As local and national governments began to roll out stay-at-home recommendations and orders last year, many businesses scrambled to find ways for their day-to-day operations to continue remotely. An unprecedented number of employees began working from home, and for many businesses, this was the first time they had dealt with remote employees. This shift created a new threat that was unforeseen by many…a drastic increase in cybersecurity incidents.
The threat to digital security had already been on the rise with more businesses turning to cloud storage and even the smallest of businesses becoming fully dependent on technology, but COVID-19 proved to be the fuel needed to ignite an inferno. As lockdowns went into effect last spring, the FBI reported a 300% increase in cybersecurity incidents.
According to cyber insurance carrier Coalition, the crime of choice during the pandemic has been funds transfer fraud via email intrusion. Catherine Lyle, Head of Claims at Coalition, advised that while many think that spam is a mere annoyance, it poses a serious risk to businesses. Spam is a phishing scheme in disguise, trying to lure an employee into providing their credentials. While providing a password to email may seem innocuous, it effectively opens a window for a bad actor to view the entire internal operation of your company. In April 2020, Google revealed that they block more than 100 million phishing emails per day.
Ransomware and malware attacks also increased drastically in 2020. Bitdefender’s Mid-Year Threat Landscape Report of 2020 advised that research shows a 715% increase in detected and blocked ransomware attacks over the previous year.
In a recently published Portland Business Journal article, Brown & Brown Northwest Insurance Senior Vice President, Steve Miller, said the rising risk has led businesses to protect themselves with cyber insurance. “With one in five companies likely to experience a cyber incident, it’s no longer a matter of if something will happen, but when,” says Miller.
Miller emphasizes that cyber insurance does not replace strategic risk management and common sense security practices, but works in tandem to enhance resilience. If a company suffers a security breach, insurance can cover the costs for funds lost and notifications to those who are impacted, business interruption, legal and regulatory fees, and even asset restoration. One strategic risk management step that businesses can receive at no cost is a Cyber Risk Assessment.
The Brown & Brown Northwest Cyber Team uses a Cyber Risk Assessment tool to help identify and quantify your cyber risk. The assessment and coverage offering provides critical features and benefits that help protect you from various cyber exposures and liabilities. To help stop an attack before it starts, continual monitoring of your business for potential security breaches is incorporated into your coverage to further help protect your business. To request a Cyber Risk Assessment for your business, please visit https://bbnw.com/cyber-security/.
Risk Management: Sprinkler System Failures
When it operates correctly, your commercial property’s sprinkler system can play a vital role in suppressing a fire. According to a recent report from the National Fire Protection Association (NFPA), in fire incidents substantial enough to require assistance from a sprinkler system, these systems activated 92% of the time.
What’s more, these systems were able to effectively control the flames in 96% of fires in which the system activated. Considering these numbers collectively, sprinkler systems both turned on and were effective in 88% of fire incidents.
But what about the other 12% of the time? Although sprinkler systems are typically very reliable, the potential for your commercial property’s system to operate ineffectively or fail to operate altogether remains. After all, NFPA data provides that a wide range of property concerns can contribute to sprinkler system operation issues—many of which involve human error and are largely preventable.
There are several steps you can take to ensure your commercial property’s sprinkler system remains operational and is able to effectively suppress the flames during a fire. Review this guidance to learn more about the top causes of sprinkler system failures and what you can do to mitigate them.
According to the NFPA, in 59% of fire incidents where the sprinkler system failed to operate, someone had shut off the system. A variety of circumstances can lead to sprinkler system shut-offs. Some of the most common scenarios include:
- Leakage concerns – The system gets shut off because it starts leaking and a lack of repair forces the system to remain off.
- Unknown accidents – Someone accidentally shuts off the system during a different task, making them unaware that the shut-off even occurred.
- Maintenance mistakes – The system is shut off during maintenance. When maintenance concludes, the system is mistakenly left off.
- Tampering problems – Someone deliberately tampers with the sprinkler system, shutting it off with malicious intent.
Regardless of the cause, shut-off incidents can have serious ramifications for your organization, rendering the sprinkler system ineffective during a fire on your property and allowing for more severe damages to occur. Fortunately, NFPA 13 – a fire protection standard for the installation of sprinkler systems – outlines measures that organizations should take to prevent shut-offs from occurring.
The standard specifically highlights valve supervision as a valuable method. This is the practice of monitoring a property’s sprinkler system valves in order to detect and fix system issues, such as valve closures, before they evolve into a serious problem like a shut-off incident.
Keep in mind that not all valves require supervision. Under NFPA 13, only valves that control the flow of water to the sprinkler system need to be kept open and, in turn, supervised.
Water Dispersal Concerns
Even if your property’s sprinkler system does activate, the system will be largely ineffective if the water coming from the sprinkler heads cannot reach the flames. According to the NFPA, water dispersal concerns were the main culprit in 51% of fire incidents in which the sprinkler system was ineffective.
