The Canadian federal excise tax imposes a 10 percent premium tax on entities resident in Canada, including international corporations, that place insurance against risk in Canada with insurers not authorized by federal or provincial insurance authorities. The tax is also applicable when coverage is placed by a non-resident broker or agent — even if the insurer is authorized in Canada.
The tax furthermore applies to master controlled programs where a non-Canadian parent company purchases insurance for a Canadian subsidiary. The involvement of a
Canadian broker or the Canadian branch of a global broker or underwriter may or may not
change the situation. For the Canadian government, the primary source of coverage takes
precedence.
The local buyer must be able to prove that the Canadian agent/broker was not merely processing the document(s). On admitted master controlled programs, the primary non-resident broker is typically considered the original point of contact and therefore the Canadian government considers the tax applicable.
Canadian tax authorities recently changed the way the federal excise tax on insurance premiums is collected. The tax authorities will no longer forward tax notices to insurance buyers but instead the insurance buyer must file an excise tax return (form B243E) and remit the federal excise tax by April 30 of each year. Previously, the tax authorities invoiced insurance buyers by forwarding to them a Notice of Excise Tax. These notices were derived from the excise tax returns submitted by brokers or insurers.
If the Canadian federal government discovers unpaid premium taxes, they will likely charge the 10 percent tax, plus interest, for current and prior years. They may also disallow the insurance premium (current and prior years) as a legitimate business expense for other tax purposes. Sorting out such problems can be time-consuming and costly.
In addition to the federal excise tax, there are provincial taxes on unlicensed coverage. The tax rates range from two percent to 50 percent. The latter is imposed by the province of Alberta.
Ontario, Quebec and Newfoundland have an additional provincial sales tax on insurance premiums. Ontario charges eight percent on all lines except Auto, for which there is no tax in respect of any premium payment due after March 31, 2004. Quebec levies nine percent for all lines except Auto (for which the rate is five percent). Newfoundland charges 15 percent on all lines. Some lines are exempt in some provinces — automobile, surety, agriculture and reinsurance contracts to name a few.
Some classes of insurance are exempt entirely under the Federal Excise Tax Act. These include Personal Accident, Life, Sickness and Marine. The point -- If you are insured or insuring in Canada check with your accountant.
Wednesday, May 02, 2007
Tuesday, May 01, 2007
Risk Managers Urged To Prepare For Pandemic
It's not a question of if a pandemic will happen, but a question of where and when, said Michael Osterholm, director for the Center for Infectious Disease Research and Policy.
Osterholm was the keynote speaker April 30 at the Risk and Insurance Management Society's annual conference in New Orleans. He urged risk managers to take the lead in planning how to respond to a pandemic for their companies, their communities and their families.
The risk of a flu pandemic spreading across the globe is greater today than it was in 1918, when a deadly flu killed about a half a million people in the United States alone. Osterholm said with improved transportation, diseases can be spread through airplane travelers very quickly.
Also, while some argue that improved medical technology would help prevent a flu pandemic from taking so many lives, Osterholm said there's a shortage of beds in hospitals and medical staffs.
For instance, there are only 105,000 ventilators in U.S. hospitals, which tend to keep a two-day supply of oxygen on hand, Osterholm said. "We'd run out of oxygen before we ran out of ventilators," Osterholm said.
In addition to the medical system being overwhelmed, Osterholm said communities would have to find a way to manage the number of corpses. "We'd run out of caskets overnight," Osterholm said. "Most communities don't have plans."
And a pandemic would also have tremendous economic ramifications. In the recent SARS outbreak, 80% of flights in to and out of Hong Kong were cancelled for 10 weeks.
(By Meg Green, senior associate editor, Best's Review: Meg.Green@ambest.com) Copyright 2007 A.M. Best Company, Inc.
Osterholm was the keynote speaker April 30 at the Risk and Insurance Management Society's annual conference in New Orleans. He urged risk managers to take the lead in planning how to respond to a pandemic for their companies, their communities and their families.
The risk of a flu pandemic spreading across the globe is greater today than it was in 1918, when a deadly flu killed about a half a million people in the United States alone. Osterholm said with improved transportation, diseases can be spread through airplane travelers very quickly.
Also, while some argue that improved medical technology would help prevent a flu pandemic from taking so many lives, Osterholm said there's a shortage of beds in hospitals and medical staffs.
For instance, there are only 105,000 ventilators in U.S. hospitals, which tend to keep a two-day supply of oxygen on hand, Osterholm said. "We'd run out of oxygen before we ran out of ventilators," Osterholm said.
In addition to the medical system being overwhelmed, Osterholm said communities would have to find a way to manage the number of corpses. "We'd run out of caskets overnight," Osterholm said. "Most communities don't have plans."
And a pandemic would also have tremendous economic ramifications. In the recent SARS outbreak, 80% of flights in to and out of Hong Kong were cancelled for 10 weeks.
(By Meg Green, senior associate editor, Best's Review: Meg.Green@ambest.com) Copyright 2007 A.M. Best Company, Inc.
Wednesday, April 25, 2007
Read The Fine Print - Part II
Previously, we have cautioned about contractual indemnity language and how if you are not careful you can become exposed as a result of contractual risk transfer. Well contractual risk avoidance is present even where you might not expect it, such as insurance policies. Exclusions to coverages are a traditional way of insurance companies saying you are covered on one hand and taking it away with the other. If you and your Independent Agent aren't careful what you do every day may be the one thing excluded from your insurance. Here are just a few examples -- Lobbyist Policies containing an exclusion for Lobbying activities; Union Insurance excluding Organizing activities; Law Office E&O coverage excluding attorneys acting as Fiduciaries; the list of exclusions to coverage is growing faster than Kudzu in a swamp.
When that policy arrives in the mail don't just stick it in a drawer. More importantly, make sure that your Independent Agent has a good understanding of what you do so he/she can review the exclusions when they come in as well. Finally, just because the original policy doesn't obtain an exclusion do not assume at renewal that the new policy is identical to the old policy.
TV commercials make you think that purchasing insurance is just like buying a book on Amazon. Nothing can be further than the truth. If you are not careful and well advised you may "save 15%," but get nothing for the 85% you pay.
When that policy arrives in the mail don't just stick it in a drawer. More importantly, make sure that your Independent Agent has a good understanding of what you do so he/she can review the exclusions when they come in as well. Finally, just because the original policy doesn't obtain an exclusion do not assume at renewal that the new policy is identical to the old policy.
TV commercials make you think that purchasing insurance is just like buying a book on Amazon. Nothing can be further than the truth. If you are not careful and well advised you may "save 15%," but get nothing for the 85% you pay.
Terrorism Insurance
If the terrorism insurance program were allowed to expire, coverage would become largely unavailable and unaffordable, and the gears of commercial real estate would grind to a halt, according to the National Association of Realtors(R) and the Coalition to Insure Against Terrorism.
"The potential unavailability of terrorism risk insurance at the end of this year impacts our financing agreements and potentially hurts the commercial real estate market," said Joseph Ditchman, former president of the Ohio Association of Realtors(R) and a partner at Colliers Ostendorf-Morris, one of Cleveland's largest commercial real estate firms.
Speaking on behalf of NAR and CIAT in testimony before the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, Ditchman urged Congress to extend the coverage that was originally enacted after September 11, 2001, and extended in September 2005. "This hearing recognizes that the essential facts have not changed from when Congress enacted the Terrorism Risk Insurance Act in 2002. Terrorism continues to be an unpredictable threat."
NAR agrees with a set of joint principles that the new legislation should contain that were developed by CIAT, along with the American Insurance Association. "We agree that the new legislation should be long term, eliminate the distinction between foreign and domestic acts of terrorism, and ensure coverage against losses from nuclear, biological, chemical or radiological events (NBCR)," said Ditchman.
NAR believes including those principles in legislation will strengthen the terrorism risk program. "The principles strengthen the economic security provided to the commercial real estate market by reducing the uncertainty of terrorism coverage availability, and covering most conceivable forms of terrorist activity," according to Ditchman.
