Category: Liability

If you use workers from staffing or leasing agencies to supplement your workforce, how adequately do your current insurance policies protect your company in the event that one of these individuals is injured on the job?

If you’re covered under an Insurance Services Office, Inc. (ISO) commercial general liability (CGL) policy and your workers’ compensation and employers liability policies are written on National Council on Compensation Insurance (NCCI) forms with no additional coverage endorsements, you may not be as protected as you think. You should consider adding the Coverage for Injury to Leased Workers (CG 04 24) endorsement to your CGL policy.

A potential gap in coverage arises from the way the CGL policy defines “temporary” and “leased” workers. A leased worker is a person leased to your company through an agreement with an employee-leasing firm to perform duties related to the operation of your business. A temporary worker is a person furnished to you to fill in for a permanent employee on leave or to meet seasonal or short-term workload conditions. Under the terms of the CGL policy, “employee” includes a leased worker, but does not include a temporary worker. The distinction is important, because the CGL policy’s Exclusion e: employers liability, excludes from coverage bodily injury claims made by an employee of the insured.

Thus, if your CGL policy definitions consider the worker to be an “employee”-even though that worker is provided by a staffing agency-the policy will not cover any bodily injury claims by that worker. If the worker is not specifically substituting for a permanent employee who is on leave, or meeting a seasonal need or short-term workload conditions, the worker is not a “temporary worker” in the eyes of the insurer, and instead is considered your employee for purposes of Exclusion e. To be a “temporary worker,” that individual must have a specific end date to his or her employment with you. A temporary employee who is hired for an indefinite period of time simply does not meet the criteria stated above, and is therefore considered an employee, and subject to Exclusion e if they are injured on the job.

Adding the Coverage for Injury to Leased Workers (CG 04 24) endorsement to your CGL policy will help you fill this coverage gap. This endorsement states that the term “employee” does not include a “leased worker” or “temporary worker,” making the employers liability exclusion of the CGL policy inapplicable to the claims for injuries to a leased or temporary worker.

Another way to protect your company in lawsuits by injured temporary workers is to require the staffing agency that provides such workers to include the Alternate Employer Endorsement (WC 00 03 01 A) on its workers’ compensation and employers liability policy, and specifically schedule your company as the alternate employer. This endorsement will provide you with coverage as an alternate employer in the event the temporary worker files a tort suit.

Without the right coverage in place, on-the-job injuries to temporary workers can present a significant potential liability to your company. Examine your current CGL policy and arrangements with any staffing or leasing firms you use to make sure your company is protected.

Tempted to hire a private investigator to spy on employees claiming workers’ compensation? You’re not alone. Luckily, covert operations can be avoided by taking a proactive approach to preventing workers’ compensation fraud.

Here are some effective tips for shielding your business.

Watch for red flags

Knowing common signals of workers’ compensation fraud is an important step in protecting your business. Some red flags to watch out for are:

·   There are no witnesses of the accident (or the only witnesses are friends/family members of the injured employee).

·   It is difficult or impossible to reach the employee.

·   The employee changes his or her story about the accident.

·   The accident happened on a Friday afternoon but wasn’t reported until the following week.

·   The accident happened outside of the employee’s normal working hours.

Not all claims that occur under these circumstances are fraudulent, but it may be worth it to take a second look.

Make safety a priority at your business
Creating a safer work environment not only lowers the chance of accidents, it also reduces the opportunity for employees to fake an injury. Your business should frequently conduct safety inspections of all work areas and any equipment. Remove hazards immediately, and be sure to document the repairs you make.

Thoroughly investigate workplace injuries
Take the time to review any surveillance videos of the area where the incident allegedly took place. Also, be sure to interview all witnesses shortly after the accident happens – and take any rumors of dishonesty or fraud seriously.

Hire wisely
People who lie on rГ(c)sumГ(c)s are more likely to lie about workplace injuries. Make it a routine part of your hiring process to conduct background checks on all applicants. And don’t neglect to verify their references and any other information included on their applications and rГ(c)sumГ(c)s.

