Why Working at Home Brought New Risks for Agencies, Clients

By | April 5, 2021

In some recent Academy of Insurance classes, I’ve been asking people about their working situation. Most of the people I’ve been talking to transitioned for a while to the work from home space, and many are still there at least part-time.

So how did that happen?

For many of these people, it happened the way it happened for you. The decision was made to shut down businesses, offices, restaurants, etc. To keep their business going, and despite not wanting to do it, most employers figured out how to make working from home possible for their team.

Consider the change in risk for companies that suddenly moved all of their people to the home office.

Property Risk Changes

The obvious change in property risk is in the distribution of business personal property. Many employees of the insurance company that we’re thinking about had business personal property on their desks. The property didn’t go anywhere because their job descriptions didn’t anticipate the need for business personal property that could go anywhere else.

Most team members have a desk that’s connected to the cubicle where they work. There is a chair and maybe a filing cabinet, or other drawer space. They have a phone on their desk and their desktop computer, both of which were not meant to leave that space until the employee left, and even then, the IT department would probably reformat the hard drive and desk phone remotely from wherever IT is.

Now multiply that by hundreds of employees in companies all over the country. That doesn’t even account for the personal property that each employee left at their desk because they were planning to come back to the office the next day. Until they couldn’t.

That’s when the scramble started. The company had to source computers, telephones and other business personal property for its employees to use while at home. Each employer that set up their team to work remotely was suddenly required to decide how they were going to help their team work somewhere else.

They may have had to buy or lease laptop computers. They may have had to bring the computers from the desks to people’s homes. They had to create ways for their telephone systems to work remotely.

Some may have even sourced office furniture for their employees to use while they were working at home.

We started by talking about an insurance company, but broaden this to any company that suddenly moved its people to a work from home position. Did anyone consider the insurance implications of the extra business personal property? Did anyone consider coverage for business personal property off premises?

Just for context, look at the Property Off-Premises Coverage Extension on the ISO CP 00 10 10 12.

You may extend the insurance provided by this coverage form to apply to your covered property while it is away from the described premises, if it is:

a. Temporarily at a location you do not own, lease or operate;

b. In storage at a location you lease, provided the lease was executed after the beginning of the current policy term; or

c. At any fair, trade show or exhibition.

The most we will pay for loss or damage under this Extension is $10,000.

We would say that there is likely coverage for the property the employees are using at their homes, but is it enough without endorsing the policy? That depends on how much property they have out there around their city, state or the country. By the way, it is worth noting that many businesses might have an issue with coverage for their buildings if the building suddenly fits the description of a vacant building in the property policy, especially if they haven’t returned to their offices since this time last year.

Then as companies start using their buildings again, there may be the issue of the plumbing systems not being able to handle the increased load. There are more faucets running today than six months ago. There are more toilets running than there were six months ago.

Liability Risk Changes

For many businesses, the liability risks have been reduced in one way. There aren’t nearly as many people coming to the business, making the premises liability almost nothing, at least for now. Yet, there are other liability exposures that are going to change, and when they do, coverage may not respond the way we would think.

Other businesses that normally have a fleet of vehicles on the road found a reduced liability risk, too. One way that they have reduced their auto liability risk is that in some areas, they didn’t drive as much. While liability often arises out of the ownership, maintenance, use or entrustment of autos, that is normally in the context of the vehicles moving down the road to somewhere.

For a time and in certain parts of the country, there were fewer cars on the road, making it less likely that business vehicles would have an accident and lowering the risk of auto liability.

In a work from home environment, one liability exposure that became cloudier is the risk of employee injury. An employee working in their own home environment complicates what happens next if they are hurt. It makes it very difficult to show that they hurt themselves because they were doing something home related or work related.

If an employee is walking down the hall at work and they are injured, it’s easy to discover whether their injury is compensable under workers’ compensation. But when they are at home, walking down the hall, that is a whole different thing. Was the employee walking down the hall and working or walking down the hall collecting laundry?

One last liability related thought: How many businesses thought through the internet needs of their employees when they sent them home to work?

How many businesses thought specifically about their employees’ internet security when they went home?

Did they create virtual private networks?

Did they make sure that they briefed their teams on how to use internet security that would work with their systems?

Did they help them understand what phishing attacks might look like when you don’t have someone right there to ask about an email?

Employment Risk Changes

Working from home has been a struggle for many people. Not only are some people just not as efficient or as effective at home because they like and need an office environment. Some people can’t concentrate without the buzz of the office. Some people can’t set aside the fact that there’s a pile of laundry on the bed.

On top of that, at the same time that workers went home for work, their children went home for school. So that created another issue for employees.

They found themselves splitting their time between their own work and helping their children work. Parents found themselves acting as parent, teacher, employee, tech support and a host of other duties at once. These duties would often conflict as schools attempted to have children working remotely at the same time that their parents were working. If the home had an office, it didn’t have two or more of them.

What does all of this have to do with employment risk? Work still demands to be done, and when these demands began to pull people in multiple directions, their employment status would come into question. It might be marginal employees that couldn’t handle the requirements of working from home. It might be that companies looked for reasons to release employees and used their inability to get their work done on time because of these conflicts as a reason.

Don’t forget the issues that came up as employers started to recall their workforce back to the office. With employees that feared the virus finding them at work and other employees that just liked working from home, the risk of there being an employment related issue is real.

Working from home has brought with it many additional risks for the businesses that sent their teams home to work, and those risks did not just go away when they recalled them to the office.

Topics Agencies

About Patrick Wraight

Patrick Wraight, CIC, CRM, AU, is director of Insurance Journal's Academy of Insurance. He can be reached at pwraight@ijacademy.com.

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Insurance Journal West April 5, 2021
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