In earlier reports, the Government Accountability Office and the President's Working Group on Capital Markets determined that no meaningful amount of insurance against NBCR events is available in the property market today, notwithstanding that TRIA backstops such insurance. NBCR events have been described as virtually uninsurable and there does not appear to be any mechanism to price such coverage. "To make sure businesses have access to this important coverage, we urge Congress to ensure that NBCR perils be added to the 'make available' requirements under TRIA," Ditchman said.
NAR testified that it believes that the "proper" long-term solution should focus on what private markets have been unwilling or unable to do. "The ideal solutions must enable businesses to purchase insurance for the most catastrophic conventional terrorism risks, provide adequate insurance capacity in all major commercial real estate markets, particularly in high-risk urban areas, and provide meaningful insurance against the so-called NBCR risks," said Ditchman.
NAR believes that this comprehensive approach can be an ideal program that will over time seek to reduce the federal role in the conventional terrorism markets and will maximize long-term private capacity by facilitating entry of new private capital.
"The potential unavailability of terrorism risk insurance at the end of this year impacts our financing agreements and potentially hurts the commercial real estate market," said Joseph Ditchman, former president of the Ohio Association of Realtors(R) and a partner at Colliers Ostendorf-Morris, one of Cleveland's largest commercial real estate firms.
Speaking on behalf of NAR and CIAT in testimony before the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, Ditchman urged Congress to extend the coverage that was originally enacted after September 11, 2001, and extended in September 2005. "This hearing recognizes that the essential facts have not changed from when Congress enacted the Terrorism Risk Insurance Act in 2002. Terrorism continues to be an unpredictable threat."
NAR agrees with a set of joint principles that the new legislation should contain that were developed by CIAT, along with the American Insurance Association. "We agree that the new legislation should be long term, eliminate the distinction between foreign and domestic acts of terrorism, and ensure coverage against losses from nuclear, biological, chemical or radiological events (NBCR)," said Ditchman.
NAR believes including those principles in legislation will strengthen the terrorism risk program. "The principles strengthen the economic security provided to the commercial real estate market by reducing the uncertainty of terrorism coverage availability, and covering most conceivable forms of terrorist activity," according to Ditchman.
In earlier reports, the Government Accountability Office and the President's Working Group on Capital Markets determined that no meaningful amount of insurance against NBCR events is available in the property market today, notwithstanding that TRIA backstops such insurance. NBCR events have been described as virtually uninsurable and there does not appear to be any mechanism to price such coverage. "To make sure businesses have access to this important coverage, we urge Congress to ensure that NBCR perils be added to the 'make available' requirements under TRIA," Ditchman said.
NAR testified that it believes that the "proper" long-term solution should focus on what private markets have been unwilling or unable to do. "The ideal solutions must enable businesses to purchase insurance for the most catastrophic conventional terrorism risks, provide adequate insurance capacity in all major commercial real estate markets, particularly in high-risk urban areas, and provide meaningful insurance against the so-called NBCR risks," said Ditchman.
NAR believes that this comprehensive approach can be an ideal program that will over time seek to reduce the federal role in the conventional terrorism markets and will maximize long-term private capacity by facilitating entry of new private capital.
Wednesday, April 04, 2007
Long Term Care Costs are Skyrocketing
Yearly Long Term Care Costs Increase 15% Since 2004 to Nearly $75,000 in 2007 According to Annual Study by Genworth Financial
Additional Polling Shows 75% of Americans Have No Long Term Care Plans
RICHMOND, Va., April 3 /PRNewswire-FirstCall/ -- Genworth Financial's (NYSE: GNW) 2007 Cost of Care Survey found the average national cost of care for nursing homes, assisted living facilities and in the home has steadily increased over the past four years and has reached new highs that exceed most household incomes in the U.S.(1) The rising costs of long term care may, therefore, present difficulties for many Americans should they need to pay for long term care out of their own pockets.
A separate national poll conducted by Public Opinion Strategies for Genworth Financial with input from the Alzheimer's Association found that 75 percent of Americans have made no long term care plans and 59 percent expressed concern about being able to pay for long term care. Almost half of the respondents (44 percent) incorrectly believe that Medicare or their private health insurance will pay for their long-term care needs. In actuality, health insurance and the federal Medicare program do not generally cover long-term care.
Genworth's annual benchmark study surveyed more than 11,000 nursing homes, assisted living facilities and home care providers in all 50 states and the District of Columbia. It was conducted by CareScout between January and February 2007 to gain a comprehensive view of long-term care expenses. The 2007 Cost of Care Survey, which offers national, state, and local cost information is available at http://www.genworth.com.
According to the 2007 Cost of Care Survey, the average national cost in 2007 of a single year in a private nursing home room is $74,806. To put this into context, one year in a private nursing home room costs nearly double the average full 4-year college degree in the U.S., including tuition, room and board (College Board's national average for public colleges is $51,184 for four years, making a single year in a nursing home 46 percent more expensive).
Additional Polling Shows 75% of Americans Have No Long Term Care Plans
RICHMOND, Va., April 3 /PRNewswire-FirstCall/ -- Genworth Financial's (NYSE: GNW) 2007 Cost of Care Survey found the average national cost of care for nursing homes, assisted living facilities and in the home has steadily increased over the past four years and has reached new highs that exceed most household incomes in the U.S.(1) The rising costs of long term care may, therefore, present difficulties for many Americans should they need to pay for long term care out of their own pockets.
A separate national poll conducted by Public Opinion Strategies for Genworth Financial with input from the Alzheimer's Association found that 75 percent of Americans have made no long term care plans and 59 percent expressed concern about being able to pay for long term care. Almost half of the respondents (44 percent) incorrectly believe that Medicare or their private health insurance will pay for their long-term care needs. In actuality, health insurance and the federal Medicare program do not generally cover long-term care.
Genworth's annual benchmark study surveyed more than 11,000 nursing homes, assisted living facilities and home care providers in all 50 states and the District of Columbia. It was conducted by CareScout between January and February 2007 to gain a comprehensive view of long-term care expenses. The 2007 Cost of Care Survey, which offers national, state, and local cost information is available at http://www.genworth.com.
According to the 2007 Cost of Care Survey, the average national cost in 2007 of a single year in a private nursing home room is $74,806. To put this into context, one year in a private nursing home room costs nearly double the average full 4-year college degree in the U.S., including tuition, room and board (College Board's national average for public colleges is $51,184 for four years, making a single year in a nursing home 46 percent more expensive).
Wednesday, March 28, 2007
Seventeen U.S. Insurance Companies became Financially Impaired in 2006
Seventeen U.S. insurance companies became financially impaired in 2006, despite a respite for property/casualty insurers from two consecutive turbulent hurricane seasons and more diversified asset portfolios among life/health insurers, according to two new A.M. Best Co. special reports, "2007 Annual U.S. Life/Health Impairments" and "2007 Annual U.S. Property/Casualty Impairments."
The property/casualty report found 15 insurers in those lines of business became impaired last year, a rate of 1-in-233 companies. While any impairment can be a hardship to policyholders and employees, 2006's impairment rate is half the historical rate of the past 38 years. So far in 2007, A.M. Best has identified one public impairment: Vanguard Fire & Casualty Co. Florida regulators placed that company in rehabilitation in January. Vanguard Fire & Casualty was never rated by A.M. Best.
Of the two life/health companies identified as impaired in 2006, one is a known confidential supervision. The other impairment is Security General Life Insurance Co., which was issued a cease-and-desist order by the Oklahoma Insurance Department last September. It was placed in rehabilitation in November. The company was not rated by A.M. Best at the time of impairment. 2006's impairment rate of 1-in-769 life/health companies continues a seven-year trend of below-average impairment rates.
A.M. Best designates an insurer financially impaired as of the first official regulatory action taken by an insurance department. That marks the point when an insurer's ability to conduct normal insurance operations is adversely affected, capital and surplus have been deemed inadequate to meet legal requirements, or the company's general financial condition has triggered regulatory concern.
State actions include supervision, rehabilitation, liquidation, receivership, conservatorship, cease-and-desist orders, suspension, license revocation and certain administrative orders. The financially impaired companies identified in these studies might not technically have been declared insolvent. The definition of financially impaired is broader than that of a Bests Rating of E (under regulatory supervision), which is assigned only when an insurer is no longer allowed to conduct normal ongoing insurance operations.
