Friday, December 28, 2007

Federal Terrorism Insurance Law Extended

Just five days before it was set to expire, President Bush has signed into law a seven-year extension of the federal terrorism insurance backstop.

Bush was aboard Air Force One, en route to his ranch in Crawford, Texas, when he signed the terrorism bill, along with legislation to fund the federal government and troops in Iraq.
The president did not comment on the terror bill specifically, but expressed concerns about the number and cost of earmarks in the federal budget, adding that Congress could do more to rein in government spending.

But Marc Racicot, the president of the American Insurance Association, said the reauthorization of the terrorism program, known as the Terrorism Risk Insurance Program Reauthorization and Extension Act of 2007, was essential to maintaining the nations economic security. He said the coverage has been critical to businesses that have relied upon the program for the stability and certainty it provides the private marketplace.

The seven-year extension ... will help remove the risk, uncertainty and instability in the market and will foster long-term investment and economic growth, Racicot said.

Joseph Annotti, senior vice president of the Property Casualty Insurers Association of America, also praised the presidents action.

This seven-year extension brings unprecedented certainty and stability to the terrorism insurance market and keeps in place an extremely successful and important public/private partnership that helps commercial insurance buyers and the entire economy protect themselves from the financial devastation of a future terrorist attack.

The Terrorism Risk and Insurance Act was first enacted in 2002 in the aftermath of the Sept. 11, 2001, attacks to provide $100 billion in reinsurance capacity for terror-related commercial property/casualty risks. When the original legislation expired in 2005, Congress passed a two-year extension. The current authorization was scheduled to expire Dec. 31.

By a 360-53 margin, House members voted Dec. 18 to approve a seven-year extension of the Terrorism Risk Insurance Program (BestWire, Dec. 18, 2007). The vote followed two prior attempts by the House the first in September and the second earlier this month to authorize a long-term extension of the program. Though both efforts passed by wide margins, they each were subject to veto threats from the White House, which objected to language adding group life insurance to the backstop and lowering the program's "trigger" level, among other provisions.
In the version passed, the House took up legislation that mirrored a version passed by the Senate last month. The bill eliminates the current program's distinction between foreign and domestic acts of terrorism, but otherwise keeps the program intact under roughly its current terms through 2014.

(By David Dankwa, senior associate editor, BestWeek: David.Dankwa@ambest.com) Copyright 2007 A.M. Best Company, Inc.

Monday, December 10, 2007

CLAIMS NOT COVERED BY EPL POLICY

CLAIMS NOT COVERED BY EPL POLICY

We recommend that all companies purchase Employment Practices Liability insurance. If you haven’t done so, make sure to discuss this program with your broker.

However, it’s important to understand that EPLI does not cover claims involving:


Charges, audits, and claims by the Federal Contract Compliance Programs
Workers Compensation claims
Unemployment insurance claims
Disability benefits claims, including ERISA
Any breach of independent contractor services agreement
Violations of the Fair Labor Standards Act and state equivalents
Workers Adjustment and Retraining Notification Form
COBRA
OSHA
National Labor Relations Act (union claims)
US Longshoremans and Harbor Workers Compensation Act
The Jones Act
The Labor Management Relation Act
Breach of contract claims
And other exclusions

Of course, other coverages (such as Workers Compensation, Directors & Officers, and General Liability insurance) might cover some of these exposures. The point: Be very clear about which risks you have covered with which policies and which risks remain uninsured.

Monday, October 08, 2007

No One is Immune

Think it cannot happen to you. "I don't need to waste money on Employment Related Practices Coverage," is said to me day after day. Well read on.


It was announced today that Sidley Austin, one of the nation's largest law firms, agreed to pay $27.5 million to 32 former partners to settle a closely watched age-discrimination lawsuit brought by the federal Equal Employment Opportunity Commission. In this case not one of the partners even filed a complaint with the EEOC. read on.

American Ballet Theater fired a trumpeter in its orchestra because it believed he was too old, the federal Equal Employment Opportunity Commission charged in an age discrimination lawsuit. The musician, Henry Nowak, was let go in 2005 at age 74, says the suit, filed on Thursday in United States District Court in Manhattan.

No one is immune. Including you.

Wednesday, October 03, 2007

Could You Financially Survive Such a Verdict

NEW YORK_In an end to a salacious three-week trial, a jury ordered the owners of the New York Knicks to pay $11.6 million to a former team executive who allegedly endured crude insults and unwanted advances from coach Isiah Thomas.



This blog doesn't comment on the merits of the lawsuit. Despite my love of sports I ignored the articles and broadcasts, focusing on an exciting end of the regular baseball season and the beginning of college and Pro football.



This verdict caught my eye though. Time and time again, I counsel clients to consider D&O, EPL, or Union Liability Insurance to protect themselves from such a verdict and the tens of millions of attorneys fees that have been incurred and will increase through an appeal and possible retrial. The usual response is "we don't have that problem" or " we have a human resources department that takes care of those things" or " I can't afford that coverage right now."



As a risk manager, time and time again, I encourage clients to adopt procedures and give trainings on Employment Related Practices only to receive a response "we don't have the time or the money" to do that.

Here are a few facts to consider if you have given such a response:

1. Three of five businesses will be sued this year by an employee or a former employee over an employment practice

2. Employment practices suits account for 20% of all Federal Court filings

3. 56% of all employment practice filings going to trial result in a verdict for the plaintiff employee

4. The average jury award is S250.000, with 15% exceeding $1 million

5. 33% of wrongful termination verdicts have punitive damages equal to or exceeding compensatory damage.

Today's sports headlines should represent a "wake up call." yesterday's verdict did not include punitive damages, did not include Plaintiff's attorneys fees, did not include all the attorneys fees that the defendant incurred and will incur, did not include the damage to the reputation of the Defendant's and the PR costs they will now incur to remedy.

Talk to your Independent Agent or your Certified Risk Manager. " Do not Pass Go, or someone will be collecting a lot more than $200 from your wallet."

Thursday, September 20, 2007

Servicemembers Civil Relief Act

The Servicemembers Civil Relief Act (SCRA) helps military,
reservists and National Guard members meet financial and legal obligations at home while they fulfill active-duty assign­ments. Though the SCRA has been active for some time, the military and the lend­ing community still need better aware­ness of this law and its provisions, which can be extremely beneficial to deployed servicemembers and their families.

The SCRA requires mortgage lenders, landlords and other creditors to grant
you special status. By law, they cannot immediately foreclose on your mortgage or other loans and cannot evict you as a ten­ant. But that’s not all: SCRA also requires lenders to lower the interest rates you pay on existing mortgages, credit cards and personal loans. And lenders must make sure the lower interest rates translate into lower monthly payments.

Some of the SCRA’s most helpful provisions include:

Reduced interest rates and loan payments: Lenders must lower interest rates to six percent on your pre-existing home mortgages, credit cards, car loans
and other personal loans. Any interest you owe above six percent during your period of active duty will be forgiven, not just deferred.

Property protection: Lenders cannot foreclose on your home mortgage or other loans without proving legally that your military duty did not affect your ability to make payments.

Rent protection: If your rent is less than $2,465 per month, your landlord cannot evict you or your family for late payments or any reason without petitioning for a court order.

Rental/auto lease protection:
When you are deployed or relocated, you can terminate a preexisting residential or automobile lease. To terminate a lease, you generally need to give the landlord or lender 30 days written notice.

State tax support: If your spouse works and owes tax in a state other than the state of your permanent legal residence, SCRA will protect your family from dou­ble taxation. When that state determines the tax rate on your spouse’s income, they will exclude your servicemember income.
Legal postponement: If your deploy­ment prevents you from attending court or legal meetings related to a divorce or other legal process, you can request defer­ral for 90 days or longer. To do so, submit a written request to the court along with a letter from your commander that explains why you cannot attend proceedings before a specified date.

In order to claim the SCRA benefits, you’ll have to request them from your lenders and provide proof of your active
status. Although most lenders comply readily when you disclose your military status, some may not be aware of the law. If you encounter any problems, contact your military legal assistance officer.

Combat Zone Protection Active-duty military personnel in combat zones receive certain tax breaks and privileges that help keep their minds on the job at hand.

As a member of the military, you are eligible for an interest-free extension to pay your income taxes because service in Iraq, Afghanistan and other locations may have seriously impaired your ability to pay or file a return. The extension lasts for the initial period of service plus six months and covers a soldier’s spouse as well, regardless of whether they file joint. or separate returns. The extension applies only to federal income taxes. Individu­als serving in a combat zone as support for the U.S. armed forces, such as Red Cross workers, accredited correspondents and civilian personnel acting under the direction of the U.S. armed forces are also entitled to the extension.

Active-duty pay earned by U.S. armed forces personnel performing duties in a combat zone is not subject to federal income tax (soldiers are still obligated to pay Social Security and Medicare taxes.) Additionally, active-duty pay is not taxed in the state in which military person­nel are currently stationed, only in their official home state of record. Most states exempt all or part of active-duty pay.

Calling home is also encouraged, because telephone calls placed to the United States from a combat zone by a member of the U.S. armed forces are exempt from the federal excise tax on toll telephone service. If you already paid the excise tax, you can file IRS Form 8849 to obtain a refund.

Combat zone military personnel, still under the combat extension, are eligible to make qualified contributions to an IRA for the 2006 tax year after April 16, 2007. Servicemembers who are entitled to a refund but who do not file until they return home from combat duty will receive interest on the refund amount from the IRS. However, the tax return must be filed within the six-month extension window to be eligible for the interest payment.

