as provide security checklists through a QR code, while also being able to take pictures of their parked vehicle at the end of the work day, helping to reinforce safe practices, accountability, and employee implementation.

For a complimentary review of your current tool and equipment coverages, as well as your safety practices, you can contact me at (619) 486-6554 or mgorham@ranchomesa.com.

Market Update: Sexual Misconduct Liability in Healthcare Organizations

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

Rancho Mesa’s insurance brokers specializing in healthcare, education and non-profit organizations continue to navigate the hardening insurance marketplace, characterized by tighter underwriting guidelines, reduced limits of liability, increased deductibles, and higher policy premiums.

One of the sectors most impacted by the hardening market is healthcare and its ability to attain adequate insurance protection, specifically sexual misconduct liability insurance. Continued claim activity, social inflation, third-party litigation financing, and the increased cost of litigation all contribute to the hardening market conditions.

Consider the following data points in order to understand why the market is hardening. Several states have recently removed barriers to reporting abuse. Only five states maintain a criminal statute of limitations on claims of abuse. Nineteen states have eliminated statutes of limitations on civil claims. And, 30 states have enacted laws allowing victims more flexibility to revive claims of sexual abuse.

Additionally, according to the Institute for Legal Reform, from 2016 to 2020 the tort system’s direct economic costs grew 6% every year, exceeding both the inflation rate and GDP. That means more and more cases are litigated each year.

Not only are the number of cases increasing, but a 2023 report titled “Medical Malpractice Claims-Made Social Inflation and Loss Development Report” indicates that claims exceeding $1,000,000 continue to grow in frequency. So, the number of claims are increasing as the cost of claims are increasing.

An increase in third-party litigation financing, the practice of investors funding lawsuits in exchange for a portion of the settlement and return on the investment, can discourage prompt and reasonable settlements. This practice also reduces an attorney’s accountability to good faith standards and produces more lawsuits.

Impact to Sexual Misconduct Coverage and Healthcare Providers

Insurance companies are now reducing their financial risk for abuse exposures. This means medical professional liability underwriters may need additional underwriting information to quote limits in excess of $100,000. Additional underwriting measures may include issuing non-renewals, considering jurisdictional challenges, careful consideration of policies covering young patients, excluding all trafficking allegations, and adding a per victim or perpetrator deductible.

Risk Management Strategies for Healthcare Providers

Healthcare organizations can help mitigate some of the risk by:

• Using chaperones to reassure patients of a procedure’s professional nature. The chaperone provides a witness to support the practitioner’s actions.

• Performing examinations for a minor in the presence of a parent, guardian, or chaperone.

• Educating the patient about the exam and its necessity prior to the patient’s appointment.

• Documenting the exam’s medical necessity, the education provided to the patient, and the chaperone’s identity.

• Maintaining boundaries by establishing proper practitioner-patient relationships.

• Educating staff on proper patient interactions, professional boundaries and reporting of misconduct.

• Ensuring familiarity with your state’s reporting obligations related to sexual misconduct and include the requirements in your policies and procedures.

The legal environment and claim trends add financial exposure for both healthcare providers and insurance companies. Rancho Mesa will continue to monitor these trends to better educate and advocate for clients. Please contact me at (619) 937-0175 or sbrown@ranchomesa.com to discuss possible insurance solutions.

Cal/OSHA Releases Top Safety Citations for 2024

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

The Occupational Safety and Health Administration (OSHA) recently released its Top 10 List of Most Frequently Cited Standards for fiscal year 2024.

Each year, OSHA compiles a list of the most common workplace safety hazards. Understanding these new numbers can provide insight for employers on potential safety issues within their organizations. While OSHA’s list includes the top ten citations, we will focus on the top five critical violations.

1. Fall Protection

Fall Protection (1926.501) was once again the leading cause of OSHA workplace violations. The administration reported over 6,000 violations this year; significantly more than any other reason for citation. There are a number of ways one can incur a fall protection violation including a lack of fall protection such as safety harnesses, hand rails or toe-boards. Regular training on fall hazards and how to properly use fall protection equipment is essential to keeping employees safe while at work.

2. Hazard Communication

Hazard Communication (1910.1200) violations were the second most common reasons for citation. OSHA guidelines require the hazards of the chemicals that a company produces or imports must be, “available and understandable to workers.” In order to avoid citations, employers must train employees on how to handle hazardous chemicals correctly, and must have safety labels displayed in the workplace.

3. Ladders

The number three violation for the year was Ladders (1926.1053). There are numerous requirements for the use of ladders on a job site, which can be found on the OSHA website. Those requirements range from the condition and spacing of ladder rungs, placement and weight limits, and manufacture date. Employers should ensure that all ladders are regularly inspected and maintained, and should make sure employees are trained on how to safely use a ladder on the job.

4. Respiratory Protection

Respiratory Protection (1910.134) was the fourth most-common type of violation. Oftentimes, contaminants in the air of a jobsite require respiratory protection. Some common contaminants that would require specific protection include harmful dusts, vapors, gases or sprays. OSHA also, “requires the employer to develop and implement a written respiratory protection program with required worksite-specific procedures and elements for required respirator use.” That program must then be administered by a trained program administrator.

5. Lockout/Tagout

Lockout/Tagout (1910.147) violations were fifth on the list of the most common safety violations for the year. These violations occur when the proper procedures for controlling hazardous energy releases are not followed when servicing machines or equipment. Proper lockout/tagout procedures are a must when performing machine maintenance, and employers should be sure to train their employees on how to protect themselves.

OSHA tracked safety violations beginning on October 1, 2023 and ending on September 5, 2024. The full list of violations include:

1. Fall Protection—General Requirements (1926.501): 6,307 violations

2. Hazard Communication (1910.1200): 2,888 violations

3. Ladders (1926.1053): 2,573 violations

4. Respiratory Protection (1910.134): 2,470 violations

5. Lockout/Tagout (1910.147): 2,443 violations

6. Powered Industrial Trucks (1910.178): 2,248 violations

7. Fall Protection – Training Requirements (1926.503): 2,050 violations

8. Scaffolding (1926.451): 1,873 violations

9. Personal Protective and Lifesaving Equipment – Eye and Face Protection (1926.102): 1,814 violations

10. Machine Guarding (1910.212): 1,541 violations

Violations of any of these OSHA guidelines can put employees in dangerous situations, and can lead to significant consequences for an employer. If the proper safety precautions are not put in place, serious injury and even death can occur on a worksite. Failing to comply with the administration’s regulations can also be incredible costly for an employer. The maximum financial penalty for an OSHA violation  is currently $16,131 per violation, and the maximum penalty for willful or repeated violations is $161,323 per violation.

Rancho Mesa’s RM365 Advantage Safety Star™ program and the SafetyOne™ platform are both great resources to train employees on the top OSHA safety violations.

If you have questions about how best to prepare your team and implement necessary safety plans, contact your Client Technology Coordinator.

Maximizing the Value of Your Next Loss Control Visit

Author, Rory Anderson, Partner, Account Executive, Rancho Mesa Insurance Services, Inc.

There are a few different reasons for a carrier to schedule a loss control visit. Sometimes, a carrier may want to perform a loss control visit before they quote your insurance. However, for the purpose of this article, I’d like to focus on the loss control service offering provided directly from your current insurance carrier.

From the perspective of a tree care business owner, uncertainty, skepticism, and hesitation are often the most common initial reactions to an insurance carrier loss control visit. However, these visits should not be seen as a negative process. Instead, they present an opportunity for tree care business owners to enhance safety protocols, reduce risks, and ultimately improve their insurability.

Loss control specialists have dedicated their careers to understanding risk and safety, and are committed to make the workplace safer. By engaging with the loss control specialist and reviewing their recommendations as constructive guidance, tree care companies can make valuable changes that not only improve their risk profile, but also potentially lower insurance premiums.