In addition to the regulatory actions that are announced publicly, there also are actions that insurance regulators undertake on a confidential basis. When A.M. Best becomes aware of an active confidential regulatory action, the impairment is counted in the aggregate analysis but is not reported on a company-specific basis to protect confidentiality.
Property/Casualty Impairments
The performance of property/casualty insurers was bolstered by a dearth of hurricanes and near-record underwriting profits, which were parlayed into a combined ratio that stands at its lowest level since 1953. "It speaks favorably to the capital strength of the property/casualty industry," said John Williams, senior business analyst at A.M. Best. "What we found with most of these companies, both in property/casualty and in life/health, the impaired companies and those that became impaired either had vulnerable A.M. Best ratings, or were not rated at all by A.M. Best."
The majority of last year's impaired property/casualty companies were affiliated with either Poe Financial Group or Vesta Insurance Group.
Poe Financial Group was formed in 1996 by Tampa Mayor Bill Poe, who later established Southern Family Insurance Co. The company acquired Atlantic Preferred Insurance Co. and Florida Preferred Insurance Co. in 2003. By July 2004, Poe Group had become the largest privately held property insurance organization in the Florida market and the third-largest property insurance organization in Florida overall. The hurricanes and storms of 2004 and 2005 prompted policyholders to submit more than 120,000 claims, which cost more than $2.1 billion. Vesta's family of companies were domiciled in Texas, Florida and Hawaii. Most were placed into rehabilitation in June, 2006 after being hit hard by hurricane claims and were unable to pay claims.
The sector's outlook for the remainder of this year is bright. David Small, an equity analyst at Bear Stearns, said both publicly traded and mutual insurance companies are in a strong position going forward in terms of capital and funding. "One could argue that aggregate amounts (of capital) measured by standard surplus is at record levels. That is one of the reasons we see rates softening," Small said. "You could argue that some of the publicly traded companies have excess capital on their balance sheets."
Small said one major hurricane this season should not adversely affect property/casualty companies. "When you look back at 2005, the industry still grew a surplus and that was after Katrina, Rita and Wilma. The companies generated so much investment income the way they're set up that one good storm isn't going to knock them out," Small said.
Life/Health Impairments
One life/health company, Oklahoma-based Security General Life Insurance Co., was placed in rehabilitation in September 2006. Another company was taken under a confidential supervision impairment. While the 2006 life/health impairment rate represents a new 31-year low, additional confidential supervision impairment could rise.
"We have a circumstance with confidential supervision," said Williams. "The states take action to try to prevent problems for companies that they see in financial trouble. We picked up three additional impairments for 2005 and there's a fair shot that you'll see a fair jump in the 2006 numbers as we go forward-- enough that they won't be the lowest numbers on record."
The recent improved annual impairment rates for life/health insurers reflects an improving operating environment since 2001, industry efforts to diversity its asset portfolios and consolidation of some of the more thinly capitalized insurers with stronger companies.
(By Tom De Martini, associate editor, BestWeek: Thomas.DeMartini@ambest.com) Copyright 2007 A.M. Best Company, Inc.
The property/casualty report found 15 insurers in those lines of business became impaired last year, a rate of 1-in-233 companies. While any impairment can be a hardship to policyholders and employees, 2006's impairment rate is half the historical rate of the past 38 years. So far in 2007, A.M. Best has identified one public impairment: Vanguard Fire & Casualty Co. Florida regulators placed that company in rehabilitation in January. Vanguard Fire & Casualty was never rated by A.M. Best.
Of the two life/health companies identified as impaired in 2006, one is a known confidential supervision. The other impairment is Security General Life Insurance Co., which was issued a cease-and-desist order by the Oklahoma Insurance Department last September. It was placed in rehabilitation in November. The company was not rated by A.M. Best at the time of impairment. 2006's impairment rate of 1-in-769 life/health companies continues a seven-year trend of below-average impairment rates.
A.M. Best designates an insurer financially impaired as of the first official regulatory action taken by an insurance department. That marks the point when an insurer's ability to conduct normal insurance operations is adversely affected, capital and surplus have been deemed inadequate to meet legal requirements, or the company's general financial condition has triggered regulatory concern.
State actions include supervision, rehabilitation, liquidation, receivership, conservatorship, cease-and-desist orders, suspension, license revocation and certain administrative orders. The financially impaired companies identified in these studies might not technically have been declared insolvent. The definition of financially impaired is broader than that of a Bests Rating of E (under regulatory supervision), which is assigned only when an insurer is no longer allowed to conduct normal ongoing insurance operations.
In addition to the regulatory actions that are announced publicly, there also are actions that insurance regulators undertake on a confidential basis. When A.M. Best becomes aware of an active confidential regulatory action, the impairment is counted in the aggregate analysis but is not reported on a company-specific basis to protect confidentiality.
Property/Casualty Impairments
The performance of property/casualty insurers was bolstered by a dearth of hurricanes and near-record underwriting profits, which were parlayed into a combined ratio that stands at its lowest level since 1953. "It speaks favorably to the capital strength of the property/casualty industry," said John Williams, senior business analyst at A.M. Best. "What we found with most of these companies, both in property/casualty and in life/health, the impaired companies and those that became impaired either had vulnerable A.M. Best ratings, or were not rated at all by A.M. Best."
The majority of last year's impaired property/casualty companies were affiliated with either Poe Financial Group or Vesta Insurance Group.
Poe Financial Group was formed in 1996 by Tampa Mayor Bill Poe, who later established Southern Family Insurance Co. The company acquired Atlantic Preferred Insurance Co. and Florida Preferred Insurance Co. in 2003. By July 2004, Poe Group had become the largest privately held property insurance organization in the Florida market and the third-largest property insurance organization in Florida overall. The hurricanes and storms of 2004 and 2005 prompted policyholders to submit more than 120,000 claims, which cost more than $2.1 billion. Vesta's family of companies were domiciled in Texas, Florida and Hawaii. Most were placed into rehabilitation in June, 2006 after being hit hard by hurricane claims and were unable to pay claims.
The sector's outlook for the remainder of this year is bright. David Small, an equity analyst at Bear Stearns, said both publicly traded and mutual insurance companies are in a strong position going forward in terms of capital and funding. "One could argue that aggregate amounts (of capital) measured by standard surplus is at record levels. That is one of the reasons we see rates softening," Small said. "You could argue that some of the publicly traded companies have excess capital on their balance sheets."
Small said one major hurricane this season should not adversely affect property/casualty companies. "When you look back at 2005, the industry still grew a surplus and that was after Katrina, Rita and Wilma. The companies generated so much investment income the way they're set up that one good storm isn't going to knock them out," Small said.
Life/Health Impairments
One life/health company, Oklahoma-based Security General Life Insurance Co., was placed in rehabilitation in September 2006. Another company was taken under a confidential supervision impairment. While the 2006 life/health impairment rate represents a new 31-year low, additional confidential supervision impairment could rise.
"We have a circumstance with confidential supervision," said Williams. "The states take action to try to prevent problems for companies that they see in financial trouble. We picked up three additional impairments for 2005 and there's a fair shot that you'll see a fair jump in the 2006 numbers as we go forward-- enough that they won't be the lowest numbers on record."
The recent improved annual impairment rates for life/health insurers reflects an improving operating environment since 2001, industry efforts to diversity its asset portfolios and consolidation of some of the more thinly capitalized insurers with stronger companies.
(By Tom De Martini, associate editor, BestWeek: Thomas.DeMartini@ambest.com) Copyright 2007 A.M. Best Company, Inc.
Thursday, March 22, 2007
Insurance Industry Mergers On the Rise.
Insurance industry mergers and acquisitions transactions in the US increased in 2006 to the highest level since 2001 and may foreshadow an acceleration of activity into 2007-2008, according to a new study by Conning Research and Consulting.
