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.
Friday, May 26, 2006
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.
Friday, January 20, 2006
A Respite
Need a respite from serious Insurance and Risk Management discussion? Go to http://writingwomen.blogspot.com or http://pickledpigsfeet.blogspot.com. The authors will tickle your funny bone and calm you like a slow moving brook.
Saturday, January 14, 2006
Hail!!
Our Chairman, John T. Pappas, a Redskins season ticket holder for more than 50 years, had an opportunity on Friday to share his enthusiasm for our team as he sang Hail to the Redskins for News4.
Thursday, January 05, 2006
West Virginia Moves to a Private Workers Compensation System
On January 1, 2006, the West Virginia Workers’ Compensation Commission will cease to exist and be replaced by BrickStreet Mutual Insurance. At first, BrickStreet will be the exclusive insurer in West Virginia. As such, it will be one of the largest insurers in West Virginia. This change leaves only four other exclusive state funds to finance workers' compensation benefits (Ohio, North Dakota, Wyoming and Washington).
The Executive Director of the West Virginia Workers’ Compensation Commission will be the President and CEO of the new insurance company. In a very novel twist to corporate covernance of a mutual insurer, 5 of the 7 Board members are elected by employers insured by the company.
The timing of the transition to private insurance will be as follows: on July 1, 2008, West Virginia’s insurance market will open to all private carriers licensed to do business in West Virginia. BrickStreet will continue to be the sole source of workers’ compensation coverage for all state agencies, boards, commissions, and higher education through 2012. Starting in 2013, these state agencies can purchase coverage from any insurance carrier.
West Virginia allows for a regulated self insured status. This year self insured employers could also adjudicate their own claims. Benefit levels for injured workers remain as before, as will administrative review of claims payments and disputed claims. The regulation of private insurance and self insurance will be transferred to the West Virginia Insurance Commission.
The Executive Director of the West Virginia Workers’ Compensation Commission will be the President and CEO of the new insurance company. In a very novel twist to corporate covernance of a mutual insurer, 5 of the 7 Board members are elected by employers insured by the company.
The timing of the transition to private insurance will be as follows: on July 1, 2008, West Virginia’s insurance market will open to all private carriers licensed to do business in West Virginia. BrickStreet will continue to be the sole source of workers’ compensation coverage for all state agencies, boards, commissions, and higher education through 2012. Starting in 2013, these state agencies can purchase coverage from any insurance carrier.
West Virginia allows for a regulated self insured status. This year self insured employers could also adjudicate their own claims. Benefit levels for injured workers remain as before, as will administrative review of claims payments and disputed claims. The regulation of private insurance and self insurance will be transferred to the West Virginia Insurance Commission.
Thursday, December 29, 2005
Medicare Prescription Drug Coverage
Beginning January 1, 2006, prescription drug coverage will be available to all Medicare recipients. You can help your friends and family members enrolled in Medicare consider this important new benefit by making certain they have the necessary information about it and how to enroll. Enrollment started November 15, 2005 and will run through May 15, 2006.
If you have a family member or friend whom you would like to assist through this decision-making process, there are five simple steps you should follow:
Understand the basics of Medicare Prescription Drug Coverage
Determine how your friend or family member gets prescription coverage today
Gather some important information
Review the plan choices
Point out to them how to enroll
Additional information about the new Medicare Prescription Drug Coverage, including a webcast of a television program that recently aired on CNBC entitled the "National Day of Conversation: Friends and Family First," can be obtained online by visiting www.medicare.gov or by calling 1-800-MEDICARE (1-800-633-4227) or TTY 1-877-486-2048. Operators are available 24/7 and can walk you, your friend, or your family member through the Plan Finder and provide personalized help in comparing and choosing a plan.
If you have a family member or friend whom you would like to assist through this decision-making process, there are five simple steps you should follow:
Understand the basics of Medicare Prescription Drug Coverage
Determine how your friend or family member gets prescription coverage today
Gather some important information
Review the plan choices
Point out to them how to enroll
Additional information about the new Medicare Prescription Drug Coverage, including a webcast of a television program that recently aired on CNBC entitled the "National Day of Conversation: Friends and Family First," can be obtained online by visiting www.medicare.gov or by calling 1-800-MEDICARE (1-800-633-4227) or TTY 1-877-486-2048. Operators are available 24/7 and can walk you, your friend, or your family member through the Plan Finder and provide personalized help in comparing and choosing a plan.
Wednesday, December 28, 2005
2005 -- Year of Challenges and Accomplishments
In its 75th year, The McLaughlin Company took significant strides to better serve its clients, and to prepare itself for the rapidly evolving world of Risk Management and Insurance. Besides the daily challenges of meeting and placing its clients insurance needs, The McLaughlin Company prepared for the future in several significant areas:
Union Liability Insurance – The McLaughlin Company negotiated with the carriers of this insurance product several improvements in the policies including the ability of the insured to select its own counsel, broader coverage, and reduced premiums for Individual Labor Leaders. This product is essential to a Union in these days of heightened scrutiny by DOL, privacy concerns about Union membership lists, and the plethora of employment related practices claims.
