Category: Commercial

What Factors Influence Malpractice Premiums?

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According to a November 2005 article published in the Insurance Journal entitled, “How to Write the Diverse Business of Lawyers Professional Liability,” between $1.5 and $2 billion is spent annually on Professional Liability coverage. With numbers such as these, it is important that any firm in the market for this insurance understand the factors affecting coverage rates.

Determining premium rates is a complex matter based on a combination of factors. However, there are two main factors insurers review when underwriting an insurance application. The first is your geographic location, because each state has a different risk assumption.  The level of risk is measured by the number of suits brought against other lawyers in your area. The second important factor is your practice area(s). You can expect to pay more for coverage if you specialize in high-risk areas such as securities, banking and/or real estate.

Other factors that insurers consider include:

·                                Liability limits and deductibles selected

·                                Breadth of coverage desired (prior acts, extended reporting, etc.)

·                                Number of attorneys covered

·                                Personal claims history of your firm’s attorneys

·                                Length of time covered attorneys have been associated with your firm

·                                Number of malpractice prevention controls utilized by your firm

The length of time covered attorneys have been associated with your firm is important, because insurers typically use step rates to calculate premiums for a new attorney.  Risk exposure increases during the initial years that an attorney practices as the number of potential plaintiffs increases with every new case. After a certain point, this risk flattens out.  So premium rates on a new attorney will automatically increase in set steps until the risk exposure matures.

It is also important to realize the significance reinsurance holds in determining premiums. Insurance is a way of transferring risk. You transfer risks to an insurance carrier, and the carrier will often transfer some of that risk to another company. By reinsuring, a carrier increases its capacity to underwrite more policies.  When reinsurance rates rise, the increased cost can be transferred to you in the form of higher rates.

Hiring the Disabled: What Are Reasonable Accommodations?

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The question of how far an employer must go to accommodate a disabled employee is at the very heart of the Americans With Disabilities Act.  Answering that question starts with understanding the term “reasonable accommodations.”

An accommodation is any change in the physical workplace, or in the methodology usually employed to perform a job, that allows a qualified individual with a disability to apply for and hold that particular job.

 There are three categories of reasonable accommodations:

  • changes to a job application process that enable a qualified disabled applicant to be considered for the position.
  • changes to the physical work environment, or to the manner in which a job is normally performed, that permit a qualified disabled individual to perform the essential functions of that job.
  • changes that allow a disabled employee to take advantage of all of the benefits and privileges of employment in the same way that all non-disabled employees do.

The term “reasonable” refers to the change being “feasible” or “plausible.”  The only exception to an employer’s obligation to provide reasonable accommodation is if it would cause “undue hardship” to the employer.  Undue hardship means that an employer would face great difficulty or expense to make the accommodation because they lack the resources or ability to provide the requested accommodation.  Undue hardship also refers to reasonable accommodations that are so extensive, substantial, or disruptive, that they would fundamentally alter the nature or operation of the business.

Keep in mind that in spite of the undue hardship clause, there are still a number of reasonable accommodations that do change operations, on some level, that the employer is required to make.  The majority of them have to do with job performance:

  • Job Restructuring – While an employer never has to reassign essential functions of a job in order to accommodate a disabled employee, they are required to reassign secondary job functions that an employee is unable to perform because of a disability.  They must also change when and how any function is performed, whether it is essential or secondary, to accommodate a disabled employee.

By the same token, if an employer restructures a job to eliminate some secondary functions, the employer can require the disabled employee to assume other secondary functions that they can perform.

  • Leave – Allowing the disabled employee to use accrued paid leave or unpaid leave when it is necessary because of their disability is another reasonable accommodation.  An employer does not have to provide paid leave beyond that which they normally provide to employees.  Employers can allow a disabled employee to use all of their accrued paid leave before providing unpaid leave.
  • Modified Scheduling – This includes changing arrival or departure times, providing periodic breaks, and changing the time certain functions are performed.  An employer must provide a modified schedule for a disabled employee, even if  they don’t provide such schedules for other employees unless it represents an undue hardship.
  • Modifying Personnel Policies – It would be a reasonable accommodation to modify a policy requiring employees to schedule vacation time in advance if a disabled employee needed to use accrued vacation time immediately because of disability- related medical problems, unless it presents an undue hardship.  In addition, an employer may be required to provide additional leave to an employee with a disability in spite of their leave policy, unless it presents an undue hardship.
  • Reassignment – Reassignment to a vacant position for which the disabled employee is qualified is also considered a reasonable accommodation.  This must be provided to an employee whose disability makes it impossible for them to continue to perform the functions of their current position.  The only exception is if the employer can prove that it would cause an undue hardship. 