"Insurance industry mergers and acquisitions transactions in 2006 increased due to a significant increase in the distribution sector. This is the highest level of transactions since 2001, yet the total value of these transactions was USD8bn lower than 2005 levels," said Clint Harris, senior analyst at Conning Research & Consulting. "The property-casualty sector led public offerings, including secondary offerings, with eight of the nine IPOs and nine of the fourteen secondary offerings."
The Conning Research study, "Mergers & Acquisitions and Public Equity Offerings -- 2007 Edition" continues Conning's annual review of insurance industry M&A and its effects on the industry.
"While transaction level increases in the insurance industry have kept pace with the broader marketplace over the past five years, the annual value of transactions has been very volatile," said Stephan Christiansen, director of research at Conning Research & Consulting. "Despite this, we forecast an increase in acquisition transaction values in the next 12-18 months, due to the continuing increase in surplus in the industry, along with private equity's increasing involvement in insurance. The ability of these firms to access large amounts of capital, and their ability to secure relatively inexpensive debt layers, means that they can be part of transactions exceeding USD10bn. Therefore, we expect more transactions valued between USD1bn and 5bn, with perhaps a few USD10bn or higher. Of course long-term drivers of scalability of data and process and global trends in business continue."
This article is supplied by Insurance Newslink (www.insurancenewslink.com).
Copyright 2007 Shillito Market Intelligence
"Insurance industry mergers and acquisitions transactions in 2006 increased due to a significant increase in the distribution sector. This is the highest level of transactions since 2001, yet the total value of these transactions was USD8bn lower than 2005 levels," said Clint Harris, senior analyst at Conning Research & Consulting. "The property-casualty sector led public offerings, including secondary offerings, with eight of the nine IPOs and nine of the fourteen secondary offerings."
The Conning Research study, "Mergers & Acquisitions and Public Equity Offerings -- 2007 Edition" continues Conning's annual review of insurance industry M&A and its effects on the industry.
"While transaction level increases in the insurance industry have kept pace with the broader marketplace over the past five years, the annual value of transactions has been very volatile," said Stephan Christiansen, director of research at Conning Research & Consulting. "Despite this, we forecast an increase in acquisition transaction values in the next 12-18 months, due to the continuing increase in surplus in the industry, along with private equity's increasing involvement in insurance. The ability of these firms to access large amounts of capital, and their ability to secure relatively inexpensive debt layers, means that they can be part of transactions exceeding USD10bn. Therefore, we expect more transactions valued between USD1bn and 5bn, with perhaps a few USD10bn or higher. Of course long-term drivers of scalability of data and process and global trends in business continue."
This article is supplied by Insurance Newslink (www.insurancenewslink.com).
Copyright 2007 Shillito Market Intelligence
Monday, March 19, 2007
Data Loss Seen as Most Serious Global Risk
More than one-third of a group of senior executives and risk professionals surveyed earlier this year view loss of data as among the most serious threats facing their organizations.
In fact, loss of data was the most commonly cited threat in a new global risk report put out by the London-based Economist Intelligence Unit for ACE European Group, IBM Corp. and KPMG L.L.P. Thirty-six percent of the 181 participants ranked it among the types of threats "seen to be most important in your organization’s consideration of operational risk management planning."
Human error followed closely, being cited by 35% of the participants, and systems failure ranked third at 31%. Natural disasters, terrorism and pandemics showed up much lower on the list, behind such exposures as supply chain disruption and attacks on information technology systems.
"The survey shows that risk managers clearly understand the value of data and, increasingly are focusing on its associated losses," Gareth Tungett, senior underwriter specializing in IT and cyber risk at ACE, said in a statement released Friday discussing the survey’s results.
The survey—"Business Resilience: Ensuring Continuity in a Volatile Environment"—is available at www.aceeuropeangroup.com.
In fact, loss of data was the most commonly cited threat in a new global risk report put out by the London-based Economist Intelligence Unit for ACE European Group, IBM Corp. and KPMG L.L.P. Thirty-six percent of the 181 participants ranked it among the types of threats "seen to be most important in your organization’s consideration of operational risk management planning."
Human error followed closely, being cited by 35% of the participants, and systems failure ranked third at 31%. Natural disasters, terrorism and pandemics showed up much lower on the list, behind such exposures as supply chain disruption and attacks on information technology systems.
"The survey shows that risk managers clearly understand the value of data and, increasingly are focusing on its associated losses," Gareth Tungett, senior underwriter specializing in IT and cyber risk at ACE, said in a statement released Friday discussing the survey’s results.
The survey—"Business Resilience: Ensuring Continuity in a Volatile Environment"—is available at www.aceeuropeangroup.com.
Thursday, March 15, 2007
Survey: Most Workers Underestimate Chances, Impact of Disability
While growing number of American workers are forecasted to experience a disability during their career, more than 80 percent of workers said they believe their chances of becoming disabled are far lower than actual statistics report, according to a new survey. The 2007 Disability Awareness Survey, released today by the Council for Disability Awareness (CDA), said the majority of workers are not concerned about the possibility of becoming disabled – an accident or illness that will keep them out of work at least three months.
Data from the survey underscores the need to better inform America's workforce about the likelihood of experiencing a disability, as well as the potential financial consequences that may accompany a disability. The CDA is embarking on an outreach effort to increase public dialogue about disability awareness.
"Preparing for an unexpected disability has never been more important for America's workforce – especially as more American workers are suffering from income-limiting disabilities that can leave them and their families vulnerable to severe financial hardship," explained Robert Taylor, executive director of CDA. "It's important that workers recognize the growing threat that disability can pose to their financial security."
Since 2000, the number of disabled workers in America has increased by 35 percent according to recent Social Security Administration data. At the same time, the financial health of many American workers has declined. Workers are not only spending their earnings, but also are dipping deeper into their savings and going into debt to make ends meet. The overall 2006 U.S. savings rate was negative 1 percent – the worst since the Great Depression. These statistics are distressing, considering two-thirds of respondents with a 401k or IRA plan are unaware of what would happen to their retirement savings should they become disabled and unable to earn an income.
Given this unsteady financial situation, it's alarming that nearly 60 percent of workers surveyed said they haven't discussed how they would manage an income-limiting disability. In fact, almost half of these workers haven't thought at all about the need to plan for the financial impact of a disability.
On the other hand, more than 80 percent of workers who have planned financially for a disability are confident about their ability to cover living expenses if a disability strikes.
The CDA survey also showed that:
* The majority of workers (56 percent) didn't realize that their chances of becoming disabled had risen over the past five years.
* Nine out of 10 (90 percent) workers underestimated their own chances of becoming disabled.
* More than one-third (35 percent) of workers with 401k or IRA plans said they haven't thought about or don't know what would happen to their contributions if they were unable to earn an income for a period of time.
As responsibility for long-term financial security continues to shift to the American worker, the need to incorporate disability planning into each person's financial security plan has become more critical," Taylor said. "Fortunately, with good planning, American workers can dramatically improve their chances of financial stability should a disability strike."
Source: Council for Disability Awareness, www.disabilitycanhappen.org.
Data from the survey underscores the need to better inform America's workforce about the likelihood of experiencing a disability, as well as the potential financial consequences that may accompany a disability. The CDA is embarking on an outreach effort to increase public dialogue about disability awareness.
"Preparing for an unexpected disability has never been more important for America's workforce – especially as more American workers are suffering from income-limiting disabilities that can leave them and their families vulnerable to severe financial hardship," explained Robert Taylor, executive director of CDA. "It's important that workers recognize the growing threat that disability can pose to their financial security."
Since 2000, the number of disabled workers in America has increased by 35 percent according to recent Social Security Administration data. At the same time, the financial health of many American workers has declined. Workers are not only spending their earnings, but also are dipping deeper into their savings and going into debt to make ends meet. The overall 2006 U.S. savings rate was negative 1 percent – the worst since the Great Depression. These statistics are distressing, considering two-thirds of respondents with a 401k or IRA plan are unaware of what would happen to their retirement savings should they become disabled and unable to earn an income.
Given this unsteady financial situation, it's alarming that nearly 60 percent of workers surveyed said they haven't discussed how they would manage an income-limiting disability. In fact, almost half of these workers haven't thought at all about the need to plan for the financial impact of a disability.
