Bret Dixon Insurance

Winter 2013


Bret Dixon Insurance News



Our newsletters are intended to keep you up to date on pertinent industry news and offer more in-depth insight into various types of coverage and endorsements.  We publish our newsletters at least once each quarter.  We hope you enjoy it.


Thank you for your patronage!


Make Your Camera System Work For You   


Back in 2009 we tackled the value of having a camera system in your business.  They're still a great idea, both for the discount you're eligible for and the proof they could afford in claims against you.  However, as one of our insurers reports back to us, they're not always providing the indisputable proof they'd hope for. 


Many businesses with camera systems on premises suffer from several drawbacks that are hurting them in times of claim. 


  • Limited hard drive space means recordings are overwritten in a matter of days.
  • Owners don't know how to pull off segments of the footage recorded, and sometimes wind up erroneously deleting them.
  • Footage of a particular incident is never backed up because no one on the staff remembered anything out of the ordinary on a particular day.


Obviously, if you can't provide footage that would hopefully exonerate you in some of these 2nd and 3rd party liability claims, the camera system loses much of the benefit it's meant to provide.  Some recommendations:


Limited hard disk space for additional recordings

This one has too many variables to offer many concrete suggestions.  First off, there's the question of how much hard drive space your system came with.  Whether or not you can hook additional hard drives to it for more storage space will depend on your manufacturer.  Unfortunately, it seems that many "out of the box" systems - the more affordable ones that can be bought and installed by proprietors, seem to be the biggest offenders in this regard.  Still, try contacting a Technology or Computer Specialist firm to see if they can help get you set up with a configuration that will do what you really want.


If you're strapped for storage space, there are a number of things you can do to preserve how long you can record before footage starts getting overwritten.


  • Reduce cameras.  This isn't ideal, as you want to be able to record all parts of your premises, if possible.  But the less cameras you have recording, the less data there is being written to the hard drive, meaning the longer the cycle is before things start getting overwritten. 
  • Set cameras to motion-activated.  If a camera is in a part of your business that doesn't regularly receive foot traffic, set it to only start recording when activated by motion into that room or area.
  • Reduce recording quality.  The higher-quality the video you capture is, the more disk space it will use.  If you do change your settings, review some footage recorded at a lower quality.  If it's so blurry you can't make heads or tails of what's going on, it's probably going to be useless if you need it in event of a claim. 


Working Knowledge of Your System

Someone in the business needs to know how to go back to a certain date at a certain time, and copy a segment of footage.  Again, without knowing how to use your system, what good is it doing you?  Preferably, there should be a few people - co-owners, managers - who know how to use the system, in case the one person who does know what they're doing is on vacation or leaves their position.


If you're not sure what you're doing, start off with a section of footage where nothing out of the ordinary happened.  Use it as your test, until you're confident you've got a handle on what you're doing.  And make use of any owners manuals or tech support hotlines that came with your camera system.


Backing Up - Find a Routine

This one falls on nearly everyone in your operation.  Any time someone has to be cut off, let alone removed from the premises, you should probably jot down an incident report on it.  Any time someone slips and falls - make an incident report (most policies require you notify the carrier of any incidents like this one where injury has likely occurred or a suit is to be expected).  Certainly any time the authorities are called, make an incident report.  As soon as time permits, a manager should then pull the video from the time that person entered the premises until they left.


Now what you do with all those video clips is up to you.  If you want to copy them to a data disc or burn them to a DVD, go ahead.  But those can be lost or damaged just like anything else.  A favorite idea of ours is to create a Google Account for your business, then upload the videos to Youtube with the same account (Google owns Youtube).  There are settings to where you can keep the videos private, so that only people with the link to the video can find and view it.  This method takes the burden of keeping the video footage safe out of your hands.  Plus, with a Google account, you have extensive storage with Google's free email program, Gmail, to archive information you would jot down on an Incident Report.  Type down the who's (and their contact info), what, where and whens of the incident, email it to yourself, upload the video privately and boom - you've archived the incident about as well as you can. 


In one recent case, the owner of an establishment was sued for overserving a patron, who then injured a 3rd party in an auto accident.  The allegedly intoxicated patron had been asked to leave the bar earlier in the night.  The tavern owner reviewed her camera footage for the night of the claim and had video that her bartender only served the man 3 drinks over the course of nearly 3 hours.  However, while trying to transfer the footage to a dvd, she inadvertently erased the video.  When her case went to trial, the judge barred her from testifying and instructed the jury that there was missing evidence, which only the defendant had seen prior to it going missing, and to make of that what they wanted.


