MARKET SEGMENTS DIVISION—STAFFING FIRMS

(February 2023)

Collapsible Index

Eligibility

MS ST DS–Staffing Firms Supplemental Schedule

MS ST 01–Staffing Firms Analysis

I. Modifications To CP 00 10–Building And Personal Property Coverage Form

II. Modifications To CP 10 30–Causes Of Loss–Special Form

III. Definitions

Endorsements

Underwriting Considerations

Rating Considerations

The Staffing Firms Program is an enhancement of the Commercial Package Policy. Any package written under the market segment division must be assembled according to the rules for all Market Segment policies.

Related Article: ISO Market Segment Overview - includes a discussion on policy construction.

This section will discuss items specific to the Staffing Firms Program, including the eligibility, supplemental schedule, Staffing Firms MS ST 01, and the special endorsement developed just for this program. In addition, there are sections on Underwriting and Rating.

This article is based on the 07 13 edition of this program. Changes from the prior edition are in bold print.

ELIGIBILITY

This segment is designed for operations that, in return for fees, furnish workers to perform services for others. The only eligible classifications for this coverage are Employment Agencies – 43200 and Sales or Service Organizations – 47367.

If other operations conducted by the business require additional classes, the business remains eligible for this program even if they are NOT the primary classification. However, each insurance company may establish its own criteria, which may be more restrictive. There is no classification listed as ineligible.

MS ST DS –STAFFING FIRMS SUPPLEMENTAL SCHEDULE

What follows is a discussion of the specific information that needs to be shown on a Supplemental Schedule for the Staffing Firms Program.

Changes in Limits

This section's only purpose is to increase insurance limits. If no limit is entered, the limits shown in the MS ST 01 apply. Any limit changes are effective on a per location basis. This allows protection for one or two locations to be increased without affecting any remaining locations.

A number of specific coverages are listed in this section. Space is also available for entering a coverage to be defined and a limit of insurance for it. The coverages subject to change are:

Note: According to the coverage form, whatever limit is entered is a replacement (not an additional) limit. If an insured wants $5,000 in coverage and the existing limit is $2,500, a limit of $5,000 must simply be entered on the schedule to get the desired level of coverage.

Hired and Non-Owned Auto Liability Insurance

If coverage is desired a check must be entered in the box beside the coverage and MS ST 03–Staffing Firms-Hired and Non-Owned Auto Liability Insurance attached. The limits can be entered on this Schedule or on the schedule that is part of the endorsement. Limits are separate for Hired Auto Liability and for Non-owned Auto Liability.

Forms Applicable

The final section of the Supplemental Schedule allows for the listing of specific endorsements by premises.

MS ST 01–STAFFING FIRMS ANALYSIS

The opening paragraph of the endorsement clarifies which of the coverage forms and the property causes of loss forms are being modified by this endorsement. They are:

The Staffing Firms endorsement is not a complete coverage part, so it must be attached to a package containing all three of the above named forms. If all three forms are not a part of the policy, the Staffing Firms Program endorsement cannot apply.

This means if a policy is issued with commercial property coverage, commercial crime, commercial inland marine and equipment breakdown coverage but no CGL, the Staffing Firms endorsement cannot be added.

When the Staffing Firms endorsement is attached, all of the underlying terms, conditions, and provisions of the above three forms apply, with the exception of those that are modified by the Staffing Firms endorsement. Each of the modifications will be reviewed in the following analysis.

I. Modifications to CP 00 10–Building and Personal Property Coverage Form

A. Additional Coverages Change–Fire Department Service Charge

The Fire Department Service Charge limit is increased to $5,000 and may be increased on the Supplemental Schedule.

B. Additional Coverages Additions

1. Money and Securities

Coverage is added for direct loss by theft, disappearance, or destruction of money and securities. This additional protection is effective if a loss occurs at a covered premises, a bank or savings institution, living quarters of the named insured, partner or employee and while the property is in transit between any of these locations. Coverage at employee living quarters applies only if that employee was given the covered property to use or hold on behalf of the named insured. The automatic amount of $10,000 applies when the covered property is either in the described premises or at a bank while the $5,000 applies when the covered property is anywhere else. Either or both limits can be increased by an entry on the Supplemental Schedule.

