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Lloyds Won't Have to Pay Diamond Seller's Claim

THE BESTGUARD NEWSLETTER

Don't Sign That Contract!!

If you are the principal of a security guard company, don't sign a client contract until you have had your insurance professional review it to make sure that your General/Professional Liability insurance coverages meet the requirements of the contract. Unfortunately, security guard contracts sometimes get signed that obligate a security guard company far beyond the coverage provided in their insurance policies leaving the security company with significant uninsured exposures. Here are some of the most common contract requirements that need to be addressed by your insurance agent or broker:

Indemnifications/Hold Harmless Agreements: Most contracts require you, the private security company, to indemnify & hold harmless the client for the acts of your employees while working for the client. There is automatic coverage in most General Liability policies for these types agreements. However, sometimes the contract also requires you to indemnify the client for their sole and/or gross negligence. Assuming liability for the sole negligence of the indemnitee (your client) is excluded under most security guard liability policies and therefore such clauses should be stricken from the contract before signing.
Additional Insured: Many contracts require that you add your client as an Additional Insured on your liability policy. Most security guard liability policies provide blanket additional insured coverage subject to two requirements: A) There is a written contract requiring Additional Insured status; B) Additional Insured status is extended to the client as only respects the negligent acts, errors or omissions of the security company's employees in the performance of their agreed upon duties. In addition, some contracts require that this additional insured coverage be provided on a primary and non-contributory basis. If so, an additional Primary/Non-Contributory Endorsement would be required.
Waiver of Subrogation: Some contracts require that you agree to waive your right to subrogate against your client for their acts and the acts of their employees and agents. A Waiver of Subrogation Endorsement is required from your insurance company to cover this exposure. Sometimes insurance companies will provide it on a blanket basis and sometimes on a per contract basis.
Limits of Liability: Most contracts require specific limits of liability for General Liability, Umbrella Liability and sometimes Errors and Omission or Professional Liability. Minimum General Liability limits are usually $1,000,000 per occurrence and $3,000,000 aggregate. If Umbrella Liability coverage is required, normal limits are usually $5,000,000 per occurrence and aggregate. Make sure the limits of liability you are carrying match the contract requirements.
WARNING!! Should your client require your employees to operate their licensed vehicles or should your employees be transported in your client's vehicles, insist that your client provide you with an indemnification agreement in your favor to cover such auto exposure. This agreement should stipulate that your client agrees to hold you harmless for any liability or physical damage, arising out of your employee's operation of or transportation in a client's vehicle. In the absence of such an agreement, make sure that your employees do not use a client's vehicle as an operator or passenger, because your General Liability or Umbrella Liability coverage may not cover this exposure.
WARNING!! Should your client contract require you to hold harmless and indemnify them for any bodily injury, occupational sickness, disease or death of your employees, make sure that your General Liability Policy covers such claims, which are called in insurance parlance, third party over suits. Here's what can happen: your employee is injured on your client's premises and besides filing a Worker' Compensation claim against you, he/she files a claim against your client. Your client turns around and produces the indemnification agreement you signed and demands that you defend and indemnify them against the claim brought by your employee. Some General Liability policies exclude these third party over suits so don't sign an agreement until you check your policy.

Good fences make good neighbors and good contracts make good business partners, but have your insurance professional review all client contracts before you enter into them.

Lloyds Won't Have to Pay Diamond Seller's Claim

A Los Angeles jury Friday decided that Lloyds of London does not have to pay more than $1 million to a diamond seller the company said staged a robbery at his downtown jewelry store to bilk the insurance company.

After three days of deliberation in which many jurors said they had been unable to sleep because they felt so torn about the case, the jury voted 9 to 3 in favor of the insurer.

Harry Yildiz, 67, said he was alone in his shop in 2004 when a stranger with a gun burst in, tied him up and emptied his safe of diamonds and jewels. He had sued Lloyds after it denied his insurance claim.