The outcome of this particular case is still pending, but what could've been a trump card in the insured's favor - showing they didn't negligently overserve this patron - will now likely be looked upon with some suspicion by the jury.


The insurance company litigating this case says that their statistics show that less than 5% of their claims at establishments with security camera systems can actually provide video footage of the claims in question.  Needless to say, they're frustrated.  They grant discounts to lots of businesses for the proactive security measures taken by installing cameras, but rarely get the benefit these systems are supposed to provide.  Make sure you know how to use your system, and put it to work for your business.


Illinois Dram Shop Limits Rise Again in '13



The 1998 amendments to the Illinois Liquor Control Act, commonly known as the Dram Shop Act, require that every January 20th, the Illinois Comptroller determines the increase or decrease in the liability limits for causes of action brought under the Act, in accordance with the consumer price index (CPI-U) published by the Bureaus of Labor Statistics.


The 2013 figures are based on an increase in the CPI-U of 1.74% from 2012. The liability limits for claims occurring on or after January 20th, 2013 are $64,057.00 for bodily injury and property damage, and $78,291.89 for either loss of means of support or loss of society resulting from the death or injury of any person.



For perspective, below are the limits over the last decade.


Bodily Injury & Property Damage

2004: $51,415.89

2005: $53,092.05

2006: $54,907.80

2007: $56,302.45

2008: $58,599.59

2009: $58,652.33

2010: $60,247.68

2011: $61,151.39

2012: $62,961.47

2013: $64,057.00


Loss of Society/Loss of Means of Support

2004: $62,841.64

2005: $64,890.28

2006: $67,109.53

2007: $68,814.11

2008: $71,621.72

2009: $71,686.18

2010: $73,636.05

2011: $74,740.59

2012: $76,952.91

2013: $78,291.89


Percent of Change

2004: +1.88%

2005: +3.26%

2006: +3.42%

2007: +2.54%

2008: +4.08%

2009: +0.09%

2010: +2.72%

2011: +1.50%

2012: +2.96%

2013: +1.74%


The numbers speak for themselves. In the last ten years, Bodily Injury and Property Damage have risen by $12,641.11, respectively, while Loss of Society/Loss of Means of Support has increased by $15,450.25. The lesson we try to stress to our clients is that the cost of Liquor Liability claims goes up every year. If you're still carrying the state minimum of $300,000 in liquor liability coverage you have a potentially dangerous exposure, and one that is often inexpensive to remedy.


In a one person claim, you very well may be ok with a lower liability limit. But even a two person claim, with maximum damages awarded per person for Bodily Injury, Property Damage and LS/LMS, you could face a potential claim well north of $300,000 - putting you almost $100,000 out of pocket without considering whether your policy limit includes or excludes defense costs. 


Even with a $500,000 Liquor Liability limit, it doesn't take much stretching of the imagination to envision a potential claim that would exhaust half a million dollars of coverage. Increasing damage settlements such as this are precisely the reason that $1 Million in liquor liability coverage has been the industry standard.


Whether you're in Illinois and are "protected" by the Dram Shop limits, or a state without a dram shop statute to cap the damages you may face in a suit, the warning is the same: these big claims happen more than you may hear about. Don't be caught off-guard and underinsured and jeopardize the the assets and future of your business.


Spotlight On: Workers Compensation


I recently came across the story of a business owner who hired a friend to do some painting at his business.  The friend hired one of his friends to help out with the job.  Wouldn't you know it, that guy fell off a ladder and injured his back.


If I didn't see some of these claims get filed myself, I'd swear these incidents were made-up.  It should come as no big surprise to find out that "Friend #1", the one originally hired for the painting job, didn't have workers compensation coverage.


You may be wondering did this guy really have to have a work comp policy?  He was picking up some part-time work, just a few days worth.  And he only brought on his buddy for a couple days as well.


To limit the scope of this column, we'll just focus on Illinois.  And the answer is "yes, he should have had his own Workers Compensation coverage."  (Here is Indiana's requirements, and here are Missouri's)


Except in very few instances, Workers' compensation insurance is not optional for businesses under Illinois state law (see below). Though this does pose a financial burden on employers, the law is designed to protect employees who get injured or sick from performing regular work duties. Without workers' compensation insurance, they may not be able to afford the medical attention they need to return to health.
In Illinois, all businesses with at least one employee must carry a valid workers' compensation insurance policy or meet another of the state's accepted methods of coverage. Even if your employee is only part time, you must provide coverage. There is no waiting period, so from the moment your employee first begins work, you are required to carry the appropriate insurance protection. You will face penalties if you are caught in violation of this law.