Monday, September 17, 2007

TRIA Extension -- Global Impact

At the Les Rendez-Vous des Septembre, Munich Reinsurance Company Chairman of the Reinsurance Committee Torsten Jeworrek indicated that global governments should not rely on reinsurers to fill in capacity gaps should they decide not to back state terrorism insurance pools. Of particular concern is the German government's recent decision to not extend its 8 billion euro guarantee for the EXTREMUS Versicherung A.G. national terror insurance pool. German insurance market insiders are hopeful the German government will change its mind once the U.S. federal government extends its own terrorism insurance pool. Jeworrek said, "We will continue to make use of our flexibility and creativity to find solutions for complex risk situations. However, risk-adequate prices, terms and conditions are a prerequisite for complex risk maintaining stable income and financial strength over the long term, and in the interests of our clients, shareholders and staff." Other participants at the meeting agreed the private terrorism risk market did not have enough capacity to stave off risks related to those events without high premium levels; and in many cases, private insurance capacity for terrorism risks would be inconsistent.
Source: Business Insurance**http://www.businessinsurance.com/cgi-bin/news.pl?newsId=11066

More On Next Year's Premiums

TWO years of unexpectedly quiet hurricane activity in the US have caused a dramatic drop in insurance premiums that, experts say, could spark consolidation amongst brokers and underwriters.

The chief executives of the world's largest insurers and brokers are predicting cover for hurricanes in the US will tumble by at least 10pc in 2008 - on top of a 20pc slump in premiums this year.

They forecast the sharp falls as they headed out to Monaco, where they meet over the next few days to estimate demand for next year's policies. The annual Monte Carlo Rendezvous is the most important event in the industry's calendar where reinsurance companies, which provide cover to insurance businesses, unveil their demands for 2008. Insurance companies tend to pass on any premium changes to their policyholders.

Grahame Chilton, chief executive of the world's third largest reinsurance broker Benfield, said despite some major hurricanes such as Felix, this has been a benign storm season.
"In 2007, catastrophe reinsurance fell by around 5pc and insurance was off by more than 20pc,'' he said. "Without a major loss, we are expecting a reduction of between 5pc to 10pc for reinsurance and for insurance, much more.''

It is thought insurers at Lloyd's of London could reduce the maximum amount of business they can underwrite in 2008 as a result of the sharp premium falls. This could lead to total capacity at the world's largest insurance market dropping from a record level of pounds 16.1bn.
Although a quiet hurricane season could lead to record profits, a fall in prices combined with the negative impact of a weak dollar may lead to takeover activity in the sector. Mr Chilton said: "There will be further consolidation.''

He said the growth of capital markets is likely to continue, with more demand for catastrophe bonds, which give investors a generous interest rate if they take on risk. "For the first time in 2007, cat bonds were more competitive than reinsurance,'' he said.

Stephen Catlin, chief executive and deputy chairman of Catlin - the largest syndicate in Lloyd's - agreed the relationship between reinsurance and capital markets will be a major discussion point. "Some people are always quite protective of their own position,'' he said "But I think there is not enough capital in the reinsurance market to pay for the big exposures in places like Florida. As such, using the capital markets as a buffer is evidently sensible.''

As Reinsurance Prices Drop, Insurers More Likely To Buy

Tue Sep 11, 2007 13:48:00By Lavonne Kuykendall Of DOW JONES NEWSWIRES

CHICAGO (Dow Jones)--The price of reinsurance for U.S. exposures peaked last year in the aftermath of 2005's record storm season, but prices have dropped since and will continue to drop into the beginning of 2008.

A quiet 2006 storm season and a so-far-light U.S. hurricane season this year, along with an increase in available capital, all contributed to a stabilizing of reinsurance rates, according to insurance brokers.

As reinsurers meet this week at an annual conference in Monte Carlo, a series of reports predict falling reinsurance prices as insurers keep more risk on their own books or use catastrophe bonds or other capital markets solutions to reduce their exposure to big insurance claims.
Reinsurance is fast becoming a lower-cost alternative to catastrophe bonds, giving reinsurers an opportunity to grab more business from property/casualty insurers, after two years of seeing risk financing move away from reinsurers to capital market structures such as bonds, according to a report published this week by insurance broker Aon Corp.'s (AOC) reinsurance brokerage unit.

"We see the 2008 market cycle as an exciting and challenging one as reinsurance has the opportunity to play a larger role in capital management strategies," said Bryon Ehrhart, president and chief executive of Aon Re Services, in a Sunday press release.
Large buyers of reinsurance will still expand their use of capital markets, said Aon Re, but will use reinsurers for the majority of their risk financing, as credit market risk spreads continue to widen or become more expensive.

Barring a major catastrophic event, which could send prices back up, insurers will be more likely to use reinsurance markets than equity and debt markets, Aon Re said.
Guy Carpenter, the reinsurance brokerage unit of Marsh & McLennan Cos. (MMC), said in a report this week that the growing popularity of catastrophe bonds has helped discourage startups in the reinsurance market.

In the first half of this year, 15 catastrophe bonds with a total value of $3.2 billion have been created, and the total for the year is expected to easily surpass the total for 2006 of 20 transactions totaling $4.69 billion in risk capital.

Twelve new reinsurers were created in 2006, but only four started up in the first half of this year "as the perceived market opportunity diminished," the report said.
A Fox-Pitt Kelton Cochran Caronia Waller note estimated Tuesday that reinsurance prices will drop by between 5% and 10% for renewals that occur Jan. 1.

-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141; lavonne.kuykendall@dowjones.com
(END) Dow Jones Newswires
09-11-07 1348ET
Copyright (c) 2007 Dow Jones & Company, Inc.- - 01 48 PM EDT 09-11-07 This is a real-time news story and may be updated in the near future.

Sunday, September 16, 2007

Significant Workers Comp. Change In NY

WC Policy Change Affects Insured Employers in NY

Under a new law that took effect on Sunday, September 9, insured employers who have employees in New York must provide "full" workers compensation coverage in the state, according to the state's Workers Compensation Board.Before this law was enacted, a multi-state employer could cover employees in New York under an "all states" endorsement to its workers comp policy unless the employer exceeded certain benchmarks, such as the amount of money its workers earned while in the state, stated Steve Carbone, head of education for the board's Bureau of Compliance.

With this new law, all insured employers must specifically state that they have coverage for New York workers under item 3A of a policy's information page, Mr. Carbone said. The new mandate stems from a workers comp reform law signed into law on March 13, 2007.

Mr. Carbone was unable to elaborate as to why legislators made the policy language mandatory. But he noted there have been instances of out-of-state contractors failing to adequately insure when hiring New York-based subcontractors with New York employees.Employers that are self-insured in other states, but not New York, must also comply, Mr. Carbone said. Penalties for failing to comply can add up, according Mr. Carbone.The statutory penalty for failing to comply is $1,000 for each 10 days that an employer does not have coverage. In addition, a noncompliant employer with five or fewer employees can be found guilty of a misdemeanor and fined an additional $5,000.An employer who has six or more employees can be found guilty of a felony and fined an additional $50,000. Employers without adequate workers compensation coverage can also be sued by an employee in civil court.
New Jersey insurance agents praised Gov. Jon Corzine for signing into law a bill that bans so-called step-down provisions in businesses' motor vehicle liability insurance policies and frees agents from a having to advise something that their insurers will not allow.

The Professional Insurance Agents of New Jersey Inc. supported the bill, S-1666/A-3038, which reverses an effect of the New Jersey Supreme Court's decision in Pinto v. New Jersey Manufacturers Insurance Co.

In the Pinto case, the court decided that step-down provisions in business auto policies, which allow insurance companies to reduce the coverage available to employees not individually named on their employer's business auto policy, are enforceable. Instead of receiving the uninsured and underinsured motorist limits stated on their employer's policy, an employee who is injured while occupying a business vehicle receives the lesser coverage limits of his own personal auto policy or that of a family member if he does not have his own policy.

The decision placed agents in an impossible situation, according to PIANJ President Jack Lynn. The ruling held that insurance producers have a duty to tell employers that if they want to avoid imposition of the step-down provision, they have to name their employees on their auto policy. However, most insurance companies will not allow employers to include employees as named insureds on a business auto policy.

"The impractical duty created by the Pinto decision had substantially increased the risk of litigation against insurance producers and placed them in an untenable position with their customers," said Lynn.

The new law eliminates the need to name employees on a business auto policy in order prevent the step-down provision. It also protects employees who are injured in work-related accidents by offering the full protections afforded under their employer's insurance policy.

Market Risk

Location: New YorkAuthor: Beaumont VanceDate: Thursday, September 13, 2007

One of my favorite sources of business wisdom comes from a Sufi sage named Nasurdin. Many of his stories are applicable to risk management, probably because he was fond of pointing out where people are most blind or foolish; we just happen to be blind and foolish when it comes to risk and uncertainty.


As I read through the parade of daily articles about the current subprime meltdown, each trying to be more hysterical than the last, I am reminded of one of these famous Sufi stories. While traveling down the road one day, Nasurdin ran into a man who was depressed. The man revealed that he had suffered a long string of bad luck and, as a result, had lost everything except for the belongings he was carrying in his bag. So Nasurdin, being something of a mischievous sage, stole the man's remaining belongings and ran away down the road.

A mile ahead, Nasurdin placed the bag he had just stolen in the middle of the road, and hid in the bushes. Some time later the destitute man whom Nasurdin had robbed came upon his bag and started jumping up and down for joy. "What luck! What fantastic luck" the man exclaimed at having recovered his lost goods. Nasurdin, watching from the bushes shook his head and said, "What it takes to make some people happy!"

We often focus on our current state of loss to determine our level of happiness. If we win $100, and then lose $50, we often are unhappy, perceiving a loss. But if we lose $100, and then get it back, we are happy, perceiving a gain. Our perception of loss or gain depends not on the net result, but on how we frame it. Kahneman and Tversky devoted a great deal of time and effort to detail how framing radically changes the way we make decisions involving risk.