Clearly communicate your workers’ compensation policies
It’s important to discuss your workers’ compensation policies with all employees. Tell them what to do when an injury occurs, and explain that insurance costs affect the amount of money available for raises and bonuses. Also, make sure you tell your employees that workers’ compensation fraud is a serious crime that will lead to termination and prosecution. Post fraud awareness posters in conspicuous locations explaining what fraud is and what its consequences are.

Implement a return-to-work program
Workers’ compensation fraud is less inviting when employers have transitional duty for injured employees. Make sure your employees know that if they get injured on the job, your business will work with the doctor to help them return to work as soon as possible.

Stay in touch
Don’t lose contact with employees who are off work because of an on-the-job injury. Injured workers who are hard to get a hold of might be committing workers’ compensation fraud. Contact them periodically, and document each contact (whether you were able to reach them or not).

Get signed statements when employees leave
In your exit interviews, obtain signed statements from exiting employees stating that they have or have not had any unreported injuries at work. This will go a long way in discouraging post-termination claims.

Workers’ compensation is a major expense for most businesses, and workers’ compensation fraud makes it more costly for everyone. It pays to take a proactive stance to reduce workers’ compensation fraud at your company.

Workers’ compensation claims can occur in any workplace. While employers understand that solid safety protocol can reduce the incidence of these claims, many don’t realize that steps taken during the hiring process can also have some impact on managing this liability. Not taking the time to thoroughly interview applicants to determine if they are a good fit for the job and the company can result in hiring workers who might create problems later on, like filing too many workers’ compensation claims.

Although federal and state laws prohibit certain questions being asked during the interview process, there are techniques you can use that will help you decide if the applicant might be the type to file problem claims. Begin by reviewing the applicant’s resume prior to the interview. Pay careful attention to gaps in employment history. During the interview, ask the applicant to explain the reasons for these gaps. Also ask the applicant about his or her attendance record during previous jobs.

Follow up with open-ended questions to see what the applicant would do in certain situations, such as resolving conflicts with managers, subordinates or co-workers. Quiz the applicant as to what he or she perceives to be the procedures necessary to effectively perform the essential functions of the applied-for job in your company.

Inform the applicant that all new hires go through a fitness-for-duty physical, which includes questions about medical history. Watch for any signs of discomfort like a change in facial expression or body movement.

Administer a skill and/or personality test to assess competency and work ethic. Whatever screening tools you use, establish reasonable criteria and apply them uniformly for all applicants.

Obtain written consent from the applicant to conduct a complete background check. As part of this:

·   Verify past employment history and follow up with references.

·   Conduct a criminal background check. Use a public records service to uncover any criminal convictions.

·   Check on past job-related injuries, workers’ compensation claims, substance abuse and safety records.

·   Contact the schools and universities listed on the candidate’s job application or resume to verify education and certifications. If the applicant listed having a professional license, call the issuing organization to verify.

·   For candidates whose job duties would include driving a motor vehicle, compare the results of the applicant’s official motor vehicle report with the answers provided on the job application.

If you do extend a job offer, make it conditional, contingent upon the candidate’s ability to perform the functions of the job. You can withdraw a job offer, if in the opinion of a licensed medical doctor, the prospective employee poses a direct threat to their own, or others’, health and safety. However, in determining the suitability of an offered job, make sure you make all reasonable accommodations necessary for those candidates subject to the Americans with Disabilities Act.

Thorough job interviews not only help you to hire the right person for the job…they help you hire the right people for your company.

The workers’ compensation system was designed to provide a method for efficiently returning injured workers to their jobs as soon as possible. Getting lawyers involved in this process when it isn’t necessary slows it down, makes it far more inefficient, and adds costs.

The best way to avoid the need for legal involvement is for the employer to take an active role in the workers’ compensation process. Here are a few ways to do that:

·   Tie managers’ performance evaluations to their concern for safety. The total quality management approach is to tie safety to a manager’s raise, bonus or promotion. In that way, it become financially advantageous for managers to be safety-conscious and reduce the possibility of workers’ compensation claims.

·   Designate an employee to call injured workers once a week. This helps you troubleshoot problems before they escalate. For example, this call might detect that an injured worker has been receiving collection notices for unpaid medical bills, indicating that the compensation claim may not have been processed properly, and alert you to the need to call your workers’ compensation insurance carrier.