To get the most out of a loss control visit:

• Set clear objectives. Establish goals and determine what you would like to accomplish. Communicate your objectives of the visit with your team members and the loss control representative. It is a good idea to engage your key employees and involve your team. Your safety officer, fleet manager, and crew leaders should be present. This will encourage participation and help cultivate a culture of safety.

• Share information.  Have your safety programs, training records, maintenance records, and any other safety information ready to share. Discuss any safety incentive programs and/or initiatives set forth by management.

• Maintain an open mind and practice humility. Welcome feedback and approach the visit with a positive attitude. View the loss control specialist as a partner and be open to recommendations.

• Conduct a walkthrough and jobsite visit. Tour your facility and visit a jobsite, unannounced. It is best to drop in on your crews without them knowing you will be there. This will provide real insight into your operations, accountability, and identify gaps in safety compliance.

• Document recommendations. Most of the time, your loss control representative will generate and send to you a report for your records. However, if that is not the case, make sure to record key points and suggestions.

• Create an action plan and prioritize changes. After the visit, review the recommendations with your team and prioritize the changes and completion of your plan within a certain timeframe.

• Build a relationship. Stay in touch after the initial visit and maintain communication with the loss control representative to discuss ongoing safety improvements and updates.

Maximizing a loss control visit strengthens your business by improving safety, reducing insurance costs, and maintaining a long-term relationship with your carrier partner. It is easy to view loss control visits as a chore or another task to check off the to-do list, but doing so overlooks the valuable insights the loss control representative can offer. Instead, try to view it as a partnership so you can leverage the representative’s knowledge to improve workplace practices and create a safer and more efficient operation.

To discuss how your tree care company can make the most of a loss control visit, contact me at (619) 486-6437 or randerson@ranchomesa.com.

Employer’s Guide to Handling Cumulative Trauma Claims

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

A growing thorn in employers’ sides has been the rise of worker’s compensation cumulative trauma (CT) claims. Cumulative trauma refers to the ongoing psychological and physical injuries that accumulate over time, often resulting from repetitive stress or exposure to adverse conditions. Employees missing time can lead to larger workers’ compensation claims, lower moral, and less efficiency. It can be easy as an employer to take a defensive stance and fight each one of these, but there are a few factors that must be taken into consideration prior to deciding if you should settle or challenge these claims.

Not every CT claim should to be fought. As hard as it is to hear, you can win the battle but lose the war. Sometimes the cost of gathering information, medical reviews, time spent away from operations and litigation can add up to more than it would have cost to settle these claims. This is extremely tough to achieve in construction as the burden is on the employer to prove that there is no way that their stated injuries could have happened while working for you.

Employers can proactively fight CT claims by staying ahead of the exposure as much as possible. This means making sure your workers have the safest, most ergonomic-friendly environment possible. Stress and repetitive motion are two of the largest causes of CT claims. Trying to keep your employees from doing the same repetitive task over and over is extremely important in keeping both moral high and frequency of claims lower. However, this can be difficult for most construction companies with the need to perform the same motion over and over, but it is necessary to have your employees switch up tasks if at all possible.

This does not mean that every cumulative trauma claim should be settled either. We are seeing younger and younger employees filing these once they have been let go or have chosen to leave. These post termination claims typically come attached with an applicant attorney and can include multiple body parts being named that appear initially as fraudulent statements. If it is determined that there truly was no record of injury and they are able to perform all normal duties, fighting the claim may make sense.

Each claim is unique and needs to be handled as such. Relying on your insurance broker and carrier claim consultant for guidance is critical in staying focused on the facts, not the frustration and emotions that often accompany these types of claims. While settling a claim that could be fraudulent can be frustrating and does have an impact on your experience modification rate, it can often be the best path towards minimizing costs and maintaining lower loss ratios that lead directly to lower renewal premiums, which is the ultimate goal.

If you have any questions about how to handle cumulative trauma claims, reach out to me at ccraig@ranchomesa.com or (619)438-6900.

How Healthcare Staffing Agencies Can Prevent Claims

Author, Jack Marrs, Associate Account Executive, Rancho Mesa Insurance Services, Inc.

Healthcare staffing agencies play a vital role in maintaining patient care standards. That is why it is critical for staffing agencies’ employees to be properly vetted, kept informed, and trained prior to being placed to reduce the likelihood of claims. Preventing such claims requires a collaboration between the healthcare staffing agency and the facility where employees are being placed. Healthcare staffing agencies can take steps to prevent claims and protect their operations.

Employee Screening

A best practice for preventing claims is to ensure that the healthcare professionals being placed are highly qualified and have the required credentials. Proper vetting includes verifying licenses, certifications, and prior work experience. If the potential employee is not properly screened and is hired, it not only is putting the patients in danger but it can result in malpractice claims.

Collective Intelligence, a professional screening service, states that “up to 30% of job applications contain false statements.” The company notes that “by using a healthcare professional screening service, you can rest assured that you are mitigating the risks associated with theft, negligent hiring lawsuits, poor employee retention and fees associated with non-compliance.”

Properly screening potential employees can reduce the risk of unintentionally bringing on unqualified people who could put the organization at risk.

Clear Communication of Job Roles and Responsibilities

Miscommunication or misunderstanding of job roles can lead to situations where healthcare professionals make decisions outside of their job roles. This not only puts the patient at risk but can also expose the agency to liability claims. To prevent this, the agency must clearly outline the roles, responsibilities, and limitations of the healthcare professionals that are being placed in the facility. Healthcare staffing agencies and the healthcare provider that hires them need to make sure that everyone involved knows exactly what the healthcare professional is responsible for at the facility. 

Effective Safety Training

The healthcare industry is physically demanding, and healthcare professionals are prone to injuries, whether from lifting patients, long shifts, or a slip and fall. Healthcare staffing agencies are also prone to high turnover which can lead to workers being less familiar with their workplace and safety protocols, thus increasing the risk of accidents.

Healthcare staffing agencies must protect themselves from workers’ compensation, general liability, and medical malpractice claims. One way to do this is by partnering with the facilities where the employees are placed and formally agree to share responsibility for training and safety.

While staffing agencies should provide proper training, client facilities should also offer site-specific training related to their own operations and protocols. Clear agreements between the agency and the client facility regarding training responsibilities will help minimize the risk of claims.

Preventing claims in the healthcare staffing industry is an ongoing process that requires attention to detail, ongoing training, and partnerships with healthcare facilities. By taking these steps, agencies can protect themselves from the financial damage associated with claims and the general safety of their employees.

To learn more about how your healthcare staffing agency can reduce risk, contact me at jmarrs@ranchomesa.com or (619) 486-6569.

Navigating Halloween Costumes and Celebrations in the Workplace

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Halloween is right around the corner, and while workplace holiday celebrations offer a chance for creativity and fun, there are a few things to keep in mind to avoid any HR violations.

Companies are not required to have a costume policy in place, but employers should consider instituting one, if they believe costumes could cause an unsafe situation for employees or clients. Examples of items that could lead to safety issues include fake blood, weapons or oversized props. Setting clear guidelines can help employees navigate the dos and don’ts of dressing up, and address the use of items that an employer determines to be a safety hazard.

Employers should also remind team members that professionalism is still a priority, while allowing for festive self-expression. Offensive or inappropriate costumes should not be worn to work. Outfits that show too much skin or depict religious, cultural or gender-related stereotypes are best avoided while working. It’s also best to steer clear from political costumes in the workplace.

It’s always good to take a proactive approach and remind employees of these rules and policies early on, especially if Halloween falls on a workday. Employers should send out a company-wide reminder highlighting workplace policies and guidelines to be sure the holiday festivities don’t make others feel uncomfortable. It’s also important to establish a process for reporting and handling issues, if an incident does occur.

Although plenty of people will enjoy participating in office costume contests and parties, employers should allow these things to be optional. If an employee chooses not to take part in Halloween activities, it may be for cultural or religious reasons, and it’s best not to push them to participate.