They showed that very often what we decide depends far more on how we frame a problem than on the actual facts. When it comes to assessing risk and probabilities, we are often fools. The subprime meltdown is a case-in-the-making for this foolishness. Of the many articles I have read in different, well-respected publications, none makes any mention of the amount of money that has been made to date on the mortgage market. None note that billions of dollars have been earned over the past years prior to the current losses. It is a grave omission; by discussing only the current loss, divorced of any reference to related past gains, the net result of the business is thoroughly obfuscated. This matters immensely in how we react to the current losses.

If a company like Goldman Sachs has earned $100 billion on mortgage backed securities over the past 5 years (I am just making this up for argument's sake) , then is a current loss of $5 Billion truly significant? Well, it is if Goldman forgets about the $100 billion and takes a highly risk averse stance. Being overly risk averse can cause as much loss as being overly risk taking.
But there is far more at stake here. Already many banks, perceiving only the downside, are pulling back their capital. Their peers, sensing that this is the right thing to do are also pulling out capital. The current mind set is "psychotic " according to Tony Crescenzi, a broker on Wall Street. The virtual cessation in trading of commercial paper has threatened to arrest the short term borrowing upon which many businesses rely to conduct operations. The effect is that of a run on the bank. When capital dries up, the economy slows and everyone loses.

Taking risks is what business is all about. Taking risks means that there will most likely be losses. If one is fortunate enough to suffer a loss of $95 for every $100 made, the net effect is still a positive cash flow. But if one forgets the gains and makes decisions based only on the losses, money can't be made. One becomes like those who endured the Great Depression and kept all of their money hidden in their mattresses.

Risk aversion can be an appropriate response. But it depends on the facts. As past sages such as Nasurdin, Kahneman and Tversky have shown us, our position on risk is often based on emotion or self deception rather than realities. This is why it is so incredibly important that specialists in risk and uncertainty (not just mathematical models, but the concepts) must be involved in strategic decision making. I fear that if we are not there to bring some sanity and logic to decision making, we will continue to get irrational exuberance followed by runs on the bank. We don't have to live this way.

Monday, August 20, 2007

DOL Adopts Stricter Enforcement Initiative

In some recent audits and unofficial public statements EBSA (Employee benefits Security Administration officials have advanced a strict application of the ERISA Section 406(b)(3) provision prohibiting a fiduciary from receiving any consideration for his or her own personal account from any party dealing with a plan in connection with a transaction involving plan assets. Under this stricter application, any gift or entertainment by a current or prospective service provider for a multiemployer plan for which the recipient serves as a trustee, was deemed by EBSA to be prohibited. Apparently EBSA deemed the trustee to be receiving the gift or entertainment as a result of his or her position as a trustee to persuade the trustee regarding the affected service provider. It has been recognized for sometime that substantial amounts for entertainment or gifts to a plan fiduciary by a service provider could run afoul of the ERISA Section 406(b)(3) prohibition and in fact, there have been published cases to that effect. What appears to be developing now is a zero tolerance application of this prohibition by extending the prohibition to any item of value regardless of whether, based on the facts and circumstances, the amount is likely sufficient to persuade a fiduciary in a transaction involving plan assets. Items with a value less than the de minimis amount for LM-30 and LM-10 reporting would be prohibited under the zero tolerance application.

Many commentators on the subject of service provider entertainment have previously suggested that service providers for a plan can pay expenses for trustees which could be properly paid by the multiemployer plan such as a reasonable meal in conjunction with a Trustees' meeting. It is unclear whether the zero tolerance application extends to payments by service providers of expenses properly payable by the plan. It is also unclear what level of enforcement will be sanctioned by the EBSA for small gifts or entertainment amounts. What is clear is that some EBSA examiners have demanded that the trustees repay the amount of any meal or entertainment provided by a service provider involved plus 20% of that amount as a civil penalty. It is currently uncertain whether such a demand will be the subject of an enforcement action where the trustee refuses to reimburse the amount involved.

While the enforcement initiative appears to be focused on multiemployer plans, the rationale cited by the EBSA offices in applying the zero tolerance application would extend to any fiduciary of a plan covered by ERISA. Another thing that appears clear is that unlike the LM-30 and LM-10 reporting which is directed at Union Trustees, the zero tolerance application of ERISA section 406(b)(3) applies to all fiduciaries. Furthermore, a process that has assisted EBSA in identifying items of value provided to a trustee is the information furnished on the LM-30 and LM-10 forms.

Thursday, August 02, 2007

Long Term Care Misconceptions

Misconceptions:

LTC Insurance is too expensive, the government will take care of me, I already have disability insurance, and it is only for old people.

Truth:

The average annual cost for long term care is over $70,000 and predicted to double by 2020.

Medicaid is only available for the totally impovrished.

Disability Insurance does not address health care.

In 2006, 58% of the LTC claims were made by those under 65

Friday, July 27, 2007

Fraud Alert

Insurers like Travelers work very hard to fight insurance fraud. Travelers feels that every dollar they can keep out of the hands of criminals will benefit Traveler's customers, their business partners, and ultimately, the entire U.S. economy.

That's why they wanted to make everyone aware of a scam involving bogus checks with Travelers name and what appears to be a Travelers claim number.

Here are the details: To date, about 250 people have received a letter purporting to be from "Indemnity Financial - A Subsidiary of Travelers Indemnity Company" and containing a counterfeit Travelers Insurance Company check. The letter informs the victim they have won either a "North American Prize Pool" valued at $250,000 or a $65,000 Readers Digest / Publishers Clearing House Online Sweepstakes. The letter also references a "claim number" which is not a valid Travelers claim number. The letter instructs recipients to call a phone number, where they are advised to deposit the check to their bank account and wire the funds to an individual in Canada. They have also learned that other insurance companies' names have been used in the same scam.

If you receive a check from "Travelers Indemnity Company" accompanied by a request similar to this one, please do not deposit the check. You should contact their local law enforcement authority instead. By being alert to this scam, you may be able to help others avoid being victimized by criminals who are using Travelers' name to prey on the public. If you have any questions, you can contact KWJONES@Travelers.com.

Monday, July 16, 2007

DOL Finalizes LM-30 Rules

The U.S. Department of Labor has finalized the rules for disclosure form LM-30. This form requires officers and employees of labor organizations to report specified financial transactions and payments received to effect public disclosure of any possible conflicts between their personal financial interests and their duty to the labor union and its members. This rule clarifies the Form LM-30 and its instructions by explaining key terms and providing examples of the financial matters that must be reported, eliminates or modifies administrative exceptions in the old Form LM-30 that impeded the full disclosure of financial matters that constitute conflicts, or potential conflicts, of interest, and improves the usability of the reports by union members and the public.

The final regulations change the longstanding de minimis exception by adopting a quantitative standard of $250 as the amount above which a report is required and $20 as the amount above which payments or benefits must be counted when calculating whether the union official’s $250 reporting threshold has been met. The rule also includes a limited exclusion for widely attended gatherings, allowing union officials to attend two such gatherings without incurring a reporting obligation provided the employer or business paying for the gathering spent $125 or less per attendee per gathering. The rules are effective August 16, 2007.

Friday, July 06, 2007

Risk Managers Urged To Plan for Pandemic

It's not a question of if a pandemic will happen, but a question of where and when, said Michael Osterholm, director for the Center for Infectious Disease Research and Policy.

Osterholm was the keynote speaker April 30 at the RIMS annual conference in New Orleans. He urged risk managers to take the lead in planning how to respond to a pandemic for their companies, their communities and their families.

The risk of a flu pandemic spreading across the globe is greater today than it was in 1918, when a deadly flu killed about a half million people in the United States alone.

Osterholm said with improved transportation, diseases can be spread through airplane travelers very quickly.

Also, while some argue that improved medical technology would help prevent a flu pandemic from taking so many lives, Osterholm said there's a shortage of hospital beds and medical staff personnel.

For instance, there are only 105,000 ventilators in U.S. hospitals, which tend to keep a two-day supply of oxygen on hand, Osterholm said. "We'd run out of oxygen before we ran out of ventilators," Osterholm said.

In addition to the medical system being overwhelmed, Osterholm said, communities would have to find a way to manage the number of corpses.

"We'd run out of caskets overnight," Osterholm said. "Most communities don't have plans."
And a pandemic would also have tremendous economic ramifications. In the recent SARS outbreak, 80% of flights into and out of Hong Kong were canceled for 10 weeks.

Thursday, July 05, 2007

IRS Eliminates Form 5500 Schedule P

To reduce administrative burdens of employers, plans, their administrators and trustees and custodians, and in anticipation of the transition to a wholly electronic filing environment under the ERISA Filing Acceptance System (EFAST), the Internal Revenue Service (IRS) has said in Announcement 2007-63 that the continued use of a Schedule P, Annual Return of Fiduciary Benefit Trust, in connection with the filing of a plan’s Form 5500 is no longer necessary. The elimination of Schedule P is effective for the 2005 and later plan years for Form 5500-EZ filers. For all other Form 5500 series filers, the elimination of Schedule P is effective for the 2006 and later plan years.

Tuesday, July 03, 2007

California Lawyers Must Disclose Malpractice Coverage

California lawyers will have to tell their clients whether they carry malpractice insurance under a proposed rule that opponents say could add to the costs of going to court.

About 20% of the state's 150,000 lawyers don't have malpractice coverage, according to Jim Towery, chairman of the State Bar of California task force that drafted the proposed rule.

Towery and others who support the rule said most clients want to know whether a prospective lawyer has insurance, or a history of complaints, but many fail to ask.

