Tropical Storm Chris was a reminder that a disaster can strike anytime, in any area. Perhaps you’ve already taken the time to sit down with employees to go over the steps they should take if a storm or other disaster occurs. The last thing to cover is how to implement the plan.
The following checklist is based on recommendations contained in ACT’s reports and is designed to assist agencies in updating their current disaster plans:
When a Foreseeable Disaster is Imminent
FedEx a tape of the latest database to the company system’s data center.
Consider e-mail and automatic call outs to customers with emergency contact information.
Staff should complete processing of all work that is outstanding, especially for Matters relating to a disaster.
Make sure all needed lists are updated in paper form as well as exported to a laptop and portable storage device. Tight security is imperative.
Make sure all employees know their assignments and have made clear how they can be reached in emergency.
If possible, load your company system application onto a laptop along with your latest data file for instant access. Take all security precautions to protect your data.
If you utilize an online data backup service, upload to them if possible.
Wrap and label all employee work to be done to protect it.
Take reasonable steps to protect all equipment.
Redirect your phone numbers before the disaster.
Disconnect all electrical equipment from the wall.
If destruction of file server is imminent, consider taking the server with you if you know how to disconnect it and handle it safely.
Shut off water and gas lines.
Have needed provisions on hand, including enough cash for a few weeks.
Needed Provisions
Fans, extension cords, batteries, flashlights, battery-powered lamps and radios and low heat, low-energy lighting available to use with your generator.
Sufficient bottled water to handle employees’ and customers’ needs for two weeks.
Canned or dry food goods that do not require refrigeration or cooking, as well as beverages and snacks for employees and customers.
Can openers, paper/plastic utensils, plates and cups, trash bags, bleach, paper towels and cleaning supplies, and hand wipes.
First aid supplies and blankets.
Matches, barbeque grill, fuel for grill.
Customers’ and Employees’ Special Needs in Disaster Aftermath
Be aware there will be significant emotional and psychological effects after major events.
Provide drinks and food.
Staff should caucus each day to adjust response as necessary.
Supplier Issues
Understand in advance each of your supplier's CAT plans, the local presence they will have and how they will permit you to contact them efficiently.
Seek draft authority or methods to provide customers with emergency funds immediately.
Wednesday, August 09, 2006
Wednesday, July 12, 2006
U.S. SUPREME COURT EXPANDS TITLE VII’S ANTI-RETALIATION PROVISION
Burlington N. & S. F. R. Co. v. White, 2006 WL 1698953 (U.S. June 22, 2006)
Facts of Burlington N. & S. F. R. Co. v. White
Marvin Brown (“Brown”), a manager for Burlington Northern & Santa Fe Railway Company (“Burlington”), hired Sheila White (“White”) in June 1997 to work as a “track laborer.” White was the only woman working in the Maintenance of Way department. White’s primary responsibility was operating a forklift; however, she also performed some of the track laborer tasks.
In September of 1997, White reported to Burlington officials that Bill Joiner (“Joiner”), her immediate supervisor, had repeatedly told her that women should not be working in the Maintenance of Way department and also made insulting and inappropriate remarks to her in front of other colleagues. After Burlington conducted an internal investigation, Joiner was suspended for 10 days and required to attend a sexual-harassment training. Brown then reassigned White to standard track laborer tasks and completely removed her from forklift duty.
White filed a complaint with the Equal Employment Opportunity Commission (“EEOC”) claiming her reassignment amounted to gender-discrimination and retaliation for her complaint against Joiner. In December, White filed another complaint with the EEOC claiming that Brown had placed her under surveillance, constantly monitoring her daily activities.
A few days after filing the December complaint, White and her supervisor, Percy Sharkey (“Sharkey”) had a disagreement. Sharkey claimed to Brown that White had been insubordinate. Brown suspended White without pay causing White to prompt internal grievance procedures, which eventually led Burlington to conclude White had not been insubordinate. White was reinstated, with 37 days backpay for the time she was suspended. She then filed another EEOC charge for retaliation, based on the suspension.
A jury found in White’s favor awarding her $43,500 in damages for her claims of unlawful retaliation. Burlington appealed arguing White did not suffer any harm from these acts of retaliation since she received backpay. The Sixth Circuit heard the matter en banc and affirmed the District Court’s judgment for White. The U.S. Supreme Court granted certiorari to resolve a deviation in the Circuit Courts as to whether Title VII’s anti-retaliation provision forbids only those employer actions and resulting harms that are related to employment in the workplace.
The Ruling
The Supreme Court held that the anti-retaliation provision of Title VII extends beyond workplace related or employment related retaliatory acts and harm. This conclusion was based on several factors. First the court found the language in the anti-retaliation provision of Title VII does not include limiting words such as “hire,” “discharge,” “compensation, terms, conditions, or privileges” as the other provisions in the Act include.
Second the Court found that an employer can retaliate against an employee with actions not directly related to employment and can cause harm outside the workplace: such as in Rochon v. Gonzales, 438 F.3d, at 1213, where the FBI refused to investigate death threats from a federal prisoner made against the agent and his family. Last, the Court agreed with the EEOC manuals stating that a broad interpretation of the anti-retaliation provision is intended to provide exceptionally broad protection to employees who protest discriminatory employment practices.
The Court limited the scope of the Title VII provision, saying it does not protect an individual from all retaliation, but only retaliation that produces injury or harm. They also adopted a rule saying a plaintiff must show that a reasonable employee would have found the challenged action materially adverse.
Ultimately the court affirmed, finding in favor of White and saying that suspension without pay could act as a deterrent to filing a complaint, which is against the primary objective of the Title VII
Analysis
Title VII has always prohibited employers from retaliating against an employee for making a legitimate claim of discrimination. The Burlington decision makes it crystal clear that the protections are even more broad than many employers believed including that employers should not suspend reporters of wrongdoing without pay, even when their claim is being investigated, and that employers should make certain that the pay and job functions of such employees remain the same or nearly the same.
The Burlington decision may place some employers between a “rock and a hard place.” In Burlington the Court had the privilege of Burlington’s internal investigation where it was determined that the harassment did occur, and the actions of the Burlington supervisors gave every appearance of being retaliatory. Unfortunately, not all complaints of retaliation are so “cut and dried.”
A concern is what to do when an investigation is non-conclusive, finding no evidence to prove or disprove the accusation. In the past, a “best practice” was to separate the accuser and the accused to avoid a claim of retaliation.
After Burlington, many employers must now choose to keep accuser and accused together, increasing the likelihood of more issues arising, especially if the accused manages the accuser, or transfer one of the parties to a different, but like position. Simply transferring an employee to a different position no longer appears to be an option.
Checklist
To prevent a Burlington dilemma, employers should keep in mind the following suggestions:
Develop policies and procedures protecting employees who file discrimination complaints from materially adverse actions both inside and outside of the workplace.
Train all supervisors on what can amount to adverse actions against an employee.
Follow all the policies and procedures thoroughly and investigate claims of discrimination fairly without taking any adverse action against the employee making the complaint.
Continue to pay the accuser and the accused during an investigation of a claim.
Make certain that human resources and your legal counsel approve any transfer of an employee who has made a claim of wrongdoing.
If transferring one of the parties becomes necessary, make certain that the transferred employee receives the same pay and benefits and has similar job duties and expectations as required in his or her previous position.
Continually check with all parties of an accusation to make certain that retaliation is not occurring after the matter is resolved.
Facts of Burlington N. & S. F. R. Co. v. White
Marvin Brown (“Brown”), a manager for Burlington Northern & Santa Fe Railway Company (“Burlington”), hired Sheila White (“White”) in June 1997 to work as a “track laborer.” White was the only woman working in the Maintenance of Way department. White’s primary responsibility was operating a forklift; however, she also performed some of the track laborer tasks.
In September of 1997, White reported to Burlington officials that Bill Joiner (“Joiner”), her immediate supervisor, had repeatedly told her that women should not be working in the Maintenance of Way department and also made insulting and inappropriate remarks to her in front of other colleagues. After Burlington conducted an internal investigation, Joiner was suspended for 10 days and required to attend a sexual-harassment training. Brown then reassigned White to standard track laborer tasks and completely removed her from forklift duty.
White filed a complaint with the Equal Employment Opportunity Commission (“EEOC”) claiming her reassignment amounted to gender-discrimination and retaliation for her complaint against Joiner. In December, White filed another complaint with the EEOC claiming that Brown had placed her under surveillance, constantly monitoring her daily activities.
A few days after filing the December complaint, White and her supervisor, Percy Sharkey (“Sharkey”) had a disagreement. Sharkey claimed to Brown that White had been insubordinate. Brown suspended White without pay causing White to prompt internal grievance procedures, which eventually led Burlington to conclude White had not been insubordinate. White was reinstated, with 37 days backpay for the time she was suspended. She then filed another EEOC charge for retaliation, based on the suspension.
A jury found in White’s favor awarding her $43,500 in damages for her claims of unlawful retaliation. Burlington appealed arguing White did not suffer any harm from these acts of retaliation since she received backpay. The Sixth Circuit heard the matter en banc and affirmed the District Court’s judgment for White. The U.S. Supreme Court granted certiorari to resolve a deviation in the Circuit Courts as to whether Title VII’s anti-retaliation provision forbids only those employer actions and resulting harms that are related to employment in the workplace.