The following three types of loss are excluded:

·         Losses that result from errors or omissions in accounting or arithmetic.

·         Losses that occur because the property was voluntarily given out in an exchange or purchase

·         Any loss of covered property that is contained within any money-operated device (such as a vending machine). This exclusion does not apply if the device has a continuous reading instrument that records all amounts that are deposited or stored in the device that is covered.

Occurrence is defined under this segment as any loss that involves a single act or a series of related acts by one or more individuals. The named insured is required to keep records of all money and securities to verify any loss.

Note: The automatic amount of $5,000 on premises or at a bank and $2,500 anywhere else can be increased by indicating the new limit on the Supplemental Schedule. Because this is a split limit and the entry on the supplemental schedule is for a single limit, be careful in the description to prevent confusion.

2. Fire Extinguisher Systems Expense (07/13 change)

Up to $2,500 is available in any one occurrence to pay the cost of recharging or replacing fire extinguishing equipment and systems. Coverage applies only if the discharge is within 100 feet of a described building or within 100 feet of the premises. The greater of the two distances is used to determine if coverage applies.

 

Example: Sean noticed a fire in the parking garage next to the building where he rents office space. He called 911 as he ran to find fire extinguishers. There were none in the garage, so he ran to his office space, and he and another employee grabbed their extinguishers. They successfully contained the fire until the fire department arrived. The parking garage was right next to the building but 200 feet from Sean’s office space. Because of this change, Sean has coverage to recharge the extinguishers while, under the prior wording, he would not have.

 

In addition, if the covered property is damaged due to an accidental discharge, it is covered but subject to the same $5,000 limit. No deductible applies to this coverage.

There is no coverage if the system is discharged during testing or installation.

3. Reward Payment

Reward payments are available to assist in finding out who committed a crime and in recovering stolen property. It is important to point out that the insurance company claims department always has the right to use rewards as part of their claims handling. This coverage acts to extend the same option for the insured to use at their discretion. The coverage consists of two categories of rewards. In the first category, up to $5,000 is available for information that leads to the arrest and conviction of any party who commits a crime that results in a covered loss to the property portion of the policy. The coverage limit is the maximum that is available and is subject to the actual cash value of the damaged property at the time of the loss or the amount it takes to repair or replace the property based on the value of the property as determined by policy conditions. In other words, the policy would not pay $2,000 for information related to a crime that caused a $1,500 loss.

The second category of reward payment applies to the return of stolen property and is also for a maximum of $5,000, subject to the same limitations as above.

The reward amounts shown are the most that are available for any one occurrence.

Who is eligible to collect the award? Only one person can receive the reward. The first person, as determined by law enforcement, who voluntarily provides information that leads to a conviction or leads to the stolen property will receive the reward. However, that person cannot be any of the following:

The reward is not paid until there is a conviction or the property is returned.

4. Computer Fraud

When the named insured’s property or money and securities is transferred by fraudulent methods using a computer, there is coverage for up to $5,000. The transfer must move property or money and securities from inside an insured premises or bank to a person or place outside the insured premises or bank. This limit can be increased on the Supplemental Schedule.

5. Money Orders and Counterfeit Money

If the named insured in good faith provides services or hands over money or merchandise to another party who pays with unrecoverable money orders or counterfeit money, coverage is provided for the loss to the named insured. The maximum payout is $1,500, but it can be increased on the Supplemental Schedule. There is a limitation that money orders are covered only if they were issued by a post office, express company, or bank. Counterfeit money is also restricted to only money accepted during the course of business.

 6. Forgery or Alteration

Loss that occurs because of the forgery or alteration of checks, drafts, promissory notes, bills of exchange or any similar instruments is covered. Such instruments must be issued by the named insured, the named insured’s agent, or someone impersonating either of these parties. There is no coverage if the loss is for instruments received by the named insured from other sources.

If the named insured realizes that an instrument has been forged or altered and refuses to honor it, this coverage also pays related and reasonable legal expenses that may ensue. The named insured is given written permission to go ahead with their own defense, and the named insured will be reimbursed for those expenses.