Rancho Mesa’s RM365 HRAdvantage™ is a great resource for Rancho Mesa clients who have additional questions about Halloween costume guidelines, how to strike the right balance between festive spirit and appropriate attire, or how to respond to a potential issue.

Exploring Innovation and Problem Solving in the Commercial Construction Industry

Kevin Howard, Partner with Rancho Mesa, interviews Jeremy Dentt of Dentt Properties Inc. and explores a range of topics relating to innovation and problem solving in the commercial construction world.

Kevin Howard: Welcome to StudioOne™. I'm Kevin Howard, Partner here at Rancho Mesa Insurance. Very excited to have our guest today, Jeremy Dentt. Jeremy, how are you doing?

Jeremy Dentt: I'm good. Thanks for having me. First time podcaster here.

KH: First time podcaster. I feel privileged. Jeremy Dentt is the owner of Dentt Real Estate Services. He's been specializing in the development, management, leasing, and sales of commercial real estate since 2004.

Jeremy, you mind if I go through your resume really fast? Geez, Louise. 19 years of experience in commercial real estate, which officially makes you a guru. San Diego State Aztec, and I'm looking through the development and management, you just have a ton of different types, a multitude of developments: commercial, habitational, gas stations. Which one of those was your favorite?

JD: I would have to say that my favorite is industrial. It's easier, four walls, some concrete, less chaos to the mix of the development where gas stations, carwashes; lots of moving parts, lots of different subs and smaller lots to build on.

KH: Makes more sense, it's more concise, less of a busy zone. And that would be your ideal build.

Well, we're going to go over some commercial real estate topics that I think.a lot of listeners are maybe asking themselves, you know, “What’s going on out there?” There’s been a ton of change since COVID, a ton of change nationally, internationally, so, just really excited to dive into this.

Let’s start with this question; if you could solve one major challenge in the commercial real estate industry today, what would that challenge be and what would you do?

JD: Well I think the biggest challenge we're still facing in commercial real estate, and just the building industry in general, is the escalating costs. We had huge spikes during COVID and we were hoping for a softening post-COVID but, some things have slowed down. It's still challenging to get material on time, costs are still going up, specifically switch gears are a year out from manufacturing to delivery to the site which presents just a major challenge to getting a project out of the ground.

KH: So you're estimating for a project to be, you know, six months, seven months, and you're way behind just because of how the economy is just so slow right now?

JD: Yeah, the supply chains are still on a significant delay for certain parts. Most of our projects that we started in the last three years, we ordered some of the important items like the switch gear and any large equipment six, seven months before even signing up a contractor.

KH: Right, frustrating, but what would you do to solve that problem? You know, you have a magic wand and you're like, "Hey, this is the big fix."

JD: That's a great question that I don't think there's one easy answer. I think having a little bit more manufacturing in the States would help. Some of the shipping logistics was the biggest challenge, getting it across seas. If we had more opportunity to manufacture some of these products locally, I think it would be easier for us to streamline the process.

KH: Totally agree. Your career spanning, you know, 20 plus years, what was the defining moment if you could just name one in your career so far, as far as a commercial real estate developer?

JD: Yeah, I think for me, I started my own project in 2019. It's an industrial complex, seven buildings in total, broken up into two phases. In the first phase, we got out of the ground in early 2019. And as you know, in 2020, March, we hit COVID and the world shut down. And I specifically remember the moment in this development when I was sitting there looking at my Excel spreadsheet with all my costs; my loan, which was a personal guaranteed loan of over $6 million and the world shutting down and wondering, what do I do next? And there's actually a funny picture of me laying in my backyard face down in, you know, March, where it's still 75 degrees here, I'm outside lying face down with a Patagonia jacket on just contemplating the decisions I've made.

KH: Yeah. “Where do we go from here?” Perfect timing, right?

JD: Yeah. I think for the defining moment side of it, it made me realize that I'd worked on this project since 2012 and we timed everything as best as we could. But there's so many factors in real estate and just anything you do that can come out of nowhere, that blindside you. And so having important economics to the deal is more important than ever because tomorrow something can change. And in that instance it was a global pandemic that I did not factor in my investment performance. But it was still a great project in a great location and luckily things turned and we did just fine but it was certainly one of those moments where it constantly changes your risk assumptions and how much risk you're willing to take on given that nothing's guaranteed.

KH: Right. Nothing is guaranteed. And obviously, that project is done. I've seen it. It's beautiful.

JD: It's done. It's insured by you, which is great. It's financed. So, yeah, it turned out to be a really good project for us.

KH: It worked out. Let's switch over to some innovation conversations. What innovations are you most excited about? I know there's just so much change with AI and, you know, remote workers What are you excited about when it comes to innovation?

JD: Well with innovation and construction and, you know, development of commercial property I've been really tracking more of the AR technologies that are coming out. Specifically, I've been working on a lot of construction projects where I'm out there, kind of old school, with a set of plans looking at details making sure the contractor built it right and I've lately come across these Apple goggles.

KH: Apple Vision Pro, the augmented reality. So cool, right?

JD: The augmented reality. Yeah those I really like and I've been tracking some of the programs that you can get where instead of the old school way of walking around with blueprints and checking the details making sure it's getting built right, the AR goggles you can build in the architectural plans with all the overlays of all the MEP sheets. And instead of looking down, they're essentially cast in front of you in the building and so if you had questions about, you know; the structural components behind it or what's behind that drywall or is that plumbing line supposed to be there? The plans are in front of you in these Apple goggles.

And I just think about how much efficiency will be brought to the construction industry when you're essentially staring at the plans while standing at the project. I think it's going to be huge for the construction industry in terms of not missing things. For instance, like right now I've got a project that I'm really concerned about some of the waterproofing and I can't get those layers pulled out. And I'm not sure that the details perfectly followed because there's some missing elements there. So now we're going to pull back some of the panels and make sure it's all there. However, if we had these technologies at the start, it'd provide one more opportunity for them to make sure that they're getting it right.

KH: That layer of comfort for you, right? Because you can see it.

JD: Absolutely.

KH: Yeah, I think that AR is definitely, it's going to come fast. It's going to affect how we train everybody in different industries, but it's definitely going to create more accuracy. You know, you can see it. It's right in front of you.

JD: Yeah, the technology doesn't just span construction. We're seeing it every year in the property management. You know, my company is unique where we do development, we do property management as well. It actually, the property management feeds itself from the development because understanding how the building is built is as important to managing it as well.

But, the technology there is constantly changing. Just coming into your office, looking at these elevator systems that have negative air systems now post-COVID, self -cleaning buttons. The property management software is changing, the connectivity between you and the tenant is easier than ever. It's really about streamlining that connection. And I always tell my clients that we incorporate these new technologies to connect us to the tenant, to get the rents paid, to get the tenants needs taken care of, but it's not to lose that connection with the manager. These types of technologies actually free up our time more so that we can be connected to the tenant base, which is important. They want to know their manager; they want to feel like they're being heard. And these programs are to kind of get rid of the minutia and streamline whatever it is, maybe a maintenance call, getting them connected to our vendor so that we can open lines of communications for other things.

KH: Right. It frees up the opportunity cost for you to go do other things, plug in your time. I mean, those are the advancements that we're so excited about.

JD: Yeah.

KH: I'm imagining listeners that are interested in commercial real estate would have some questions for you having to do with the future. What are you seeing in 20 years from now? You know, 20 years ago, if we talked about AR, augmented reality, we'd be like, “What?”

What's on the horizon and what would be really cool?

JD: Well, I think that one's more of a challenge for guys like you and I that are born and raised in San Diego. Perfect example, 25, 30 years ago, downtown San Diego was never on my radar. I didn't think there was any opportunity to develop. As you know, when we were kids, it wasn't the safest area to go. For me, I remember going down to Old Spaghetti Factory and my pops would drive up to that front door, open the minivan, say, “Get out, go inside.” Then he'd come in hour later, said, “Wait at the door,” minivan comes around, open, jam in. That was my understanding depiction of downtown, right? And then all of a sudden this ballpark comes in and everything explodes down there.