Changes in First Aid Recommendations for the Workplace

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First Aid training is probably the only type of instruction an employer provides that everyone in the workplace hopes never to need. However, when an injury or illness strikes, knowing how to effectively administer proper First Aid can be the deciding factor between a quick or a lengthy recovery, a temporary or permanent disability, and in some cases, life or death. That is why it is imperative to be familiar with common First Aid procedures. It is equally significant to learn the correct way to administer aid procedures so they are safe to perform.

In an attempt to discredit some of the faulty notions that have developed concerning current First Aid treatment recommendations, the American Safety & Health Institute (ASHI) along with 25 other nationally recognized organizations joined together to form the 2005 National First Aid Science Advisory Board (NFASAB). The Board’s mission was to review and evaluate the existing scientific literature on First Aid to determine the most effective treatments for common workplace injuries. They reviewed data from the U.S. Centers for Disease Control and Prevention, Cochrane Reviews, which are evidence-based evaluations of the effects of health care treatments, the U.S. National Library of Medicine, and medical journals and textbooks.

As a result of the Board’s review and evaluation of this data, they recommend the following procedures:

  • If an employee is bleeding, apply pressure firmly for an extended period of time, until either bleeding stops or paramedics arrive . Earlier guidelines also recommended elevating a bleeding limb above heart level and, if direct pressure was ineffective, pressing on specific arterial points. Actual evidence is insufficient to recommend for or against these practices and also the use of tourniquets .
  • Thermal burns should be treated with cold water as soon as possible, but direct application of ice to a burn area can cause harm. Avoid cooling burns with ice or ice water for longer than 10 minutes, especially if the burn covers more than 20% of a person’s body.
  • If an employee has a soft-tissue injury such as a sprain, strain, contusion or fracture, apply cold to the injury to decrease hemorrhage, edema, pain and disability. Cooling is best accomplished with a plastic bag or damp cloth filled with ice, which is more effective than re-freezable gel packs. To prevent injury, limit each application to periods of no more than 20 minutes and place a barrier, such as a thin towel, between the ice container and the skin .
  • To prevent a minor wound from becoming infected, cleanse the wound with clean tap water until all foreign matter has been flushed. Apply triple-antibiotic ointment or cream only to a scratch or superficial wound. Previous methods recommended applying antibiotic to all wounds no matter how deep.
  • Do not give water, milk or syrup of ipecac to someone who has ingested poison. Previous guidelines allowed use of these substances in certain cases after consultation with a poison control center, but they may be harmful and are not recommended now.

By keeping yourself and your employees up to date with basic First Aid care, as well as maintaining a well-stocked First Aid kit on-site, you can significantly reduce the chance of a severe trauma that could have been prevented by simple First Aid. 

Self-Insuring Workers’ Compensation Plans May Produce Premium Savings

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Joining a workers’ compensation group self-insurance program may be a significant means for small and mid-sized employers to reduce operating costs. Such plans deliver savings by providing employers with considerable control over losses, medical care and rehabilitation, plus improving cash flow.

While some companies self-insure workers’ compensation programs individually, these are usually best suited for larger corporations with immense assets. For smaller and medium-sized businesses, a Group Self-Insurance (GSI) workers’ compensation plan is more suitable. A GSI is a non-profit association of employers formed for the specific purpose of providing workers’ compensation coverage. A GSI enables employers to assume a major portion of their risk and provides group purchasing power for excess insurance to cover individual losses or in the aggregate in excess of a specified amount.