The $2,500 limit is the most that will be paid under this coverage for a single loss. The amount may be exhausted by the loss itself, the defense of a suit or a combination. The limit can be increased on the Supplemental Schedule.

Example: The office manager of Keep Up Clerical Services has an eagle eye. She was reviewing canceled checks and noticed a payee she did not recognize. She examined the signature and saw that it did not match the owner’s signature. She called the bank and advised them it was probably a forgery. This caused the bank to withdraw funds back from the payee, which caused the payee to become overdrawn. The payee sues Keep Up for the payment and for additional expenses it has incurred. The payee is disappointed when it is proven that the signature was forged. Keep Up is compensated for the $1,250 legal fees incurred by denying the payment.

 

7. Outdoor Signs

Direct damage to outdoor signs owned or under the control of the named insured is covered. This coverage supersedes any other coverage provided for signs elsewhere in the policy.

The any one-occurrence limit is $5,000. This limit can be increased in the declarations.

8. Employee Dishonesty

Coverage is provided for employee dishonesty that results in the loss of money, securities, or business personal property. The dishonest employee may be working alone, or the employee may collude with other persons. However, if any of those other persons include the named insured, partner, member, or manager of the named insured, there is no coverage.

Coverage is also provided for loss or damage to money and securities or other property of a client caused by a theft committed by an identified employee of the named insured who is acting alone or in collusion with others. The client must own the property, holding the property for another or legally liable for the property. An important condition is that all settlements for any client property loss are between the named insured and the insurance company. The client cannot present the claim independently.

 

Example: Keep Up Clerical Services assigns Dennis to work at Grandings Incorporated’s bookkeeping department while an employee is on sick leave. On his first day, he runs into an old friend, Lisa, who works in the warehouse. Lisa asks for Dennis’ help to steal from the warehouse. He agrees, and during the two weeks he is assigned there, they steal more than $30,000 worth of property. Later, Dennis and Lisa’s thefts are discovered. Keep Up’s liability for Dennis’s action is covered under this section because he is identified as the thief. Coverage applies even though he colluded with Lisa.

 

There is no coverage for any type of indirect loss attributable to the employee dishonesty, such as a business income loss, any costs to establish the existence or the amount of a loss or any legal liabilities.

 

Example: After Dennis and Lisa’s thefts are discovered, Grandings shuts down for two days to perform a complete warehouse inventory. They lose income because they cannot make shipments to several customers, causing an additional loss of several thousand dollars. Grandings sues Keep Up for this loss. This loss is NOT eligible for protection under the dishonesty coverage.

 

Legal expenses incurred are not covered.

An inventory computation and/or profit and loss statement cannot be the sole proof that a loss has occurred or be the sole method of establishing the value of the loss. In other words, there must be tangible evidence that a dishonest act occurred, and there must be a way to calculate the amount of that loss accurately.

A special exclusion applies to employees who have committed prior acts of dishonesty. If the named insured (or any partner, officer, trustee, member, manager, or director of the named insured) discovers that an employee was previously involved in a dishonest act, there is no coverage for any acts of that party. It doesn’t matter whether the incident occurred before or after the insured hired the employee—coverage ceases. The termination takes effect the moment the party's prior act is discovered. There are no exceptions to this exclusion (unless the insurer is willing to write a manuscript endorsement to document an exception).

The $5,000 limit in the form may be increased on the Supplemental Schedule. This limit is the total amount available to respond to a single occurrence. The limit of insurance is not cumulative from year to year, so the limit shown is the maximum that will be paid for any one occurrence of a dishonest act or event, regardless of how many years the policy has been in force or how much premium has been paid.

The act or event that causes a loss must have not only occurred during the policy period but must also be discovered no later than one year from the end of the policy period. There is an important exception. If the insured suffers a loss that would have been eligible under a previous policy but was not discovered until after the one-year limitation expired, there may be coverage. However, the old loss would have to meet two criteria. First, this policy must be the replacement for the one in force when the loss actually occurred. Second, the loss would have to involve a loss that is eligible under this policy provision. In addition, any payment made is subject to the current policy term's insurance limit (unless the prior term's limit was lower).