I think it's part of what I'm talking about of what 30 years looks like, density, right? We are out of land in San Diego. Single family homes, building them is a challenge. We just don't have big tracks to put it together. You'll get your small pockets here and there, but the reality is, is most of our housing is going to come from density. And you've seen it in downtown San Diego. You see constant sky rises going up. You're seeing it more in North Park than ever before with the cities updating their community plans for denser locations near freeways. And so I think that the 20, 30-year outlook for San Diego is just a completely different sky rise. The single family huts that we grew up in East County, all those areas will have to accommodate growth, and we’re out of land. So how do you do it? You go up.

And I think that's honestly, we're seeing it even in industrial. It hasn't hit San Diego, but in markets like Seattle, Oakland, New York, they're building two and three story industrial buildings now. Those same markets are constrained with land. And so how do you create more industrial space?

KH: Go up.

JD: You go up. It's expensive, but at some point it does make sense. So I think just a vertical skyline is going to be the future of San Diego.

KH: Right, and that reminds me of the book Ready Player One that I asked you to read years ago.

JD: Sure, what a great recommendation.

KH: And that story, the stacks are stacked high because of that same problem, right?

JD: Sure, hopefully, we don't lose the social interaction that is lost in that world, but the density, I agree.

KH: We shall see. We'll listen to this podcast later on in life and say, "We were way off," or "You nailed it." So, we've talked about innovation. We've talked about the future of commercial real estate, what are you doing for risk management? What are you doing out there to really mitigate major risk?

JD: Yeah, I think that's one of the biggest things where we constantly look into. First things first is hire a good insurance agent, like you, to ensure the entire portfolio and be as cost effective as possible.

At a property level, we're encouraging all of our owners and looking at our own assets and trying to add cameras. I think from a perspective of risk for litigation, having captured more data on your building; what people are coming and going, what happens when they're at their building, I think is one of the best things that you can do. It doesn't help proactive. Of course, we got to stay proactive with getting eyes on our property, checking to make sure that everything's in good order. We don't want broken concrete. We don't want tripping hazards, all the kind of normal checks. But inevitably things are going to happen, right? And so mitigation of that risk after it happened. Well, not to say anyone lies about trip and fall on a property, however, having an understanding of what happened can be a defensible situation for us. And so having cameras at our properties to pick up on any activity of what may or may not happen is something that we're trying to roll out across our portfolio. And we do it on our large properties, which cost a little bit more because you have a bigger area to capture, all the way down to the properties that we represent that are one and two units. And this can be achieved with even installing a ring camera that has the ability to just capture an area.

And what we found is in these situations if something arises, we understand what happened so we can defend or acknowledge the situation and oftentimes it's just using it as a defense opportunity. The risk perspective is, we got to hand it over insurance and then our insurance premiums go up, right? So, doing as much to the building as possible to protect us and keep our claims low.

KH: I think it's especially very timely as far as adding a control, adding something to invest in that will just pay benefits over the long run If you do have a claim like that. It’s the same with commercial auto right now like, “Hey, so what happened?” Is it he said, she said or oh, “Here's the footage, we have it right here.” So that's really smart.

JD: Great point. Yeah, it's no different than insurance policy to us. It helps after the fact of collecting the data and understanding. And on an amenity base for tenants, they're actually finding a lot of value in it.

So we've got two high traffic buildings, one in Chula Vista and one in Escondido. And now multiple times I've provided footage for a tenant or a client of the tenant that reached out and said, "Someone backed up into my car." And I provided them the make, the model of the vehicle and they were just blown away like, "This is fantastic. This is what my insurance needed. They know it's not me.”

KH: I love it.

JD: What they do with it, I don't know, but it at least helps them on their side.

KH: Right.

JD: And so, we've been really trying to push for a lot of that.

KH: This is really innovative and can't cost too much either, right?

JD: It's coming down in price. I remember when I started, you would look at it and it just didn't make financial sense. But with the wireless connectivity, which is the most challenging part, because you don't want to be running wires 600 feet down the building, right? In a conduit, it all starts adding up. But with the new wireless capabilities and the quality of these videos, it's cheaper than it's ever been.

You know, I do all these things, right? And I put in all these checks and balances for my buildings. My most recent project, that you're aware of, is the ESFR rated fire system. The best you can get. If anything catches fire there, that fire system is going to suppress. But, the industry in general, every year, not every year, I should say the last couple of years, we've seen it premium spikes. And the comments have been, “Well, there's been a lot of wildfires, there's been floods.” Nothing that's been extremely detrimental to my properties or in my location, but my premiums continue to go up. I'm curious is why are outside events affecting my properties?

KH: That's a really good question. I think that, you know, we see premiums go up and we're wondering, “Hey, time out. My portfolio was not affected, you know, I'm so far away from these fire zones.” In reality, you know, I have some statistics in front of me. In 2023, 7,127 wildfires. The year prior, 7,667 wildfires. Both years ranging $10 billion to $ 15 billion and paid out insurance costs.

So, your insurance companies, they're buying reinsurance. They're buying insurance on top of insurance. Those reinsurers, they're getting killed. Hurricane Milton, for example, has an estimated $60 billion payout. So when we have these disasters internationally that are taking a huge hit and these re-insurers are taking a huge hit. The pressure passes down to the insurers and ultimately the consumer, right? So we'll see the effect of Milton and Hurricane Helene. But that's the long and short of it is you can have the best controls in place, but because of what's going on with natural disasters, Unfortunately, you're seeing the effect.

And then one more added layer is the cost of goods. Like you mentioned, you know, gas prices being up, money costs more. If there is a situation where a building has to be rebuilt, it costs way more now than it did 10 years ago.

JD: Sure.

KH: So you combine those two together and, you know, that's why we're seeing premiums go up. And the best way for us to really help you fight, you know, at commercial real estate portfolios, you know, fight down those costs, is to communicate early with your insurance agent, make sure they know everything about those controls that you're talking about. Do you have the cameras? And what else are you doing that really helps us mention that to the marketplace and find savings where we can find savings?

JD: So my mitigation of risk can transfer over to their mitigation of risk and hopefully, maybe move the needle of premiums?

KH: I mean, for example, we talked about property premiums going up. General liabilities are usually a good portion of your total insurance costs. Can we push that down? Should we raise the deductible? Are we fighting for the best rate on that? We got to fight where we can fight right now when we have no control, we're completely powerless over what's happening in the property marketplace.

Similar to homeowners right now that live in these fire zones, paying five, six, seven thousand dollars a year in premiums. They weren't expecting that. They didn't budget for that. So we have to just hold tight, be as creative as possible, and really dig deep as far as how we market your account and how we fight for credits.

JD: Yeah, I agree.

KH: We've covered a lot of ground here. We've talked about how you're mitigating risk. We've talked about the implementation of new technology. With everything that you have under your belt, who can you help right now? Who's out there that might need your services?

JD: So our focus is twofold. We're looking for clients and partners that have land or a building that has some type of value-add lift that needs someone with expertise of construction, ownership, and management. And then also over the past five years, we've added multifamily into our portfolio. Which, the landscape of San Diego has changed from a few small developers and managers to multi-billion dollar companies. And so being just focused in one silo of commercial real estate presented challenge. So we pivoted and took what we experienced in commercial real estate, which is a higher level of care and trust for a building and added that to our multifamily portfolio.

So there's a lot of families out there that are self-managing their own portfolio, whether it's a three unit, four unit or a couple hundred units that the family was doing on their own. They're reaching that point of retirement where that building--it makes a nice cash flow for them--and to give up that management fee to shed all risk and just the risk of everything that's constantly changing. They don't have to stay on top of anymore giving passing that baton over to a company that stays on top of it works with the right people, the right insurance, the right GCs to keep that building running healthy for a long time is who we're really looking for. Someone that we can form a relationship with. We're not just there for just the management. We want to be a partner to it and provide them the highest level of service that we originally started our roots in, which is commercial real estate.