The Ruling
The Supreme Court held that the anti-retaliation provision of Title VII extends beyond workplace related or employment related retaliatory acts and harm. This conclusion was based on several factors. First the court found the language in the anti-retaliation provision of Title VII does not include limiting words such as “hire,” “discharge,” “compensation, terms, conditions, or privileges” as the other provisions in the Act include.
Second the Court found that an employer can retaliate against an employee with actions not directly related to employment and can cause harm outside the workplace: such as in Rochon v. Gonzales, 438 F.3d, at 1213, where the FBI refused to investigate death threats from a federal prisoner made against the agent and his family. Last, the Court agreed with the EEOC manuals stating that a broad interpretation of the anti-retaliation provision is intended to provide exceptionally broad protection to employees who protest discriminatory employment practices.
The Court limited the scope of the Title VII provision, saying it does not protect an individual from all retaliation, but only retaliation that produces injury or harm. They also adopted a rule saying a plaintiff must show that a reasonable employee would have found the challenged action materially adverse.
Ultimately the court affirmed, finding in favor of White and saying that suspension without pay could act as a deterrent to filing a complaint, which is against the primary objective of the Title VII
Analysis
Title VII has always prohibited employers from retaliating against an employee for making a legitimate claim of discrimination. The Burlington decision makes it crystal clear that the protections are even more broad than many employers believed including that employers should not suspend reporters of wrongdoing without pay, even when their claim is being investigated, and that employers should make certain that the pay and job functions of such employees remain the same or nearly the same.
The Burlington decision may place some employers between a “rock and a hard place.” In Burlington the Court had the privilege of Burlington’s internal investigation where it was determined that the harassment did occur, and the actions of the Burlington supervisors gave every appearance of being retaliatory. Unfortunately, not all complaints of retaliation are so “cut and dried.”
A concern is what to do when an investigation is non-conclusive, finding no evidence to prove or disprove the accusation. In the past, a “best practice” was to separate the accuser and the accused to avoid a claim of retaliation.
After Burlington, many employers must now choose to keep accuser and accused together, increasing the likelihood of more issues arising, especially if the accused manages the accuser, or transfer one of the parties to a different, but like position. Simply transferring an employee to a different position no longer appears to be an option.
Checklist
To prevent a Burlington dilemma, employers should keep in mind the following suggestions:
Develop policies and procedures protecting employees who file discrimination complaints from materially adverse actions both inside and outside of the workplace.
Train all supervisors on what can amount to adverse actions against an employee.
Follow all the policies and procedures thoroughly and investigate claims of discrimination fairly without taking any adverse action against the employee making the complaint.
Continue to pay the accuser and the accused during an investigation of a claim.
Make certain that human resources and your legal counsel approve any transfer of an employee who has made a claim of wrongdoing.
If transferring one of the parties becomes necessary, make certain that the transferred employee receives the same pay and benefits and has similar job duties and expectations as required in his or her previous position.
Continually check with all parties of an accusation to make certain that retaliation is not occurring after the matter is resolved.
Tuesday, July 11, 2006
Phishers Hooking Employers for $2 Billion Each Year
The Federal Trade Commission (FTC) estimates that thieves posing as legitimate businesses send 75-150 million fake emails daily, a practice is known as “phishing.” These scam artists are looking for financial and personal information that will allow them to steal the identity and money of their victims. Candace Heckman, “Phishing finds victims even among savvy computer users,” seattlepi.nwsource.com (May 1, 2006).
Claiming to represent a legitimate business such as a bank or the IRS, the phisher sends out emails asking the reader to follow a hyperlink to update or verify his or her personal information. If the person receiving the email clicks on the link but never submits any information, the phisher may still be able to capture important data from the victim’s computer.
The FTC claimed that in 2005, consumers lost $929 million to these cons, and businesses suffered losses of $2 billion.
Phishers are not only after the financial information of individuals; the FTC numbers reveal that they are successful in obtaining financial information from businesses as well…$2 billion in losses for 2005 alone.
Any person in charge of an organization’s financial accounts and any person in charge of employee social security numbers are possible targets.
Beware of any email requesting updated financial information. These requests will often appear to come from sites with which you do business, including your financial institutions, and will create the “look and feel” of your institution’s website by incorporating their colors, logos. and disclosure information.
The best method to stop phishing from impacting you is to never respond to emails requesting financial information about you, your organization, or your employees.
When you receive emails asking for such information, do not open the email or any attachment; instead, forward it unopened to a representative of the institution it is reputed to be from and ask if the email is legitimate.
Claiming to represent a legitimate business such as a bank or the IRS, the phisher sends out emails asking the reader to follow a hyperlink to update or verify his or her personal information. If the person receiving the email clicks on the link but never submits any information, the phisher may still be able to capture important data from the victim’s computer.
The FTC claimed that in 2005, consumers lost $929 million to these cons, and businesses suffered losses of $2 billion.
Phishers are not only after the financial information of individuals; the FTC numbers reveal that they are successful in obtaining financial information from businesses as well…$2 billion in losses for 2005 alone.
Any person in charge of an organization’s financial accounts and any person in charge of employee social security numbers are possible targets.
Beware of any email requesting updated financial information. These requests will often appear to come from sites with which you do business, including your financial institutions, and will create the “look and feel” of your institution’s website by incorporating their colors, logos. and disclosure information.
The best method to stop phishing from impacting you is to never respond to emails requesting financial information about you, your organization, or your employees.
When you receive emails asking for such information, do not open the email or any attachment; instead, forward it unopened to a representative of the institution it is reputed to be from and ask if the email is legitimate.
US Hurricanes may wipe out 20-40 Insurers
By Ed Leefeldt - NEW YORK, June 1 (Reuters) - The U.S. hurricane season kicked off Thursday with another gloomy prediction: major storms could cause $100 billion worth of property loss, and wipe out 20 to 40 insurers.
With a booming coastal population and high-priced real estate, "this is not far down the road," said John Williams, an author of the report at A.M. Best Co., a leading rating agency for insurers.
For 3 to 7 percent of insurers exposed to the catastrophe, that could spell disaster, Williams said. Likely to fail are thinly capitalized property casualty carriers that are low-rated at Best, along with some firms not rated at all.
"This will take a bigger bite out of the industry than the 1906 San Francisco earthquake," Williams said.
Insurance costs from last year's major catastrophes, or "megacats" -- Hurricanes Katrina, Rita and Wilma -- have already reached $58 billion, with some claims still in court. In addition, federal aid to rebuild areas such as New Orleans, which was flooded by Katrina, will top $100 billion, Best said.
With population expansion in vulnerable areas and soaring real estate values, catastrophe losses are likely to double every 10 years, according to hurricane modelers. In Florida, which has seen five major hurricanes in the past two years, four insurers have already failed, according to Best.
When insurers are no longer around to answer the phone, the burden falls to the state, which sets up a claims fund and forces solvent insurers to pay the costs. But settlements are slow, particularly after a catastrophe like Katrina has damaged the infrastructure, Williams said.
Insurers are also running from areas where storm damage is likely to be the worst. American International Group Inc. (AIG.N:), the world's largest insurer, is declining to write new property policies in areas of the Gulf Coast, while Allstate Corp. (ALL.N:), the U.S.'s second-largest home insurer, is limiting exposure in areas as far north as New York.
While no one knows where hurricanes will hit this year or in the future, they are almost certain to arrive, fueled by warmer than usual water temperatures and new wind patterns in the Atlantic, forecasters said.
Professor Mark Saunders, head of the British-based Tropical Storm Risk Venture, which plots storms, is expecting two major storms to hit U.S. coastal areas during the hurricane season, which runs for six months through November.
These megacats won't be confined to the Gulf Coast, which has seen the worst of the recent storms. "The specter of a hurricane hitting a major Northeast population center is hardly the stuff of Hollywood fantasy," warned Wendy Baker, president of Lloyd's America, a unit of the insurance syndicate, in a speech on Thursday.
Six of the 10 costliest storms in U.S. history have occurred within the 14 months of the 2004-2005 hurricane season. While 2006 isn't expected to suffer the megacats of 2005, it will be part of a pattern that has seen the most devastating pattern of hurricanes since 1900, said Saunders.
On Wednesday William Gray and his Colorado State University forecasting team repeated their prediction that the 2006 season would produce nine hurricanes, five of which would be major storms with winds over 110 miles her hour.
The National Oceanic and Atmospheric Administration expects eight to 10 hurricanes, with four to six of them major. Saunders' group is the lowest, looking for about eight hurricanes, more than three of them severe. © Reuters 2006. All Rights Reserved.
With a booming coastal population and high-priced real estate, "this is not far down the road," said John Williams, an author of the report at A.M. Best Co., a leading rating agency for insurers.
For 3 to 7 percent of insurers exposed to the catastrophe, that could spell disaster, Williams said. Likely to fail are thinly capitalized property casualty carriers that are low-rated at Best, along with some firms not rated at all.
"This will take a bigger bite out of the industry than the 1906 San Francisco earthquake," Williams said.