Possible Exclusion Ambiguity

There is one more exclusion, and it may not be very clear. It states that loss or damage due to a dishonest act performed by the named insured and any partner, member, officer, manager, director, or trustee is ineligible for coverage. Up to this point, the exclusion is very similar to exclusions in the Commercial Crime Form. However, the exclusion also bars loss for dishonest or criminal acts by authorized representatives and by anyone to whom the named insured has entrusted property. This part of the exclusion may be problematic. Doesn’t the named insured entrust items to employees as part of their duties? Aren’t employees authorized representatives? This wording is not used in the Commercial Crime policy and could cause confusion after a loss.

9. Artificially Generated Electrical Current

This coverage is applicable only to computers. When an artificially generated electrical current damages or destroys the named insured's computers, the carrier will pay, but only if either of the following applies:

Any loss payment is subject to the deductibles in the policy and the limit on the Declarations that apply to this computer equipment.

C. Coverage Extensions Changes

1. Newly Acquired or Constructed Property

The only change is for computers. Coverage at newly acquired or constructed property in the CP 00 10 ends at the earliest of when the policy expires, thirty days after the property is acquired or when the values are reported to the insurance company.

This coverage extension adds one additional time of coverage ending, but it applies only to computers. When ‘specific insurance’ is purchased at the newly acquired premises, coverage ends. The other times also continue to apply to computer.

Note: This extra item is confusing because it doesn’t say that coverage specific to computers is purchased but instead says only ‘specific insurance.’ This confusion could be an ambiguity to the benefit of the insured.  

 

Example: Keep Up Services has the opportunity to take over the space and all office equipment of a competitor. It moves quickly and doesn’t notify its insurance company. The acquisition occurred on 12/20/2022, and their policy period is 1/1/2021-1/1/2022. The policy is renewed on 1/1/2023. The busy holidays prevent any notification. A fire occurred on 1/2/2023, and Keep Up Services notified the carrier, but coverage was denied because the applicable policy’s term had expired.

 

2. Personal Effects and Property of Others

This extension increases the limit from $2,500 to $5,000, and it then takes away coverage. The personal property section of this extension is amended to exclude personal property of tenants and personal property belonging to others if the tenant is legally liable for that property.

3. Valuable Papers and Records (Other than Electronic Data)

The valuable papers and records coverage extension is increased from $2,500 to $25,000 for on-premises loss or damage. It also adds coverage when the valuable papers and records are off premises but only for $10,000. These limits can be increased for an additional premium.

Coverage is expanded to include not only the cost to replace or restore the lost information but also any physical loss or damage to the valuable papers and records owned by or in the named insured’s care, custody or control. The coverage extends to the cost of blank material and the labor necessary to transcribe any available records.

The covered cause of loss is more restricted and must be due to a specified cause of loss as defined in the CP 10 30–Causes of Loss - Special Form or due to collapse. Property that is held as samples or that has been sold and is waiting to be delivered is not covered. Any property that is being stored off premises is also not covered.

Note: If higher limits are needed, consider using one of the following forms because of causes of loss and coverage designed just for this exposure.

Related Articles:

AAIS Valuable Papers and Records Coverage Form

ISO Valuable Papers and Records Coverage Form

 

Example: Green Players, Inc. has a break-in, and all of their contracts and physical records are taken along with their computers and their backup peripherals. Green Players sustains a loss of $20,000 and expects full payment. They are very unhappy to discover they have no coverage for theft. They are even more unhappy when they discover that prior to moving to the Staffing Firm Program they had theft coverage.

 

4. Property Off Premises

The Staffing Firm Program enhances the property off-premises extension by adding computers while in transit.

5, Outdoor Property

The Staffing Firms Program provides coverage for outdoor property (other than outdoor property that is for sale) for the following causes of loss:

Limits are based on the type of outdoor property.

The expense to remove property of others consisting of trees, shrubs, and plants debris is covered under this item. The property of others cannot belong to the owner of the building when the named insured is a tenant.

Note: No limit is mentioned with the expense to remove property of others item, although there is a reference to the terms and conditions of the rest of extension. There could be an ambiguity as to what limit, if any, applies.