KH: Right. And it sounds like you'd bring a real peace of mind in that scenario where somebody's kind of at the end of where they want to manage their property and they want to hand it over to a pro.

And I'll vouch for Jeremy. I've known Jeremy my entire life. He's such a good guy. I really truly believe in what you're doing out there in the community for San Diego. Jeremy also contributes his time to Miracle League, which is a fabulous, very important part of San Diego as far as a nonprofit. And I'm just so proud to be your friend.

JD: Appreciate that. You know, we're here to help. I understand management comes at a cost. Oftentimes there's an opportunity to offset that expense that you see from management fees. So we're really pushing for families and owners that, looking for retirement, that want to hand over their asset that they worked really hard. And we're going to honor how hard they work to make that deal and to hold it for so long and carry out that legacy of management for them.

KH: That's a good point. It's a very good point. Well Jeremy if somebody wants to reach out to you. How can they get ahold of you?

JD: Yeah, we can attach my email to this post. It's jeremy@denttprop.com Happy to help.

KH: Very cool.

JD: Thanks so much for having me.

KH: Thank you for coming to StudioOne™.

JD: Great introduction to my first podcast.

KH: There you go. Appreciate it.

JD: Thanks.

Preparing Your Company for Winter Weather

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Winter is on its way, and companies are preparing for the colder months still ahead. Lower temperatures, heavy rain, and illnesses caused by the cold can all take away from the safety and efficiency of a business or job site.

Cold-weather related incidents are preventable if the proper steps are taken to ensure employee safety. That’s why it is important for employers to take necessary precautions, and prepare their employees for the seasonal changes.

To prepare for the winter weather, supervisors should be sure their workers are wearing the proper clothing in order to reduce body-heat loss, and are staying dry as much as possible; wet clothing can chill the body rapidly. It’s also important not to ignore shivering. Even if an employee says they are fine, persistent shivering is a sign it’s time to return indoors.

In addition to the cold weather, heavy rains, dense fog and substantial snowfall can decrease visibility on the job site, and on the road, which increases the likelihood of accidents with equipment or vehicles. If it is raining, the best thing to do is stay off of the roads. If avoiding the roads is not an option, be sure vehicles are equipped with properly inflated tires that are not bald or badly worn. This will improve traction and reduce the likelihood of losing control of the vehicle.

These are just some of the ways companies can mitigate weather-related incidents. If an accident does occur, SafetyOne™ users can complete an incident report mobile form. A tutorial on how to complete a mobile form can be found on the Rancho Mesa website. To help prevent accidents caused by a mechanical failure, SafetyOne users can file an inspection report for vehicles in need of service using the “Motor Vehicle” observation. A tutorial on how to complete an observation report can be found on the Rancho Mesa website.

Rancho Mesa also has a number of toolbox talks available for cold weather, including safety tips when using an industrial space heater and weather awareness for landscape contractors and tree care companies. To enable access to these weather-specific toolbox talks via the mobile app, Rancho Mesa recommends the SafetyOne administrator create a Winter Weather toolbox talk group specifically for these toolbox talks and assign the group to the desired projects or crews. This will make the winter weather-specific toolbox talks available to users in the mobile app.

Rancho Mesa recommends the following toolbox talks through SafetyOne:

• Cold Weather

• Driving in Wet Conditions

• Effects of Weather

• Hypothermia

• LP Gas Salamander Heaters

• Snow Removal

• Temporary Heat Safety

• Weather Awareness for Landscape Contractors

• Weather Awareness for Tree Care Companies

To learn more about preparing for the winter weather or how to enable toolbox talks in SafetyOne, reach out to your client technology coordinator. 

New California Employment Laws for 2025

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Starting January 1, 2025, a number of new laws will be on the books for employers in California. Here’s a look at two of the changes business owners need to be aware of at the start of the new year.

First, Senate Bill 1100 (SB 1100)bars employers from requiring a driver’s license for a job, unless that job satisfies a two-part test. Employers will only be able to include a driver’s license requirement in a job posting if they “reasonably expect driving to be one of the job functions for the position,” and “reasonably believes […] using an alternative form of transportation (including ride hailing, carpooling, walking or biking) would not be comparable in travel time or cost,” according to the law.

Another new law worth noting requires multiple updates to workers’ compensation and whistleblower posters in the workplace. Assembly Bill 1870 (AB 1870) requires employers to add new information to the informational poster titled “Workers’ Compensation Notice to Employees — Injuries Caused by Work.” Starting January 1, 2025, the poster must alert employees that they may take council from a licensed attorney for advice on their legal rights.

Additionally, employers will also need to display a whistleblower notice that discloses an employee’s rights and responsibilities under the state’s whistleblower laws.

It is important that employers across the state of California understand how to implement these new laws within their business, in order to avoid legal penalties and foster a fair and informed workplace. Managers should work with their human resources department to ensure their business is in compliance with these new laws.

Rancho Mesa’s RM365 HRAdvantage™ is a great resource for employers looking to make certain they are up to date with these changes.

These are just a few key laws California employers should keep in mind for the upcoming year.

For a full breakdown of the changing legal landscape, be sure to attend Rancho Mesa’s 2025 Employment Law Workshop, happening Friday, November 22, 2024 from 10:30 A.M. to 11:30 A.M. at the Mission Valley Library.

Exploring the Current Commercial Surety Climate

Author, Andy Roberts, Surety Account Executive, Rancho Mesa Insurance Services, Inc.

Surety Account Executive Andy Roberts interviewed Miggs Borromeo, Commercial Surety Underwriter for Merchants Bonding, and discussed the current climate of the commercial surety world in Southern California. They also covered the bonding trends most commonly seen today, and the programs that Merchants Bonding Company offers.

Andy Roberts: Welcome back, everybody to StudioOne™. My name is Andy Roberts and I’m a Surety Account Executive here at Rancho Mesa. Today, my guest is Miggs Borromeo who is a commercial surety underwriter in San Diego and working for Merchants Bonding Company.  Today, we’re going to be talking about the commercial surety world.

Miggs, welcome to the show.

Miggs Borromeo: Thanks for having me, Andy. I’m excited to be part of the show.

AR: Awesome, so before we dive in, why don’t you give us a little bit of background about yourself.

MB: For sure. Hello everyone, my name is Miggs Borromeo. I’m the Commercial Surety Underwriter for Merchants Bonding, the eighth largest surety company on SFAA. I currently handle the Southern California territory, starting from Los Angeles all the way down to America’s Finest City, San Diego. I’ve been in the industry for about a year and a couple months, so there’s a lot to learn and many more years to go, as they say. I’m originally from Maryland but moved to California a couple years ago.

AR: Fantastic. So, how did you get involved in the industry?

MB: It’s always a funny story, because it all started with my friend’s dad being the head of surety at the company I interned for back in college. One day in the summertime he gathered all the interns to talk about surety bonds. And funny enough his name is Mike Bonds, so shout-out Mr. Mike for all the introductions. But, he talked about the surety industry and what it entailed. He talked about working with contractors, analyzing financial statements, and visiting and traveling with agents. And so, I thought that was a really cool industry, especially being a college student. The only profession I really knew was financial analyst, accounting, and investment banking. So, I started doing some research and once I graduated college I applied to become a surety underwriter in L.A. But, unfortunately, COVID happened that year, so, you know, a bunch of companies were having hiring freezes, so I had to put a pause in that dream for a little. But, fast-forward to a couple years later and I moved to San Diego, and thankfully, I had a friend named Andrew Shin who is their current contract underwriter referred me to the company he was working at that provided business loans. I started as an underwriter and switched around to sales, and one day I just wanted to update my resume, so, as you know, you search on Google “surety underwriting positions”.