On the other hand, more than 80 percent of workers who have planned financially for a disability are confident about their ability to cover living expenses if a disability strikes.
The CDA survey also showed that:
* The majority of workers (56 percent) didn't realize that their chances of becoming disabled had risen over the past five years.
* Nine out of 10 (90 percent) workers underestimated their own chances of becoming disabled.
* More than one-third (35 percent) of workers with 401k or IRA plans said they haven't thought about or don't know what would happen to their contributions if they were unable to earn an income for a period of time.
As responsibility for long-term financial security continues to shift to the American worker, the need to incorporate disability planning into each person's financial security plan has become more critical," Taylor said. "Fortunately, with good planning, American workers can dramatically improve their chances of financial stability should a disability strike."
Source: Council for Disability Awareness, www.disabilitycanhappen.org.
Wednesday, March 14, 2007
The McLaughlin Company Speakers Bureau
Over the years, we have seen an increase in the need for professional speakers in the Insurance and Risk Management area. Ted Pappas, Webb Hubbell, Brenda Mantz and Cheri Brewer represent over 100 years of experience in these areas. To make it more convenient for your organization to utilize their abilities, The McLaughlin Company responded by creating a speakers bureau specifically focused on those areas. Each speaker has become fluent in the issues and trends surrounding the insurance and risk management industries. Our speaker's bureau coordinator, Julie Johnson will strategically work with you to define your exact needs in a speaker. Contact her at speakersbureau@mclaughlin-online.com
Our Insurance and Risk Management speakers address many areas including:
Specific insurance and/or risk management topics
Continuing education and training Industry trends
Market transformations
Dynamic sales and management techniques
Insurance Programs and Risks specifically designed for Labor Unions
Fiduciary Insurance and Risk Avoidance
Risk Management for Pension Real Estate Investments
The Hidden Costs of Workers Compensation Insurance
The Pension Protection Act of 2006
To learn more about our speakers go to www.mclaughlin-online.com
Our Insurance and Risk Management speakers address many areas including:
Specific insurance and/or risk management topics
Continuing education and training Industry trends
Market transformations
Dynamic sales and management techniques
Insurance Programs and Risks specifically designed for Labor Unions
Fiduciary Insurance and Risk Avoidance
Risk Management for Pension Real Estate Investments
The Hidden Costs of Workers Compensation Insurance
The Pension Protection Act of 2006
To learn more about our speakers go to www.mclaughlin-online.com
Friday, March 09, 2007
Backdating -- What's in your D&O Wallet?
Stock option backdating and financial restatements will bring on a surge of shareholder class actions and drive the cost of D&O coverage upward in 2007. Numerous suits were filed at the end of 2006 and the SEC is investigating over 100 other backdating charges. Although insurers continue to say that they look at each company on a case-by-case approach pressure continues to grow to raise D&O rates for all companies.
Monday, January 29, 2007
Identity Theft Update
An announcement from Aetna detailing the theft of sensitive personal information of l30,000 plan members from a field office of a company that provides medical claim audit services highlighted a year of data loss and theft throughout the insurance industry in 2006.
More than 10 such announcements from insurers were reported last year as Companies dealt with the fallout of customer privacy missteps including the loss of names, addresses, birthdates, drivers license numbers and social security numbers of its insured. Some instances included loss of sensitive medical information.
Aetna’s December announcement of late October event was the second for the company in 2006.
In May 2006, the company also reported the loss of information of 38,000 of its members resulting from a theft of an employee’s laptop.
Other insurers reporting data breeches last year included Aflac, Allstate, American Family Insurance, American Insurance Group (AIG), Blue Cross - Blue Shield, Kaiser Permanente, Progressive Casualty Insurance, Sentry Insurance Virginia Bureau of Insurance and Wellpoint.
The announcements of each of these data loss incidents typically included the disclaimer that any personal information would be difficult to access by thieves, with many adding that the sensitive data was simply part of a burglary of property that could be sold for cash and that identity theft was not an intended goal. But with identity theft three times greater than the aggregate of all U.S. property crimes (burglary, larceny and motor vehicle theft), the cause for concern is high.
More than 10 such announcements from insurers were reported last year as Companies dealt with the fallout of customer privacy missteps including the loss of names, addresses, birthdates, drivers license numbers and social security numbers of its insured. Some instances included loss of sensitive medical information.
Aetna’s December announcement of late October event was the second for the company in 2006.
In May 2006, the company also reported the loss of information of 38,000 of its members resulting from a theft of an employee’s laptop.
Other insurers reporting data breeches last year included Aflac, Allstate, American Family Insurance, American Insurance Group (AIG), Blue Cross - Blue Shield, Kaiser Permanente, Progressive Casualty Insurance, Sentry Insurance Virginia Bureau of Insurance and Wellpoint.
The announcements of each of these data loss incidents typically included the disclaimer that any personal information would be difficult to access by thieves, with many adding that the sensitive data was simply part of a burglary of property that could be sold for cash and that identity theft was not an intended goal. But with identity theft three times greater than the aggregate of all U.S. property crimes (burglary, larceny and motor vehicle theft), the cause for concern is high.
Tuesday, December 12, 2006
Big I opposes Spitzer decision
ALEXANDRIA, Va., Nov. 30, 2006-The Independent Insurance Agents & Brokers of America (the Big "I") disagrees with, and is disappointed by, New York Attorney General Eliot Spitzer's decision that four leading companies can no longer offer incentive compensation to agents and brokers selling their products.
Spitzer today announced that he has notified ACE, AIG, St. Paul Travelers and Zurich that, under agreements reached with his office earlier this year, they may no longer offer this form of legal compensation because they have crossed the 65-percent "tipping point" in those agreements as to homeowners', personal auto, boiler and machinery and financial guaranty insurance. Those agreements bar carriers from paying incentive compensation to their sales forces when more than 65 percent of that line of insurance is sold by companies that do not pay incentive compensation.
"The independent agent and broker community is greatly distressed by this development," says Big "I" CEO Robert A. Rusbuldt. "These carriers are now unable to use what otherwise is a perfectly legal way to compensate their sales forces, just as is done in virtually all industries across America. It is ironic that the illegal activities uncovered by Mr. Spitzer occurred in commercial lines, not personal lines, and yet, it is largely in personal lines that the fallout is being felt today. The solution imposed on carriers and agents of banning incentive compensation is totally misplaced and directed at business that was never a problem to begin with."
The Big "I" continues to defend incentive compensation as a legal, legitimate form of compensation that is employed in all sales-based industries. Any compensation system can be abused, but the problem lies with those few who abuse it, not the system itself.
"There is no doubt that a few bad actors in the commercial lines area abused the system, and we have always agreed that those who break the law should be punished to the fullest extent possible," Rusbuldt says. "But it is absolutely wrong and indefensible to penalize the innocent majority for the misdeeds of a handful of people. This decision will impact thousands of agencies across the country as they face reductions in compensation that will hamper their ability to create jobs in their communities, train staff, invest in their agencies, and provide consumers access to insurance. On behalf of the hundreds of thousands of agents and brokers across America who had no part in the dishonest activity of a few, we will continue to fight to preserve the right of companies to pay legal incentive compensation." www.independentagent.com
Spitzer today announced that he has notified ACE, AIG, St. Paul Travelers and Zurich that, under agreements reached with his office earlier this year, they may no longer offer this form of legal compensation because they have crossed the 65-percent "tipping point" in those agreements as to homeowners', personal auto, boiler and machinery and financial guaranty insurance. Those agreements bar carriers from paying incentive compensation to their sales forces when more than 65 percent of that line of insurance is sold by companies that do not pay incentive compensation.
"The independent agent and broker community is greatly distressed by this development," says Big "I" CEO Robert A. Rusbuldt. "These carriers are now unable to use what otherwise is a perfectly legal way to compensate their sales forces, just as is done in virtually all industries across America. It is ironic that the illegal activities uncovered by Mr. Spitzer occurred in commercial lines, not personal lines, and yet, it is largely in personal lines that the fallout is being felt today. The solution imposed on carriers and agents of banning incentive compensation is totally misplaced and directed at business that was never a problem to begin with."