6. Accounts Receivable

The limit of insurance for the business personal property may be extended to include direct loss or damage to accounts receivable from a covered cause of loss. Coverage applies to:

The amount available is $5,000 for on-premises loss or damage and up to $2,500 for off-premises loss. The limit can be increased for an additional premium, and the higher limit will be shown in the declarations.

The reference to accounts receivables in the Property Not Covered section is deleted in regard to this supplemental coverage.

Note: If higher limits are needed, consider using one of the following forms because the coverage is designed just for this exposure.

Related Articles:

AAIS Accounts Receivable Coverage

Accounts Receivable Coverage

II. Modification to CP 10 30–Causes Of Loss-Special Form

A. Mechanical Breakdown

The mechanical breakdown exclusion does not apply to computers.

B. Dampness, Dryness, Changes in Temperature, Marring or Scratching

The only change in the dampness, dryness, and changes in temperature, marring or scratching exclusion subparts is the dampness or dryness of the atmosphere portion.

An exception is added so that when an air conditioning system used with the computer is damaged by a covered cause of loss, the resulting damage to a computer because of any dampness or dryness is covered.

 

Example:

Scenario 1: The summer turns out to be one of the wettest on record. It rains non-stop for weeks. The atmosphere is so humid that Jerry’s computer system fails and loses its data. There is no coverage for this loss.

Scenario 2: Jerry’s exterior air conditioning unit is struck and destroyed by lightning. The loss of air conditioning causes the computer to breakdown and lose data. This loss would be covered because its proximate cause was the lightning strike (a covered peril) to the air conditioning equipment.

 

C. Additional Exclusions for Computer Coverage Only

1. The following exclusions apply to computer coverage. Loss or damage due to any of the following is excluded regardless of other concurrently or sequentially occurring causes of loss.

Note: The reason these extra exclusions are needed is that MS SF 01 includes coverage for mechanical breakdown of computers that is not provided by the CP 10 30.

a. Errors or Omission

There is no coverage for damage or loss due to human errors or omissions in processing, recording, or storing information on computers. (Resulting fire or explosion is covered if caused by a covered peril.)

b. Electrical Disturbance

There is no coverage for damage due to electronic or magnetic injury, disturbance, or erasure of electronic recordings unless it is a result of a direct loss or damage caused by lightning.

c. Computer-related Losses

There is no coverage for any loss or damage that is caused by or results from the failure, malfunction, or inadequacy of any of the following (regardless of who owns the property) because they cannot correctly recognize, process, distinguish, interpret, or accept dates or times:

d. Computer Advice or Consultation

Any of the following provided by the named insured or for the named insured is not covered when used to determine, test, or rectify potential or actual problems described in exclusion c. above.

2. When Electrical Disturbance, Computer-related Losses and Computer Advice or Consultation excluded above result in a specified cause of loss or elevator collision, that resultant loss is covered. However, there is no payment to repair, replace, or modify any item listed in exclusion c. above.

The damage from an elevator collision must involve the elevator experiencing a mechanical breakdown.

D. Employee Dishonesty

Most of the exclusions in the Cause of Loss–Special Form do not apply to the Employee Dishonesty Coverage provided in this endorsement. The only exclusions are Governmental Action, Nuclear Hazard, War and Military Action and the specific exclusions discussed in the Employee Dishonesty Additional Coverage.

E. Outdoor Signs

Most of the exclusions in the Cause of Loss–Special Form do not apply to the Outdoor Sign Coverage provided in this endorsement. The only applicable exclusions are Governmental Action, Nuclear Hazard, War, Military Action, Wear and Tear, Rust and Mechanical Breakdown.

Related Article: Basic, Broad and Special Causes of Loss Forms Analysis – See its description of the exclusions.

F. Valuable Papers and Records and Accounts Receivable

The only exclusions that apply to Valuable Papers and Records and Accounts Receivable are:

Note: This item is ambiguous because of the difference between the two coverages. Valuable Papers and Records coverage applies only for specified causes of loss and collapse, while accounts receivable coverage is subject to the CP 10 30 causes of loss. Remember that under the Valuable Papers Coverage Extension only specified causes of loss and collapse are considered covered causes of loss. Combining the two coverages under this same modification would suggest that the two are covered for the same causes of loss when they are not.