Opponents fear that requiring disclosure might effectively force all lawyers to buy such insurance and pass on the costs -- up to $9,000 a year -- to clients.

Most of those who lack the insurance are sole practitioners who represent accident or consumer fraud victims.

"They're the people who really provide access to justice, as opposed to tall-building lawyers," said Diane Karpman, a legal ethics expert who predicted that some small practitioners would be put out of business.

The number of disgruntled clients who sue their attorneys is small relative to other types of civil lawsuits but the number of claims is rising, according to an American Bar Assn. study. For instance, legal malpractice cases worth $2 million or more jumped 60% between 1996 and 2003, the latest year for which data are available. In most cases, clients ask for much less, but the number of claims under $10,000 has risen too, by 8% in the same period.

Most legal malpractice claims result from personal injury and real estate cases, according to the study, and close to 70% of these suits were lodged against sole practitioners or members of firms with 10 lawyers or fewer.

"There are so many ways that the lawyer can make an error," said Edith Matthai, a Los Angeles lawyer who generally represents other lawyers in malpractice cases.

Proponents of the rule, including lawyers who handle malpractice cases for plaintiffs, say the requirement would protect consumers whose claims are mishandled.

"Prospective clients should at least know that an attorney chooses to practice without insurance or is unable to get it," said Robert Sall, a Laguna Beach lawyer.

In the '90s, Sall said, he represented an Orange County woman whose divorce lawyer "failed to take the most basic steps to protect the marital assets." The woman's estranged husband squandered hundreds of thousands of dollars before the divorce was final.

She sued the lawyer for malpractice, winning a $450,000 judgment but collecting a tiny fraction of it because the lawyer, who had no liability coverage, filed bankruptcy. The woman, then in her 60s and with meager resources, had to move in with one of her children.
"There are victims here," Sall said.

Some lawyers feel uncomfortable carrying malpractice insurance. Newport Beach plaintiffs' lawyer Mary Shea has never been sued for malpractice but carried insurance for 10 years. Financial and philosophical reasons prompted her to let her policy lapse in 2005.

The premium took a big bite out of her income, she said, and she felt there was an inherent conflict of interest in relying on the same insurance companies she often sued on behalf of wronged clients to defend her if she herself was sued.

The American Bar Assn adopted a model insurance disclosure rule in 2004, and 20 states now embrace some form of it. Several others are considering proposals. The requirement was in effect in California between 1992 and 2000 but the Legislature let the rule sunset during an unrelated dispute over State Bar funding.

The proposed rule would have to be approved by the State Bar's Board of Governors and the California Supreme Court.

The State Bar's comment period closes Aug. 6. To submit comments, go to the State Bar's website at calsb.org, click on "public comment" and search for "insurance disclosure."

molly.selvin@latimes.com

Copyright 2007 Los Angeles Times

Friday, June 29, 2007

As Predicted -- Pension Plan Consultant's Conflicts under Scrutiny

Copyright 2007 Los Angeles TimesAll Rights Reserved
Los Angeles Times
June 29, 2007 Friday Home Edition

Conflicts of interest may hurt pension plans; Unreported business dealings can affect consultants' advice and drive down returns, a federal agency finds.
Jonathan Peterson, Times Staff Writer

WASHINGTON
Undisclosed conflicts of interest by pension consultants could be taking a bite out of your retirement plan.

In a report released Thursday, the Government Accountability Office said such conflicts appeared to drive down annual returns for traditional pension plans by 1.3% a year.
Pension consultants advise pension plans on a range of matters, such as investment goals, where to allocate assets and whom to use as money managers. Conflicts may arise if a consultant's advice is influenced by other, unreported business dealings.

Though lower returns are borne by the employer in such pensions, they can add up significantly over time and ultimately lead to benefit cuts, said lawmakers who requested the report.
The findings are the latest piece of evidence that retirement savings may be affected by business decisions made in pursuit of fees and profits rather than the worker's best interest. They follow congressional hearings on the effect of hidden fees and conflicts on 401(k) plans, and seemed likely to stir new calls for stricter oversight of the business arrangements that may affect retirement savings.

"Our overarching concern when it comes to hidden fees or conflicts of interest is this: Are the people entrusted with managing other people's money held to the highest possible ethical standard?" asked Rep. George Miller (D-Martinez), chairman of the House Committee on Education and Labor. "Are they looking to serve the best interests of the pensioners, or are they looking to line their own pockets? That's what this is all about."

Miller is preparing legislation that would address concerns about conflicts of interest and hidden fees in retirement plans, including traditional pensions and 401(k) plans.

In the report, government auditors described the lower returns as "suggestive" of the effect of undisclosed conflicts but stopped short of saying there was an absolute connection. The finding "nevertheless illustrates the importance of detecting the presence of undisclosed conflicts of interest" in pension plans, the GAO said.

The study built on a 2005 analysis by the Securities and Exchange Commission, which scrutinized the dealings of 24 pension consultants and concluded that 13 had conflicts that should have been revealed.

For example, the SEC found that pension consultants were often affiliated with brokerage firms that provided brokerage services to the consultants' client pension plans. It also found that pension consultants sometimes charged money managers to attend conferences and sold them software.

"Concerns exist that pension consultants may steer clients to hire certain money managers and other vendors based on the pension consultant's (or an affiliate's) other business relationships and receipt of fees from these firms, rather than because the money manager is best suited to the clients' needs," the SEC said in its analysis.

At the request of Miller and Rep. Edward J. Markey (D-Mass.), the GAO tried to figure out whether such conflicts cost people money.

Based on the finding, Miller said in a statement that there was "potentially a significant cost to workers and retirees when consultants or money managers have conflicts of interest."
Not everyone shared the concern, however. Mark Ugoretz, president of a group that represents major corporations on pension matters, said the report produced scant evidence of damage and based it on shaky assumptions about business relationships.

"They have made assumptions that these are conflicts of interest, and when they made these assumptions they found a minimal effect," said Ugoretz, of the ERISA Industry Committee (ERISA is an acronym for the Employee Retirement Income Security Act, the 1974 law that set pension standards). "That's not a sound basis on which to take legislative action."
Members of Congress, however, seized on the findings as a further sign that retirees could be victimized by obscure conflicts in the investment world.

"When it comes to the management of pension funds and workers' hard-earned savings, investment decisions should be driven by thorough analysis and research, not by the pursuit of fees that pad profit margins of consultants to the detriment of fund beneficiaries," Markey said.
Questions about the proper handling of retirement savings by financial professionals have become increasingly widespread in recent years, particularly as members of the baby boom generation start to reach their 60s.

The Labor Department is reviewing pension disclosure requirements and expects to unveil soon a proposal that would require pension consultants and other pension service providers to disclose details of their direct and indirect compensation, fees and "other financial arrangements," Bradford P. Campbell, an acting assistant Labor secretary, told the GAO in a letter.

Obesity and Workers Comp. Claims

Duke Hospital conducted a study on obesity and Workers' Comp. Results:

There was a clear linear relationship between BMI (Body Mass Index) and rate of claims
Employees in obesity class III (BMI40) had 11.65 claims per 100 FTEs, while recommended weight employees had 5.80

The effect on lost workdays (183.63 vs 14.19 lost workdays per 100 FTEs)

Medical claims costs ($51,091 vs $7,503 per 100 FTEs)

Indemnity claims costs ($59,178 vs $5,396 per 100 FTEs) was even stronger The claims most strongly affected by BMI were related to the following:

Lower extremity, wrist or hand, and back (body part affected)

Pain or inflammation, sprain or strain, and contusion or bruise (nature of the illness or injury)

Falls or slips, lifting, and exertion (cause of the illness or injury) The combination of obesity and high risk occupation was particularly detrimental.

This information should really cause you to consider an obesity program in your business.

Thursday, June 28, 2007

Dear Doctor: What You Need To Know About Own Occupation Disability Insurance Policies

You've worked hard to get through medical school, gone on to specialize and now, you need to protect one of your most important assets: your income stream, says Frank N. Darras, the nation's leading disability and long-term care insurance lawyer.

Purchasing disability insurance, however, can be tricky and expensive. Policy features, advantages and benefits vary greatly. While some policies are iron-clad and pay benefits when you need them, others have holes and can cause financial disaster, should you become disabled. See http://www.darrasnews.com.

Darras offers the following tips:

-- Always buy as much individual coverage as you can afford. While doctors think (like everyone else) that they will never become disabled, the reality is that one third of all Americans between the ages of 35 and 65 will become disabled for more than 90 days.

-- Buy your policy as soon as you can, as coverage is the cheapest when we are young and healthy.

-- Even if your practice offers a group policy, be sure you buy your individual coverage first, and pay the premiums for the policy yourself so any benefits will flow tax-free. With individual coverage you also have more rights and remedies in the event your claim is wrongfully denied.

-- Only purchase "non-cancelable" and "guaranteed renewable" coverage. These features mean the insurance company cannot cancel your policy, increase your premiums or change the contract language as long as you pay your premiums on time -- even if the insurer is "taking a bath" on the claim side or decides to stop writing new business in your state.

-- Obtain the longest benefit period possible -- lifetime if available, but at least until you reach age 65. Always buy "own occupation" coverage.

-- Remember, when it comes to insurance, "the big print giveth ... the small print taketh away," so be careful and read the fine print.

-- Be a smart shopper and don't miss a premium payment.

"Finally, physicians often make fatal mistakes early in the claim process," says Darras. "Be sure to seek out the most experienced disability counsel before you file your claim so the carrier doesn't schnooker you with legalese or fine print.

Webb's Tip -- Use a qualified Independent agent to help you. For more information contact us at info@mclaughlin-online.com

Tuesday, June 26, 2007

"Feds Indict Adviser for Huge Borrowing"

The adviser, who managed investments for the Ohio Bureau of Workers' Compensation, allegedly borrowed 4500 percent of a fund's assets.