Insurance costs from last year's major catastrophes, or "megacats" -- Hurricanes Katrina, Rita and Wilma -- have already reached $58 billion, with some claims still in court. In addition, federal aid to rebuild areas such as New Orleans, which was flooded by Katrina, will top $100 billion, Best said.
With population expansion in vulnerable areas and soaring real estate values, catastrophe losses are likely to double every 10 years, according to hurricane modelers. In Florida, which has seen five major hurricanes in the past two years, four insurers have already failed, according to Best.
When insurers are no longer around to answer the phone, the burden falls to the state, which sets up a claims fund and forces solvent insurers to pay the costs. But settlements are slow, particularly after a catastrophe like Katrina has damaged the infrastructure, Williams said.
Insurers are also running from areas where storm damage is likely to be the worst. American International Group Inc. (AIG.N:), the world's largest insurer, is declining to write new property policies in areas of the Gulf Coast, while Allstate Corp. (ALL.N:), the U.S.'s second-largest home insurer, is limiting exposure in areas as far north as New York.
While no one knows where hurricanes will hit this year or in the future, they are almost certain to arrive, fueled by warmer than usual water temperatures and new wind patterns in the Atlantic, forecasters said.
Professor Mark Saunders, head of the British-based Tropical Storm Risk Venture, which plots storms, is expecting two major storms to hit U.S. coastal areas during the hurricane season, which runs for six months through November.
These megacats won't be confined to the Gulf Coast, which has seen the worst of the recent storms. "The specter of a hurricane hitting a major Northeast population center is hardly the stuff of Hollywood fantasy," warned Wendy Baker, president of Lloyd's America, a unit of the insurance syndicate, in a speech on Thursday.
Six of the 10 costliest storms in U.S. history have occurred within the 14 months of the 2004-2005 hurricane season. While 2006 isn't expected to suffer the megacats of 2005, it will be part of a pattern that has seen the most devastating pattern of hurricanes since 1900, said Saunders.
On Wednesday William Gray and his Colorado State University forecasting team repeated their prediction that the 2006 season would produce nine hurricanes, five of which would be major storms with winds over 110 miles her hour.
The National Oceanic and Atmospheric Administration expects eight to 10 hurricanes, with four to six of them major. Saunders' group is the lowest, looking for about eight hurricanes, more than three of them severe. © Reuters 2006. All Rights Reserved.
Monday, July 10, 2006
Workplace bullies may be next on Insurer's Watchlist
From the playground to the classroom to the office -- bullies can be found in all walks of life, but new anti-harassment legislation in some states could put an end to bullying in the workplace that can be costly for employers.
"We define bullying as strictly repeated health harming mistreatment," Dr. Gary Namie of the Workplace Bullying and Trauma Institute, an advocacy group that supports anti-bullying legislation, told Ortega-Wells of the Insurance Journal. Namie and his organization have supported anti-bullying legislation, or the "Healthy Workplace Bill," since the first bill was introduced in California in 2003. He says bullying in the workplace "undermines legitimate business interests."
While bullying is not currently a protected category under harassment law, Johan Lubbe, a partner at Jackson Lewis LLP law firm, says bullying is likely the next "evolutionary" step in harassment law. He advises businesses to understand what workplace bullying conduct is and to develop preventative strategies that prohibit such conduct in the work environment.
Coverage for bullying claims may already exist under some employment practices liability policies, according to Gregg Draddy, assistant vice president of employment practices liability at The Hartford. Draddy says "there are issues around bullying/harassment that are covered, whether it's under other workplace harassment, infliction of emotional distress, or other areas that are covered under wrongful acts under EPLI policies."
Robert Cap, associate product manager for EPLI and nonprofit D&O, at Shand Morahan, a part of the Markel Corp. Group, argues that the problem in coverage for workplace bullying "is that if the allegation was simply one of workplace bullying, it's hard to do that negligently -- it's really an intentional act."
That's precisely why anti-bullying legislation is needed, says WBTI's Namie.
Source: The Insurance Journal
"We define bullying as strictly repeated health harming mistreatment," Dr. Gary Namie of the Workplace Bullying and Trauma Institute, an advocacy group that supports anti-bullying legislation, told Ortega-Wells of the Insurance Journal. Namie and his organization have supported anti-bullying legislation, or the "Healthy Workplace Bill," since the first bill was introduced in California in 2003. He says bullying in the workplace "undermines legitimate business interests."
While bullying is not currently a protected category under harassment law, Johan Lubbe, a partner at Jackson Lewis LLP law firm, says bullying is likely the next "evolutionary" step in harassment law. He advises businesses to understand what workplace bullying conduct is and to develop preventative strategies that prohibit such conduct in the work environment.
Coverage for bullying claims may already exist under some employment practices liability policies, according to Gregg Draddy, assistant vice president of employment practices liability at The Hartford. Draddy says "there are issues around bullying/harassment that are covered, whether it's under other workplace harassment, infliction of emotional distress, or other areas that are covered under wrongful acts under EPLI policies."
Robert Cap, associate product manager for EPLI and nonprofit D&O, at Shand Morahan, a part of the Markel Corp. Group, argues that the problem in coverage for workplace bullying "is that if the allegation was simply one of workplace bullying, it's hard to do that negligently -- it's really an intentional act."
That's precisely why anti-bullying legislation is needed, says WBTI's Namie.
Source: The Insurance Journal
Friday, July 07, 2006
Bloggers -- Are you at risk?
The most popular new form of expression may soon become the most dangerous. Weblogs, or “blogs,” as they are called, combine the immediacy of a diary with the gloss of an online magazine, creating a potent brew of reportage, opinion, and gossip. With blog-hosting services like Blogspot available for free, nearly anyone can become a journalist. And therein lies the problem.
According to USA Today, blogs and “bloggers” are “rewriting rules of journalism.” With little editorial oversight, and no pretense at objectivity, bloggers have aggressively pursued certain stories that were initially ignored by the mainstream media. As noted by USA Today, bloggers hounded Senate Majority Leader Trent Lott who remarked, at the birthday party of Senator Strom Thurmond, “that the nation might have been better off had Thurmond won his segregationist campaign for president in 1948,” which led Lott to resign his leadership post. Elsewhere, bloggers disclosed that CBS had relied on forged documents in its exposé of President Bush’s National Guard service, leading to the resignation of an award-winning CBS producer and widespread criticism of Dan Rather.
To paraphrase P.T. Barnum, a blog is born every second. There are millions of blogs, devoted to thousands of topics, from cross-country running to gourmet cooking to energy conservation. According to Technocratic, a search engine that indexes blogs, there are over 35 million blogs, 75,000 new blogs are created every day, and blog traffic continues to double every six months. Most blogs require no knowledge of the complicated protocols of web design — just a keyboard and a dream. Once posted, a blog is instantly accessible to anyone on the Internet. Some of the best-known blogs receive a million or more individual page “hits” each month.
But media experts worry about the dangers blogs pose. “The biggest risk is that there isn’t the normal vetting process,” says Kelly Sager, a Los Angeles media lawyer and partner in the law firm Davis, Wright & Tremaine. A reporter who blogs on his own time may nonetheless expose his employer to unanticipated liabilities. For example, an injured plaintiff might claim that the employer is liable for any damaging statements made by the reporter on his blog. The blog might provide evidence of “actual malice” — a critical element of many libel cases — because the reporter is likely to be less guarded about his statements. The disclosure of information on a blog that is not published elsewhere might waive the privilege journalists normally have not to disclose information they learn in the course of their reporting. In short, according to attorney Sager, blogging puts the reporter in the position of “making decisions about content that the publisher might not make.”
And the issue is not limited to publishing companies. Many non-media companies allow or even encourage employees to maintain blogs. Although few cases have been brought against blogs and bloggers to date, Sager says there has been a great deal of discussion and concern among media lawyers. While companies have begun to embrace blogs, recognizing that it provides another forum for news and information — and appeals especially to a younger demographic — they have been slower in recognizing the associated risks. Many employers may be surprised to learn that their employees’ activities — even if done on their own time — could subject them to liability. Others may not realize that claims arising from blogging may not be covered under traditional insurance policies. One thing however is certain: as blogs proliferate, claims against them will inevitably follow.
According to USA Today, blogs and “bloggers” are “rewriting rules of journalism.” With little editorial oversight, and no pretense at objectivity, bloggers have aggressively pursued certain stories that were initially ignored by the mainstream media. As noted by USA Today, bloggers hounded Senate Majority Leader Trent Lott who remarked, at the birthday party of Senator Strom Thurmond, “that the nation might have been better off had Thurmond won his segregationist campaign for president in 1948,” which led Lott to resign his leadership post. Elsewhere, bloggers disclosed that CBS had relied on forged documents in its exposé of President Bush’s National Guard service, leading to the resignation of an award-winning CBS producer and widespread criticism of Dan Rather.
To paraphrase P.T. Barnum, a blog is born every second. There are millions of blogs, devoted to thousands of topics, from cross-country running to gourmet cooking to energy conservation. According to Technocratic, a search engine that indexes blogs, there are over 35 million blogs, 75,000 new blogs are created every day, and blog traffic continues to double every six months. Most blogs require no knowledge of the complicated protocols of web design — just a keyboard and a dream. Once posted, a blog is instantly accessible to anyone on the Internet. Some of the best-known blogs receive a million or more individual page “hits” each month.