G. Accounts Receivables

·         The following exclusions apply in addition to the exclusions described in F. above: Loss involving alteration, falsification, concealment, or destruction of accounts receivable records if these actions were meant to conceal another action such as giving, taking, or withholding money, securities or other property.

·         Loss due to errors or omission in a covered operation's bookkeeping, accounting or billing functions.

·         Loss that is only found due to an audit or inventory. There must be some other outside evidence.

Changes to The Commercial General Liability Coverage Part

Note: This market segment makes NO changes to the Commercial General Liability Coverage Part.

III. Definitions

Thirteen definitions are added:

Client refers to an individual, company, or organization to which the named insured is contractually obligated to provide services. The service must be performed at a specific premises, and there must be a bill for such services.

Note: This definition applies only with regard to employee dishonesty, personal effects, and property of others coverage.

Client’s premises, as defined here, applies only to employee dishonesty coverage and off-premises coverages. It is the interior of only the portion of a building actually occupied by the named insured’s client to conduct business.

Computer is a programmable electronic device used for processing data. While the definition does apply to peripheral equipment and to related air conditioning and fire suppression systems, it doesn’t apply to data or media.

Counterfeit money is a money imitation meant to deceive.

Employee is a defined term only for Money and Securities and Employee Dishonesty coverages. (07 13 changes)

Employee is expanded beyond the full-time employee of a business. There are seven different categories that qualify as employees:

a.     An actual person (not a corporation) who is paid by the named insured and is under the control of the named insured with respect to performing his or her duties. The person remains an employee for 30 days after termination, but only if termination is not related to dishonest actions.

b.    A person who is a substitute for an employee or is hired for short temporary work is considered an employee while under the control of the named insured except when caring for property off-premises.

c.     A person leased to the named insured that is not a person described in a. or b. above. There must be a contract and a labor-leasing firm involved.

d.    A consultant for the named insured but only if that consultant was formerly an employee, director, partner, member, trustee, or manager.

e.     A guest student or intern but only while acting as a student or providing services for the named insured. There is no coverage for loss of property off premises.

f.      Any employee of an entity that merged with the named insured or was acquired by it prior to the policy effective date.

g.    Managers, directors or trustees when acting as employees or while on a task-oriented board.

An employee does not include independent contractors or similar type individuals unless specifically described in the list above.

Forgery refers to one party signing another party's name with the intent to deceive. It does not include an unauthorized signing by a person of his or her own name.

Manager is any director in a limited liability company.

Member is one of the owners of a limited liability company. (07 13 addition)

Money includes all currency, coins, and banknotes with a face value and in current circulation, plus money orders, travelers’ checks and similar items held for sale to the public.

Occurrence applies to only the Crime portions of this form, and the meaning varies by the type of coverage. Under Money and Securities coverage, it means all loss that involves one or more related acts by one or more persons. Under Money Order and Counterfeit Money coverage, it means either one or more related acts or events by one or more persons or one or more related acts or events not involving any person. Under Forgery or Alteration coverage, it means all losses involving one or more instruments caused by any person or in which that person was involved. Under employee dishonesty, it means all loss that result from a single act or series of acts caused by one or more employees.

Other Property as defined here, applies only to employee dishonesty, client’s property coverage. It includes all tangible property except for money and securities. However, no coverage exists for any such property classified as ineligible elsewhere in the policy.

Securities are evidence of debt such as stock certificates, bonds, contracts, tokens, stamps, credit card evidence that can be used to collect from the credit card company and other items that represent money but are not money.

Theft, as defined here, applies only to employee dishonesty, client’s property coverage and is an illegal activity that deprives the client of money, securities, or other property.

ENDORSEMENTS

The forms and endorsements developed for the Market Segments series of programs carry the designation MS.

There is only one specific endorsement available to modify the coverage provided under the Staffing Firm program. However, all of the endorsements available under the Property and General Liability Coverage Parts are available for use under this division.

MS ST 03–Staffing Firms-Hired Auto and Non-Owned Auto Liability Insurance

This endorsement amends the General Liability Coverage Part to provide coverage on a basis similar to commercial auto coverage. Hired auto coverage applies to bodily injury and property damage that arises from the maintenance or use of a hired auto by the named insured or any employee of the named insured. Non-Owned Auto Liability applies to bodily injury or property damage that arises from any person using a non-owned auto in the course of the named insured’s business.