Workers’ compensation is well suited for self-insurance plans because claims are typically of low severity but high frequency, which allows losses to be predicted with some accuracy. Further, payment for large claims can be spread over several years, which benefits a company’s cash flow. GSI programs enable companies to better manage safety programs and have more direct involvement in seeing that employees receive prompt medical care when injured, and employers are able to exercise closer monitoring of the return of the employee to work.

Requirements for joining or forming a GSI vary considerably from state to state. Some states do not allow GSIs and in other states, companies must meet certain solvency standards and provide financial and loss data to be considered. Also, if a company has operations in more than one state, GSIs must be setup in each state. A GSI in one state will not cover losses in another state.

Besides improved cash flow, the major benefits that come from joining or creating a GSI are enhanced loss experience through more effective loss prevention, loss control and managed care programs; reduced administrative costs, and interest income earned on premiums. GSIs in most states do not have to pay premium taxes and or be assessed for residual workers’ compensation market losses.

Members of a GSI pay a premium to the group based on their exposures, classification codes, payroll, experience modifications, and rates developed by a state’s workers’ compensation rate making bureau. At the end of the contract year, any surpluses from both the claims fund and the administrative expense fund can be returned as dividends to group members.

GSIs handle claims following guidelines of the state workers’ compensation laws. Often, third-party administrators handle loss prevention and control, case management, accounting, investment and actuarial services.

An agent can provide guidance to employers wanting to explore joining a GSI. An interested company should first seek management commitment as joining a GSI requires careful attention to the entire workers’ compensation program rather than shifting these responsibilities and duties to a private insurer. Also, an employer has to be willing to disclose detailed information regarding its finances, support systems and ongoing risks.

While GSIs offer important advantages, there are some disadvantages. Members of the group are usually jointly and severally liable for losses incurred by the entire membership. A bankruptcy or dissolution of a member does not release the remaining members from liability. If the GSI’s retention and excess insurance are exhausted by a catastrophic event, the group members must contribute their pro rata share of the total loss. And, if a GSI has a pattern of liberal underwriting for new members, it’s possible it will have financial deficiencies in the future.

If an employer understands the additional risks it assumes as well as the added reporting and administrative duties when it joins a GSI program, the end result could be a significant reduction in overall costs for workers’ compensation.

Protect Your Business with Building and Equipment Insurance

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If you are a business owner, you have undoubtedly heard of building and equipment insurance, which covers your business’ buildings and all personal property under the care or control of your business.  Even so, you may not yet be aware of everything else this insurance covers, and just how important it can be to you and to your business.

For instance, did you know that building and equipment insurance covers additions, alterations, and even repairs to your buildings?  This type of insurance also covers items and equipment used to maintain your business’ property.

Giving this type of coverage a second thought now?  You should.  Building and equipment insurance also provides coverage for furniture, fixtures, equipment and machinery; stock; all other personal property you and your business own and use in the business; labor, parts, or service by your business on other’s property; and improvements you make to the building you or your business lease.

Similar to the personal property you own, the coverage also includes personal property inside and outside your business’ buildings, or in vehicles within 100 feet of your buildings.  And, interestingly enough, payment for damages done to personal property owned by others goes to the account of the property owner and not to the actual insured business owner.

There are a few types of property excluded from this coverage, and you should be aware of them.  The types of property excluded from this coverage include: waterborne personal property; animals (in most circumstances); automobiles for sale; bridges, roads, walks or other paved surfaces; contraband; costs for excavations; certain foundations; land, water, growing crops, or lawns; money; piers, wharves, or docks; retaining walls that are not part of the building; and underground pipes, flues, or drains.

However, you can obtain additional coverage for your business’ outdoor property, valuable papers and records, the personal property or effects of others, personal property at newly acquired buildings, property temporarily off-premises, and newly built or acquired buildings.  Keep in mind, though, that several of the categories may have limitations about which you need to be educated.

Preventing Violence Before It Happens Through Pre-Employment Screening

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Violence in the workplace has become an increasingly more common occurrence. According to the Bureau of Labor Statistics in its 2004 report entitled Fatal Occupational Injuries by Event or Exposure, 1998-2003, there were 631 documented workplace homicides in 2003. Workplace homicides are the second leading cause of death in the workplace and they make up 16% of all occupational fatalities.