Creative Risk Management – The Sarbanes – Oxley Act of 2002 has had a tremendous impact on an enterprises’ risk management function. Enterprises have an obligation to establish and maintain an adequate internal control structure and assess annually its internal controls. Lack of controls in certain insurance areas can lead to financial mistatement. Creative Risk Management, a division of The McLaughlin Company, is fully staffed to provide risk management services to new and existing clients.
Workers Compensation Insurance – This year, The McLaughlin Company, partnered with a database company to assist it in analyzing our client’s workers compensation claims. This database has proven to reduce many workers compensation premiums by 30 percent and insure that a client is never overpaying for workers compensation insurance.
Interactive Website – In 2005, The McLaughlin Company’s website received a completely new facelift. This new website allows existing clients to fill out applications on-line, provides an immediate vehicle for visitors to access up to date information on insurance products and trends in the industry, and gives new clients immediate availability to a trained insurance professional.
New Markets – This year, The McLaughlin Company, added several new insurance companies to its already long list of outstanding companies it represents. It has also developed markets for difficult to place coverages such as political organizations, technology companies, training funds, i.e. Finally, as markets tightened for some products The McLaughlin Company partnered with insurance companies to insure that its clients would always have certain products available. When there is a difficulty getting insurance coverage, The McLaughlin Company is the place to go.
Employee Benefits – In 2005, The McLaughlin Company entered into an association with a team of specialists in the area of employee benefit programs, group and individual life, health and disability programs. The McLaughlin Company is able to provide its clients significant savings and expertise in designing employee benefit programs.
Identity Theft – The McLaughlin Company saw a need for its personal lines clients to protect them when they become victims of identity theft. Through a program with St. Paul/Travelers every McLaughlin Company personal lines client is provided identity theft coverage free of charge.
The McLaughlin Company has a rich history of looking for better ways to provide service and products for new and existing clients. The year 2006 will present new challenges and we are prepared to meet them.
Union Liability Insurance – The McLaughlin Company negotiated with the carriers of this insurance product several improvements in the policies including the ability of the insured to select its own counsel, broader coverage, and reduced premiums for Individual Labor Leaders. This product is essential to a Union in these days of heightened scrutiny by DOL, privacy concerns about Union membership lists, and the plethora of employment related practices claims.
Creative Risk Management – The Sarbanes – Oxley Act of 2002 has had a tremendous impact on an enterprises’ risk management function. Enterprises have an obligation to establish and maintain an adequate internal control structure and assess annually its internal controls. Lack of controls in certain insurance areas can lead to financial mistatement. Creative Risk Management, a division of The McLaughlin Company, is fully staffed to provide risk management services to new and existing clients.
Workers Compensation Insurance – This year, The McLaughlin Company, partnered with a database company to assist it in analyzing our client’s workers compensation claims. This database has proven to reduce many workers compensation premiums by 30 percent and insure that a client is never overpaying for workers compensation insurance.
Interactive Website – In 2005, The McLaughlin Company’s website received a completely new facelift. This new website allows existing clients to fill out applications on-line, provides an immediate vehicle for visitors to access up to date information on insurance products and trends in the industry, and gives new clients immediate availability to a trained insurance professional.
New Markets – This year, The McLaughlin Company, added several new insurance companies to its already long list of outstanding companies it represents. It has also developed markets for difficult to place coverages such as political organizations, technology companies, training funds, i.e. Finally, as markets tightened for some products The McLaughlin Company partnered with insurance companies to insure that its clients would always have certain products available. When there is a difficulty getting insurance coverage, The McLaughlin Company is the place to go.
Employee Benefits – In 2005, The McLaughlin Company entered into an association with a team of specialists in the area of employee benefit programs, group and individual life, health and disability programs. The McLaughlin Company is able to provide its clients significant savings and expertise in designing employee benefit programs.
Identity Theft – The McLaughlin Company saw a need for its personal lines clients to protect them when they become victims of identity theft. Through a program with St. Paul/Travelers every McLaughlin Company personal lines client is provided identity theft coverage free of charge.
The McLaughlin Company has a rich history of looking for better ways to provide service and products for new and existing clients. The year 2006 will present new challenges and we are prepared to meet them.
Monday, November 21, 2005
Workers Wanted?
Bt 2010, many skilled workers will have retired and there will be too few active workers to replace and support them, even drawing on the dwindling labor resources of the Far East that have provided outsourcing labor. To fill the labor pool employers will increasingly turn to older workers, married women, and disabled individuals.
According to the Bureau of Labor Statistics, the number of workers aged 55 or older is expected to grow 50 Percent between 2005 and 2012.
According to the Bureau of Labor Statistics, the number of workers aged 55 or older is expected to grow 50 Percent between 2005 and 2012.