Virtually every business in Illinois is required to provide insurance coverage, though there are a few exceptions. If you own an agricultural business, you may be exempt. Also, real estate brokers, broker-salesmen and commission-only salespeople are not considered employees under the Illinois Workers' Compensation Act.

Business Owners
If you are a sole proprietor, a partner or an executive officer of a corporation, you do not need to purchase workers' compensation insurance coverage for yourself. If your business has no employees, you can avoid a policy altogether. However, if you do purchase a policy that covers your employees, you must either buy coverage for yourself and your fellow owners, or exclude yourself from the policy in writing.

Illinois takes its workers' compensation laws seriously. Your business can be fined up to $500 per day you are without required coverage, with a minimum fine of $10,000. If the business fails to pay this fine, you can be held personally liable for the debt, even if you are a corporate officer of the company. Additionally, you can be charged with and found guilty of a misdemeanor for failing to provide the necessary coverage; if it is proved that you willingly and knowingly refused to provide coverage, the charge escalates to a felony.  If you operate a business with a liquor license, a felony conviction would preclude you from continuing to hold a liquor license.


We see a fair number of attempted end-around runs on Workers Comp and payroll taxes.  Calling someone an independent contractor to avoid putting them on payroll doesn't make them an independent.  To truly be an independent they need their own policies, license(s), permit(s), etc...


Who gets the Work Comp claim in situations like this?  It keeps moving right up the chain of "sub-contractors" until one of them passes the test of a true sub and has Workers Compensation coverage.  In the instance described above, it's going back to the business being painted.  In absence of his own Workers Comp coverage, the painter isn't considered a sub-contractor, but rather an employee of the business owner and likewise for his assistant.  Their payroll will be included at the time of policy audit, and any claims will go against the business owner's coverage.


Now, the insurer will try to "subrogate" against the "sub-contractor", Friend #1.  But as an individual, they're not likely to collect much, if anything from him. 


Ideally, when contracting out work, you should hire someone with the proper credentials.  But if you're insistent on throwing a little work to a friend, bite the bullet and do things the right way: put them on the payroll for however long the job takes.


Now, this business owner will have to live with the consequences.  The additional payroll will still be added at time of audit and probably generate a small, additional premium due.  Also, they'll have the claim on their record for the next 3-5 years.  Additionally, companies will view the risk as less favorable, and the Workers Comp insurance will carry a higher rate.


The morale of the story: PROTECT YOURSELF.  No matter how small or inconsequential a job seems make sure you're hiring someone who carries the appropriate insurance (General Liability, Workers Compensation, and even Business Auto coverage).  Just as important, make sure their limits are adequate.  Don't let anyone start working a job on your business or home until they can provide you a current certificate of insurance showing all of these coverages in force.  Because if something does go wrong, their problems will eventually become your problems. 



Illinois Gaming - Business Personal Property Endorsement Coming


Since the Illinois Gaming Bill was approved and machines began going online last fall, we've seen a steady stream of clients who are participating increasing their Business Personal Property (BPP) and Money & Securities (cash) limits. 


With up to five machines, plus the vault, valued at around $12,000 - $15,000 apiece, and depending on the wording of your contract with your gaming vendor, your establishment could be responsible for providing coverage on the equipment.  At the maximum number of machines, that may mean adding up to $90,000 to your BPP limit.


As for Money & Securities, we've seen varying amounts of cash coverage needed, depending on how many machines an establishment has and how much they're being played.  But the highest we've seen to date has been $40,000 added for cash inside the premises.


These endorsements to your policy, if your contract stipulates you're responsible for them, can really bump your premium up.  It's not inconceivable to add $800 - $1000 to your premium.


We've been speaking with our carriers who specialize in businesses that are adding video gaming.  We're working with them to create a Video Gaming endorsement, which would raise your BPP  and Money & Securities - Inside Premise limits for a flat charge.  We're hopeful that this will satisfy most contractual obligations we've seen thus far, while easing the strain on business owners' pocketbooks for the additional coverage.


One of our carriers, Illinois Casualty Company, has such an endorsement they'll be rolling out soon.  It's been delayed a little, but they're still hopeful to roll it out in March.  We're still working with a couple more carriers to develop similar endorsements.