But media experts worry about the dangers blogs pose. “The biggest risk is that there isn’t the normal vetting process,” says Kelly Sager, a Los Angeles media lawyer and partner in the law firm Davis, Wright & Tremaine. A reporter who blogs on his own time may nonetheless expose his employer to unanticipated liabilities. For example, an injured plaintiff might claim that the employer is liable for any damaging statements made by the reporter on his blog. The blog might provide evidence of “actual malice” — a critical element of many libel cases — because the reporter is likely to be less guarded about his statements. The disclosure of information on a blog that is not published elsewhere might waive the privilege journalists normally have not to disclose information they learn in the course of their reporting. In short, according to attorney Sager, blogging puts the reporter in the position of “making decisions about content that the publisher might not make.”
And the issue is not limited to publishing companies. Many non-media companies allow or even encourage employees to maintain blogs. Although few cases have been brought against blogs and bloggers to date, Sager says there has been a great deal of discussion and concern among media lawyers. While companies have begun to embrace blogs, recognizing that it provides another forum for news and information — and appeals especially to a younger demographic — they have been slower in recognizing the associated risks. Many employers may be surprised to learn that their employees’ activities — even if done on their own time — could subject them to liability. Others may not realize that claims arising from blogging may not be covered under traditional insurance policies. One thing however is certain: as blogs proliferate, claims against them will inevitably follow.
Wednesday, July 05, 2006
DOL Expands, Simplifies Voluntary Fiduciary Correction Plan
The Department of Labor (DOL) recently finalized and expanded revisions to the Voluntary Fiduciary Correction Program (VFCP). The VFCP is designed to encourage voluntary corrections of fiduciary violations of ERISA by describing how to apply for relief, listing the specific transactions covered, and providing acceptable methods for correcting violations.
To take advantage of the VFCP, an applicant cannot be under investigation by DOL or any federal agency in connection with a plan transaction. If an applicant is not under investigation, the applicant may apply for relief under the VFCP by identifying fiduciary violations and determining whether the violations fall within the transactions covered by the program.
Next, an applicant must follow the program’s procedures for correcting the violations. Generally, a VFCP applicant corrects a violation by: (1) conducting valuations of plan assets; (2) restoring the plan, its participants and its beneficiaries to the condition they would have been in if the breach had not occurred; (3) paying the expenses associated with correcting transactions; and (4) making supplemental distributions when appropriate to former employees, beneficiaries, or alternate payees. Finally, an applicant must file an application with the appropriate Employee Benefits Security Administration (EBSA) regional office.
An applicant that satisfies the criteria and complies with the procedures set forth in the VFCP receives a “no-action” letter from EBSA and is not subject to certain civil and monetary penalties. The VFCP also includes a prohibited transaction exemption (PTE) that provides relief from excise taxes imposed under the Internal Revenue Code for certain transactions covered by the VFCP.
In 2005, DOL proposed revisions to the VFCP that include, among other things, the adoption of a model application form, a reduction in the documentation required from an applicant, and simplification of the calculations needed to determine lost earnings or profits to be restored to a plan. The final 2006 revision adopts many of the 2005 proposed revisions and makes some notable changes. Among the changes are an expansion of the program to provide relief under ERISA Section 502(i) and (1) (which generally apply to welfare plans and nonqualified pension plans), the addition of a new covered transaction for expenses improperly paid by a plan because they were either “settlor” expenses or because a plan’s terms require the sponsor to pay the expenses out of its own funds, and a more narrow definition of when a plan is considered “under investigation.” In addition, DOL expanded the PTE that is part of the VFCP to include two additional covered transactions.
The 2006 revisions to the VFCP are effective May 19, 2006. Notice of the 2006 revisions to the VFCP Update can be found in the April 19, 2006 Federal Register
To take advantage of the VFCP, an applicant cannot be under investigation by DOL or any federal agency in connection with a plan transaction. If an applicant is not under investigation, the applicant may apply for relief under the VFCP by identifying fiduciary violations and determining whether the violations fall within the transactions covered by the program.
Next, an applicant must follow the program’s procedures for correcting the violations. Generally, a VFCP applicant corrects a violation by: (1) conducting valuations of plan assets; (2) restoring the plan, its participants and its beneficiaries to the condition they would have been in if the breach had not occurred; (3) paying the expenses associated with correcting transactions; and (4) making supplemental distributions when appropriate to former employees, beneficiaries, or alternate payees. Finally, an applicant must file an application with the appropriate Employee Benefits Security Administration (EBSA) regional office.
An applicant that satisfies the criteria and complies with the procedures set forth in the VFCP receives a “no-action” letter from EBSA and is not subject to certain civil and monetary penalties. The VFCP also includes a prohibited transaction exemption (PTE) that provides relief from excise taxes imposed under the Internal Revenue Code for certain transactions covered by the VFCP.
In 2005, DOL proposed revisions to the VFCP that include, among other things, the adoption of a model application form, a reduction in the documentation required from an applicant, and simplification of the calculations needed to determine lost earnings or profits to be restored to a plan. The final 2006 revision adopts many of the 2005 proposed revisions and makes some notable changes. Among the changes are an expansion of the program to provide relief under ERISA Section 502(i) and (1) (which generally apply to welfare plans and nonqualified pension plans), the addition of a new covered transaction for expenses improperly paid by a plan because they were either “settlor” expenses or because a plan’s terms require the sponsor to pay the expenses out of its own funds, and a more narrow definition of when a plan is considered “under investigation.” In addition, DOL expanded the PTE that is part of the VFCP to include two additional covered transactions.
The 2006 revisions to the VFCP are effective May 19, 2006. Notice of the 2006 revisions to the VFCP Update can be found in the April 19, 2006 Federal Register
Interesting facts
Interesting facts:
43% of all people age 40 will have a long-term disability event prior to 65.
64% of disabilities occur off the job and are not covered by workers compensation
48% of all mortgage foreclosures are the result of disability.
About 1 in 7 people can expect to be disabled for 5 years or more.
Due to medical advances, things that used to kill you now disable you.
43% of all people age 40 will have a long-term disability event prior to 65.
64% of disabilities occur off the job and are not covered by workers compensation
48% of all mortgage foreclosures are the result of disability.
About 1 in 7 people can expect to be disabled for 5 years or more.
Due to medical advances, things that used to kill you now disable you.
Insurance Company CEOs, Concerned About Capacity and Pricing, Stress Underwriting Discipline
Republished from the Insurance Journal, written by Amy Friedman
Although property casualty insurance capacity still exists in some areas in the U.S.'s east coast, the rate at which it is vanishing, especially in coastal areas, as well as the steep prices being offered for available capacity, have industry executives concerned about pricing discipline.
"Someone's going to have to blink soon," said Ted Kelly, chairman, president, and CEO of Liberty Mutual Group Inc.
Property catastrophe capacity was high on the list of concerns for panelists from the property casualty industry at Standard & Poor's Ratings Services' recent annual insurance conference, "Insurance 2006: Rethinking Risk."
Whether insurers price risk properly is a worry. Even though premiums have doubled in the past three to four years, "pricing in primary markets isn't supporting the cost of reinsurance," Kelly said.
Kelly said that reinsurance capacity might still be 20 percent short of demand in the southeastern U.S., and "[p]roblems getting insurance in the Gulf region haven't been settled yet."
Companies "should look at their enterprise risk management, and what kinds of controls management has on currency and hedging," said Martin Sullivan, president and CEO of American International Group Inc., who would also like to see construction codes improved in the Southeast.
Property casualty industry pricing, looking forward, is a huge question mark, and an additional worry for these CEOs. If 2006's hurricane season is benign, pricing discipline will remain, especially in the catastrophe area, Sullivan said.
Kelly, however, was not so sure. "A pricing bloodbath" could ensue if the hurricane season is moderate, he said. "Watch October renewals--they will be the first sign of a lack of discipline," he warned.
The role capital markets now play in maintaining financial strength also had panelists, as well as the moderator, Standard & Poor's credit analyst Thomas Upton, concerned. Although capital to replace what was lost to the catastrophes of 2005 and 2004 was readily available, it might not be if severe catastrophes hit in 2006.
"I was surprised at the ease of which companies recapitalized after Katrina," said Dinos Iordanou, president and CEO of Arch Capital Group Ltd.
Would companies be better off if they had to replenish capital organically rather than going to the capital markets? Opinions were not uniform. Kelly was emphatic about the industry's need for a free flow of capital, but Sullivan said the industry would be tested if the season were active. Iordanou cited that even if a major hurricane does come, $600 billion-$650 billion of surplus still exists in the global marketplace.
Bottom line, underwriting discipline continues to be important.
"Given the legal environment, what we are writing today will be the issue five to seven years down the road," Sullivan said. Surprisingly, the industry has made an underwriting profit only once in the past 25 years--in 2004. "Clearly, there's room for improvement," Sullivan added.