The Big "I" continues to defend incentive compensation as a legal, legitimate form of compensation that is employed in all sales-based industries. Any compensation system can be abused, but the problem lies with those few who abuse it, not the system itself.
"There is no doubt that a few bad actors in the commercial lines area abused the system, and we have always agreed that those who break the law should be punished to the fullest extent possible," Rusbuldt says. "But it is absolutely wrong and indefensible to penalize the innocent majority for the misdeeds of a handful of people. This decision will impact thousands of agencies across the country as they face reductions in compensation that will hamper their ability to create jobs in their communities, train staff, invest in their agencies, and provide consumers access to insurance. On behalf of the hundreds of thousands of agents and brokers across America who had no part in the dishonest activity of a few, we will continue to fight to preserve the right of companies to pay legal incentive compensation." www.independentagent.com
Thursday, October 12, 2006
ICE -- In Case Of An Emergency
In a recent article from the Toronto Star, "the ICE idea", is catching on and it is a very simple, yet important method of contact for you or a loved one in case of an emergency. As cell phones are carried by the majority of the population, all you need to do is program the number of a contact person or persons and store the name as "ICE".
The idea was thought up by a paramedic who found that when they went to the scenes of accidents, there were always mobile phones with patients, but they didn't know which numbers to call. He therefore thought that it would be a good idea if there was a nationally recognized name to file "next of kin" under.
Following a disaster in London The East Anglican Ambulance Service has launched a national "In case of Emergency (ICE)" campaign. The idea is that you store the word "ICE " in your mobile phone address book, and with it enter the number of the person you would want to be contacted "In Case of Emergency ". In an emergency situation, Emergency Services personnel and hospital staff would then be able to quickly contact your next of kin, by simply dialing the number programmed under "ICE".
It really could save your life, or put a loved one's mind at rest. For more than one contact name simply enter ICE1, ICE2, ICE3 etc.
The idea was thought up by a paramedic who found that when they went to the scenes of accidents, there were always mobile phones with patients, but they didn't know which numbers to call. He therefore thought that it would be a good idea if there was a nationally recognized name to file "next of kin" under.
Following a disaster in London The East Anglican Ambulance Service has launched a national "In case of Emergency (ICE)" campaign. The idea is that you store the word "ICE " in your mobile phone address book, and with it enter the number of the person you would want to be contacted "In Case of Emergency ". In an emergency situation, Emergency Services personnel and hospital staff would then be able to quickly contact your next of kin, by simply dialing the number programmed under "ICE".
It really could save your life, or put a loved one's mind at rest. For more than one contact name simply enter ICE1, ICE2, ICE3 etc.
Friday, September 15, 2006
DISB approves new Annual Workers Compensation Rates
NCCI received approval for its filing of workers comp loss cost and rates effective November 1, 2006 for new and renewal policies. This filing proposes an overall pure premium level decrease of 7.9% for the voluntary market and an overall rate level decrease of 5.8% for the residual market. The following gives a breakdown of the overall indication for the voluntary market: Change in experience and trend: 8.5%; Change in Benefits (increase in Maximum benefits): +0.2%; Change in Loss Adjustment Expense: 0.4%; Overall indication: -7.9%. Circulars are posted at NCCI’s website (www.ncci.com).
Tuesday, September 12, 2006
The ABCs of indemnity agreements and additional insured endorsements
Understanding your business’s risk exposures is the cornerstone to managing them. Whether your business relies on outside vendors to provide goods and services, or you’re a provider of goods and services to your clients, you should be aware of how to take contractual precautions to protect your business against potential losses or damages. An indemnity agreement secured by an additional insured endorsement is a risk-transfer tool that can help insulate your business from potential risks.
Indemnity and additional insured endorsements
It is a common practice to enter into contractual agreements with those involved in a project to formalize the terms and responsibilities for all parties. These contracts often include an indemnity agreement, also known as a hold harmless agreement, as a means to transfer the risk of future losses or damages from one party to another.
There are basically three kinds of indemnity or hold harmless clauses typically contained in contracts.
1.Limited - obligates the indemnitor (the party paying compensation) to hold harmless the indemnitee (the party receiving compensation) only for the indemnitor’s own negligence
2.Intermediate - obligates the indemnitor to hold harmless the indemnitee for all liability except that which arises out of the indemnitee’s sole negligence.
3.Broad form - obligates the indemnitor to hold harmless for all liabilities, including the indemnitee’s negligence.
Carefully review the indemnity agreement prior to finalizing the contract to determine the extent of your company’s liability. Once the scope is understood, you may want to negotiate the terms to limit your exposure. The application and enforcement of an indemnification agreement does, however, depend upon the statutory and common law of the jurisdiction in which enforcement is sought.
To support the terms of the indemnity agreement, the contract will often include insurance requirements. These spell out the insurance required by the various parties entering into the contract. It is common for one party to include another as an additional insured under its Commercial General Liability (CGL) policy. For example, owners or general contractors of construction projects commonly require those who are actively involved in the project operations, such as subcontractors, to sign a contract and name them as an additional insured on their CGL policy to limit their liability for damages caused by the subcontractor.
Additional insured status
When reviewing the insurance requirements section of a contract, pay particular attention to the additional insured requirements. There are numerous additional insured endorsements. The specific additional insured endorsement, required in the contract, must be reviewed in order to determine the scope of coverage. Contact The McLaughlin Company] to obtain sample endorsement wording.
The Insurance Services Office (ISO) released new additional insured endorsements in 2004. The intent of the endorsements is to provide liability coverage for additional insureds (typically the general contractor or project owner) with respect to damages caused by the named insured (subcontractor). The endorsements do not provide coverage for the additional insured’s sole negligence, but they can provide coverage for the additional insured’s contributory negligence. Make sure that the actual additional insured endorsement satisfies contract requirements.
What’s in a name?
Don’t be confused—additional insured coverage is different than “additional named insured” coverage. An additional named insured usually is an affiliate of the primary insured. You will not be able to add or be added as an additional named insured. If this is part of the contract, it should be removed.
Understanding your coverage
Understanding the terms of the contract, the extent of liability assumed in the indemnity agreement, and the insurance requirements—including the coverage provided or afforded by the additional insured endorsement—are critical to minimizing future liabilities and exposure to losses.
Keep in mind, the liability assumed in the indemnification agreement of the contract can be broader than the coverage provided under the additional insured endorsement. A comparison of the two should be done to determine what is covered by insurance and what is not.
Many businesses choose to transfer or accept risk through contracts, purchase orders and lease agreements. However, not all contracts or endorsements are created equal. Contact The McLaughlin Company to learn more about contractual risk transfer and how it can be a part of your overall risk management program.
Indemnity and additional insured endorsements
It is a common practice to enter into contractual agreements with those involved in a project to formalize the terms and responsibilities for all parties. These contracts often include an indemnity agreement, also known as a hold harmless agreement, as a means to transfer the risk of future losses or damages from one party to another.
There are basically three kinds of indemnity or hold harmless clauses typically contained in contracts.
1.Limited - obligates the indemnitor (the party paying compensation) to hold harmless the indemnitee (the party receiving compensation) only for the indemnitor’s own negligence
2.Intermediate - obligates the indemnitor to hold harmless the indemnitee for all liability except that which arises out of the indemnitee’s sole negligence.
3.Broad form - obligates the indemnitor to hold harmless for all liabilities, including the indemnitee’s negligence.
Carefully review the indemnity agreement prior to finalizing the contract to determine the extent of your company’s liability. Once the scope is understood, you may want to negotiate the terms to limit your exposure. The application and enforcement of an indemnification agreement does, however, depend upon the statutory and common law of the jurisdiction in which enforcement is sought.
To support the terms of the indemnity agreement, the contract will often include insurance requirements. These spell out the insurance required by the various parties entering into the contract. It is common for one party to include another as an additional insured under its Commercial General Liability (CGL) policy. For example, owners or general contractors of construction projects commonly require those who are actively involved in the project operations, such as subcontractors, to sign a contract and name them as an additional insured on their CGL policy to limit their liability for damages caused by the subcontractor.