Charging Mark D. Lay with failing to report to investors overleveraging that had grown to more than 4000 percent, U.S. attorneys for the Northern and Southern Districts of Ohio indicted the investment manager on four counts concerning his handling of an offshore hedge fund that allegedly resulted in the Ohio Bureau of Workers Compensation losing $216 million of its $225 million investment.

In directing the bulk of the trade activity of the MDL Active Duration Fund, an investment consisting primarily of government, corporate, and mortgage-backed fixed-income securities, Lay far exceeded the fund's pre-set limit of 150 percent in borrowing, according to the indictment issued Friday. In an April 2004 meeting with the workers' comp board's chief investment officer, Lay did not admit that the fund's leverage was 900 percent, according to the U.S. attorneys.

In September 2004, the CIO and CFO of the board confronted Lay about the fund's poor performance, which by then had a value of $57 million despite the $200 million the workers' comp board had invested, according to the indictment. While Lay admitted at that meeting that the fund was overleveraged, he "falsely" told the board executives that he had only borrowed 900 percent of the funds assets while knowing that the leverage exceeded 4500 percent, the U.S. attorneys contended.

The indictment charges that Lay, the chairman and chief executive officer of MDL Capital Management, hid the true nature and effect of the use of leverage in the fund by failing to disclose the overleveraging and its effect on the investment funds to the comp board, thus breaching his fiduciary role as an investment advisor. He was charged with investment advisory fraud, mail fraud, and conspiracy to commit mail fraud and wire fraud.

CFO.com could not reach Lay at press time for comment on the indictment. Lay stated last week, however, that "Recent reporting and comments concerning MDL Capital Management and its investment performance have painted an inaccurate and misleading picture of the Company and our track record." Lay claimed that all his company's fixed-income products, with the exception of the one the workers' comp board invested in, had made money.

The indictment seeks forfeiture of nearly $1.8 million , which represents the amount of compensation MDL received from the workers' comp board for managing the Fund. If convicted, Lay faces up to 20 years in prison and a fine of $500,000.

Lay is the 19th person to be charged in the case, according to the Columbus Dispatch. So far, the task force probing the fraud has produced 16 convictions, the paper added."

Next time your Pension Fund Trustees meet, maybe you should ask about Fiduciary Insurance and your limits. If one of your advisors also sells insurance to the fund, maybe its time to make a change. That advisor may not want an Independent agent asking hard questions.

Wednesday, June 20, 2007

U.S. Supreme Court to decide right to sue for mishandling 401(k) plans.

The U.S. Supreme Court will decide whether a federal pension law gives workers who participate in 401(k) plans the right to sue claiming their accounts were mishandled.
The justices on Monday agreed to hear arguments from a man who says his retirement account is $150,000 short because the consulting firm that employed him didn't make investment changes he requested. A federal appeals court barred the suit.
The case will shape the rights of participants in "defined contribution" plans, a category that also includes employee stock ownership and profit-sharing plans. Together, those plans hold more than $3.2 trillion in U.S. employee assets.
The case before the court concerns James LaRue, who says his employer, management-consulting firm DeWolff Boberg & Associates, didn't follow his investment instructions in 2001 and 2002. He sued the firm, the administrator of the plan, in 2004 in federal court in Charleston, S.C. The suit invokes the 1974 Employee Retirement Income Security Act.
The 4th U.S. Circuit Court of Appeals in Richmond, Va., said the pension law allows suits for damages only when a participant is seeking to vindicate the rights of a plan "as a whole," not just the interests of a single account.
DeWolff Boberg urged the Supreme Court not to hear the case, saying the appeals court correctly applied a 1985 Supreme Court ruling.

Monday, June 11, 2007

Fast-Growing, State-Run Property Insurers Pose Risk for Taxpayers

Exponential growth of state-run property insurers of last resort ultimately may shift much of the long-term risk of hurricane-related losses to policyholders and taxpayers, even those who live nowhere near the coast, reports the private insurance industry's Insurance Information Institute.

By year-end 2006, total exposure to loss in state-run property insurers is estimated to have surged to more than $600 billion, compared with $54.7 billion in 1990. Total policies in force had also risen to in excess of 2 million.

The explosive growth in these plans is attributable to a number of factors, including the rapid rise in coastal development and property values, and the changing shape and role of state-run property insurers in a number of states, according to a new study from the I.I.I.

'While state-run insurers of last resort fulfill a key role by ensuring that policyholders can obtain insurance coverage, many have morphed from their traditional role as urban property insurers into major providers of insurance in high-risk coastal areas," said Dr. Robert P. Hartwig, president and chief economist of the I.I.I.

According to Dr. Hartwig, this shift of high risk exposure away from the private property insurance market is placing an enormous financial burden on state-run insurers, leaving a number of them operating at substantial deficits. As a result, state-run insurers of last resort may end up shifting the long-term risks of hurricane-related losses to policyholders and taxpayers who do not live near the coast.

"Depending on the state, the redistribution of costs is commonly achieved via laws that allow state-run insurers (which are often the largest insurers in the most hazardous areas) to recover their losses in excess of their claims-paying resources by assessing (effectively taxing) the insurance policies of homeowners and business owners throughout the state, including those well away from the coast and those who have never filed a claim," Dr. Hartwig said. "In some cases, even unrelated types of insurance such as auto insurance and commercial liability coverage can be assessed."

"Even in states where the value of insured coastal property represents a relatively small percentage of total insured property values, this does not mean that state-run property insurers are not experiencing rapid growth," added Claire Wilkinson, vice president, Global Issues at the I.I.I. and co-author of the study.

For example, North Carolina's $105.3 billion in insured coastal exposure represents just 9 percent of the state's total insured property values. Yet the state's beach and windstorm plan saw its exposure and total policy count more than double between 2003 and 2006.

"The insurance industry is committed to working in partnership with public policymakers, consumers and businesses in developing solutions to the formidable challenges posed by catastrophe risks in future," said Dr. Hartwig.

Tuesday, May 29, 2007

Cyber Insurance

So-called cyber attacks threaten businesses of all sizes, yet business use of various insurance products to protect against such attacks substantially differ among insurers, industry experts say.

According to American International Group Inc., cyber attacks compromised nearly 90 million identities in the United States since 2005.

Of 200 data breach claims, AIG said 33% were from hacking, 25% were from stolen equipment, 10% were from missing or lost data, 7% were from dishonest insiders and 22% from ``other security failures,'' with 3% unaccounted for.

``The victim must determine what happened, how information was accessed, what was accessed and if it was criminal,'' said Nancy Callahan, vp of AIG's identity theft and fraud division. ``If it was criminal, they have to bring in law enforcement.''

``The sheer magnitude of the loss of almost 90 million customer records and the variety of causes is shocking,'' Ms. Callahan said. ``It's urgent to protect middle-market companies and small businesses against the aftermath of an identity breach theft.''

Experts estimate indirect costs for lost productivity from stolen or misplaced data average $15 per customer record, while lost customers and recruiting new customers costs $75 per customer record.

Ms. Callahan said the average total cost of an information breach is $50 million.
Data security breaches pose an enormous threat and cost businesses a huge amount of money, said Kate Armfield, co-chair of RiskProNet International's marketing/placement practice group, a network of 28 independent brokers in the United States and Canada. She is also principal-account marketing at brokerage Armfield, Harrison & Thomas Inc. in Leesburg, Va.
Examine differences
``We have reviewed multiple forms that provide this type of coverage and caution there are differences that need to be reviewed during the placement process,'' Ms. Armfield said. ``Some, for example, provide coverage for `Dumpster diving' or data from stolen laptops and others do not.''

Businesses have been slow to buy technology and cyber liability coverage for several reasons, said Patrick Deaver, vp of operations at digital media company i-Mark Inc. in Holly Springs, N.C.
``This is still a concept. There is a lack of awareness due to slow rollout and penetration among business insurers,'' Mr. Deaver said.

``Where the coverage has been promoted, the value of the coverage has yet to exceed the cost. The insured is still willing to accept the risk of exposure due to a lack of monumental cases that illustrate true impact dollars resulting from security breaches,'' Mr. Deaver said.
Kirk Sexton, former chief information officer with CHOICE Medical Management Services L.L.C., a Tampa, Fla.-based workers compensation and disability management services provider, has used data breach insurance provided by Unisource Administrators Inc., its parent company in Sarasota, Fla. Mr. Sexton, now an independent consultant, said data breach claims were part of a roll-up technology/Internet rider attached to a general liability policy.

``There were some general conditions that we put into internal policy that helped protect ourselves and lower the premium cost as well,'' Mr. Sexton said. ``Among those were the policy of requiring our trading partners to carry a minimum of a $10 million policy as well.''
Data security breach coverage can be purchased as part of a technology liability policy or on a stand-alone basis, said Joshua Gow, vp of Philadelphia-based ACE Professional Risk, a unit of ACE USA.

``We are seeing a lot of demand from a lot of industries that do not have full-line professional liability exposure like retail, hospitality, restaurant chains,'' he said.
``Companies outsource a ton of different tasks from payroll to accounting to consulting contracts and call centers,'' Mr. Gow said. ``The natural result is that they are taking their confidential client information and entrusting it to third parties.''

``If I am entrusting my payroll to an outside company, I say, `Fine, as part of our contract you are required to maintain $5 million coverage in private liability limits,' '' Mr. Gow said.
Data security policy limits are available from $1 million to $50 million.