·   Report all injuries. Even if an employee insists that he or she isn’t seriously injured, report the incident to your insurer anyway. There may not be any ramifications from the injury now, but there could be in the coming months. If you don’t report an injury when it happens, the claim could be rejected as fraudulent later on when you do report it. This could cause the employee to hire legal counsel.

·   Monitor the progress of claims. There are many points at which a claim can become bogged down-the employee delays the first doctor’s visit, there’s a lag time in getting a report from doctor, the employee has to wait to see a specialist, etc. These all have negative effects on the progress of the claim. An employer can improve the efficiency of the process by examining injury records, writing down dates and identifying excessive delays. Reducing delays and maintaining continuity in care will keep the process flowing and eliminate the need for the employee to find an attorney to intervene.

·   Don’t alienate employees. Many disgruntled employees file workers’ compensation claims because they feel the company owes them something, or to get even for poor treatment in the workplace. Most of these revenge claims result from conflicts that could have been avoided if a supervisor had spent more time empathizing with employees.

Some workers’ compensation claims will require the involvement of legal professionals, but if you can keep these occurrences to a minimum, you’ll help keep your workers’ compensation costs in check.

Does your current insurance portfolio adequately protect your company and its most key people against significant financial losses? All companies understand the importance of a general liability policy, for example, to cover customer injuries that occur on the business premises. And every business knows it’s important to protect the business premises and its contents against the risks of fire, flooding, vandalism, etc., through a comprehensive property and casualty policy. But many overlook an entire area of potential liability and loss that can result when claims are made that are based on the actions of its directors and officers.

Directors and officers (D&O) liability insurance protects against financial losses resulting from claims based on allegations of wrongdoing by these individuals when acting in their corporate capacities. Both publicly traded and privately held companies should consider the coverage.

What kinds of claims fall under the scope of such policies? Consider these-

• Claims by shareholders/investors alleging misrepresentations, inadequate disclosures, conflicts of interest, misdealing and mismanagement.

• Claims by competitors alleging bad faith in business dealings, appropriation of trade secrets, and unfair or deceptive trade practices.

• Claims by customers based on dishonesty, sales disputes, and the like.

• Employment practices liability claims, including failure to hire, termination, discrimination and sexual harassment.

• Suits by government agencies, including those involving tax laws, securities laws, labor laws, violation of applicable business regulations, etc.

When claims such as these include allegations of a company’s directors’ or officers’ wrongdoing, that can bring them within the coverage of a D&O policy. For publicly traded companies, in 2006, 49% of claims covered under D&O policies were brought by shareholders, according to a survey by professional services firm Towers Perrin. Think of the well-publicized cases involving corporate giants like Enron and Worldcom, which alleged financial misdealing and cover-ups by corporate officers.

Private companies can also be hit by shareholder lawsuits. These companies do have investors, who can become disgruntled with management decision-making when their investment in the company does not turn out to be as good as expected. Also, the definition of a “security” can be a very broad term. But a key reason these firms need D&O coverage is the increasing number of employment practices lawsuits, brought by employees, alleging claims such as sexual harassment, discrimination, or wrongful discharge. A policy that couples D&O and employment practices liability insurance (EPLI) works well for these firms.

A claim against a company’s CEO, chief financial officer, vice president, etc.-whether based on allegations of misrepresentation, negligence, employment discrimination, or the like-has the potential to cripple an organization financially. Even if a claim does not result in a legal judgment or settlement, it will need to be defended, resulting in substantial legal costs to the organization.

A properly written policy will provide protection both to the company, and to the individual insured directors and officers. The personal assets of individual directors and officers-and thus those of their spouses and estates-can be at risk if the company is not in a position to indemnify them for any losses. Such a situation could occur if corporate bylaws or public policy would not permit indemnification based on the particular allegations, or if the company is in a bad financial condition, or even bankrupt.

Today’s insurance market offers D&O coverage at surprisingly affordable rates. Given the financial loss potential, it’s a coverage that any company should consider adding to its insurance portfolio.