Water dispersal concerns are usually the result of either sprinkler head obstructions or system design issues. With this in mind, there should be 18 inches minimum of clearance below all sprinkler heads. In addition, sprinkler heads should be inspected regularly to detect obstructions and remedy them as quickly as possible.
To avoid water dispersal concerns caused by sprinkler system design issues, make sure you have your system designed, installed, and serviced by a qualified professional. Have a professional review your sprinkler system for potential design failures as well, and make changes as needed.
Water Supply and Pressure Problems
Apart from water dispersal concerns, sprinkler systems can also be rendered ineffective when the amount of water released from the system or the system’s water pressure is not enough to properly suppress the flames during a fire. According to the NFPA, this contributed to 30% of fire incidents in which the sprinkler system was ineffective. To prevent these problems, it’s crucial to ensure that your sprinkler system is connected to a reliable water supply and utilizes enough pressure to adequately suppress flames throughout the property.
Since water supply and pressure issues can also arise from clogged or damaged system pipes, your sprinkler system should be routinely cleaned to avoid debris buildup and allow water to travel easily throughout the pipes. Damaged pipes – namely, those that are corroded – should be replaced. Keep in mind that dry sprinkler systems tend to corrode faster than wet sprinkler systems, which means that the pipes within dry systems may need to be replaced more frequently.
A fire department connection (FDC) can also help deter water supply and pressure problems within your sprinkler system. If a fire occurs at your property, an FDC—which consists of an inlet and piping system—can be utilized by your local fire department to rapidly suppress the flames with an additional water supply and heightened pressure, increasing firefighters’ ability to get the fire under control before entering the building.
To accomplish this, the fire department connects a hose line from the fire engine to the FDC and pumps extra water into the building’s sprinkler system, thus providing an adequate amount of water pressure to mitigate the flames in a timely, efficient manner. NFPA 13 and NFPA 14 collectively require FDCs on all sprinkler systems and standpipe systems.
Manual Intervention Issues
Manual intervention refers to someone, such as building staff, shutting off a property’s sprinkler system after a fire begins but before the flames are fully extinguished. According to the NFPA, manual intervention issues led to 17% of sprinkler system failures during fire incidents.
Manual intervention issues typically result from the perpetrator thinking the fire is minor or has already been extinguished, thus motivating them to shut off the sprinkler system prior to its activation. Given that, the best way to avoid manual intervention issues is to instruct all building occupants to avoid shutting off the sprinkler system unless absolutely necessary—such as if the system is broken or malfunctioning.
Further, ask emergency response personnel to clearly communicate when a fire has been fully extinguished at your property. Doing so will prevent misunderstandings regarding whether any flames are still present and any additional fire mitigation measures are needed.
Lack of Maintenance or Damaged Components
Maintenance issues and damaged components can result in both sprinkler system ineffectiveness and system failures. According to the NFPA, a lack of maintenance and damaged components collectively contributed to 11% of fire incidents in which the sprinkler system was ineffective, as well as 17% of system failures during fire incidents.
As such, it’s important to keep your system on a regular inspection and maintenance schedule. Specifically, NFPA 4 and NFPA 25 require you to have a qualified professional routinely inspect your sprinkler system to ensure all components of the system are functioning correctly, as well as conduct maintenance when needed.
In addition to inspections, these standards also outline protocols related to testing the sprinkler system for effectiveness through various test scenarios. These tests will allow you to detect potential system damages or deficiencies and fix them prior to an actual fire incident.
Inappropriate System Design
Lastly, sprinkler systems can also be ineffective or fail if the system is not designed to handle the unique fire exposures associated with the property. According to the NFPA, an inappropriate system design led to 6% of fire incidents in which the sprinkler system was ineffective, as well as 7% of system failures during fire incidents.
An inappropriate sprinkler system design can result from your property’s system not being designed with your organization’s specific characteristics in mind, like your industry, the types of activities you conduct onsite, the average number of people in the building during the day and materials stored at the property. For example, if you operate a carpentry shop but don’t have a sprinkler system tailored to mitigate sawdust-related fires, your system could be more likely to fail or work less effectively.
This particular sprinkler system issue is especially common when an organization moves into an existing commercial property that was not initially designed for an organization within the same industry, or when an organization alters daily operations in a way that significantly changes the property’s fire exposures. With that in mind, if you make changes to your operations or relocate to a new property, be sure to evaluate and adjust the property’s sprinkler system as needed.
There are a number of compliance issues employers should be aware of in 2021. COVID-19 relief packages and other rules passed by congress include changes that will significantly impact group health plans and the healthcare industry at large. Employers should consider discussing what requirements they have under these new rules and how their current health plans will meet the following compliance updates throughout the year and as they approach renewal.