Although property casualty insurance capacity still exists in some areas in the U.S.'s east coast, the rate at which it is vanishing, especially in coastal areas, as well as the steep prices being offered for available capacity, have industry executives concerned about pricing discipline.
"Someone's going to have to blink soon," said Ted Kelly, chairman, president, and CEO of Liberty Mutual Group Inc.
Property catastrophe capacity was high on the list of concerns for panelists from the property casualty industry at Standard & Poor's Ratings Services' recent annual insurance conference, "Insurance 2006: Rethinking Risk."
Whether insurers price risk properly is a worry. Even though premiums have doubled in the past three to four years, "pricing in primary markets isn't supporting the cost of reinsurance," Kelly said.
Kelly said that reinsurance capacity might still be 20 percent short of demand in the southeastern U.S., and "[p]roblems getting insurance in the Gulf region haven't been settled yet."
Companies "should look at their enterprise risk management, and what kinds of controls management has on currency and hedging," said Martin Sullivan, president and CEO of American International Group Inc., who would also like to see construction codes improved in the Southeast.
Property casualty industry pricing, looking forward, is a huge question mark, and an additional worry for these CEOs. If 2006's hurricane season is benign, pricing discipline will remain, especially in the catastrophe area, Sullivan said.
Kelly, however, was not so sure. "A pricing bloodbath" could ensue if the hurricane season is moderate, he said. "Watch October renewals--they will be the first sign of a lack of discipline," he warned.
The role capital markets now play in maintaining financial strength also had panelists, as well as the moderator, Standard & Poor's credit analyst Thomas Upton, concerned. Although capital to replace what was lost to the catastrophes of 2005 and 2004 was readily available, it might not be if severe catastrophes hit in 2006.
"I was surprised at the ease of which companies recapitalized after Katrina," said Dinos Iordanou, president and CEO of Arch Capital Group Ltd.
Would companies be better off if they had to replenish capital organically rather than going to the capital markets? Opinions were not uniform. Kelly was emphatic about the industry's need for a free flow of capital, but Sullivan said the industry would be tested if the season were active. Iordanou cited that even if a major hurricane does come, $600 billion-$650 billion of surplus still exists in the global marketplace.
Bottom line, underwriting discipline continues to be important.
"Given the legal environment, what we are writing today will be the issue five to seven years down the road," Sullivan said. Surprisingly, the industry has made an underwriting profit only once in the past 25 years--in 2004. "Clearly, there's room for improvement," Sullivan added.
Wednesday, June 21, 2006
Survey: Millions of Renters Lack Insurance Coverage
Almost 25 million U.S. families renting their homes are going bare on insurance coverage, leaving themselves vulnerable to serious property and liability losses. Many renters without coverage own valuable, high-tech equipment and face higher risk related to pets, a new national survey conducted by Trusted Choice® finds. Among those respondents who said they don't have renters' insurance, 26 percent feel that the coverage is too expensive and another 17 percent said they didn't know they needed it. Moreover, another 8 percent have never heard of renters' insurance. Coverage for renters is widely available in most parts of the country, with the average annual premium about $20 per month for about $20,000 of property coverage and $500,000 of liability coverage.
Friday, May 26, 2006
Increased Use of Blogs Creates Many New Exposures
For television fans who can't get enough of their favorite shows and characters, the Internet offers an instant fix of backstage gossip and plot extensions: Web logs, or "blogs" as they are called, combine the immediacy of a diary with the gloss of a fan magazine. Producers of many popular television shows have created blogs written by characters in the shows, or by writers and producers about the shows. In doing so they have expanded their audience but created potential new liabilities.
TV blogs give producers a new way to reach out to fans on the Internet. According to an article in the April 5, 2006 issue of USA Today, TV shows are beefing up their blogs to help market their programs in a more community-friendly way, offering eager and younger tech-savvy fans a bonus for being loyal and, in the end, boosting ratings for the shows. Dr. Nigel Townsend's blog on the series Crossing Jordan, for example, has created a story line that will be incorporated into the show later this year, according to USA Today. On other shows, like The Office, characters blog about real-life behind-the-scenes events, dishing on everything from the catering for the show to the clothing worn by fellow actors.
But media law experts worry about the dangers TV blogs pose. "It reminds me of the problems caused by extra material included on DVDs," says Lou Petrich, a partner in the Los Angeles entertainment firm Leopold, Petrich & Smith. Petrich notes that the additional commentary by directors and screenwriters included on DVDs has raised libel, privacy, and copyright claims, and extended the statute of limitations for claims that might otherwise be time-barred. Like DVDs, TV blogs can create or strengthen a copyright claim based on an allegation that material posted on the blog originated elsewhere. Blogs about backstage goings-on could raise privacy and libel issues, as well as potential misappropriation claims if actors are featured in ways beyond the scope of their contracts.
In addition, according to Petrich, because supplemental material is often added as an after-thought, without the usual rounds of legal review and executive supervision, it can include material that is more problematic than what otherwise might appear on a finished show.
Although no cases have been brought to date against producers based on material posted on a TV blog, the risks are significant as the experience with DVDs demonstrate. Any new medium of exploitation creates the potential for new claims. Because of their freewheeling nature, blogs seem particularly ripe for legal exposure. One thing is certain: as blogs proliferate, claims against them will inevitably follow.
Media/Professional Insurance Company is very aware of this development and has a solution. Like all of our media liability insurance policies, the Film and Program Producer Policy can be structured to cover the liabilities associated with this growing exposure. By adding language such as "all websites or blogs authorized by the Insured relating to the production," to the definition of Scheduled Productions on the Declarations Page, coverage will extend to claims arising out of these additional activities. Clients planning to use blogs or other similar devices should advise their Independent Insurance Agent.
TV blogs give producers a new way to reach out to fans on the Internet. According to an article in the April 5, 2006 issue of USA Today, TV shows are beefing up their blogs to help market their programs in a more community-friendly way, offering eager and younger tech-savvy fans a bonus for being loyal and, in the end, boosting ratings for the shows. Dr. Nigel Townsend's blog on the series Crossing Jordan, for example, has created a story line that will be incorporated into the show later this year, according to USA Today. On other shows, like The Office, characters blog about real-life behind-the-scenes events, dishing on everything from the catering for the show to the clothing worn by fellow actors.
But media law experts worry about the dangers TV blogs pose. "It reminds me of the problems caused by extra material included on DVDs," says Lou Petrich, a partner in the Los Angeles entertainment firm Leopold, Petrich & Smith. Petrich notes that the additional commentary by directors and screenwriters included on DVDs has raised libel, privacy, and copyright claims, and extended the statute of limitations for claims that might otherwise be time-barred. Like DVDs, TV blogs can create or strengthen a copyright claim based on an allegation that material posted on the blog originated elsewhere. Blogs about backstage goings-on could raise privacy and libel issues, as well as potential misappropriation claims if actors are featured in ways beyond the scope of their contracts.
In addition, according to Petrich, because supplemental material is often added as an after-thought, without the usual rounds of legal review and executive supervision, it can include material that is more problematic than what otherwise might appear on a finished show.
Although no cases have been brought to date against producers based on material posted on a TV blog, the risks are significant as the experience with DVDs demonstrate. Any new medium of exploitation creates the potential for new claims. Because of their freewheeling nature, blogs seem particularly ripe for legal exposure. One thing is certain: as blogs proliferate, claims against them will inevitably follow.
Media/Professional Insurance Company is very aware of this development and has a solution. Like all of our media liability insurance policies, the Film and Program Producer Policy can be structured to cover the liabilities associated with this growing exposure. By adding language such as "all websites or blogs authorized by the Insured relating to the production," to the definition of Scheduled Productions on the Declarations Page, coverage will extend to claims arising out of these additional activities. Clients planning to use blogs or other similar devices should advise their Independent Insurance Agent.
Tuesday, May 23, 2006
California Law Mandates Sexual Harassment Training
California employment law now mandates that all employers with 50 or more employees provide two hours of sexual harassment training for supervisory employees. Newly enhanced sexual harassment training modules present managers and supervisors with scenarios and basic employment law principles including application of California state law. These modules are available through certain Independent Insurance Agents such as the McLaughlin Company. Over 40% of claims made under a Union Liability Policy are related to employment related practices. Don’t be caught uninsured. Contact info@mclaughlin-online.com
26 Million Veteran's Personal Information Stolen
Last June, we wrote our clients identifying a substantial risk to their organization. This risk is generally not covered by a Commercial Liability Policy, but is covered by the policy The McLaughlin Company developed -- the Union Liability Policy to protect Unions and individuals engaged in Union activities. Typically those exposures arise from the Landrum Griffin and Taft-Hartley Acts, which permit union members to sue union leaders for alleged misconduct.
Last June, we explained there was a new risk making the headlines that made it imperative that a labor organization consider Union Liability Coverage.
This risk was exposure to Unions and Union Officers due to Identify theft of the Union’s database of personal information on its members. The McLaughlin Company foresaw claims and lawsuits arising out of this exposure.
Today's headlines bring this issue to the forefront. No matter how many steps an organization takes to protect its member's information the simple act of bringing a disc or a laptop home can lead to a disaster.