With statistics like these, it is the duty of every employer to make violence prevention a number one priority. Avoiding potential violence should begin with the hiring process. This is the company’s opportunity to weed out any violent individuals before they get a foothold in the workplace.

The pre-employment screening process begins with the application. If an applicant omits information or there are gaps of time in the area of job history, the applicant should be instructed to fill in the missing information. If the applicant cannot provide the information, the employer needs to determine when and if it can be provided, note it on the application and then follow through with getting the information if the person selected is to be given an employment offer. Ensure that all of an applicant’s information is on hand before any offer is made.

The interviewer will have the most significant opportunity to assess the applicant’s stability. Begin with the person’s overall physical appearance and grooming. Is it interview appropriate? The next level of assessment involves body language and eye contact. While the applicant is speaking, are they looking you in the eye while answering questions in a relaxed manner? What is your own comfort level during the interview? What is the applicant’s response level to questions? Do they answer the questions asked or are they evasive? Do they provide too little information or do they go out of their way to give an elaborate explanation? By discussing what an applicant liked or disliked about the tasks associated with different jobs they held and why they left those jobs, an interviewer can often get a sense of possible aggression towards the company that if pushed far enough can manifest itself in workplace violence.

If the applicant seems acceptable, then the next step is to do a thorough background check. This is the major area where most companies fall short in the evaluation process. If you do not get an immediate response from a past employer or a reference, follow up until you do. Don’t assume that the failure is due to being too busy to respond. Sometimes the lack of response is avoidance. It is not unheard of for one company to pass a problem employee off on another. To investigate further, in addition to the telephone background check, you can also examine court records, credit reports and driving records.  However be advised that you need a signed release from the applicant to conduct this type of background screening. Your corporate counsel should be your consultant in the development of any pre-employment screening methodologies to be sure they do not violate existing laws.

Many companies also conduct drug testing as part of their pre-employment screening process. Drug testing identifies individuals who have the potential to become problem employees.  It is easier to eliminate individuals on the basis of failing a drug test prior to employment then it is to terminate them once they have been employed. While drug testing doesn’t eliminate all potential problem employees, it does reduce their number.

No matter what procedures you use to screen applicants, the important thing to remember is that you must follow through. If you only make a half-hearted attempt, it’s the equivalent of no attempt at all. 

Understanding Material Safety Data Sheets Can Save You from Injury

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For many workers, handling hazardous chemicals is part of their daily routine. However, no matter how routine, you should never let your guard down when it comes to handling chemicals properly. Each chemical has its own set of hazards, which means the recommended emergency procedures for each chemical are different. If you are going to handle chemicals safely, you should be aware of the manufacturer’s recommended handling and storage procedures, the personal protective equipment you will need when handling, and the actions to take in the event of a chemical spill or leak.

You can find this information on the “Material Safety Data Sheet” (MSDS), which must be sent from the manufacturer/supplier along with the chemical. OSHA requires all chemical manufacturers/suppliers to provide customers with MSDS’s that answer the questions listed above. However, OSHA does not require that MSDS’s be written in a standard format and most are written in technical language, which can be difficult to understand.

Realizing the need for standardization, The American National Standards Institute (ANSI) and the Chemical Manufacturers Association developed a standard format for MSDS’s. While its use is voluntary, many chemical manufacturers/suppliers have already adopted this format. The information provided by this format is broken down into the following sections:

Section 1 lists the manufacturer’s name, address and telephone number, the product name, the generic names for the chemical, the commonly used industry name and possibly, an emergency telephone number.

Section 2 provides information on the chemical’s ingredients. OSHA requires that all hazardous components be listed on the MSDS. Non-hazardous ingredients are usually included too if helpful in determining how to use and store the chemical.

Section 3 identifies the hazards of the material. This section is divided into two sub-sections. The first sub-section provides an overview and the second sub-section discusses the potential health effects of the chemical.

Section 4 describes basic first aid procedures to be used by a worker with no specific training in first aid. Instructions are provided for each type of potential exposure.

Sections 5 and 6 provide information, precautions and instructions to fight fires caused by the material, including hazards the material presents when burned and what methods can be used to extinguish flames.