Stay tuned to this space for additional information about the endorsements as it becomes available. 


Has your business started Video Gaming yet?  What do you think of it thus far?  Worth the hype?  Over-rated?  We'd love to hear more feedback on the subject.  Drop us a line on our Facebook page.


Consider Your Homeowners Coverage When Picking Out Your Next Pooch         


To say that canines are the worst enemy of insurance companies is a bit of an exaggeration, but an estimated one-third of all homeowners liability insurance claims (source: Insurance Information Institute) stem from canines.  Homeowners policies commonly exclude property coverage for damage caused by a pet.  For example, the ISO Homeowners 3 - Special Form excludes damage to Coverage A - Dwelling or Coverage B - Other Structures if the loss is caused by an animal owned or kept by an insured, but there is a growing trend to address canine claims on the liability side.  To protect the bottom line, many insurers are taking measures to restrict or eliminate coverage for canine-related liability claims. 

Why Exclude?

According to the Centers for Disease Control and Prevention (CDC), about 4.5 million people in the U.S. are bitten by dogs each year causing about 885,000 people to seek medical attention.  These dog bites cost insurance companies an estimated $1 billion annually.  To keep premiums competitive, the insurance market now offers a variety of solutions to exclude canine liability coverage.

Beyond the current cost of canine claims, there is little encouragement that these costs will decline as an increasing number of jurisdictions adopt canine legislation.  There are two types of canine legislation: Breed Specific Legislation (BSL) and the One Bite Rule.

In some jurisdictions the increasing problem of dog attacks has been addressed with legislation that is specific to a breed or multiple breeds.  In hopes of reducing dog inflicted injuries and fatalities, breeds labeled as dangerous or vicious are either regulated or banned completely.  Such regulations may include higher pet registration fees, minimum liability insurance requirements, mandatory muzzling in public areas such as parks, and stricter fencing regulations.  This legislation impacts insurers because, in some jurisdictions, the liability for any injury or death caused by a regulated or banned dog is assigned to the owner of the dog with little regard to the circumstances surrounding the attack.  An assignment of liability seriously impairs any defense that an insurer may otherwise be able to provide.  Most Breed Specific Legislation applies to pit bulls with some jurisdictions also regulating Rottweilers or other notorious breeds.  The vast majority of BSL is enacted at the local level; however, each military branch also has specific regulations applicable to US military installations, and in rare cases, there are laws at the state level.

Many feel that Breed Specific Legislation is ineffective in preventing dog bites and related injuries and fatalities because enforcement of such regulations is impractical and costly.  Any breed of dog is capable of docile or dangerous behavior, so targeting specific breeds does not effectively address other prevalent offenders like unneutered male dogs.  Rather than singling out a specific breed, many jurisdictions have enacted legislation characteristic of the One Bite Rule.  Depending on the wording of the specific law, this type of legislation may protect a dog owner from liability associated with an animal's first attack unless there is evidence of a violent tendency.

The origin of this type of law can be traced back to English common law.  The rationale being that a pet dog is a domesticated animal, and is, by definition, tamed and not expected to inflict injury.  Based on this type of law, the owner of a domesticated animal such as a dog may not be held strictly liable for any damages unless there is evidence of a dangerous or vicious propensity.

While criterion for a violent tendency classification varies, many places have definitions for "vicious dog" or "dangerous dog" to assist with this determination.  Though this type of law may shield a dog owners from a lawsuit on the first offense, the dog owner assumes strict liability for any subsequent occurrences.  Again, this type of law impedes an insurance company's ability to defend.  The One Bite Rule applied in a unaltered state provides protection for a dog owner should the dog cause bodily injury if the owner has no indication of vicious or dangerous behavior.  Under this type of rule, in order to hold the dog owners liable, the injured party must show that the dog has exhibited past violent behavior, not necessarily an attack, or has a vicious propensity.  In many states or jurisdictions the One Bite Rule no longer exists in its pure form, but rather statutes and case law have modified this approach to take into consideration other indications of negligence such as a violation of leash law or other similar restrictions.

Dog bite laws are constantly changing and vary greatly from place to place.  This unique legal environment creates a serious challenge to insurers.  To answer this challenge and keep premiums competitive, the insurance market now offers a variety of solutions to limit or exclude canine liability coverage.


Many in the insurance industry recognize canine liability as a growing exposure.  Rather than a single solution, there are a variety of approaches that are currently utilized within the insurance industry.