If you don't have this protection contact us at info@mclaughlin-online.com
Last June, we explained there was a new risk making the headlines that made it imperative that a labor organization consider Union Liability Coverage.
This risk was exposure to Unions and Union Officers due to Identify theft of the Union’s database of personal information on its members. The McLaughlin Company foresaw claims and lawsuits arising out of this exposure.
Today's headlines bring this issue to the forefront. No matter how many steps an organization takes to protect its member's information the simple act of bringing a disc or a laptop home can lead to a disaster.
If you don't have this protection contact us at info@mclaughlin-online.com
Monday, May 01, 2006
Expect a Wild Ride
Oil prices are going through the roof, but in Bermuda and London a wilder ride is expected as the 2006 season treaty renewal season begins for reinsurance. Some companies are pulling back while others are ratcheting up business in America.
Bermuda companies lost over $2.8 billion in catastrophe losses last year. So what happens, over $18.4 billion in new capital from investors has entered the reinsurance market hoping to capitalize on rising reinsurance rates.
What does it all mean to you the insurance buyer. No one knows for sure, but this sage predicts reduced premiums for fiduciary and human failure risks, and increased premiums on the casualty side especially in coastal states.
We will see.
Bermuda companies lost over $2.8 billion in catastrophe losses last year. So what happens, over $18.4 billion in new capital from investors has entered the reinsurance market hoping to capitalize on rising reinsurance rates.
What does it all mean to you the insurance buyer. No one knows for sure, but this sage predicts reduced premiums for fiduciary and human failure risks, and increased premiums on the casualty side especially in coastal states.
We will see.
Monday, March 13, 2006
Trustees “First Do None Harm.”
Despite repeated warnings from the DOL, SEC and other regulators, professional fund consultants persist in trying to provide multiple and conflicting services including procurement of regulated products (i.e. securities, mutual funds, insurance, etc.) as part of a “total package of services” or as an “accommodation.”
If this pitch persuades your fund to hire one of these consultants, then at a minimum a "prudent trustee" must:
1. Find out if the consultant is receiving a commission (both an up front commission and/or eligible for a contingent commission) from any vendor. Is such an arrangement inconsistent with your contract with the consultant?
2. Receive a copy of the individual consultant's license to sell any regulated product for the relevant jurisdiction. Do not accept the statement, “that we run it through our ________ office.” Ask, “is your company licensed to sell this product in our state.” Obtain a copy of the license.
3. Review the consultant's professional negligence policy to make sure it covers the sale of regulated products such as securities, mutual funds, insurance, etc., not just professional errors and omissions. Check with your Fund’s fiduciary carrier whether the proposed arrangement creates additional risk. Even if the arrangement is covered, it may be and is perhaps costing the Fund more in the way of additional premium.
4. Most importantly, obtain from the consultant a hold harmless agreement that protects your Fund should a claim be made against the Fund or any trustee as a result of a potential conflict of interest. Ask for language like the following:
“Consultant agrees to hold Fund, its trustees, its employees and its agents harmless from any and all claims, lawsuits, causes of action, etc that might arise, regardless of its origin, that asserts, claims, alleges or accuses the Fund, its trustees, its employees, its agents, and or its consultants for acting improperly or imprudently by reason of the Fund allowing Consultant to procure for the Fund regulated products while performing other services for the Fund.”
The safest approach for a prudent Trustee is, of course, to avoid potential conflicts of interest; but if you can’t resist the lure, protect your Fund and yourself. Be prepared to answer the following question, “What steps did I, as a prudent trustee, take to make sure that the Funds assets were not exposed by this arrangement.” If the answer is simply, the “consultant said it was not a problem,” you are likely to have failed the “prudent trustee” rule.
If this pitch persuades your fund to hire one of these consultants, then at a minimum a "prudent trustee" must:
1. Find out if the consultant is receiving a commission (both an up front commission and/or eligible for a contingent commission) from any vendor. Is such an arrangement inconsistent with your contract with the consultant?
2. Receive a copy of the individual consultant's license to sell any regulated product for the relevant jurisdiction. Do not accept the statement, “that we run it through our ________ office.” Ask, “is your company licensed to sell this product in our state.” Obtain a copy of the license.
3. Review the consultant's professional negligence policy to make sure it covers the sale of regulated products such as securities, mutual funds, insurance, etc., not just professional errors and omissions. Check with your Fund’s fiduciary carrier whether the proposed arrangement creates additional risk. Even if the arrangement is covered, it may be and is perhaps costing the Fund more in the way of additional premium.
4. Most importantly, obtain from the consultant a hold harmless agreement that protects your Fund should a claim be made against the Fund or any trustee as a result of a potential conflict of interest. Ask for language like the following:
“Consultant agrees to hold Fund, its trustees, its employees and its agents harmless from any and all claims, lawsuits, causes of action, etc that might arise, regardless of its origin, that asserts, claims, alleges or accuses the Fund, its trustees, its employees, its agents, and or its consultants for acting improperly or imprudently by reason of the Fund allowing Consultant to procure for the Fund regulated products while performing other services for the Fund.”
The safest approach for a prudent Trustee is, of course, to avoid potential conflicts of interest; but if you can’t resist the lure, protect your Fund and yourself. Be prepared to answer the following question, “What steps did I, as a prudent trustee, take to make sure that the Funds assets were not exposed by this arrangement.” If the answer is simply, the “consultant said it was not a problem,” you are likely to have failed the “prudent trustee” rule.
Friday, March 10, 2006
New Grace Period for Filing LM-10s
> >
>
>
> The Labor Department's Office of Labor-Management Standards
>announced March 7 that many employers will have extra time to file LM-10
>forms disclosing payments and gifts made to unions and their officers and
>employees.
> OLMS said employers whose fiscal year ends Dec. 31 will have until May 15 to file fiscal 2005 LM-10s. Normally, LM-10s must be filed 90 days after the
>end of an employer's fiscal year; thus, organizations whose fiscal year
>ends Dec. 31 normally would have to file LM-10s by March 31.
>
> A separate March 7 advisory OLMS included an updated list of
>frequently asked questions regarding the LM-10, including who must file it
>and what must be disclosed.
>
> Under the Labor-Management Reporting and Disclosure Act, employers
>must report any payments and loans made to unions and union officials, as
>well as payments to employees designed to persuade them regarding their
>bargaining and representation rights, and payments to labor relations
>consultants.
>
> In announcing the grace period, OLMS said it received many inquiries
>following its last update of the frequently asked questions in November
>2005. The new guidance is
>designed to address some of the questions raised, but the Labor Department
>acknowledged that employers utilizing the new guidance would have only a
>short period of time to incorporate the answers prior to the normal March
>31 deadline. Thus, while the department does not have the authority to
>extend statutory deadlines, OLMS said it would use its discretion and not
>take any enforcement measures against employers with fiscal years ending
>Dec. 31 as long as they file by May 15.
>
> The November guidance from OLMS also said that as an incentive to
>get employers to file LM-10s for the first time, organizations filing their
>fiscal 2005 forms on time would not have to file delinquent forms for such
>years. Under the new extension, employers with fiscal years ending Dec. 31
>can file their LM-10s for the first time by May 15 and not have to file
>back LM-10s, the department said.
>
>
> Clarification of Who Is 'Employer.'
>
> The new list of frequently asked questions includes new guidance on
>when businesses are considered employers for LM-10 purposes. For example,
>it clarifies that any person acting directly or indirectly as an agent of
>an employer is covered. Thus, an individual hired by a financial services
>firm to generate new business and who provides a union official with season
>tickets to sporting events would have to file an LM-10, even if that
>individual does not employ anyone.
> In addition, the guidance now states that outside attorneys retained
>by unions "will in most, if not all, cases" have to file LM-10s. A law firm
>providing representation to an employer for collective bargaining purposes
>also would have to disclose the value of lunches provided to union
>officials during bargaining, subject to the $250 annual de minimis
>limitation. However, sole proprietors generally are not employers for LM-10
>purposes, according to the guidance.
>
> The guidance also specifies that certain payments from employers to
>unions and union officials are not reportable if the union reimburses the
>employer for those payments. Thus, a law firm that provides a meal during a
>meeting to prepare for collective bargaining would not have to report the
>value of that meal if the food costs are billed to the union, the
>department said. If one employer reimburses another for a reportable
>payment, the entity responsible for the final cost must file the LM-10, it
>added.
>
> The department added language to the guidance making it clear that
>employers must disclose otherwise reportable payments to union employees
>who earn $10,000 or less per year, even though such employees do not have
>to be mentioned by name on LM-2 financial disclosure reports for unions.
>The guidance also clarified that employers do not have to report payments
>to individuals who are officers or employees of unions composed entirely of
>state, county, or municipal employees and thus not covered by the LMRDA.
>
> OLMS also introduced new exemptions for reporting payments and gifts
>to union officials associated with widely attended gatherings, which the
>department defined as events that many people attend, including a
>substantial number with no union connection. Employers that sponsor such an
>event and spend $20 or less per attendee do not have to report such gifts,
>nor do they have to track such payments. In addition, an employer can
>sponsor up to two widely held events per year and spend up to $125 per
>participant without reporting or tracking such expenses.