If you run a small, privately held company, you may not think that you need the kind of insurance protection that larger, publicly traded companies have for their directors and officers. You would be mistaken. Directors and officers (D&O) liability insurance has a place in the insurance portfolio of just about any company.

D&O insurance is designed to cover claims based on the actions of a company’s directors and officers in their corporate capacity. Claims can be filed by shareholders/investors, competitors, customers, employees or government agencies. The cost of defending such claims can run high, and if a claim proceeds to judgment or settlement, the outcome can be financially crippling to a company.

Consider these “Top Ten” reasons for adding D&O liability coverage to the insurance protections you already have in place for your business:

1.   While private businesses may not trade company shares on a public exchange, they do have investors, who expect to turn a profit on the money they have invested. Today’s credit market makes it more difficult for deals to succeed, meaning that new business enterprises have a harder time getting off the ground. If investors lose their seed money, they may seek recourse against the fledgling firm’s top executives.

2.   Many private companies are established with the hope that someday, down the road, the business can go public. If and when that deal does happen, D&O can protect the founding entrepreneurs against claims by shareholders/investors that the sales price wasn’t good enough.

3.   Г‚ In private companies, directors and officers often are active, hands-on business executives. Because they are very involved in their company’s business operations, their actions are more likely to be called into question.

4.   Employment practices liability litigation claims of sexual harassment, discrimination, wrongful termination are growing in number. These types of lawsuits can result in staggering judgments and settlements. Hands-on management by a private firm’s key executives makes them easy targets for these types of claims. Combination D&O/EPLI (employment practices liability insurance) policies make sense for these firms.

5.   Private companies, especially in their early years, may not have the resources to hire specialized support staff or outside advisors for complex legal filings and other requirements. This makes them more susceptible to legal compliance claims brought by governmental agencies, on matters such as tax law, labor law, etc.

6.   Even when claims of wrongdoing, negligence or mismanagement are unfounded, they still need to be defended. Legal defense costs can quickly add up, straining the resources of a private firm.

7.   Directors and officers of private companies often have a great deal of their own wealth tied up in the firm. Therefore, the cost of defending, settling, or being held liable on a claim can have financial repercussions for that executive’s spouse, family and estate.

8.   D&O policies are best designed when they insure both the company, and individual directors and officers. That’s because there may be situations where the company cannot, or will not, indemnify the individually named directors/officers in a lawsuit. A company may not have the financial resources to back up the executive’s loss, or the corporate bylaws or public policy may prohibit it.

9.   The current insurance market has made D&O coverage more affordable than it has been in the past.

10.   Individuals may be reluctant to take on director/officer roles without the protection D&O insurance can provide. This may make it more difficult for a company to find the right people to serve in key corporate positions.

The right D&O coverage like any insurance protection you purchase for your company gives managing executives peace of mind, and the time to attend to running the core operations of their company which is, after all, why they went into business in the first place.

The chances that an employee’s responsibilities to work and to family will collide have increased in the past few decades. Mothers are more likely to be employed than not, for example, and more individuals with aging parents have taken on caregiving roles.

Employees with caregiving responsibilities are not a protected group under federal workplace discrimination laws. Yet, the Equal Employment Opportunity Commission (EEOC) has released Enforcement Guidance under the title “Unlawful Disparate Treatment of Workers with Caregiving Responsibilities.” According to the EEOC, the guidance is not intended to create a new protected category, but to illustrate circumstances in which stereotyping of caregivers, or other types of disparate treatment against caregivers, might violate Title VII discrimination laws or run afoul of the Americans with Disabilities Act’s prohibition of discrimination based on a worker’s association with a disabled individual.

The guidance discusses seven broad categories of possible unlawful discrimination against caregivers. The bulk of the guidance is about gender-based disparate treatment of female caregivers. The guidance explains that employment decisions that discriminate against workers with caregiving responsibilities are prohibited if they are based on gender or another protected characteristic, regardless of how other workers in the same protected class, but without the caregiving responsibilities, are treated. For example, if women with children are routinely passed over for an executive training program while men with children are selected for the program, the fact that women without children also are selected for the program would be no defense against a sex discrimination charge.

