Since the pandemic, more small and mid-sized businesses have embraced the flexibility of remote work on a permanent basis. However, many of these companies have not assessed how their risks have changed and what their insurance needs are in this new environment. The following are some ways small and mid-sized remote businesses can reduce risk and protect themselves from losses.
The first step to navigating these risks is to conduct a risk assessment to review operations and existing coverages and look for mismatches and gaps. If your business does not have a policy on remote work and the use of company property offsite, consider formalizing such practices and either conforming the remote work policy to help ensure coverage (for example, permitting remote work within the geographic reach of existing insurance policies) or seeking endorsements that apply to your business’s situation—in most circumstances, both approaches will likely be appropriate.
When formalizing policies, you should also ensure that the company’s remote work practices are in compliance with applicable laws and regulations, including data protection and privacy laws, taxation rules, and workers compensation. This will help minimize liability on a number of fronts. If your policies or practices change during a policy period, you may need to notify your insurer to avoid nullifying coverage.
Businesses often maintain commercial package policies that combine liability and property coverages. While often useful, this kind of policy may be both under- and over-inclusive for the modern remote or hybrid business model.
Commercial property insurance—standard in many package policies—is written to cover business property and personal property against covered perils such as theft, fire, vandalism and smoke damage. Yet commercial property insurance may not cover work-related damage that occurs at an employee’s home. Standard commercial property policies only cover business personal property located on the insured business premises, not at an employee’s home. It is therefore imperative to ensure that your commercial property policy covers business personal property used by workers at remote locations. If your business no longer has a physical location or does not cover the bulk of valuable business property, the cost of the premium may not be a worthwhile investment.
By contrast, cyber insurance is not a standard coverage in many package policies, but may protect against the largest risks faced by a business, particularly one that maintains customer or client data. Small and mid-sized businesses face significant security risks and may be unprepared as cyberattacks increase. Because the remote workspace is an online workspace, cyber coverage can be crucial to enable a business to redress a cyber incident, minimize downtime and recoup losses. Cyber insurance typically provides coverage for both first-party and third-party risks, assisting insureds to pay the costs incurred directly for such things as data recovery, ransom costs, business interruption losses, and costs associated with claims against the insured by parties affected by a cyber incident. While cyber insurance may seem like an extra expense up front, it may be a sound investment.
Maximizing Your Available Assets
For all businesses, it is important to ensure that existing coverages are being maximized. Recordkeeping surrounding a loss can be important, as adequate documentation can be vital to establishing a claim. If new working patterns have disrupted prior recordkeeping practices, develop and formalize new strategies along with other remote work policies and protocols.
In the event of a loss, there may be multiple coverages that potentially cover different aspects of the loss, and the whole coverage picture should be considered. In considering what coverages might apply, insureds should read their policies broadly and a potentially covered claim or incident should be promptly reported to the appropriate carrier or carriers. A sound recordkeeping protocol can be important to track the timeline of the claim and ensure that the insurer issues a timely response. Claims-related emails should be archived, and records of telephonic or online claims submissions should be saved.
Once a claim is reported, insureds should be prepared to persistently follow up. Insurers may have a limited amount of time to either accept or deny coverage. For example, in California, an insurer is obligated to accept or deny coverage, or state why they are unable to, within 40 days of the insured’s notice.
In the event a claim is denied, or if an insurer fails to issue a coverage decision within a reasonable time, businesses should carefully consider options before walking away from the claim. Insureds should ask for (and are generally legally entitled to) an explanation of the basis for the denial and should ask for clarifying questions if the ground are not clear. Sometimes providing additional information may change an insurer’s understanding of the loss and facilitate payment. If all else fails, and an insured thinks an insurer is wrongly standing on its denial, it may be appropriate to consult an insurance recovery attorney to help assess the strength of a claim and identify options for litigation, arbitration or mediation with the insurer.