Note: Non-owned coverage is designed to protect the named insured, not the owner or driver of the vehicle.

Related Articles:

Commercial Property Program Available Endorsements and Their Uses

Commercial General Liability Available Endorsements and Their Uses

UNDERWRITING CONSIDERATIONS

Any program offered by an individual insurer will have its own set of eligibility guidelines. If the program is a generic or standard program, as in the case of ISO’s Market Segments Program, it usually has a set of qualifying criteria. Because there may be differences between the two sources of eligibility criteria, the insurance professional needs to be thoroughly familiar with the applicable new business and renewal qualifications. The following review of the underlying and eligibility requirements for the Staffing Firms Program is for the ISO generic program.

Specific Staffing Firms Operations

The most important aspect of underwriting staffing firms is the employment contract which explains the relationships between the staffing firm, the client, and the worker. Some firms may be operating as recruiters who find employees for prospective employers, and once the employee is hired, the relationship for that transaction ends. They may supply contract employees to a client. In this case, the staffing firm is the employer for the employee even though the employee is working at the client’s premises. The worker may be considered an independent contractor, and the staffing firm operates more as a general contractor. Underwriting cannot start until the relationships are firmly established and understood.

The contracts are also important because they spell out the responsibility all parties have to one another. This will impact workers compensation exposures and also employee dishonesty, and the general liability and auto liability definitions of who is an insured.

A number of employment-related cases have been working through the courts to define better the responsibilities the staffing agencies have toward the employees they supply to clients. While many will relate to workers compensations, some may also involve commercial general liability coverage. Anyone working in this niche must stay on top of the latest changes.

COVERAGE ISSUES

Commercial Property Coverages

Many of the issues related to the underwriting of commercial property insurance, such as construction, occupancy, physical characteristics, types of rates and so forth, are discussed in detail under the commercial property section.

Related Article: Commercial Property Program Underwriting Considerations

Commercial General Liability Coverages

Many of the issues related to the underwriting of commercial general liability insurance, such as claims-made versus occurrence coverage, limits, deductibles, endorsements, and so forth, are discussed in detail under the commercial general liability section.

Related Article: Commercial General Liability Policy Underwriting Considerations

Property Enhancements

Several commercial property coverage enhancements are added by the Market Segment endorsement. Any resulting increase in exposure should be evaluated to determine if they are contemplated by the program's coverages and rating structure. The exposures should be addressed if any additional coverages, endorsements, premiums, or other tailoring is necessary. The property enhancements with the most significant underwriting concerns are as follows:

Accounts receivables are covered, up to $5,000. The insured should have copies of records stored at a safe, off-premises location. The same is true of valuable papers and records covered for up to $25,000 on-premises and $10,000 off-premises.

Personal Effects and Property of Others coverage is increased but, more importantly, extends to personal property of the clients while in transit or at the client’s premises. Although coverage is limited to $500 at any one client, with the wrong employee, this could add up.

Crime and Dishonesty Enhancements

The Staffing Firms Program endorsements add coverage for money and securities, money orders and counterfeit paper currency, forgery and alteration and employee dishonesty. The limits of $10,000 for money and securities and $25,000 for Employee Dishonesty are significant and can be increased. Coverage is extended to employee theft of client’s property.

The insured should be evaluated for crime protection devices, including the type of devices used and how they are maintained. The evaluation should include alarms, locks, lighting, fencing, guards, or other security measures.

Sound hiring procedures, background checks, and internal controls are necessary to minimize employee dishonesty losses. Procedures should be implemented and reviewed regularly to monitor and prevent the potential for crime and dishonesty losses.

Questions should be asked about how employees are monitored at client’s premises to prevent them from stealing from the client.

Related Article: Crime Underwriting Considerations.

RATING CONSIDERATIONS

The rating for this product is the same as any other package product. All coverages must be rated according to the rules found in the ISO Commercial Lines Manual. The MS ST 01 has a number of enhancements, and pricing should be in place for any one that is used. It is rated based on the number of employees and whether Earthquake and/or Flood are covered in the policy's other parts.