Similarly, gender-based assumptions about a future caregiving role-such as asking young female applicants, but not young men, their plans for marriage and children-would be unlawful. Other examples in this category include assigning lower-level projects to a new mother, not making an offer which requires a relocation to a qualified woman with a family based on the assumption that she wouldn’t want to move, or assigning more weight to absences or tardiness due to caregiving responsibilities than to those due to other reasons.

The guidance recognizes discrimination against male caregivers, stating that stereotyping about men as caregivers can result in them being denied certain opportunities that female co-workers have, or in harassment. So, for example, refusing to grant a male employee’s request for leave for childcare purposes while granting female employees’ requests would be discriminatory.

The EEOC notes that because the law does not prohibit discrimination based solely on parental or other caregiving status, there generally would not be a violation if working mothers and working fathers were both treated in a similar unfavorable (or favorable) manner, as compared to workers without children.

Assumptions about the job commitment of pregnant women, or about their ability to perform certain physical tasks, can amount to pregnancy discrimination. The guidance warns against pregnancy-related inquiries and treating a pregnant employee who is temporarily unable to perform some of the duties of her job differently than workers who are temporarily restricted for other reasons.

The guidance also addresses discrimination against women of color, unlawful caregiver stereotyping under the Americans with Disabilities Act and subjecting employees with caregiving responsibilities to hostile work environments.

The EEOC guidance should put employers on notice to review their workplace policies to ensure that hiring, promotion and other practices do not, inadvertently, treat employees with caregiving responsibilities in ways that violate federal discrimination laws for protected classes of workers. Also, state, city and county laws should be reviewed, as these may impose additional requirements.

Many of the same problems that plague the U.S. health care system are spilling over into workers’ compensation, including rising costs, an increased incidence of potential injuries brought on by an aging workforce and the obesity epidemic, and regulatory uncertainties. In a speech at the 62nd Workers’ Compensation Educational Conference, Robert Hartwig, president of the Insurance Information Institute (I.I.I.), outlined these and other challenges facing the workers’ compensation system over the next 10 to 20 years.

Hartwig first applauded businesses’ efforts that have radically reduced the frequency of workplace injuries in America. Successes on this front have-

·   Helped companies remain productive, by lowering the number of future lost workdays that result from permanently disabling injuries or fatalities.

·   Increased and preserved worker incomes-Seriously injured workers have lower lifetime earnings, a higher incidence of bankruptcy, and increased dependency on public assistance.

·   Maintained and improved the quality of workers’ home life-Seriously injured workers experience a higher incidence of divorce, substance abuse and depression.

Hartwig then turned his remarks to problems facing the workers’ compensation system-

·   The never-ending cycle of reform, fraud and abuse, which will be an endless driver of costs in the future.

·   The shift in balance between medical benefits and wage replacement-In 20 years, he predicted, 80-85 percent of workers’ compensation benefits will be medical, and only about 15 percent will be for wage replacement. As a result, the workers’ compensation system will face the same problems as the health care system, but even more so, because the workers’ compensation system doesn’t have the same tools to control costs, such as deductibles and copayments.

·   The aging workforce-Fatality rates for workers ages 65 and older are triple that of workers ages 35-44. The workplace of the future will require a complete redesign to accommodate the surge in the number of older workers.

·   The obesity epidemic-In 2006, the most obese workers filed twice as many workers’ compensation claims and had 13 times more lost workdays than healthy-weight workers.

·   Regulatory issues-Health care reform will be a major theme in the 2008 elections, as it was in 1992, when proposals surfaced that workers compensation be rolled into the general health care system. This could happen again.

Though this information is sobering, Hartwig urged businesses to use it to their competitive advantage and work to head off problems before they occur, and not wait until injury patterns emerge to take action. 

The best way to prevent fleet crashes and in the process lower injury frequency rates is to hire drivers based on their ability and past performance. This discovery comes from Liberty Mutual Group, which recently released the results of its annual trucker survey.

As part of the study, the company identified practices in seven key areas that contributed to lower injury frequency rates:

1.   Management Programs

·              Most companies that measure injury frequency rates have lower frequency rates.