Additional insured status
When reviewing the insurance requirements section of a contract, pay particular attention to the additional insured requirements. There are numerous additional insured endorsements. The specific additional insured endorsement, required in the contract, must be reviewed in order to determine the scope of coverage. Contact The McLaughlin Company] to obtain sample endorsement wording.
The Insurance Services Office (ISO) released new additional insured endorsements in 2004. The intent of the endorsements is to provide liability coverage for additional insureds (typically the general contractor or project owner) with respect to damages caused by the named insured (subcontractor). The endorsements do not provide coverage for the additional insured’s sole negligence, but they can provide coverage for the additional insured’s contributory negligence. Make sure that the actual additional insured endorsement satisfies contract requirements.
What’s in a name?
Don’t be confused—additional insured coverage is different than “additional named insured” coverage. An additional named insured usually is an affiliate of the primary insured. You will not be able to add or be added as an additional named insured. If this is part of the contract, it should be removed.
Understanding your coverage
Understanding the terms of the contract, the extent of liability assumed in the indemnity agreement, and the insurance requirements—including the coverage provided or afforded by the additional insured endorsement—are critical to minimizing future liabilities and exposure to losses.
Keep in mind, the liability assumed in the indemnification agreement of the contract can be broader than the coverage provided under the additional insured endorsement. A comparison of the two should be done to determine what is covered by insurance and what is not.
Many businesses choose to transfer or accept risk through contracts, purchase orders and lease agreements. However, not all contracts or endorsements are created equal. Contact The McLaughlin Company to learn more about contractual risk transfer and how it can be a part of your overall risk management program.
Tuesday, August 29, 2006
New California Sexual Harassment Training Guidelines Released
New California Sexual Harassment Training Guidelines Released
Last year California passed legislation that requires employers with 50 or more employees to train their managers and supervisors on sexual harassment. Because some felt that the law was too broad and general, the California Fair Employment and Housing Commission has drafted more detailed guidelines to help California employers. “Commission provides definitive guidelines for sexual harassment training,” San Diego Daily Transcript as reported in www.yahoo.news (Aug. 15, 2006).
The guidelines, which may go into effect as soon as three months, include these points:
The trainer must possess a certain level of expertise – either a law degree or practical experience in prevention training and knowledge of California law;
Online training must be interactive so that a trainee can pose a question and receive an answer within two days;
All live training must be interactive presumably permitting questions and answers;
Employers must keep a training record for each individual supervisor; and
Employers must distribute their harassment policies and incorporate these policies into the training.
Commentary
The proposed guidelines eliminate from consideration any training where a trainee sits and watches a video without a trainer or person present to answer questions. It also eliminates any training where an employer simply reads from a training manual without any form of interaction.
Employers that utilize online training should make certain that the training allows trainees to ask questions and that the training records participation for each individual trainee. California employers should also make certain that employees acknowledge reading and understanding their sexual harassment policy just prior to taking any training and that they are provided the name of a person to ask questions about their policy.
Live training requires that employers do their homework to make certain that the trainer is qualified and that the materials can pass muster if questioned.
Last year California passed legislation that requires employers with 50 or more employees to train their managers and supervisors on sexual harassment. Because some felt that the law was too broad and general, the California Fair Employment and Housing Commission has drafted more detailed guidelines to help California employers. “Commission provides definitive guidelines for sexual harassment training,” San Diego Daily Transcript as reported in www.yahoo.news (Aug. 15, 2006).
The guidelines, which may go into effect as soon as three months, include these points:
The trainer must possess a certain level of expertise – either a law degree or practical experience in prevention training and knowledge of California law;
Online training must be interactive so that a trainee can pose a question and receive an answer within two days;
All live training must be interactive presumably permitting questions and answers;
Employers must keep a training record for each individual supervisor; and
Employers must distribute their harassment policies and incorporate these policies into the training.
Commentary
The proposed guidelines eliminate from consideration any training where a trainee sits and watches a video without a trainer or person present to answer questions. It also eliminates any training where an employer simply reads from a training manual without any form of interaction.
Employers that utilize online training should make certain that the training allows trainees to ask questions and that the training records participation for each individual trainee. California employers should also make certain that employees acknowledge reading and understanding their sexual harassment policy just prior to taking any training and that they are provided the name of a person to ask questions about their policy.
Live training requires that employers do their homework to make certain that the trainer is qualified and that the materials can pass muster if questioned.
Thursday, August 24, 2006
Offline Media versus Online Media Coverage
Most of the combined tech/media/eBusiness forms in the market limit their media liability coverage to “online” media. That is, they limit the coverage to liability arising out of the content on a Web site or used to run a Web site or other of the company’s operations (e.g., software) and content sent via the Internet (like e-mails). But more and more insurers are willing to add endorsements to their forms to extend such coverage to offline media—e.g., traditional forms of advertising, publishing, broadcasting, etc.
So, one of the questions that insureds and brokers alike should ask themselves when reviewing a quote for a combined tech/media/eBusiness policy is whether they want coverage for offline media activities. If so, they also need to understand what issues to look for when negotiating the various endorsements that insurers use for offering offline media coverage; as one might imagine, not all endorsements are created equal. Some of those issues are discussed below.
Interplay with CGL “Personal and Advertising Injury” Coverage
One of the issues that might drive an insured’s decision regarding the need to pursue offline media coverage is how the insured’s general liability program is structured. By “general liability” we mean commercial general liability, foreign general liability, and umbrella liability. These policies provide coverage for “bodily injury,” “property damage,” “personal injury,” and “advertising injury” (with newer forms combining the latter two coverages into “personal and advertising injury” coverage).
Several general liability insurers will put endorsements on their programs that bar all “personal injury” and “advertising injury” coverage from the program, because they don’t want any part of that risk, and know that the insured is buying separate coverage for “media liability” in some fashion or another. If an insured’s general liability program contains such an exclusion, then the insured should seriously consider seeking coverage for offline media in the insured’s combined tech/media/eBusiness insurance program. Also, care must be taken when doing this, because the tech/media/eBusiness policy, even when endorsed to
address offline media, might not cover all risks typically covered by the “personal injury” coverage of a general liability program. Accordingly, an insured might need to approach its general liability insurers and ask them to amend their “personal injury/advertising injury” exclusions so as to minimize gaps in coverage.
So, one of the questions that insureds and brokers alike should ask themselves when reviewing a quote for a combined tech/media/eBusiness policy is whether they want coverage for offline media activities. If so, they also need to understand what issues to look for when negotiating the various endorsements that insurers use for offering offline media coverage; as one might imagine, not all endorsements are created equal. Some of those issues are discussed below.
Interplay with CGL “Personal and Advertising Injury” Coverage
One of the issues that might drive an insured’s decision regarding the need to pursue offline media coverage is how the insured’s general liability program is structured. By “general liability” we mean commercial general liability, foreign general liability, and umbrella liability. These policies provide coverage for “bodily injury,” “property damage,” “personal injury,” and “advertising injury” (with newer forms combining the latter two coverages into “personal and advertising injury” coverage).
Several general liability insurers will put endorsements on their programs that bar all “personal injury” and “advertising injury” coverage from the program, because they don’t want any part of that risk, and know that the insured is buying separate coverage for “media liability” in some fashion or another. If an insured’s general liability program contains such an exclusion, then the insured should seriously consider seeking coverage for offline media in the insured’s combined tech/media/eBusiness insurance program. Also, care must be taken when doing this, because the tech/media/eBusiness policy, even when endorsed to
address offline media, might not cover all risks typically covered by the “personal injury” coverage of a general liability program. Accordingly, an insured might need to approach its general liability insurers and ask them to amend their “personal injury/advertising injury” exclusions so as to minimize gaps in coverage.
Tuesday, August 22, 2006
Watch What You Write
In a recent survey, 24% of the employers responding reported receiving subpoenas for emails that were stored in their company records. At times the content of existing emails led to legal troubles, and other times the destruction of emails led to other adverse legal consequences. Eric J. Sinrod, “Why employers are cracking down on email,” www.news.com (July 26, 2006).
According to the survey conducted by the American Management Association and the ePolicy Institute, emails written at work have led to litigation for 15% of the companies surveyed.