Responsible outsourcing

``It's a matter of going in and transferring liability,'' Mr. Gow said. ``Even though I have outsourced that service to a third party, if that third party loses my customer data, the customers are going to sue me. I'm the one who trusted this third party to handle the data.''
``So I want my own insurance and I want them to have insurance to subrogate against in case there is a problem,'' Mr. Gow said.
Numerous insurers write data security coverage.
Mark Ware, director of IMA Financial Group Inc.'s technology industry practice, a Denver-based brokerage, said the market penetration is low because some brokers do not understand the issue and companies with strong information technology departments think they are beyond claims.

``Cost of such insurance depends on what a company considers to be its exposure,'' said David Halstrom, an underwriter at Beazley Group P.L.C. in Farmington, Conn. ``A risk manager and a company protecting stakeholders (are) going to have elaborate and technologically related controls available to fend off these risks.

``It's going to be a risk/reward related to the premium vs. the protection you get,'' Mr. Halstrom said. ``Also, it is a matter of do you include that into your total risk management process as a risk manager.''

``There are a lot of moving parts to these issues. At the end of the day, the good guys in network security are having trouble keeping up with the bad guys,'' Mr. Halstrom said. ``At the end of the day, that is when insurance is there to protect against those types of situations, where the companies we insure did all that they could, but weren't able to fend off.''

Copyright 2007 Crain Communications Inc.

Wednesday, May 23, 2007

U.S. Supreme Court Toughens Standards for Antitrust Suits

The justices, in a 7-2 opinion, ruled that an allegation that two or more companies are acting in parallel isn't enough for an antitrust lawsuit to proceed. Even if the result benefited the companies and diminished competition, the plaintiffs must go further and include some allegation indicating that the companies were actively working together.

When independent self-interest also could explain the conduct, Justice David Souter wrote for the court, plaintiffs must allege "some factual context suggesting agreement" to restrain trade.

The ruling doesn't radically upend the rules for antitrust actions. Nevertheless, it marks the latest in a sequence of cases where the court has tightened the scope of the Sherman Antitrust Act, the 1890 statute that took aim at monopoly by outlawing any "contract, combination . . . or conspiracy in restraint of trade or commerce."

Business interests contend that many companies are forced to settle even meritless lawsuits, because the cost of discovery may dwarf a payment that would make the case go away. But the court was vague about what it had in mind as the minimum allegation for a suit to proceed.

Justice Souter wrote that "the problem of discovery abuse" could cost innocent defendants huge sums. In the telecom case, "determining whether some illegal agreement may have taken place between unspecified persons at different [companies], (each a multibillion dollar corporation with legions of management level employees) . . . is a sprawling, costly and hugely time-consuming undertaking."

The 1996 Telecommunications Act sought to foster competition by allowing the so-called Baby Bells, the Bell System's successors, to sell long-distance service while also requiring them to open their local exchanges to rival carriers. But instead of promoting a robust marketplace for local telephone service, the Baby Bells largely declined to enter each others' regions and, plaintiffs alleged, they made it hard for upstart competitors to use their exchanges.
Citing this parallel conduct, plaintiffs, represented by the class-action firm Milberg Weiss Bershad & Schulman, filed suit. They alleged that the mutually beneficial parallel conduct by the Baby Bells -- which, after various mergers and name changes, now include AT&T Inc., Qwest Communications International Inc. and Verizon Communications Inc. -- suggested some sort of agreement. Plaintiffs sought to begin discovery in search of evidence supporting the claim.

A federal judge in Manhattan dismissed the case, ruling that plaintiffs must also allege facts that tend "to exclude independent self-interested conduct as an explanation for defendants' parallel behavior."

But the Second U.S. Circuit Court of Appeals, in New York, reinstated the case, citing a 1957 Supreme Court opinion that a suit shouldn't be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim." Since a conspiracy was a conceivable explanation for conduct that undercut competition, the court ruled the case could proceed.
Not so, wrote Justice Souter, joined by Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas, Stephen Breyer and Samuel Alito.

In this case, Justice Souter wrote, the plaintiffs didn't list "a single fact in a context that suggests an agreement." The Baby Bells, he observed, descended from a world where telecom was a monopoly and "doubtless liked the world the way it was." Thus, "a natural explanation for the noncompetition alleged is that the former government-sanctioned monopolists were sitting tight, expecting their neighbors to do the same thing."

In dissent, Justice John Paul Stevens, largely joined by Justice Ruth Bader Ginsburg, contended that the majority was driven not by settled law but a "transparent policy concern" to protect antitrust defendants from litigation costs.

I have health insurance -- Why do I need Workers Compensation?

This question highlights the need to use a full service Independent Agent qualified to coordinate Health, Disability and Workers Compensation coverage. Many health insurers are starting to qualify or exclude coverage for work-related injuries under group health plans yet the old rule of thumb was exclude corporate officers from Workers Compensation to save money. A corporate President injured in an auto accident or by a falling file cabinet may face a huge medical bill with no insurance unless all the company's coverages are coordinated.

In most states, sole proprietors and partners are not covered as employees under the Workers Compensation act, but may elect to be covered. In some states the option to be covered applies only to sole proprietors and partners whose employees are covered under the act (either by law or by the employer's election).

With respect to executive officers of a corporation, the general rule is the opposite of the general rule for sole proprietors and partners. In most states, the officers of a corporation (including the executive officers) are covered, but provision is made for at least some officers to exempt themselves from coverage under the act. Many states allow only the corporation's executive officers to exempt themselves; which officers are considered executive officers may or may not be spelled out in the act. Other states do not specify which officers can exempt themselves, but allow only a specified number of corporate officers to exempt themselves.

A number of states address the status of limited liability company members and managers. This relatively new type of legal entity is a hybrid that combines features of both corporations and partnerships.

Keep in mind that, in many states, those who voluntarily exempt themselves from coverage under the act retain the right to sue the employer for damages caused by the employer's negligence. However, the standard endorsement used to exempt corporate officers and others from coverage under the employer's workers compensation insurance policy eliminates both workers compensation and employers liability coverage for injury to these individuals.

Bottom line, coordinate coverages -- don't just try to save a WC penny and end up having multiple pounds of your own pocketbook eroded.

Monday, May 21, 2007

Employment Liability Practices Coverage -- Think you don't need it? Consider this.

Scary Compliance Facts:

-Tens of Thousands of employment practices claims filed every year (DOL)
-Employees win 63% (Jury Verdict Research)
-Average verdict exceeds $250K (JVR)
-Sex discrimination easiest for plaintiffs to win (JVR)
-Age discrimination highest average verdict- over $275K (JVR)
-Awards even higher in state court (JVR)
-Retaliation is fastest growing claim category (DOL, JVR)
-Median Settlement $89K (JVR)
-Entry level settlement $30K (JVR)
-Top filings in health services, business services, eating and drinking places (GenRe)
-None of these figures includes cost of legal fees, loss of time and emotional strain

Thursday, May 03, 2007

While You Are Sleeping?

You have read a lot and taken steps to limit your children's access to certain areas of the Internet, but have you given a minute of thought or checked with your Independent Insurance Agent about exposure to personal injury claims? You should have, especially if you have adolescent children.

Up until 10 or 15 years ago, chances were remote that a household would be sued for libel, slander, invasion of privacy, or some other offense. Unless they were picked up in a publication, damaging comments tended to remain within small circles of people and faded away soon after they were uttered.

In the Internet age, however, the potential for personal injury claims has increased substantially. Thanks to the global reach of e-mail, blogs, and shared sites such as MySpace and YouTube, damaging comments can be instantly transmitted to millions of people throughout the world and live on, so to speak, in electronic files that may never be fully expunged.

The growth in personal electronic communications is staggering. According to an August 2006 report by General Reinsurance Corporation, an estimated 57% of American teens had posted material on the Internet; and more than 53 million American adults had created online content. Those figures do not include the text and photos shared in supposedly private e-mails.

As a result of this communications revolution, households and personal lines insurers are seeing personal injury suits filed by individuals who have been ridiculed in electronic communications or had embarrassing information or photos of themselves posted online. Businesses are also taking legal action against “gripe sites” and individuals who post disparaging comments about their products and services online.

“The concern [today] is that the trickle of claim activity may become a torrent, as Internet usage continues its sharp growth among younger, and perhaps less worldly, insureds.” one report begins.

The American Association of Insurance Services (AAIS) has responded to the transformation in personal injury exposure by introducing new policy language for personal injury coverage.
AAIS is a national advisory organization that develops policy forms and rating information used by more than 600 property/casualty companies throughout the United States. Several states have already approved a comprehensive revision of the AAIS Homeowners forms, due to take effect in some states on July 1, 2007.

Among other things, the revision introduces several changes in wording in the optional endorsement for providing personal injury coverage.

First, the definition of “personal injury” is modified to explicitly include injury that arises from electronic publication of material that slanders or libels a person or organization, disparages the products or services of a person or organization, or violates another’s right to privacy.

With coverage for electronic publication established, the revised AAIS endorsement then clarifies the extent of coverage for electronic
publication by implementing a new exclusion that includes a key exception. This new provision generally excludes coverage for personal injury arising from “chat rooms,” "bulletin boards,” “gripe sites,” and other electronic forums that an insured hosts or controls. However, it contains an exception that preserves coverage for personal injury arising from content posted or provided by an insured.

Thus, in a general sense, the exclusion and exception are crafted to preserve coverage for an insured’s own comments, but not for his or her potential liabilities as a publisher of the comments and ideas of others.

In today’s world, one’s liability for personal injury does not necessarily end after a libelous, slanderous, or compromising comment is transmitted for the first time. A key characteristic of modern electronic communications is that the person initiating a communication usually loses control of it once it is released into cyberspace. No one can completely prevent others from forwarding malicious e-mails, or from copying malicious Web content and passing it along, even if the original is “taken down.”