·              Those companies that conduct driver surveys had frequency rates 18 percent lower than those that didn’t conduct surveys.

·              While most companies conduct injury investigations, those that use written injury investigation forms, ask for prevention recommendations, calculate injury rates, set injury rate goals and track injury rates by customer had a 13 percent lower injury frequency rate.

2.   Expectations

·              Four out of five companies have a written seat belt policy and close to 50 percent have both a written seat belt policy and enforcement activities. Those with both the policy and enforcement had a crash injury frequency rate that was 33 percent lower than those that didn’t use both.

3.   Selection

·              Four out of five companies use a hiring checklist to document each step of the hiring process. Those using a hiring checklist had 30 percent lower injury frequency rates.

·              Four out of five companies have job descriptions that include essential job functions. Companies including essential job functions in the job descriptions had an 11 percent lower injury frequency rate.

·              Four out of five companies designate a medical provider. Those using designated medical providers had slightly lower injury frequency rates.

4.   Monitoring Performance

·              Companies that provide technology for driver managers so they can verify available hours of service for drivers had a 37 percent lower crash injury frequency rate.

·              One out of four companies have GPS and use it to monitor speed. These companies had a 15 percent lower crash injury frequency rate.

·              Two out of three companies conduct road observations. This practice results in a slightly lower injury frequency rate.

5.   Transitional Work Programs

·              One out of four companies had someone responsible for tracking employees out of work and had written transitional work job descriptions. The group using both had a 7 percent lower injury frequency rate.

6.   Injury Prevention

·              Most companies offer some form of injury prevention activities. Those that use an injury prevention manual, provide regular training and have observations for enforcement had an injury frequency rate that was one-third of those that do not.

7.   Training

·              Three out of four companies use written agendas for training. While written agendas are important, the survey found that injury frequency rates went down as the training group size became smaller. Those with written agendas and one-on-one training had a 30 percent lower injury frequency rate.

In the case of United States v. Atlantic Research Corporation, the Supreme Court ruled that potentially responsible parties (PRPs) that voluntarily clean up contaminated sites may sue other PRPs to recover their cleanup costs under section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The reinstatement of this right comes after many years of federal court battles over the issues of authority and methodology for recovering cleanup costs from other PRPs.

When CERCLA was originally enacted, the courts interpreted section 107(a) as providing a method for PRPs to recover their costs from other PRPs. However, in 1986, Congress enacted the Superfund Amendments and Reauthorization Act (SARA). Section 113(f) of this law outlined explicit means for PRPs to pursue contribution from other PRPs. After the enactment of SARA, some federal courts held that section 113 was the only remedy for cleanup cost recovery. Other courts prevented PRPs from suing under section 107 of CERCLA and expanded section 113 to allow PRPs’ contributions without the need for a suit.

Section 107 makes PRPs liable for “all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe” and “any other necessary costs of response incurred by any other person.” In Atlantic Research, the United States argued that the section 107 use of “any other person” was limited to suits brought by “non-PRPs.”  That meant that Atlantic Research, a PRP, was barred from filing suit. The Supreme Court held that all the words of the statute must be “read as a whole.” They added that using the United States’ reading of the language would decrease the number of plaintiffs permitted to sue to almost zero, which would make Section 107 worthless.

Section 113 prohibits claims against PRPs who have satisfied their liability to the United States or a state in an administrative or court approved settlement. In Atlantic Research, the United States argued that permitting PRPs to seek recovery under section 107 negates the protection offered to PRPs who have settled under section 113. The Supreme Court conceded this. However, the Court stated that this “supposed loophole” would not discourage settlements because district courts would take into account any earlier settlements when assigning the level of liability to the various PRPs involved.

The Supreme Court also ruled that section 107 and 113 provide two “clearly distinct” remedies. Section 107 permits PRPs to recover cleanup costs they have incurred from other PRPs. A PRP that has satisfied a settlement agreement or court judgment under CERCLA may pursue contribution from other PRPs through section 113. The Court made clear that simultaneous recovery under section 107 and section 113 is not allowed. PRPs can’t choose their method of recovery. The appropriate remedy will depend on the circumstances in each case.