In some cases, the high risk canine breeds are addressed through underwriting considerations.  Answer "yes" to certain questions related to dog breeds and a carrier deems the client an undesirable risk.  At a minimum, the list of ineligible dog breeds often includes German shepherd, Pit Bull, Rottweiler, and Siberian husky.  Breeds such as Dachshunds and Chihuahua have a higher tendency to nip or bite, but these breeds do not generally cause significant injury.  The notoriety of particular breeds is often linked to the extent of damage inflicted.  Insurance companies that use dog breeds as an underwriting consideration may follow state or local dog statutes in determining ineligible breeds, so an insurance company may decline to write a homeowners policy for the owner of a forbidden or restricted dog breed.  In other cases the insurance company maintains a list of undesirable varieties.  Regardless of the basis of the list, this approach prevents owners of particular dogs from obtaining homeowners policies.

Commonly blacklisted breeds:

  • German shepherd
  • Pit Bull
  • Rottweiler
  • Siberian husky or husky-type
  • Akita
  • Chow Chow
  • Doberman
  • Presa Canario

Policy Language

Under Personal Liability and Medical Payments to Others, the standard Homeowners Policy provides coverage for injury caused by an animal the insured owns or is in the insured's custody; however, some insurers have altered this policy language to remove or limit Personal Liability coverage.  Because most consider Medical Payment to Others to be a goodwill type of coverage, the animal or canine exclusion is not always applicable to that coverage, so there may be some coverage available to assist with medical bills.

In most dog bite claims, the coverage provided under Medical Payments to Others is inadequate since the average hospital stay cost for treatment of a dog bite is over $18,000 according to a December 2010 report from the Agency for Healthcare Research and Quality.

Other insurers alter the policy language with a different approach.  For example, a company may exclude any loss arising from certain animals.  Though applicable to all animals, as it pertains to canines, the list of excluded animals may include any animal that is illegal to acquire or own, breeds that are named or controlled by any ordinance or law because of a safety concern, any animal that has previously killed or seriously harmed a human or domestic animal, or any animal that has been trained to fight or kill.  Other commonly excluded animals are primates, anything venomous, and other species that are not generally domesticated such as exotic animals.  This type of policy language excludes a claim that stems from any insured owning, acquiring or keeping an excluded animal.




Rather than turn away otherwise desirable Homeowners business, many carriers in the last few years have implemented various types of endorsements that exclude coverage.  The Canine Exclusion Endorsement may be added to policies where homeowners have a blacklisted canine.  This protects the insurance company from the undesirable exposure, yet allows dog owners a better selection of coverage alternatives.  The exclusion applies only to canine-related liability that specifically pertains to a scheduled (listed) canine.  the endorsement must include the name and description of the dog that is to be excluded.  Policy holder would have to sign off on the exclusion at the time of policy inception for the endorsement to be added to the policy.


Another option being used is an endorsement called Exclusion - Injury or Damage Arising Out of a Canine.  With this type of endorsement, the canine is not specifically named, however a description of the animal is still required in the endorsement schedule.  Again, the policy holder would have to sign an acknowledgement of the endorsement for the exclusion to apply.


Beyond the Homeowners Policy


In the past, the personal umbrella policy often bridged the gap in coverage left by canine exclusions in the homeowners policy; don't assume this is still the case. Coverage for canine-related liability is sometimes also excluded in a personal umbrella policy. As with the homeowners policy, there are different approaches to excluding coverage. Some umbrella policies use an endorsement to remove coverage while some build a restriction into the policy language.


Considering the large number of dog owners in the United States and the exposures to loss and potential coverage gaps that emanate from potential dog ownership, it's apparent that dog bite issues aren't going away any time soon.  If you and your family has a pooch, or are considering getting one, it's worth checking into what a certain type of dog could do to your homeowners coverage. 




Check Out our Personal Lines in 2013

We offer a full range of personal lines coverages for homeowners, condos, renters and rental property, auto, boats, motorcycles, RVs and more. Give us a shot at your next renewal to see how we compete.



Carrier Corner

We represent over 15 insurance carriers directly and have access to many more via brokers, but you may only know one or two that we deal with.  Each issue, we'll highlight one of our valued partners in this space.


North Pointe Insurance


North Pointe is an A rated company writing business in all 50 states.  We've been contracted with them for nearly a decade.  We use them for bowling centers, restaurants, fraternal organizations and some contractors. 



 Bret Dixon Insurance recently became a Trusted Choice Agency.  Learn more about it here

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