Section 7 addresses risk prevention when working with the material, including proper storage procedures.

Section 8 discusses controls and protective equipment.

Section 9 describes the physical and chemical properties of the material.

Section 10 contains information on stability and reactivity of the chemical including whether the chemical has the potential to react with another substance due to oxidation, heat, decomposition or polymerization.

Sections 11 through 13 outline toxological and ecological information, including how to dispose of the chemical.

Sections 14 through 16 explain methods to transport the chemical.

Material Safety Data Sheets are important tools when working with hazardous chemicals. Of course, a tool is only effective if you understand how to use it. Be sure you know where the MSDS’s are kept for the chemicals you use and familiarize yourself with them. And most importantly, know where you can find the emergency information on all of the MSDS’s for chemicals in your work area.

Certificates of Insurance – A Prudent Means to Avoid Costly Claims

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More and more companies are hiring independent contractors to handle not only administrative matters, such as benefits and human resources, but also sales and distribution. With this delegation of authority to third-party suppliers comes less direct control over these operations, and greater becomes the need for clients to demand that vendors provide them with timely Certificates of Insurance (COI).

The COI proves that the insured (the third party) has purchased the insurance coverages as required by the outsourcing client. But, the COI also states that the holder of the certificate has no legal right to be covered by the insurance described in the COI, nor does it amend, extend or alter the represented coverage. The COI only shows that the outside contractor has the insurance coverage as explained on the certificate. This protects the business that has contracted with the third party against liability for negligence caused by the independent contractor up to the limits of the policy.

It is the responsibility of the independent contractor to provide the COI to the client that has hired the firm. Usually a COI is prepared by an agent/broker with a copy sent to the insurance company and the client for whom the third party has contracted to perform certain functions.

The COI contains the name of the insured, the name of the insurance companies issuing the policies as stated on the COI, what specific coverages are contained in the insurance policies issued to the insured, and various descriptions of normal policy terms, exclusions and conditions.

Most often COIs are obtained for commercial general liability to provide protection from liability arising out of the insured’s premises or operations, products and completed operations. Usually, a general form will provide broad, standardized coverage terms. In cases, where the coverage is more complex and of a higher risk, manuscript forms of a COI can be written specifically by or for an insurance company. These manuscript COIs should be reviewed carefully for the scope of coverage being provided.

There are two types of general liability forms — claims-made and occurrence. The trigger that compels the policy to respond is the main difference between the two forms. In the occurrence policy, occurrences are covered that take place during the policy period, no matter when a claim is reported. A claims-made policy requires that the occurrence take place during the policy period and the claim be reported during the policy period. Most COIs use the occurrence form for all independent contractors as claims-made policies limit coverage.

But simply having a COI in hand does not always mean that the independent contractor has the insurance coverage. A prudent practice is to have a system to audit, review and correct the certificates to reflect the provisions in the contracts. Some clients establish an auditing program in house, while others have the insurance agent or broker manage the program as part of their fee arrangement. This cost depends greatly on the workload.

The consequences of not monitoring COIs of a third party can be costly for the firm that hired the contractor. Consider this sobering example. A business hired an independent contractor to provide distribution service for the company. An employee of the vendor had a serious car accident, and soon afterwards, the contractor ceased business. When the employee began submitting workers’ compensation claims, there was no coverage — the contractor had never maintained that insurance. Unfortunately, the company had not insisted on a COI from the independent contractor to verify this coverage. Casting about for payment of the claim, the court ruled that the vendor’s employee was a statutory employee of the company that hired the contractor. The workers’ compensation claims have totaled more than $100,000 with more to come.

This is just one of many chilling cases of companies that have been caught with unexpected losses that came from not requiring proper COIs from independent contractors and auditing them to make sure they remain current and reflect the actual coverages held by the insured.

Good Management Lowers Premiums

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How do insurance companies measure good management? And, how does this measurement affect policy premiums?

Insurance companies judge management many ways, including attitude toward safety (cooperation with risk personnel), financially (credit checks), superficially (housekeeping, deferred maintenance), and in depth systems analysis (employee selection process). Positive results earn schedule credits, which reduce premiums.