This characteristic of electronic communications is raising legal questions that are now being weighed in the courts. When does publication happen? Is existing content on a blog re-published anew—and, thus, potentially a new offense—every time the blog is updated with additional new content? What is the extent of liability for the originator of injurious content when others link to it, or when it finds its way into search engines?

The one thing you can do is make sure your Homeowners Insurance has the broadest coverage possible for this activity, that you have an Umbrella policy that gives you comfort so you can go back to sleep.

Wednesday, May 02, 2007

Canadian Excise Tax on Insurance

The Canadian federal excise tax imposes a 10 percent premium tax on entities resident in Canada, including international corporations, that place insurance against risk in Canada with insurers not authorized by federal or provincial insurance authorities. The tax is also applicable when coverage is placed by a non-resident broker or agent — even if the insurer is authorized in Canada.

The tax furthermore applies to master controlled programs where a non-Canadian parent company purchases insurance for a Canadian subsidiary. The involvement of a
Canadian broker or the Canadian branch of a global broker or underwriter may or may not
change the situation. For the Canadian government, the primary source of coverage takes
precedence.

The local buyer must be able to prove that the Canadian agent/broker was not merely processing the document(s). On admitted master controlled programs, the primary non-resident broker is typically considered the original point of contact and therefore the Canadian government considers the tax applicable.

Canadian tax authorities recently changed the way the federal excise tax on insurance premiums is collected. The tax authorities will no longer forward tax notices to insurance buyers but instead the insurance buyer must file an excise tax return (form B243E) and remit the federal excise tax by April 30 of each year. Previously, the tax authorities invoiced insurance buyers by forwarding to them a Notice of Excise Tax. These notices were derived from the excise tax returns submitted by brokers or insurers.


If the Canadian federal government discovers unpaid premium taxes, they will likely charge the 10 percent tax, plus interest, for current and prior years. They may also disallow the insurance premium (current and prior years) as a legitimate business expense for other tax purposes. Sorting out such problems can be time-consuming and costly.
In addition to the federal excise tax, there are provincial taxes on unlicensed coverage. The tax rates range from two percent to 50 percent. The latter is imposed by the province of Alberta.
Ontario, Quebec and Newfoundland have an additional provincial sales tax on insurance premiums. Ontario charges eight percent on all lines except Auto, for which there is no tax in respect of any premium payment due after March 31, 2004. Quebec levies nine percent for all lines except Auto (for which the rate is five percent). Newfoundland charges 15 percent on all lines. Some lines are exempt in some provinces — automobile, surety, agriculture and reinsurance contracts to name a few.


Some classes of insurance are exempt entirely under the Federal Excise Tax Act. These include Personal Accident, Life, Sickness and Marine. The point -- If you are insured or insuring in Canada check with your accountant.

Tuesday, May 01, 2007

Risk Managers Urged To Prepare For Pandemic

It's not a question of if a pandemic will happen, but a question of where and when, said Michael Osterholm, director for the Center for Infectious Disease Research and Policy.

Osterholm was the keynote speaker April 30 at the Risk and Insurance Management Society's annual conference in New Orleans. He urged risk managers to take the lead in planning how to respond to a pandemic for their companies, their communities and their families.

The risk of a flu pandemic spreading across the globe is greater today than it was in 1918, when a deadly flu killed about a half a million people in the United States alone. Osterholm said with improved transportation, diseases can be spread through airplane travelers very quickly.
Also, while some argue that improved medical technology would help prevent a flu pandemic from taking so many lives, Osterholm said there's a shortage of beds in hospitals and medical staffs.

For instance, there are only 105,000 ventilators in U.S. hospitals, which tend to keep a two-day supply of oxygen on hand, Osterholm said. "We'd run out of oxygen before we ran out of ventilators," Osterholm said.

In addition to the medical system being overwhelmed, Osterholm said communities would have to find a way to manage the number of corpses. "We'd run out of caskets overnight," Osterholm said. "Most communities don't have plans."

And a pandemic would also have tremendous economic ramifications. In the recent SARS outbreak, 80% of flights in to and out of Hong Kong were cancelled for 10 weeks.

(By Meg Green, senior associate editor, Best's Review: Meg.Green@ambest.com) Copyright 2007 A.M. Best Company, Inc.

Wednesday, April 25, 2007

Read The Fine Print - Part II

Previously, we have cautioned about contractual indemnity language and how if you are not careful you can become exposed as a result of contractual risk transfer. Well contractual risk avoidance is present even where you might not expect it, such as insurance policies. Exclusions to coverages are a traditional way of insurance companies saying you are covered on one hand and taking it away with the other. If you and your Independent Agent aren't careful what you do every day may be the one thing excluded from your insurance. Here are just a few examples -- Lobbyist Policies containing an exclusion for Lobbying activities; Union Insurance excluding Organizing activities; Law Office E&O coverage excluding attorneys acting as Fiduciaries; the list of exclusions to coverage is growing faster than Kudzu in a swamp.

When that policy arrives in the mail don't just stick it in a drawer. More importantly, make sure that your Independent Agent has a good understanding of what you do so he/she can review the exclusions when they come in as well. Finally, just because the original policy doesn't obtain an exclusion do not assume at renewal that the new policy is identical to the old policy.

TV commercials make you think that purchasing insurance is just like buying a book on Amazon. Nothing can be further than the truth. If you are not careful and well advised you may "save 15%," but get nothing for the 85% you pay.

Terrorism Insurance

If the terrorism insurance program were allowed to expire, coverage would become largely unavailable and unaffordable, and the gears of commercial real estate would grind to a halt, according to the National Association of Realtors(R) and the Coalition to Insure Against Terrorism.

"The potential unavailability of terrorism risk insurance at the end of this year impacts our financing agreements and potentially hurts the commercial real estate market," said Joseph Ditchman, former president of the Ohio Association of Realtors(R) and a partner at Colliers Ostendorf-Morris, one of Cleveland's largest commercial real estate firms.

Speaking on behalf of NAR and CIAT in testimony before the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, Ditchman urged Congress to extend the coverage that was originally enacted after September 11, 2001, and extended in September 2005. "This hearing recognizes that the essential facts have not changed from when Congress enacted the Terrorism Risk Insurance Act in 2002. Terrorism continues to be an unpredictable threat."

NAR agrees with a set of joint principles that the new legislation should contain that were developed by CIAT, along with the American Insurance Association. "We agree that the new legislation should be long term, eliminate the distinction between foreign and domestic acts of terrorism, and ensure coverage against losses from nuclear, biological, chemical or radiological events (NBCR)," said Ditchman.

NAR believes including those principles in legislation will strengthen the terrorism risk program. "The principles strengthen the economic security provided to the commercial real estate market by reducing the uncertainty of terrorism coverage availability, and covering most conceivable forms of terrorist activity," according to Ditchman.

In earlier reports, the Government Accountability Office and the President's Working Group on Capital Markets determined that no meaningful amount of insurance against NBCR events is available in the property market today, notwithstanding that TRIA backstops such insurance. NBCR events have been described as virtually uninsurable and there does not appear to be any mechanism to price such coverage. "To make sure businesses have access to this important coverage, we urge Congress to ensure that NBCR perils be added to the 'make available' requirements under TRIA," Ditchman said.

NAR testified that it believes that the "proper" long-term solution should focus on what private markets have been unwilling or unable to do. "The ideal solutions must enable businesses to purchase insurance for the most catastrophic conventional terrorism risks, provide adequate insurance capacity in all major commercial real estate markets, particularly in high-risk urban areas, and provide meaningful insurance against the so-called NBCR risks," said Ditchman.
NAR believes that this comprehensive approach can be an ideal program that will over time seek to reduce the federal role in the conventional terrorism markets and will maximize long-term private capacity by facilitating entry of new private capital.

Wednesday, April 04, 2007

Long Term Care Costs are Skyrocketing

Yearly Long Term Care Costs Increase 15% Since 2004 to Nearly $75,000 in 2007 According to Annual Study by Genworth Financial

Additional Polling Shows 75% of Americans Have No Long Term Care Plans
RICHMOND, Va., April 3 /PRNewswire-FirstCall/ -- Genworth Financial's (NYSE: GNW) 2007 Cost of Care Survey found the average national cost of care for nursing homes, assisted living facilities and in the home has steadily increased over the past four years and has reached new highs that exceed most household incomes in the U.S.(1) The rising costs of long term care may, therefore, present difficulties for many Americans should they need to pay for long term care out of their own pockets.

A separate national poll conducted by Public Opinion Strategies for Genworth Financial with input from the Alzheimer's Association found that 75 percent of Americans have made no long term care plans and 59 percent expressed concern about being able to pay for long term care. Almost half of the respondents (44 percent) incorrectly believe that Medicare or their private health insurance will pay for their long-term care needs. In actuality, health insurance and the federal Medicare program do not generally cover long-term care.

Genworth's annual benchmark study surveyed more than 11,000 nursing homes, assisted living facilities and home care providers in all 50 states and the District of Columbia. It was conducted by CareScout between January and February 2007 to gain a comprehensive view of long-term care expenses. The 2007 Cost of Care Survey, which offers national, state, and local cost information is available at http://www.genworth.com.

According to the 2007 Cost of Care Survey, the average national cost in 2007 of a single year in a private nursing home room is $74,806. To put this into context, one year in a private nursing home room costs nearly double the average full 4-year college degree in the U.S., including tuition, room and board (College Board's national average for public colleges is $51,184 for four years, making a single year in a nursing home 46 percent more expensive).

Wednesday, March 28, 2007

Seventeen U.S. Insurance Companies became Financially Impaired in 2006

Seventeen U.S. insurance companies became financially impaired in 2006, despite a respite for property/casualty insurers from two consecutive turbulent hurricane seasons and more diversified asset portfolios among life/health insurers, according to two new A.M. Best Co. special reports, "2007 Annual U.S. Life/Health Impairments" and "2007 Annual U.S. Property/Casualty Impairments."