Andre Cronthall, who represented Lloyds, said the alleged heist was full of "red flags." He said Yildiz's business was struggling, giving him a motive to stage a robbery. And Cronthall suggested Yildiz may have dispatched his son to Aruba to sell off the purportedly stolen jewels on the cheap. He also said the bag carried by the robber in a surveillance tape seemed too small to accommodate all the jewels, and that the robber was inside Yildiz's store for 14 minutes, an eternity for a robbery.

As the verdict was read, Yildiz let out a loud sigh. His son Scott, sitting next to him, sank his head into his hands. Both declined to comment, but Marc Brumer, the Turkish immigrant's attorney, said the verdict meant "my client's American dream has been shattered." "I'm disappointed in the system," he said. "There was no proof."

Lawyers for Lloyds said they felt vindicated — especially, they said, because Yildiz submitted a claim for $800,000 five years ago, which was paid — a fact they had not been allowed to reveal during the trial.

Source: LA Times (9/30/06) Garrison, Jessica

Trial or Settlement?

Liability litigation is tricky, but firms with a solid strategy can determine which cases should be settled and which should be decided through a trial. First, companies have to evaluate each case for settlement and then account for what the ceiling of the settlement offer should be. Once those things are evaluated, firms can then examine the costs and expenses associated with a trial and what other damages could be wrought through litigation. If a settlement offer is the route selected, firms have to determine what the lowest possible offer will be that has a likelihood of being accepted by the claimant, and whether changes in the case could prompt quicker settlement or improved success via trial. Experts note that if punitive damages or other open ended claims are made, the evaluation process can be trickier, but if claimants' refuse to be reasonable during settlement negotiations or refuse to admit weaknesses in their case, a trial may be inevitable. Companies and risk managers must remember that liability claims management is an ongoing process not a one-time decision because circumstances change during the course of discovery and settlement negotiation.

Source: Claims (10/06) Vol. 54, No. 10, P. 20 ; Hickey III, Stockard

Corporate Records – What to Keep

Whether you’ve created a corporation or limited liability company, you must maintain records. Here’s a primer on the basic corporate records you need to maintain.

Corporate Records

When forming a corporation or limited liability company, you are creating an entity independent from yourself. In so doing, this independent entity must take actions for itself, not you. For instance, a corporation will have a corporate bank account through which all revenues and debt payments are handled. As a shareholder, even with a single shareholder entity, you will not pay personal expenses out of the corporate bank account. This concept extends to record keeping.

For the purpose of this article, both corporation and limited liability company documents are considered "corporate records." Although the records of each entity have different names, they serve the same purpose. For instance, articles of incorporation for a corporation serve the same purpose as Articles of Organization. The following list applies to corporations, but you can apply the list to the limited liability equivalents.

Although each state has different records requirements, all require you to keep the following records.

Articles of Incorporation – The charter establishing the existence of the entity with the relevant Secretary of State.
Bylaws – The rules of the corporation. Essentially, the bylaws set out how the corporation will be administered from a procedural perspective, the rights of shareholders, how meetings will be called and so on.
Board Resolutions – These are resolutions passed by the Board of Directors from time to time, such as defining classes of corporate stock and approving particular courses of action for the business.
Minutes of Shareholder Meetings
Annual Meeting – Every state requires a corporation to have at least one meeting of the board of directors each year. Keep these in your corporate book.
Shareholder Communications – Copies of all communications to shareholders. Most states require you to hold these for three years, but you should keep these permanently to guard against future shareholder lawsuits.
Shareholders – A list of shareholders and the shares they own.
Annual Report – Most states require you to file an annual or bi-annual report with the Secretary of State. Keep copies of these in your corporate records. Most states provide a pre-printed form.
Balance Sheets – Shareholders have the right to inspect the finances of the corporation, although this right has limitations. You need to keep up to date balance sheets.
Tax Returns

So, how long should you keep these corporate records? Some attorneys will tell you three or five years. Personally, I believe you should keep them permanently. If a shareholder dispute occurs, you don’t want to testify you through away a document. If the business is eventually sold, the buyer is going to want to see all corporate records. Either way, you are better off holding on to all records.

Source: Article by: Richard A. Chapo is a San Diego business lawyer with www.sandiegobusinesslawfirm.com - a San Diego business law firm in San Diego, California.