Commentary and Checklist:
Employees write and respond to hundreds if not thousands of emails each year. For an employer to monitor every email is impossible. This means that managers and supervisors need to monitor themselves when writing emails and monitor their subordinates.
Here are some rules when writing emails:
Write every email with the understanding that people other than the recipient may read what you have written.
Don’t write anything that you wouldn’t state verbally to the recipient in a business conversation.
Don’t write emails when you are angry or upset. If angry or upset, take some time to cool down first and write a few drafts before sending.
Avoid using abbreviations and slang. These informalities can lead to a wrong interpretation from readers.
Skip attempts at humor especially when writing about a serious subject. Humor has little value in a courtroom.
Be clear and concise in your language.
Avoid sending long emails. If a matter requires a lengthy explanation, make your explanation in a formal memorandum attached to an email.
If you discover that subordinates are writing improper emails, especially emails that harass or threaten other employees, move quickly to stop the problem.
Counsel your employees on why they should take the time to follow these rules.
According to the survey conducted by the American Management Association and the ePolicy Institute, emails written at work have led to litigation for 15% of the companies surveyed.
Commentary and Checklist:
Employees write and respond to hundreds if not thousands of emails each year. For an employer to monitor every email is impossible. This means that managers and supervisors need to monitor themselves when writing emails and monitor their subordinates.
Here are some rules when writing emails:
Write every email with the understanding that people other than the recipient may read what you have written.
Don’t write anything that you wouldn’t state verbally to the recipient in a business conversation.
Don’t write emails when you are angry or upset. If angry or upset, take some time to cool down first and write a few drafts before sending.
Avoid using abbreviations and slang. These informalities can lead to a wrong interpretation from readers.
Skip attempts at humor especially when writing about a serious subject. Humor has little value in a courtroom.
Be clear and concise in your language.
Avoid sending long emails. If a matter requires a lengthy explanation, make your explanation in a formal memorandum attached to an email.
If you discover that subordinates are writing improper emails, especially emails that harass or threaten other employees, move quickly to stop the problem.
Counsel your employees on why they should take the time to follow these rules.
Friday, August 18, 2006
Using Materials From The Internet
Overview of Copyright Law
Copyright law protects original works of authorship ranging from literary works to sound recordings. Rights accrue the moment that the content is “fixed” in a tangible medium of expression. This means that works written on paper, programmed onto a webpage or recorded on a digital tape have been fixed in a medium and are protected by copyright laws. To receive full federal rights and remedies, the work must be registered with the Copyright Office. The rights of registration include statutory damages and attorney’s fees.
Much of what is posted on the Internet is protected by federal copyright law, despite the fact that it is available free of charge and/or does not contain a © copyright symbol or notice. A good rule of thumb is to always attribute your sources and obtain permission from the copyright owner before posting an article or provide a link from your Web site to the article.
Frequently Asked Questions
1. What material is subject to copyright laws? The safest assumption is that all materials available on the Internet are subject to copyright laws. This includes photographs, charts and other graphics.
2. When is Permission required? Re-posting or republishing an article in its entirety always requires permission from the copyright holder, unless the original posting specifically indicates to the contrary. Permission may not be required when using small excerpts from a copyrighted source under the Fair Use Exception. See question number seven (7) below. Linking to an article, rather than re-posting may also avoid the permission issue.
3. How do I obtain Permission? You may contact the publisher or the author of the materials to obtain permission directly. Another option that may be more efficient for those regularly obtaining copyright owners’ permissions is to go through a licensing agency such the Copyright Clearance Center. Their website is located at www.copyright.com.
4. Why is there a hyperlink entitled “Terms of Use” on a webpage? Many websites will post a Terms of Use type of document as a link on the bottom of their home page. Reading this document will allow you to determine whether the site owners intended to grant you a license to copy or re-post or otherwise republish the material on their website. It may also indicate how to contact them to obtain permission to utilize their materials.
5. What is the difference between Linking and Deep Linking? This is a method by which you may direct your users to content on another site by providing a hypertext link, or hyperlink. This method of linking directs users to the website’s home page, not the specific page containing the article which you would like to share. The user must navigate the site to find the article in question. Deep linking is the use of a link that brings users directly to a specific page containing the desired article.
6. May I modify content? You may not edit or create another work based upon a copyrighted work without prior permission from the copyright holder. Since only an expression of an idea or fact is copyrightable, and not the idea or fact itself, you may use the information and credit the source.
7. What is fair use? The Fair Use doctrine is an exception to copyright law which permits one to copy segments of an otherwise protected work in certain circumstances. Four factors are used to evaluate whether a particular use is fair: (1) the purpose of the use; (2) the type of work being excerpted; (3) the amount being used as compared to the copyrighted work as a whole; and (4) the impact of the use upon the market for and value of the original work. See 17 U.S.C. 107.
Some examples of possible fair uses are as follows: using a paragraph from a copyrighted two page piece to report news of a piece of legislation; copying two sentences of an editorial for a critique; using a three-page chapter from a 350 page book to inform an audience about a topic. Fair use is a narrow exception and an attorney should be consulted prior to relying on it.
For more information, please visit the Federal Copyright Office’s website located at: www.copyright.gov.
Copyright law protects original works of authorship ranging from literary works to sound recordings. Rights accrue the moment that the content is “fixed” in a tangible medium of expression. This means that works written on paper, programmed onto a webpage or recorded on a digital tape have been fixed in a medium and are protected by copyright laws. To receive full federal rights and remedies, the work must be registered with the Copyright Office. The rights of registration include statutory damages and attorney’s fees.
Much of what is posted on the Internet is protected by federal copyright law, despite the fact that it is available free of charge and/or does not contain a © copyright symbol or notice. A good rule of thumb is to always attribute your sources and obtain permission from the copyright owner before posting an article or provide a link from your Web site to the article.
Frequently Asked Questions
1. What material is subject to copyright laws? The safest assumption is that all materials available on the Internet are subject to copyright laws. This includes photographs, charts and other graphics.
2. When is Permission required? Re-posting or republishing an article in its entirety always requires permission from the copyright holder, unless the original posting specifically indicates to the contrary. Permission may not be required when using small excerpts from a copyrighted source under the Fair Use Exception. See question number seven (7) below. Linking to an article, rather than re-posting may also avoid the permission issue.
3. How do I obtain Permission? You may contact the publisher or the author of the materials to obtain permission directly. Another option that may be more efficient for those regularly obtaining copyright owners’ permissions is to go through a licensing agency such the Copyright Clearance Center. Their website is located at www.copyright.com.
4. Why is there a hyperlink entitled “Terms of Use” on a webpage? Many websites will post a Terms of Use type of document as a link on the bottom of their home page. Reading this document will allow you to determine whether the site owners intended to grant you a license to copy or re-post or otherwise republish the material on their website. It may also indicate how to contact them to obtain permission to utilize their materials.
5. What is the difference between Linking and Deep Linking? This is a method by which you may direct your users to content on another site by providing a hypertext link, or hyperlink. This method of linking directs users to the website’s home page, not the specific page containing the article which you would like to share. The user must navigate the site to find the article in question. Deep linking is the use of a link that brings users directly to a specific page containing the desired article.
6. May I modify content? You may not edit or create another work based upon a copyrighted work without prior permission from the copyright holder. Since only an expression of an idea or fact is copyrightable, and not the idea or fact itself, you may use the information and credit the source.
7. What is fair use? The Fair Use doctrine is an exception to copyright law which permits one to copy segments of an otherwise protected work in certain circumstances. Four factors are used to evaluate whether a particular use is fair: (1) the purpose of the use; (2) the type of work being excerpted; (3) the amount being used as compared to the copyrighted work as a whole; and (4) the impact of the use upon the market for and value of the original work. See 17 U.S.C. 107.
Some examples of possible fair uses are as follows: using a paragraph from a copyrighted two page piece to report news of a piece of legislation; copying two sentences of an editorial for a critique; using a three-page chapter from a 350 page book to inform an audience about a topic. Fair use is a narrow exception and an attorney should be consulted prior to relying on it.
For more information, please visit the Federal Copyright Office’s website located at: www.copyright.gov.
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