>
> The $125 exemption also applies to union officials. They can attend
>up to two events not costing more than $125 each without reporting the
>benefit on LM-30s, which are the corresponding forms filed by union
>officers and employees. In addition, such payments would not count toward
>the de minimis threshold for LM-30 purposes; thus, if a union official
>attended two employer-sponsored events that cost $120 each and also
>received a reportable payment of $50, he or she would still not have to
>file an LM-30 because of de minimis rules.
>
> However, OLMS cautioned that if an employer does not know at the
>beginning of its fiscal year that it will hold no more than two such
>events, it should keep records of its expenses and attendee lists.
>
> OLMS added language to its LM-10 guidance specifying how such forms
>are different from LM-30s. For example, employers filing LM-10s must
>disclose payments to unions officers, agents, shop stewards, and other
>representatives, while union officers and employees must file LM-30s if
>they--or a spouse or minor child--receive a reportable payment. In
>addition, employers filing LM-10s must disclose any payment to any union
>employee. Meanwhile, a union employee who is a member of the clerical staff
>would not have to report the receipt of such a payment on an LM-30.
>
> As for past-due forms, the guidance said that in order to comply
>with the department's grace period offer, employers were required to file
>an LM-10 for fiscal 2005. Now, however, employers can take advantage of the
>grace period even if they did not make any reportable payments for fiscal
>2005. Rather than filing a blank form, employers should maintain records
>demonstrating that they identified no reportable interest after making a
>good-faith effort to track such payments, according to OLMS.
>
> The new guidance is available on the Web at
>http://www.dol.gov/esa/regs/compliance/olms/lm10_advisory.htm.
>
>
>
> >
>
>
>_____________________________________________________________________
>>
>
>
> The Labor Department's Office of Labor-Management Standards
>announced March 7 that many employers will have extra time to file LM-10
>forms disclosing payments and gifts made to unions and their officers and
>employees.
> OLMS said employers whose fiscal year ends Dec. 31 will have until May 15 to file fiscal 2005 LM-10s. Normally, LM-10s must be filed 90 days after the
>end of an employer's fiscal year; thus, organizations whose fiscal year
>ends Dec. 31 normally would have to file LM-10s by March 31.
>
> A separate March 7 advisory OLMS included an updated list of
>frequently asked questions regarding the LM-10, including who must file it
>and what must be disclosed.
>
> Under the Labor-Management Reporting and Disclosure Act, employers
>must report any payments and loans made to unions and union officials, as
>well as payments to employees designed to persuade them regarding their
>bargaining and representation rights, and payments to labor relations
>consultants.
>
> In announcing the grace period, OLMS said it received many inquiries
>following its last update of the frequently asked questions in November
>2005. The new guidance is
>designed to address some of the questions raised, but the Labor Department
>acknowledged that employers utilizing the new guidance would have only a
>short period of time to incorporate the answers prior to the normal March
>31 deadline. Thus, while the department does not have the authority to
>extend statutory deadlines, OLMS said it would use its discretion and not
>take any enforcement measures against employers with fiscal years ending
>Dec. 31 as long as they file by May 15.
>
> The November guidance from OLMS also said that as an incentive to
>get employers to file LM-10s for the first time, organizations filing their
>fiscal 2005 forms on time would not have to file delinquent forms for such
>years. Under the new extension, employers with fiscal years ending Dec. 31
>can file their LM-10s for the first time by May 15 and not have to file
>back LM-10s, the department said.
>
>
> Clarification of Who Is 'Employer.'
>
> The new list of frequently asked questions includes new guidance on
>when businesses are considered employers for LM-10 purposes. For example,
>it clarifies that any person acting directly or indirectly as an agent of
>an employer is covered. Thus, an individual hired by a financial services
>firm to generate new business and who provides a union official with season
>tickets to sporting events would have to file an LM-10, even if that
>individual does not employ anyone.
> In addition, the guidance now states that outside attorneys retained
>by unions "will in most, if not all, cases" have to file LM-10s. A law firm
>providing representation to an employer for collective bargaining purposes
>also would have to disclose the value of lunches provided to union
>officials during bargaining, subject to the $250 annual de minimis
>limitation. However, sole proprietors generally are not employers for LM-10
>purposes, according to the guidance.
>
> The guidance also specifies that certain payments from employers to
>unions and union officials are not reportable if the union reimburses the
>employer for those payments. Thus, a law firm that provides a meal during a
>meeting to prepare for collective bargaining would not have to report the
>value of that meal if the food costs are billed to the union, the
>department said. If one employer reimburses another for a reportable
>payment, the entity responsible for the final cost must file the LM-10, it
>added.
>
> The department added language to the guidance making it clear that
>employers must disclose otherwise reportable payments to union employees
>who earn $10,000 or less per year, even though such employees do not have
>to be mentioned by name on LM-2 financial disclosure reports for unions.
>The guidance also clarified that employers do not have to report payments
>to individuals who are officers or employees of unions composed entirely of
>state, county, or municipal employees and thus not covered by the LMRDA.
>
> OLMS also introduced new exemptions for reporting payments and gifts
>to union officials associated with widely attended gatherings, which the
>department defined as events that many people attend, including a
>substantial number with no union connection. Employers that sponsor such an
>event and spend $20 or less per attendee do not have to report such gifts,
>nor do they have to track such payments. In addition, an employer can
>sponsor up to two widely held events per year and spend up to $125 per
>participant without reporting or tracking such expenses.
>
> The $125 exemption also applies to union officials. They can attend
>up to two events not costing more than $125 each without reporting the
>benefit on LM-30s, which are the corresponding forms filed by union
>officers and employees. In addition, such payments would not count toward
>the de minimis threshold for LM-30 purposes; thus, if a union official
>attended two employer-sponsored events that cost $120 each and also
>received a reportable payment of $50, he or she would still not have to
>file an LM-30 because of de minimis rules.
>
> However, OLMS cautioned that if an employer does not know at the
>beginning of its fiscal year that it will hold no more than two such
>events, it should keep records of its expenses and attendee lists.
>
> OLMS added language to its LM-10 guidance specifying how such forms
>are different from LM-30s. For example, employers filing LM-10s must
>disclose payments to unions officers, agents, shop stewards, and other
>representatives, while union officers and employees must file LM-30s if
>they--or a spouse or minor child--receive a reportable payment. In
>addition, employers filing LM-10s must disclose any payment to any union
>employee. Meanwhile, a union employee who is a member of the clerical staff
>would not have to report the receipt of such a payment on an LM-30.
>
> As for past-due forms, the guidance said that in order to comply
>with the department's grace period offer, employers were required to file
>an LM-10 for fiscal 2005. Now, however, employers can take advantage of the
>grace period even if they did not make any reportable payments for fiscal
>2005. Rather than filing a blank form, employers should maintain records
>demonstrating that they identified no reportable interest after making a
>good-faith effort to track such payments, according to OLMS.
>
> The new guidance is available on the Web at
>http://www.dol.gov/esa/regs/compliance/olms/lm10_advisory.htm.
>
>
>
> >
>
>
>_____________________________________________________________________
>>
Thursday, March 02, 2006
Lobbyists and Associations Need Fiduciary Insurance
A new rash of lawsuits are on the horizon.
Clients and members of associations are, in light of recent scrutiny of lobbyists activities, becoming more concerned about how their funds are being spent in DC, whether directly or through their lobbyists. Lobbyists who handle or direct client's funds may be determined to be fiduciaries for their clients. The SEC, the Courts, and other regulatory bodies are rapidly expanding the definition of a fiduciary.
For lawyers this is usually not a problem, most Professional E&O policies cover fiduciary exposures, although if I were a lawyer-lobbyist I would want to make sure there is not an exclusion in my firm's policy for fiduciary responsibilities. However there are many lobbyists who are not lawyers or lawyers who do not carry professional E&O who have this exposure. They direct the client where to spend money or do it themselves.
The same goes for associations who use their member's funds to promote certain causes in many ways. There is an exposure to a claim that funds were not used in a "prudent" manner. The association's assets or lobbyist assets can very quickly be used up defending such a claim. The McLaughlin Company is developing with its carriers a low-priced exclusive product targeting lobbyists, but we also think that the exposure to associations is possibly even greater. Although the exposure is even greater, most evidence indicates that less than 10% of associations carry fiduciary coverage. A "prudent" association Board of Directors should consult with its Independent agent about fiduciary coverage.
As always we would both really appreciate your thoughts and insights.
Clients and members of associations are, in light of recent scrutiny of lobbyists activities, becoming more concerned about how their funds are being spent in DC, whether directly or through their lobbyists. Lobbyists who handle or direct client's funds may be determined to be fiduciaries for their clients. The SEC, the Courts, and other regulatory bodies are rapidly expanding the definition of a fiduciary.
For lawyers this is usually not a problem, most Professional E&O policies cover fiduciary exposures, although if I were a lawyer-lobbyist I would want to make sure there is not an exclusion in my firm's policy for fiduciary responsibilities. However there are many lobbyists who are not lawyers or lawyers who do not carry professional E&O who have this exposure. They direct the client where to spend money or do it themselves.