AR: They’re looking for them all over the place.

 MB: Yeah, exactly. So, I was lucky enough that Merchants popped up as the first link, so I clicked on it and read all about them. You know, they’ve been around for 90 years, focused on one product which was surety, so I really liked that. And then I saw that a bunch of their underwriters would travel every year for meetings and trainings and, so, I thought that was a great part of the culture, and I wanted to be a part of that. So, I applied, flew to good old Iowa, and luckily passed the test.

AR: So, basically like a dream come true, kind of circling back to what you said about your surety dream, earlier in that statement.

MB: Yeah, exactly. And, sometimes, you know, it takes a while to get to it, but I’m glad that I was able to kind of experience different roles to build up my skillsets to become a surety underwriter.

AR: Absolutely. And I feel like too, you know, I came from the insurance world where, you know, not a lot translates, but I had a good understanding of the insurance world. And that’s what really fed me into this job, and this role, and this opportunity that I’ve really grown to love. And, you know, it’s been a lot of fun that way.

So, kind of diving into your actual role as a commercial surety underwriter. You know, I know commercial surety has a vast range of bonds that kind of fall under that umbrella. You know, looking at your license bonds for contractors, or subdivision, or maintenance landscape. Can you talk to us about your experience with the variety, with all of those?

MB: Yeah, for sure. As you mentioned there’s definitely a wide variety of bonds. I look at our bond form library and there’s 3,000 bonds and, you know, it’s a lot. And there’s always new ones coming in, so I always handle different types of bonds, I never know which kind I’m going to get. But, luckily enough, Merchants has a great library that I mentioned about, where a bunch of underwriters from the past and current underwriters right now are just researching the bond types that they see, you know, summarizing guarantees, what the risk entails and, kind of, what information we need. And, it’s not only helpful for me but it’s also helpful for the agents that are seeing a bunch of different bonds that they’re not used to. We’ve gotten feedback that the library is very helpful, it helps them understand the bond. And, like you mentioned, I handle a different, wide variety from license permit to financial guarantee, so it’s just all about trying to understand what the bond is guaranteeing and what we need. Do we need credit reports; do we need financial statements; personal business indemnity? And, sometimes I see bonds that no one has seen before, so I have to, kind of, put a little more research into it; seeing the county, seeing what it entails and to see if we can support it. So, it’s been a learning experience.

AR: Yeah, well I feel too, like especially on your guys’ portal, you know, I get a request from a client for some random license bond that I’ve never heard of or seen, you can go in there and kind of figure out, “Well, Merchants is willing to write it in their portal.” So, you give a nice breakdown of everything that it is and what you guys need. So, that’s really, really helpful.

How long do you think, since you’ve been here for a little over a year, how long did it take for you to, kind of, get up to speed in this and really feel confident in engaging with agents and clients, and really knowing what was going on?

MB: I’d say it took me about nine months to year. There was definitely a lot of learning process, especially the first couple months when you have to learn about the system and really learn about the industry.

But, I think I was very fortunate enough to have a great team around me, starting from management position who’s had 15 plus years of experience, to my current teammates who have a wide variety of perspectives from the agency side and different markets, and to even our assistants who are always helping us out with our day-to-day activities. So, the first couple months was really understanding what the systems were all about. And then six to nine months we had a training program where they would sit us down and talk to us about how to properly plan the agency meetings, how to conduct them, specific questions that the agents might ask.

And so, it’s definitely a great experience to have that around me, but it’s also cool that there’s always new questions coming up, and so there’s always something to lean. And, we’re always improving, trying to improve, our technology and so, we’re always trying to focus on marketing those new things we come up with.

AR: Fantastic. How often do you have to go out to Iowa?

MB: I try to go about twice a year. One’s mandatory for the underwriting meetings, but, sometimes I like to stop by and say hello to everyone.

AR: Hopefully not in the wintertime.

MB: Yeah, no. Can’t get me out there in the wintertime, besides this time for November’s underwriting meetings.

AR: So, kind of circling back to the different bond types. So, are you seeing a lot of submissions on a certain type right now?

MB: Yeah, so, I’ve been seeing a lot of Motor Vehicle Dealer Bonds coming up, and I’ve also seen Immigration Consulting. But, it’s starting to really pick up with our Court and Probate bonds. I’ve been starting to see a lot of Non-Construction Performance Bonds, Landscaping Projects. The variety is starting to pick-up as the more visits I come in and really just tell what Merchants’ appetite is, I’m starting to see different types of submissions. And I think that’s the main idea of it, is that we haven’t had presence in Southern California, but now I’m around and I’m visiting agents, I’m letting them know that, “Hey give us a chance to review these files,” and that’s where the variety comes in.

AR: Yeah, no, absolutely. Kind of looking at the marketplace, and maybe this might be a tough question just because you guys have such a wide variety of bonds that you guys write on the commercial side, but what are some of the main challenges that you’re kind of seeing, and have you maybe seen any uptick in claims?

I know, because, especially, kind of, thinking of the license bonds for the contractors, you guys have really kind of stepped in and filled the void for a different surety that, kind of, left the marketplace. So, there’s probably been a lot more volume there.

MB: Yeah, there’s definitely a lot of claims activity that I’ve seen with the Motor Vehicle Dealer Bonds. Principles are going out of business so claims are rising. I’ve also seen challenges in the notary side. The Notary Bonds are tied in with the mortgage interest rates, and so, you know, not a lot of people are buying houses right now so there’s not a lot of need for notary.

And I’ve also seen that, just by, like, challenges, you know, I see a lot of agents talking about, they’ve been seeing a lot of smaller transactional bonds that’s been taking up their time. And so, as I mentioned earlier, Merchants is always trying to improve their technology, so we’ve recently rolled out Hub Express, where it allows agents to issue small transactional bonds with little touch. We recently updated our systems to allow California Contractor State License Bonds, so that allows agents to issue those pretty fast. And, it’s tax season so, tax repair bonds too are a big deal, it helps them out on that.

AR: Yeah, that’s fantastic. Is there anything else you want to talk about on the commercial side, or any questions you might have for me?

MB: Yeah, for sure. Before we end the show, would you happen to have any advice on any new underwriters or agents that’s entering the industry right now?

AR: What I think helped me a lot when I first got in, I’ve been doing this for six and a half years now, was I started participating in the Surety Association right away, because, industry wise, that really helps you to get to know everyone in town; all the different agents, all the different underwriters. Which, I mean, you’re already doing that so, that’s a good step. So, maybe your next step is to try and get on the board next time there’s a company position for there. I think that’s been really, really beneficial for me as well. So, I would recommend doing that.

Other than that, I would just say you’re doing the right thing in, like, getting involved in the industry and getting out in front of people. Surety is such, more relationship driven than the insurance side. So, as you’re going to start growing your book, both the underwriter side and the agent side, you just have to be out there in front of people, and building your relationships and just knowing that this is more of a longer play and not a short-term play.

MB: Yeah, I agree. Great advice. I know you mentioned joining the board, I guess until a position opens up I’ll still be the photographer for the events.

AR: Yeah, absolutely. Well, Miggs, thank you so very much for joining me in StudioOne™ today and giving us some background on yourself and some info on the commercial surety industry.

MB: Yeah, thanks so much for having me Andy, this was fun. It’s always a pleasure to see you and I’m excited for all the future events that I run into you at.

AR: Absolutely.

Three Industry Benchmarks all Landscape Companies Should Track

Author, Greg Garcia, Account Executive, Rancho Mesa Insurance Services, Inc.

There are three major benchmarks that all landscape companies should consider when looking at how well they manage risk.  The three benchmarks are your:

• Average Claim Cost

• Claim Indemnity Rate

• Claim Frequency Rate

Knowing the importance of this, we designed a key performance indicator (KPI) dashboard that highlights these industry benchmarks, as well as compares them against other landscape companies in their geographic area.