The American Rescue Plan Act of 2021 includes 100% subsidy of COBRA premiums for employees (and eligible dependents) who lost group health coverage due to reduced hours or involuntary termination because of the pandemic. The subsidy will begin April 1, 2021 and continue through September 30, 2021. The subsidy will apply to federal COBRA and state continuation.
Mental Health Parity:
There are two new requirements for health plans regarding mental health parity under the Consolidated Appropriations Act of 2021. Health plans will be required to conduct a comparative analysis of the design and application of Non Quantitative Treatment Limitations (NQTL’s) [i.e. preauthorization] for mental health and substance use benefits to medical and surgical benefits. There is also a requirement to disclose this analysis along with other information to the department of labor upon request starting February 10, 2021. Employers should be aware that these new Mental Health Parity rules may impact benefits in their health plans.
New Transparency Rules:
To help meet the goal of increasing price transparency for health care costs, CMS implemented transparency rules effective January 1, 2021 that require health care facilities to provide specific information about their rates and cost to the public. The transparency rules also require group health plans and health insurance companies to share cost estimates and maintain more current provider directories on their websites. Health plans will be required to meet compliance with the new transparency rules starting January 11 with staggered effective dates into 2024 for the required disclosures.
There will be additional compliance changes that will impact health plans and employer groups alike. Your BBNW service team will help you stay up to date.
Climate change has inexorably stacked the deck in favor of bigger and more intense fires across the American West over the past few decades, science has incontrovertibly shown. Increasing heat, changing rain and snow patterns, shifts in plant communities and other climate-related changes have vastly increased the likelihood that fires will start more often and burn more intensely and widely than they have in the past.
The scale and intensity of the wildfires burning across the western U.S. right now is “staggering,” says Philip Higurea, a wildfire scientist and paleoecologist at the University of Montana. More than five million acres have already burned this year—and much more may be yet to come.
Wildfires leave the ground unable to absorb water, creating conditions ripe for flooding. Flood insurance is an easy way to protect your home or business.
Did you know that*:
- After an intense wildfire, burned vegetation and charred soil form a water-repellent layer blocking water absorption for years.
- Just one inch of floodwater in your home can cause $25,000 of damage.
- During rainfall, water bounces off the soil and even a light rain can potentially turn into a flood or mudflow.
- Properties located below or downstream from burn areas are at an increased risk of flooding.
- Most homeowners and renters insurance policies do not cover flood damage.
Reduce your risk, contact your agent for more information or visit the National Flood Insurance Program at www.FloodSmart.gov.
*According to FEMA and the National Flood Insurance Program
While feared by some, the inherent uncertainty of economic downturns is often seen as a cyclical elimination of inefficient businesses and as a chance to expand and seize market shares relinquished by weaker competitors. However, companies that do weather tough times relatively unscathed could still find themselves facing uninsured risks in the long term. Here are some tips to keep your business prospering well into the next economic cycle.
About Your Partners
It’s no secret that the financial security of your business hinges on that of your partners, vendors and suppliers and that in tough times, everyone is looking for a way to cut costs.
Never rely on the insurance coverage of your business partners to protect your assets or protect against third-party liability claims. In the event of financial insolvency, a business’ partner organizations could eventually be held liable for claims filed against it. Even healthy, well-insured partner organizations are no substitute for comprehensive liability coverage for your own business.
Ultimately, in order to protect your company, it may be a wise long-term investment to expand your coverage limits. While it may be tempting to cut costs by limiting coverage, you could risk paying out of pocket for hefty claims or settlements.
In the construction industry, in particular, an important way to protect your company from the enormous cost of specialty trade contractor failure is to transfer the risk of project completion through surety bonds.
Secure Seamless Contracts
In a turbulent economic climate, it is more important than ever to have thorough, seamless contracts. They should clearly outline the obligation of each party and discuss dispute resolution policies so that if something goes wrong, you avoid a messy and expensive disagreement.
It is never a good business decision to sign a contract hastily, and especially in a difficult economic time, be sure to look into all the risks and legal ramifications. Small companies who partner with larger companies are often strong-armed into making decisions with which they are not completely comfortable.
Exploit Change with Caution
For many construction companies, change is the best way of reacting to an economic crisis. Offering new services or exploring different customer bases can be a crucial factor in surviving difficult economic times. While expanding in either of these ways can revolutionize your business and keep you afloat in good times, it could also expose you to additional liability you had not dealt with before.
When you experiment with new products or services, you will inevitably face a learning curve, which puts you at a larger risk of facing liability claims. You may want to consider purchasing additional lines of coverage to protect yourself, as your surplus lines insurance policy may only cover claims arising from existing projects or services.
By the same token, shifting or expanding your customer base may put you at risk of unexpected lawsuits. The same product or service may evoke disparate reactions in different sectors of the market. This is another instance in which it is important to be covered for potential liabilities resulting from a change in your business.
Contact Brown & Brown Northwest today to be sure your plan for escaping the economic downturn unscathed does not backfire.