The same goes for associations who use their member's funds to promote certain causes in many ways. There is an exposure to a claim that funds were not used in a "prudent" manner. The association's assets or lobbyist assets can very quickly be used up defending such a claim. The McLaughlin Company is developing with its carriers a low-priced exclusive product targeting lobbyists, but we also think that the exposure to associations is possibly even greater. Although the exposure is even greater, most evidence indicates that less than 10% of associations carry fiduciary coverage. A "prudent" association Board of Directors should consult with its Independent agent about fiduciary coverage.
As always we would both really appreciate your thoughts and insights.
Wednesday, March 01, 2006
Professional Advisors = Fiduciaries -- Are you insured?
Scandals that have rocked the financial services industry and have raised awareness among investors of the potential for conflicts of interest, misrepresentations and other alleged wrongdoings by investment advisers, actuaries, brokers and money managers. As a result, professionals increasingly are subject to lawsuits alleging various forms of misfeasance, including breach of fiduciary duty, misrepresentation or omission of material facts, conflict of interest and fraud. Lawsuits of this kind also entail the possibility of personal liability.
Financial planners, investment advisers, actuaries, securities dealers, registered representatives and others in the financial field often act in a fiduciary role.
Recently, the SEC has moved toward treating all brokers as fiduciaries, as well.
Those advisers who deal with pension, employee benefit and other benefit plans are subject to additional fiduciary duties under the Employee Retirement Income Security Act of 1974. In our litigious times, even the most circumspect professionals may find themselves sued for breach of fiduciary duty or other misfeasance. Insurance is therefore of paramount importance as a defense against fiduciaries’ liability exposure.
Due diligence on the insurance front entails more than simply the purchase of the right kinds of policies. Policyholders must be aware of common provisions routinely inserted by insurance providers that raise the likelihood of coverage denials in time of need. Over the past few years, there has been a significant restriction in the insurance marketplace for investment advisers and asset managers. Many companies pulled out altogether, and those that remained increased their pricing and retentions significantly while at the same time carving out important areas of coverage. Recently, however, the underwriting conditions have improved. Companies that withdrew from the market have stepped back in, and new entrants have begun to surface. With this opening up of the marketplace has come a reduction of the pricing scale, somewhat lower retentions and a willingness to consider broadening the scope of certain coverage.
Although underwriters remain stringent regarding the amount of limits to which they are willing to commit, the addition of these new markets allows for the layering of much higher limits than has recently been available. There are significant differences among the various insurers’ policy forms.
Although the market has improved carriers continue to try and reduce their exposure by addining exclusionary language. The following is a sampling of some actions taken by insurance companies of which to be aware:
* Limiting regulatory-investigation coverage.
* Widening the exclusions for personal profit and wrongful acts.
* Narrowing the severability language of their policies, which protects innocent officers from the
wrongful conduct of other officers.
* Issuing specific additional exclusions, such as market timing and late trading.
Since the policy forms, exclusions and available endorsements are changing frequently, it is advisable that someone well versed in financial insurance, like The McLaughlin Company, review your current policies.
Financial planners, investment advisers, actuaries, securities dealers, registered representatives and others in the financial field often act in a fiduciary role.
Recently, the SEC has moved toward treating all brokers as fiduciaries, as well.
Those advisers who deal with pension, employee benefit and other benefit plans are subject to additional fiduciary duties under the Employee Retirement Income Security Act of 1974. In our litigious times, even the most circumspect professionals may find themselves sued for breach of fiduciary duty or other misfeasance. Insurance is therefore of paramount importance as a defense against fiduciaries’ liability exposure.
Due diligence on the insurance front entails more than simply the purchase of the right kinds of policies. Policyholders must be aware of common provisions routinely inserted by insurance providers that raise the likelihood of coverage denials in time of need. Over the past few years, there has been a significant restriction in the insurance marketplace for investment advisers and asset managers. Many companies pulled out altogether, and those that remained increased their pricing and retentions significantly while at the same time carving out important areas of coverage. Recently, however, the underwriting conditions have improved. Companies that withdrew from the market have stepped back in, and new entrants have begun to surface. With this opening up of the marketplace has come a reduction of the pricing scale, somewhat lower retentions and a willingness to consider broadening the scope of certain coverage.
Although underwriters remain stringent regarding the amount of limits to which they are willing to commit, the addition of these new markets allows for the layering of much higher limits than has recently been available. There are significant differences among the various insurers’ policy forms.
Although the market has improved carriers continue to try and reduce their exposure by addining exclusionary language. The following is a sampling of some actions taken by insurance companies of which to be aware:
* Limiting regulatory-investigation coverage.
* Widening the exclusions for personal profit and wrongful acts.
* Narrowing the severability language of their policies, which protects innocent officers from the
wrongful conduct of other officers.
* Issuing specific additional exclusions, such as market timing and late trading.
Since the policy forms, exclusions and available endorsements are changing frequently, it is advisable that someone well versed in financial insurance, like The McLaughlin Company, review your current policies.
Tuesday, February 21, 2006
Will you serve on our Board of Directors?
Playing golf with your Saturday foursome you are asked, " John, I think you are just what I need. Recently, we have been advised to add independent individuals to my company's board, and I think you would be perfect. What do you say?"
John is very interested, but knows that going on a Board is not the social club it used to be. There are lots of questions John should ask before saying yes including checking with his personal independent insurance agent who should say:
A prospective director should evaluate the company’s D&O insurance program and consider buying personal director’s liability insurance.
In evaluating the corporate D&O policy, questions to ask include the following.
1. Is the company carrying sufficient D&O insurance in light of increased risks to independent directors?
2. Do severability provisions or policy exclusions leave individuals personally exposed? Limited or no severability means that the entire board of
directors, who might be included in a potential lawsuit, might not have coverage regardless of any individual’s own actions.
3. How experienced and financially stable are the insurers of the D&O program?
4. Does the company’s D&O policy cover the company as an entity in addition to directors and officers? Entity coverage erodes protection for individuals.
5. What is the effect of bankruptcy on the D&O policy? Entity coverage can tie a policy up in bankruptcy court.
6. Is the company following corporate governance best practices?
In addition, John should consider Personal Director’s Liability Coverage
An existing or prospective director should also consider personal director’s liability coverage. Personal director’s liability insurance is a coverage that protects individuals and their personal assets in the event that they are sued as a result of their directorship activities.
If the response is when he starts asking these questions is " we don't need D&O insurance its expensive and a waste of money." John, should join another foursome.
John is very interested, but knows that going on a Board is not the social club it used to be. There are lots of questions John should ask before saying yes including checking with his personal independent insurance agent who should say:
A prospective director should evaluate the company’s D&O insurance program and consider buying personal director’s liability insurance.
In evaluating the corporate D&O policy, questions to ask include the following.
1. Is the company carrying sufficient D&O insurance in light of increased risks to independent directors?
2. Do severability provisions or policy exclusions leave individuals personally exposed? Limited or no severability means that the entire board of
directors, who might be included in a potential lawsuit, might not have coverage regardless of any individual’s own actions.
3. How experienced and financially stable are the insurers of the D&O program?
4. Does the company’s D&O policy cover the company as an entity in addition to directors and officers? Entity coverage erodes protection for individuals.
5. What is the effect of bankruptcy on the D&O policy? Entity coverage can tie a policy up in bankruptcy court.
6. Is the company following corporate governance best practices?
In addition, John should consider Personal Director’s Liability Coverage
An existing or prospective director should also consider personal director’s liability coverage. Personal director’s liability insurance is a coverage that protects individuals and their personal assets in the event that they are sued as a result of their directorship activities.
If the response is when he starts asking these questions is " we don't need D&O insurance its expensive and a waste of money." John, should join another foursome.
Tuesday, February 14, 2006
DOL's latest on reporting requirements
WHAT CAN EMPLOYERS EXPECT IN THE FUTURE FROM DOL?
DOL has initiated rulemaking on the LM-30 instructions. It is anticipated that parallel rules will be developed for the LM-10 employer reports. Several DOL proposals would eliminate exemptions and significantly increase the reporting requirements of employers. For example:
(1) DOL proposes to require reporting on the LM-30 payments received by union officers and employees for work performed for the union — e.g., a “no docking” arrangement under which a union steward or union officer resolves grievances on an “as needed” basis while being paid regular wages or a “union leave” arrangement whereby a union officer continues to be paid a salary by the employer while working fulltime on union business. Both the employee and the employer would have to report all payments other than those for “productive work”.
(2) DOL proposes to eliminate the de minimis exception altogether.
DOL has initiated rulemaking on the LM-30 instructions. It is anticipated that parallel rules will be developed for the LM-10 employer reports. Several DOL proposals would eliminate exemptions and significantly increase the reporting requirements of employers. For example:
(1) DOL proposes to require reporting on the LM-30 payments received by union officers and employees for work performed for the union — e.g., a “no docking” arrangement under which a union steward or union officer resolves grievances on an “as needed” basis while being paid regular wages or a “union leave” arrangement whereby a union officer continues to be paid a salary by the employer while working fulltime on union business. Both the employee and the employer would have to report all payments other than those for “productive work”.
(2) DOL proposes to eliminate the de minimis exception altogether.
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