We have pulled data from all landscape companies using the 0042 class code and have come up with some industry averages.  For the sake of this example, we will use California landscape contractors only. 

In California, the average claim cost for landscape contractors is $50,300 per 1 million dollars of landscape payroll.  In other words, on average for every 1 million dollars a landscape company has in the 0042 class code they should incur about $50,300 in claim cost. That number would rise to $100,600 in claim cost if a landscape company had 2 million dollars in 0042 class code. 

The next major category to consider would be indemnity rate.  Indemnity rate, or claims that result in lost time and temporary disability, the industry average is 0.7 claims per 1 million dollars of 0042 payrolls. 

Finally, the last category we consider is frequency rate.  In California for every 1 million dollars allocated to the 0042 class code on average that company will have 1.5 claims.

Knowing the data will not only give your team a good indication of how safe your company is, but these categories also play a significant role in determining work comp premiums.  There are several underwriting metrics a worker compensation underwriter takes into consideration when looking at a prospective business.  The Experience MOD, loss history, and of course safety protocols and procedures to name a few. 

The other major metric that underwriters are looking at are these three benchmarks: , average claim cost, indemnity rate, and frequency rate.  Simply put, the better a landscape company scores in these critical metrics, the better chance that an underwriter will add schedule credits to lower the worker’s compensation premium.

Now is a great time to see how well your landscape company stacks up against your peers, and consider any internal options to improve your metrics in any of these three major categories.

Protecting Your HVAC and Plumbing Business with Proper Classifications

Author, Matt Gorham, Account Executive, Rancho Mesa Insurance Services, Inc.

Within the construction industry, it is common for questions to arise about how to categorize work that a contractor performs. While organizations like the Insurance Service Office (ISO), Workers’ Compensation Insurance Rating Bureau (WCIRB), and the National Council on Compensation Insurance (NCCI) have created classification systems, nuances in worksite demands can lead to confusion about which class code to use for a given business’s operations.

Even though many types of work have similarities, mistakes in classification can lead to:

1. Problematic coverage exclusions

2. Surprise audit bills

3. Overpaying insurance premiums

General liability class codes differ between types of work, such as commercial/industrial plumbing and residential plumbing, or heating and air conditioning with or without liquefied petroleum gas.

Problems can arise for businesses when their coverage fails to match the work being performed, especially when certain endorsements are included within their policies. When a loss happens in this situation, a carrier may deny coverage, leaving the business to respond to the damage or injury on its own.

We recently started working with an HVAC contractor that had previously found themselves on the wrong end of this scenario, having incurred over $350,000 in property damage costs because they were held responsible for flooding an apartment while moving a water line. Their previous carrier denied the claim because of a coverage limitation endorsement, which specifically limited coverage only to the classification codes listed on their policy.

In severe cases, a carrier may also choose to cancel or non-renew coverage for the business if they learn that the business’s operations are heavier or significantly different than what was previously represented.

Like general liability, workers’ compensation class codes can also cause challenges for contractors.

Consider the example of an HVAC contractor. Their workers’ compensation payrolls could easily be categorized into either 5183/5187 or 5538/5542. There is a subtle difference that separates whether payroll should be classified within the plumbing class codes or the sheet metal class codes. However, there can be a substantial difference in the corresponding premium a company would pay for workers’ compensation, especially when you consider that these classifications are subject to different dual wage thresholds.

An HVAC company with a technician getting paid $32 per hour whose payroll is classified as 5187 could expect to pay premiums from a $4 to $5 base rate per $100. Another HVAC company with a technician getting paid the same, but categorized as 5538 could expect to pay premiums from a $10 to $12 base rate per $100. While the lower rate may at first be appealing, if payroll is improperly classified throughout the policy term, an audit could lead to a substantial additional premium, so it is best that you classify your work correctly from the start so that your premium properly reflects the risk of the work being done.

Plumbers often encounter a similar classification challenge. Should they be categorizing payroll under the plumbing class code only? Do they have any sewer or excavation exposure? That depends on some key details in their operations and will directly influence which carriers are willing to partner with them and how aggressively they price their coverage.

Rancho Mesa recognizes the importance of proactively working with accurate, complete information. To better serve the needs of our clients, we have developed a comprehensive submission and renewal process, which includes:

• Pre-renewal meetings 90 to 120 days before the renewal date to understand any changes in the business

• Industry specific supplemental applications to gather more thorough and relevant information

• Open, honest communication with carrier partners that fosters trust and transparency

• Policy reviews and audits to identify potential coverage issues

To request a policy audit, and ensure that the coverage and pricing for your insurance program properly aligns with your industry, contact me at (619) 486-6554 or mgorham@ranchomesa.com.

Trim the Risk: Professional Liability for Tree Care Companies

Author, Rory Anderson, Partner, Account Executive, Rancho Mesa Insurance Services, Inc.

Whether you have a consulting arborist on staff or not, every tree care company has a professional liability exposure. Your general liability policy will likely exclude professional liability claims. A misdiagnosis of tree disease, damage to property, or an injury resulting from an error or miscalculation can be extremely costly. So, it is important to understand the risk, then make a decision on whether or not you would like to transfer that risk by purchasing a professional liability policy.

Many tree care companies have certified arborists on staff that offer consulting and expert advice related to the health, safety, and management of trees. This type of work clearly has the highest need for professional liability insurance to cover any errors or incorrect advice that leads to financial loss, property damage, or bodily injury. A professional liability insurance policy would help protect the arborist by covering legal defense costs, settlements, or judgements if the arborist is found liable for errors or omissions related to their consulting work.

If you do not have a certified arborist on staff and you are simply performing tree care contracting work, you still have exposure to professional liability. General liability policies are in place to cover third party property damage and bodily injury that occurs as a result of your work. They do not, however, cover your work itself. If your tree care business removes the wrong tree or the tree that you pruned died from over-pruning, and your client sues for the cost of the tree and emotional distress, you would need faulty workmanship coverage to cover your work. For many of these instances, you may choose to absorb these costs internally; but, if the mistake was on a mature and rare tree, paying out of pocket may severely impact your balance sheet.

Although there are more examples, these are the two main professional liability exposures that tree care companies face. In a field as specialized as tree care and arboriculture, protecting your business is crucial.

Talk with your insurance agent about purchasing a professional liability policy to transfer your risk and give yourself peace of mind, knowing that you are covered for any unexpected or unpleasant surprises.

If you have any questions, please reach out to me at (619) 486-6437 or randerson@ranchomesa.com.

Digitalizing Risk Management: A Step-by-Step Guide for Getting Started

Author, Alyssa Burley, Partner, Media Communications & Client Services Group, Rancho Mesa Insurance Services, Inc.

Imagine you are working in a highly productive organization. Over many years of trial and error, the team has streamlined their operations to the point of a well-oiled machine using good ol’ paper and spreadsheets. Then, your insurance broker offers a digital risk management solution and you are faced with the prospect of transitioning your manual processes to a digital platform. This is the scenario that many Rancho Mesa clients have faced and successfully overcome.

Mobile applications have become an integral part of daily life by streamlining everything from banking to finding a ride in the city. Manual tasks can now be completed easily from a mobile device. So, why haven’t most businesses implemented this mobile technology into their daily operations?

Planning & Support

Transitioning a manual process, like the administration and documentation of toolbox talks, safety trainings, jobsite inspections, and other risk management activities, to a digital platform does not have to be a daunting task, though it may seem that way at first. With proper planning and support from those who have helped others digitalize their manual processes, you can significantly increase the chances for success. Utilize resources like Rancho Mesa’s client services team to provide best practices for each manual process that will be replaced by a digital platform.

Where to Start

Once an organization has decided they are ready to make the move to a digital platform, they often ask how they should begin. It is a best practice to start digitalizing a process that has few barriers to implementation, yet will still have a significant impact on operations. Therefore, utilizing digital toolbox talks (e.g., tailgate talks, safety meetings, and the like) is typically the best process to tackle first.

