Everyone I talk to asks, "What’s new in the industry?" Sitting here, looking at an end-of-winter ice storm, I’d rather look forward than back (or even current) so let’s talk about items to consider in the future:

• Gas prices continue to climb—How do we market this to our advantage?
• Repos are down, and in some areas, homes to fill sites are becoming scarce.
• New companies are buying home loan books. This should lead to more finance companies; however, they will start with only the very best rated customers.
• As the economy improves, we see a returning workforce and income tax collection in the state has increased in each of the last 5 months. How do we market to the growing new workforce?
• MHI, on a national level, is working to try and get our industry involvement removed or reduced in the SAFE ACT. Please stay active with Michigan Manufactured Housing Association (MMHA) to keep up to date.
• The new governor is reviewing all taxes in the state. Included is an article reviewing taxes from Dykema. This is another great reason to be a member of MMHA. If you want to have a larger say about taxes on your operation, then your voice with others (on a timely basis) will make a difference. If you are not a member, then we could all have problems.

It’s time to get back to good sound business practices and get excited about our future.

Nearly half (44 percent) of private company executives expect their firms to add jobs by year end, and more than half (54 percent) plan to expand product or service offerings. Another 12 percent of those same executives anticipate completing a major acquisition in the near future. That’s according to executives who responded to the 2010 Chubb Private Company Risk Survey.

Thirty-six percent of respondents indicated that an employment practices liability (EPL) lawsuit was the loss event that would cause the most financial damage to their company. Employee theft (18 percent) and a breach of electronically stored private customer data (15 percent) were also ranked as potentially damaging.

Nearly one in five (16 percent) respondents anticipated that an EPL charge would be lodged against their firm in the next 12 months. Twenty-one percent experienced such an action during the past five years, with loss costs as much as $750,000.

“While such actions may spur business growth for private companies as they try to recover from difficult economic circumstances, they may also increase their exposure to liability claims and lawsuits,” said Lisa Jones, vice president and private commercial product manager for Chubb Specialty Insurance.

Fifty-four percent anticipated that employees would steal company funds,equipment, inventory or merchandise in the next 12 months. This compares to 30 percent of companies experiencing such thefts in the past five years.

Ninety-two percent of the survey respondents did not believe that it is likely that they would endure an electronic breach of confidential customer information that would require them to comply with costly notification laws in more than 40 states. A strong majority (67 percent) of the companies in the survey do not have an incident response plan for an electronic security breach. This is despite their concern of the financial consequences of a breach. A recent Symantec survey found that 73 percent of small and mid-sized companies experienced a cyber attack in 2009.

One in six company executives (17 percent) believe it is likely their company will experience a directors and officers (D&O) liability-related loss in the coming year. One in eight survey respondents (12 percent) experienced a D&O lawsuit within the past five years. Settlement and litigation costs averaged $225,682, with some losses approaching $5 million.

In the next 12 months, one in four (25 percent) of survey respondents indicated that their firm is likely to change their employee benefits plans—an event which can spur fiduciary liability lawsuits.

The Chubb Private Company Risk Survey was conducted by Pollara, an independent public opinion and market research firm. The firm interviewed decision makers at 451 U.S. for-profit companies, more than 90 percent of which had annual revenues of less than $25 million. Chubb also sponsored the survey in 2007, 2005 and 2003.

Source: Chubb Group of Insurance Companies

With the recent disaster in Japan, I have been asked by a couple of people about earthquake coverage. I would not be surprised if mortgage companies start requiring earthquake coverage. Earthquake coverage varies greatly depending type of build or business income you are looking for coverage. You must also keep in mind underground piping is normally not covered in standard policies.

Most people know that the West coast, Hawaii and Alaska (at 12,000 plus for 30 years is almost triple the number of earthquakes than California, the next closest) are high prone areas. The next high is the New Madrid Seismic area (mainly the southern half of the Mississippi river states).

Quakes in other states of note (over 3.5 magnitude for 30 year period) are Texas with 20, New York 16, Ohio eight, Georgia seven, Indiana six and Michigan two. (Information was gathered from the Seismic Hazard Mapping Project.)

If you would like us to look into coverage for you, please doesn’t hesitate to call, 248.283.0250.

How big? Recent research compiled by the National Highway Traffic Safety Administration estimates that 6,000 deaths and 500,000 injuries were attributable to distracted driving in 2008.

What is distracted driving?
First of all, it is important to understand the concept of distracted drivers. From a definition standpoint, it can be quite confusing. However, in general, there are, in fact, three types of distractions:

• Visual—actions that require drivers to take their eyes off the road
• Manual—actions that require drivers to take their hands off the steering wheel
• Cognitive—actions that require drivers to take their minds off what they are doing

We all know phone calls (manual) and “texting” (manual and visual) are a particular problem. However the laws now being passed go to cognitive. Don’t be surprised: cities like Troy, Mich. are writing tickets for cognitive distractions.

A ticket is minor compared to the numbers above. Be safe while driving; your life, your love ones and others depend on it.

As you know, the Lieutenant Governor released the preliminary draft of a proposed Corporate Income Tax that reportedly would replace the Michigan Business Tax and the MBT surcharge.

The document is a skeletal, discussion draft, but generally sets forth the structure for a new tax consistent with the income tax the Governor described in his campaign. The draft includes, among others, the following highlights:

1. The tax applies only to C corporations (corporations that are taxed as separate entities under Subchapter C of the Internal Revenue Code of 1986, as amended).
• The tax would not apply at the entity level to an S corporation, a partnership, a limited partnership, a limited liability company (whether single member or multiple member), or a trust.
2. The tax applies at a flat rate of 6 percent to a C corporation’s taxable income, which under the draft appears to be based largely on federal taxable income that is reported to the IRS in a federal income tax return (IRS Form 1120).
3. The tax incorporates a unitary combined filing approach.
• In a unitary filing, separate corporations that are under common control and that have some amount of interrelated business activity are required to file a single, combined return.
• Several other states use some form of unitary combined filing, such as California, Illinois and Indiana.
4. The tax would apply a “market” method of sourcing sales and would utilize a single sales factor; notably, the draft specifically overrides any election that might be available under the MultiState Tax Compact.
5. The draft references only one credit, the Small Business Credit. The treatment of existing credits, including MEGA, Brownfield, and other credits previously granted under the MBT Act and the by MEDC, remains a subject of discussion.
6. The tax applicable to insurance companies and financial institutions is in very rough draft form.

The discussion draft appears to have been released to initiate a discussion and to obtain assistance from the business community, including associations. There is a lot of work to do. Please contact me if you have specific questions, or would like to discuss.

Wayne D. Roberts is an attorney with Dykema in Grand Rapids, Mich. He can be reached by phone at 616.776.7514, or e-mail at wroberts@dykema.com.

Overview of recent claims:

• Normal slip and falls due to ice and snow to be defended.
• Water damage to rental home $6,000.
• Thief of equipment in service building $7,000.
• Higher than normal year for claims on plowing operations, including damage to autos and property of others (due to more and larger snowfalls).
• Homes abandoned after fires in communities … two at $2,000 each and one at $6,000 with damage to trees and other property.

A related issue
An Ohio jury has awarded $2.5 million to a family when a young child rode a tricycle into a retaining pond and drowned. They ruled that because the pond had a steep slope to it, barriers should have been provided. Because of this, we will start asking you to consider natural barriers around non fenced ponds that have steep slopes. Items such as trees and cattails can be used to break up the area, and will not disturb the overall look of your community.