Schedule credits enable insurance companies to reward those conscientious managements that have a long-term commitment to reduce losses. The insurance company wants to partner with risk-avoiding management, so they lower premiums to attract these risks.

Insurance companies use diagnostic tools to measure the quality of management. Accounting measurements, physical property surveys, human resource surveys, psychological tools and, of course, loss history data combine to paint an overall management picture.

Accounting measurements include reviewing financial statements, credit reports, tax forms, and management control systems. Is everything up to date? Do all the data agree for an easy audit trail? Is the company candid about finances?

Physical risk surveys include a report on management results. An untidy workplace suggests lazy management or an undisciplined workforce. Neither is good for business or loss prevention. If in-house automobile maintenance facilities are not kept neat, management attitude towards maintaining vehicles properly is questioned.

Neat, orderly premises imply pride in ownership and professional management. Deferred maintenance and chaos suggest either poor management, the beginnings of bad credit or absentee, uncommitted ownership.

Sincere interest in loss control surveys, suggestions and recommendations indicates cooperation. Safety is a function of cooperative efforts. Taking corrective actions when asked, keeping OSHA logs up to date, knowledgeable responses to claims questions and having safety equipment on hand and up to date all indicate a safety culture appreciated by insurance companies.

How does the company handle employee recruitment and training, particularly drivers? If this system qualifies employees in terms of knowledge, skill sets and attitude, more appropriate employees will be selected. The insurance company wants evidence of ongoing training for job-specific skills and safety.

The psychology of risk management involves assessing the company’s approach towards safety and loss control. Cooperation, responsiveness to recommendations, forthrightness in interviews, openness to inspections, commitment to safety and good record keeping contribute to management attitude.

The company interested in long-term profitability does not skimp on loss control or maintenance. Easily administered systems remind employees and supervisors of their safety culture.

All these data are collected and reviewed to determine the management input to insurance premium rating: schedule credits. These credits must be rationalized by the underwriter. Schedule credits can impact premiums up to 25%. Good management pays well.

Schedule credits are earned by well-managed, safety-conscious companies. Unfortunately, poorly managed businesses earn debits, increases in premium, the same way.

Take a look around your business today and think about how you can earn a few more credits. And remember, we’re here to help too. 

Tips to Prevent Sprains and Strains At Work

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Many jobs require lifting and pushing in one form or another as part of the routine job description. Employees that frequently lift or push objects need to be aware that lifting, pushing, and over reaching can cause strains and sprains. Such injuries typically affect the back, arms, and shoulders and are caused by improper handling techniques. If your job requires you to push, pull or lift during the day, make sure you know how to perform these activities properly.

The first issue to keep in mind is that most strains and sprains happen because people lift objects that weigh too much. Before lifting anything, size up the load to determine if you have the physical strength to lift without straining. If you don’t possess the physical capability, you can either break it down into smaller loads, if applicable, or seek help from a co-worker. If you use carts or hand trucks, be sure they are in good operating condition. These devices can put additional strain on your back if they don’t work correctly or if you overload them.

If it is within your physical capability to lift the load, then be sure that you use the correct procedure. Stand close to the object. Then squat down and bend your knees, not your back. Grip the object firmly and lift slowly. As you lift, straighten your legs until you are standing erect. Carry the load close to your body near your waist. Never lift the object above your shoulders. If you have to turn while lifting, point your feet in the direction you’ll be heading; don’t twist your back.

If you must push or pull a load, bend your knees and use your legs and the weight of your body to move it. Take small steps and keep your stomach muscles tightened. You should lean slightly into the load if you are pushing, and lean slightly out if pulling. Note that it’s always better for your body if you can push rather than pull an object.

Repeatedly lifting heavy objects is the most common cause of strains and sprains. However, injuries can also happen as a result of lifting moderate loads in awkward positions or remaining in a bent-over or twisted position for long periods of time. Remember, the further the load is from your body, the greater strain placed on your back. You should always attempt to position any load you are carrying at waist level. Keep your body as close to the work area as is safely possible. And most importantly, never overestimate your physical ability to lift or carry an object.