Next, review your existing toolbox talk process and document the steps. It may be helpful to ask the following questions:

• Who decides which topics will be used each week?

• Where is the content sourced?

• How is the topic content distributed?

• Who administers the toolbox talk (e.g., tailgate talk, safety meeting, etc.)?

• Where are the toolbox talks performed?

• How are employees tracked who participated in the toolbox talk?

• Where is the documentation stored?

The answers to these questions will help you identify who will need access to the toolbox talks in the digital platform, whether through an administrator website or a mobile application.

Then, identify one to three people in the organization who are excited about being an early adopter of the new technology. They should be excited at the prospect of streamlining the manual process of getting the toolbox talk content each week, performing the safety meeting, passing around the sign-in sheet, and making sure the signed paper makes it back to the office and in the correct file cabinet. These early adopters could be an administrator, foreman, supervisor, or safety manger, depending on who is responsible for performing portions of this task.

The early adopters will function as the organization’s initial testers, cheerleaders, and then coaches for the rest of the team. They will test the digital process by accessing toolbox talk content and documenting the meeting attendance with both pictures and signatures from their mobile devices. They will report back to their organization’s leadership on how the new process is working. This gives the organization a chance to work with their insurance broker’s client services team to offer suggestions for minor adjustments to the new digital process. Meanwhile, the early adopters will naturally promote the new technology to their co-workers and get others excited for the launch of the new process.  

Once the new digital toolbox talk process is tested and adjusted as needed, it is ready to be released to the rest of the organization. There will be a learning curve, but the early adopters will be familiar with how the streamlined digital process works and will act as informal coaches for new users of the platform. 

Benefits

Changing a well-established process can cause some people within the organization to question why the change is needed in the first place. So, be prepared to explain the reasoning behind the transition. Explain the benefits that will be felt by both the employee and the organization.

Employees will spend less time on paperwork, so they can get back to their other job responsibilities. No longer will a supervisor have to worry about where the sign-in sheet went from yesterday’s safety meeting. All the documentation is digitally uploaded to the cloud and instantly accessible to those who need it.

The organization can ensure compliance with the Occupational Safety and Health Administration’s (OSHA) safety meeting requirements and eliminate lost paperwork. No longer do organizations need file folders full of sign-in sheets with, unfortunately, illegible signatures. Digital records are easily accessible and filtered by date, project, topic, etc. in order to streamline the process of retrieving data.

All of these things save time, effort, and increases compliance, which ultimately translates to reduced costs.

If your organization is ready to make the transition from paper to digital, contact your Client Technology Coordinator for more information about Rancho Mesa’s proprietary SafetyOne™ mobile app and website.

Building a Productive Surety Relationship

Author, Anne Wright, Surety Relationship Executive, Rancho Mesa Insurance Services, Inc.

Having represented contractors and developers of all types and sizes for many years, I have plenty of examples of what works best for clients to maintain a level of surety support that helps them meet their growth goals and objectives: updated financials and proper communication.

Updated Financial Paperwork

No one likes to deal with unnecessary paperwork; however, as companies grow and they streamline certain reporting information (i.e., financial statements and work-in-progress reports), their surety relationship can grow with them. It is not all about the paperwork, however; that is only one way to measure what your business can expect in the way of surety support.

Regular file updates to annual and perhaps interim business financials (depending on the frequency of your bonding needs, including possible internal or CPA supported reports), personal financials, cash verifications, and status of your backlog is the basic paperwork that is needed to maintain a current file for an active surety relationship.

An important thing to note is that posting even the smallest of net profits at the end of the year, and making sure that your balance sheet tracks the equity from year to year, helps the surety feel confident in your ability to manage this aspect of your business.

Communication

Beyond the paperwork that is needed, communication is an integral part of the surety relationship, as with any healthy relationship.

Depending on the frequency of your bonding needs, regular communication might be limited to only a few questions each time a bond is needed. These questions are often regarding the scope of the work if you are looking at jobs that are outside of your historically performed projects or territory. The questions may include:

• Is this a typical job for you or outside your normal scope?

• Have you worked for the owner or general contractor before?

• What do you like about the job and/or what do you see as the challenges on the job?

So much of the relationship tends to be communicated on paper. Unfortunately, face to face meetings just don’t happen the way they used to. So, to the extent a client can let us know of things that impact their business, good or bad, in between financial reports or with updated financial reports, it is all for the better.

Examples of things to communicate might include:

• New work opportunities in which you do not need our services or a new client that is bringing you more work

• Increasing work opportunities and job sizes

• Moving into any new areas of work (scope or geographically)

• Hiring new staff for the office and/or field management

• Investing in new or upgraded accounting systems

• Considering a new bank relationship

• A problem job. (Let us know before we see a problem reflected in the financials and have to ask the question. Again, whether it’s bonded or not.)

This is just a quick overview of how to build a productive surety relationship. Rancho Mesa strives to support our clients and their bonding needs on a regular basis. Every relationship is a little different, but the basics of good communication and information sharing are always key to the mutual success of these relationships.

For questions about your surety program, contact me at (619) 486-6570 or awright@ranchomesa.com.

Don’t Wait Until It’s Too Late: Notify Your Insurer of a Claim Right Away

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

Rancho Mesa’s commercial clients purchase insurance to transfer financial risk to a third party and protect their business against claims of liability. These clients rightfully expect their respective insurers to fulfill the obligation found in black and white on the Insurance Service Office (ISO) general liability form that reads “We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies.” So, what must a policyholder do to ensure this obligation is fulfilled?

Most importantly, following a known event, policyholders should not wait until served a lawsuit. Per the policy conditions, the policyholder must notify the insurer “as soon as practicable” of an “occurrence or an offense” which may result in a claim. Failure to do so can result in a breach of duty and forfeiture of coverage for that claim.

When reviewing policy coverage and terms in proposal meetings with their broker, clients often voice concerns about what types of occurrence require notice, how a notice to an insurer will impact future coverage and premiums, and how quickly is “as soon as practicable.”

Per the ISO general liability form, “occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Various court cases and legal precedent do not provide a clear reporting timeline. It is safe to say policyholders do not want to find out how late is too late to report a claim. Report the incident without delay.

Having some apprehension in reporting the incident due to potential rate increases is common and understandable, but should not come into play at the expense of triggering coverage. It is also true that most insurers do not weigh reported incidents or notice only items when underwriting the risk. In contrast, claims, or matters where a third party actually alleges the policyholder is responsible for damages, will have significance to the underwriter. When determining how or when to properly provide notice to the insurer, your Rancho Mesa service team can educate and advise on how best to proceed.

For more information on a policyholder’s obligation to report an incident or to ask questions about your current policy, please contact me at (619) 937-0175 or sbrown@ranchomesa.com.

Return of the Rush Hour: Avoid Increased Risk with Safe Driving

Author, Megan Lockhart, Marketing & Media Communications Special, Rancho Mesa Insurance Services, Inc.

As students return to the classroom, the back to school traffic has also resumed. With more cars on the roads, this leads to more risk for commercial vehicles making their daily commutes.

By the time Labor Day passes, most school districts and universities in the nation have started classes again, and with that, an increase in traffic in the mornings and afternoons has also resumed. The roads are flooded with school buses, parents, carpoolers, and college students rushing to their destinations. At the same time, the normal work commute continues, including many commercial and company-owned fleet vehicles.

In 2021, the National Highway Traffic Safety Administration reported that the rate of large truck fatal crashes was highest in the months August through October.

In order to keep their drivers safe, employers should educate their employees on the added hazards on the road this time of year and revisit training topics related to defensive and distracted driving.

The SafetyOne™ platform offers driver safety resources to help employers prevent auto accidents, with many toolbox talks and a library of online training courses. 

Additionally, anyone can register online for Rancho Mesa’s Fleet Safety webinar with dates throughout September and October.

To learn more about driver safety resources, contact your client technology coordinator.