The property/casualty report found 15 insurers in those lines of business became impaired last year, a rate of 1-in-233 companies. While any impairment can be a hardship to policyholders and employees, 2006's impairment rate is half the historical rate of the past 38 years. So far in 2007, A.M. Best has identified one public impairment: Vanguard Fire & Casualty Co. Florida regulators placed that company in rehabilitation in January. Vanguard Fire & Casualty was never rated by A.M. Best.

Of the two life/health companies identified as impaired in 2006, one is a known confidential supervision. The other impairment is Security General Life Insurance Co., which was issued a cease-and-desist order by the Oklahoma Insurance Department last September. It was placed in rehabilitation in November. The company was not rated by A.M. Best at the time of impairment. 2006's impairment rate of 1-in-769 life/health companies continues a seven-year trend of below-average impairment rates.

A.M. Best designates an insurer financially impaired as of the first official regulatory action taken by an insurance department. That marks the point when an insurer's ability to conduct normal insurance operations is adversely affected, capital and surplus have been deemed inadequate to meet legal requirements, or the company's general financial condition has triggered regulatory concern.

State actions include supervision, rehabilitation, liquidation, receivership, conservatorship, cease-and-desist orders, suspension, license revocation and certain administrative orders. The financially impaired companies identified in these studies might not technically have been declared insolvent. The definition of financially impaired is broader than that of a Bests Rating of E (under regulatory supervision), which is assigned only when an insurer is no longer allowed to conduct normal ongoing insurance operations.

In addition to the regulatory actions that are announced publicly, there also are actions that insurance regulators undertake on a confidential basis. When A.M. Best becomes aware of an active confidential regulatory action, the impairment is counted in the aggregate analysis but is not reported on a company-specific basis to protect confidentiality.

Property/Casualty Impairments

The performance of property/casualty insurers was bolstered by a dearth of hurricanes and near-record underwriting profits, which were parlayed into a combined ratio that stands at its lowest level since 1953. "It speaks favorably to the capital strength of the property/casualty industry," said John Williams, senior business analyst at A.M. Best. "What we found with most of these companies, both in property/casualty and in life/health, the impaired companies and those that became impaired either had vulnerable A.M. Best ratings, or were not rated at all by A.M. Best."

The majority of last year's impaired property/casualty companies were affiliated with either Poe Financial Group or Vesta Insurance Group.

Poe Financial Group was formed in 1996 by Tampa Mayor Bill Poe, who later established Southern Family Insurance Co. The company acquired Atlantic Preferred Insurance Co. and Florida Preferred Insurance Co. in 2003. By July 2004, Poe Group had become the largest privately held property insurance organization in the Florida market and the third-largest property insurance organization in Florida overall. The hurricanes and storms of 2004 and 2005 prompted policyholders to submit more than 120,000 claims, which cost more than $2.1 billion. Vesta's family of companies were domiciled in Texas, Florida and Hawaii. Most were placed into rehabilitation in June, 2006 after being hit hard by hurricane claims and were unable to pay claims.
The sector's outlook for the remainder of this year is bright. David Small, an equity analyst at Bear Stearns, said both publicly traded and mutual insurance companies are in a strong position going forward in terms of capital and funding. "One could argue that aggregate amounts (of capital) measured by standard surplus is at record levels. That is one of the reasons we see rates softening," Small said. "You could argue that some of the publicly traded companies have excess capital on their balance sheets."
Small said one major hurricane this season should not adversely affect property/casualty companies. "When you look back at 2005, the industry still grew a surplus and that was after Katrina, Rita and Wilma. The companies generated so much investment income the way they're set up that one good storm isn't going to knock them out," Small said.

Life/Health Impairments
One life/health company, Oklahoma-based Security General Life Insurance Co., was placed in rehabilitation in September 2006. Another company was taken under a confidential supervision impairment. While the 2006 life/health impairment rate represents a new 31-year low, additional confidential supervision impairment could rise.

"We have a circumstance with confidential supervision," said Williams. "The states take action to try to prevent problems for companies that they see in financial trouble. We picked up three additional impairments for 2005 and there's a fair shot that you'll see a fair jump in the 2006 numbers as we go forward-- enough that they won't be the lowest numbers on record."
The recent improved annual impairment rates for life/health insurers reflects an improving operating environment since 2001, industry efforts to diversity its asset portfolios and consolidation of some of the more thinly capitalized insurers with stronger companies.

(By Tom De Martini, associate editor, BestWeek: Thomas.DeMartini@ambest.com) Copyright 2007 A.M. Best Company, Inc.

Thursday, March 22, 2007

Insurance Industry Mergers On the Rise.

Insurance industry mergers and acquisitions transactions in the US increased in 2006 to the highest level since 2001 and may foreshadow an acceleration of activity into 2007-2008, according to a new study by Conning Research and Consulting.

"Insurance industry mergers and acquisitions transactions in 2006 increased due to a significant increase in the distribution sector. This is the highest level of transactions since 2001, yet the total value of these transactions was USD8bn lower than 2005 levels," said Clint Harris, senior analyst at Conning Research & Consulting. "The property-casualty sector led public offerings, including secondary offerings, with eight of the nine IPOs and nine of the fourteen secondary offerings."

The Conning Research study, "Mergers & Acquisitions and Public Equity Offerings -- 2007 Edition" continues Conning's annual review of insurance industry M&A and its effects on the industry.

"While transaction level increases in the insurance industry have kept pace with the broader marketplace over the past five years, the annual value of transactions has been very volatile," said Stephan Christiansen, director of research at Conning Research & Consulting. "Despite this, we forecast an increase in acquisition transaction values in the next 12-18 months, due to the continuing increase in surplus in the industry, along with private equity's increasing involvement in insurance. The ability of these firms to access large amounts of capital, and their ability to secure relatively inexpensive debt layers, means that they can be part of transactions exceeding USD10bn. Therefore, we expect more transactions valued between USD1bn and 5bn, with perhaps a few USD10bn or higher. Of course long-term drivers of scalability of data and process and global trends in business continue."

This article is supplied by Insurance Newslink (www.insurancenewslink.com).

Copyright 2007 Shillito Market Intelligence

Monday, March 19, 2007

Data Loss Seen as Most Serious Global Risk

More than one-third of a group of senior executives and risk professionals surveyed earlier this year view loss of data as among the most serious threats facing their organizations.

In fact, loss of data was the most commonly cited threat in a new global risk report put out by the London-based Economist Intelligence Unit for ACE European Group, IBM Corp. and KPMG L.L.P. Thirty-six percent of the 181 participants ranked it among the types of threats "seen to be most important in your organization’s consideration of operational risk management planning."

Human error followed closely, being cited by 35% of the participants, and systems failure ranked third at 31%. Natural disasters, terrorism and pandemics showed up much lower on the list, behind such exposures as supply chain disruption and attacks on information technology systems.

"The survey shows that risk managers clearly understand the value of data and, increasingly are focusing on its associated losses," Gareth Tungett, senior underwriter specializing in IT and cyber risk at ACE, said in a statement released Friday discussing the survey’s results.

The survey—"Business Resilience: Ensuring Continuity in a Volatile Environment"—is available at www.aceeuropeangroup.com.

Thursday, March 15, 2007

Survey: Most Workers Underestimate Chances, Impact of Disability

While growing number of American workers are forecasted to experience a disability during their career, more than 80 percent of workers said they believe their chances of becoming disabled are far lower than actual statistics report, according to a new survey. The 2007 Disability Awareness Survey, released today by the Council for Disability Awareness (CDA), said the majority of workers are not concerned about the possibility of becoming disabled – an accident or illness that will keep them out of work at least three months.

Data from the survey underscores the need to better inform America's workforce about the likelihood of experiencing a disability, as well as the potential financial consequences that may accompany a disability. The CDA is embarking on an outreach effort to increase public dialogue about disability awareness.

"Preparing for an unexpected disability has never been more important for America's workforce – especially as more American workers are suffering from income-limiting disabilities that can leave them and their families vulnerable to severe financial hardship," explained Robert Taylor, executive director of CDA. "It's important that workers recognize the growing threat that disability can pose to their financial security."

Since 2000, the number of disabled workers in America has increased by 35 percent according to recent Social Security Administration data. At the same time, the financial health of many American workers has declined. Workers are not only spending their earnings, but also are dipping deeper into their savings and going into debt to make ends meet. The overall 2006 U.S. savings rate was negative 1 percent – the worst since the Great Depression. These statistics are distressing, considering two-thirds of respondents with a 401k or IRA plan are unaware of what would happen to their retirement savings should they become disabled and unable to earn an income.

Given this unsteady financial situation, it's alarming that nearly 60 percent of workers surveyed said they haven't discussed how they would manage an income-limiting disability. In fact, almost half of these workers haven't thought at all about the need to plan for the financial impact of a disability.

On the other hand, more than 80 percent of workers who have planned financially for a disability are confident about their ability to cover living expenses if a disability strikes.

The CDA survey also showed that:
* The majority of workers (56 percent) didn't realize that their chances of becoming disabled had risen over the past five years.
* Nine out of 10 (90 percent) workers underestimated their own chances of becoming disabled.
* More than one-third (35 percent) of workers with 401k or IRA plans said they haven't thought about or don't know what would happen to their contributions if they were unable to earn an income for a period of time.

As responsibility for long-term financial security continues to shift to the American worker, the need to incorporate disability planning into each person's financial security plan has become more critical," Taylor said. "Fortunately, with good planning, American workers can dramatically improve their chances of financial stability should a disability strike."

Source: Council for Disability Awareness, www.disabilitycanhappen.org.