Wednesday, November 16, 2005
New ISO-CGL Changes Raise Concerns For Additional Insureds and Indemnitors
The whole issue of hold harmless, indemnity, and insurance requirements in contracts is an ongoing battle for risk managers. With the introduction of a new ISO additional insured endorsement and a change in the definition of what constitutes an insured contract, all you thought you might know about the subject is changing. Here is what you must know.
It is assumed by many policyholders that whenever the Insurance Services Office, Inc. (ISO) announces it is “clarifying original intent,” the result will be a reduction in coverage. ISO recently (in December 2003 and in March 2004) announced that it is introducing substantially revised additional insured endorsements as well as-a revised “insured contract” definition. Such changes have the potential to wreak havoc on an already complex and chaotic area of contractual indemnity and additional insured law. While the new ISO endorsements ostensibly are meant to address the insurance industry’s perception that courts have been extending additional insured coverage beyond the drafting intent behind that coverage, the new ISO endorsements also may result in increased litigation-and restricted coverage to additional insureds and indemnitors.
It is common among contracting parties to assess the liability risk of contractual activities and seek the allocation of the economic risk of such liability in advance. Such allocation is most frequently done through a combination of
indemnity provisions and insurance procurement requirements. Subject to certain anti-indemnity statutes and wording requirements, most states allow parties to fully shift liability risk by allowing one party to agree to indemnify another party rather than rely upon the application of common law liability allocation rules. Indemnitors often are more willing to take on such indemnity obligations because the indemnitor relies upon its contractual liability coverage for those “insured contracts.”
However, because even the most well-written indemnification provisions are only as good as the assets that the indemnitor has available to satisfy its obligations, indemnitees frequently require that they also be made additional insureds on the indemnitor’s liability policy. But this indemnity/insurance approach to contractual risk transfer is subject to a maze of statutory restrictions and has generated an enormous amount of widely varying, and frequently irreconcilable, court decisions. Indemnitors, indemnitees, insurers, and the courts have all struggled with the intent behind, and the enforceability of, indemnity provisions. Such a task is made even more difficult where parties have economic incentives to modify their intent and to create ambiguities where none would otherwise exist when large losses occur. Some
courts have been similarly guilty in engaging in result-driven interpretations of indemnity provisions to maximize financial compensation for a victim, despite the parties’ clear mutual contracting intent. These complex interpretation problems have not been limited to contractual indemnity provisions. Contracting parties and their respective insurers also have struggled with the rights of, and scope of
coverage for, additional insureds. As might be expected, the additional insured generally wants to transfer as much of its liability as possible onto the additional
insured carrier and avoid implicating its own coverage. At the same time, the insurer generally wants to construe the additional insured’s coverage
rights as narrowly as possible and to offset its obligations by seeking contribution from the additional insured’s own insurance program.
Outside of construction-related contracts and subject to wording requirements, the majority of states allow parties to broadly shift liability prior to a loss through
indemnity provisions. Further, most courts have construed additional- insured coverage broadly to
encompass not just vicarious or joint negligence, but the additional insured’s sole negligence as well. In response to this majority trend and significant insurance industry exposure, ISO introduced several
new additional insured endorsements and a new “insured contract” definition earlier last year.
Specifically, ISO introduced ten revised additional insured endorsements: CG 2007 01 96 (Engineers, Architects, or Surveyors), CG 20 10 10 01 (Owners,
Lessees,or Contractors as Scheduled),
CG 20 15 11 88 (Vendors), CG 2026 11 85 (Designated Persons or Organizations) CG 20 33 1001 (Automatic Status When Required in Contracts for Owners, Lessees, and Contractors),
CG 203403 97 (Automatic Status When Required in Contracts for Equipment Lessors), and CG 2037 1001 (Completed Operations). Finally, -ISO introduced a new form, CG 242606 04, which seeks to amend the standard ISO-CGL’s “insured contract” definition.
Additional insureds should be wary of the use of the new ISO additional insured endorsements, particularly where their risk management programs rely heavily upon their contractors or vendors being fully responsible for the entire risk associated with a project. Further, additional insureds can expect insurers to become increasingly aggressive in trying to characterize losses as arising from the additional insured’s sole negligence, potentially pitting insureds against each other while an underlying claim is pending. Finally, indemnitors who frequently enter into broad form indemnity agreements must make sure those indemnity obligations remain “insured contracts.”
These new endorsements should cause warning bells to sound for named insureds, additional insureds, indemnitors, and indemnitees alike. While ISO’s intent to limit the insurance industry’s exposures through these endorsements is clear, it is less clear whether these new endorsements will clarify these complex issues or, rather, simply result in more coverage disputes.
It is assumed by many policyholders that whenever the Insurance Services Office, Inc. (ISO) announces it is “clarifying original intent,” the result will be a reduction in coverage. ISO recently (in December 2003 and in March 2004) announced that it is introducing substantially revised additional insured endorsements as well as-a revised “insured contract” definition. Such changes have the potential to wreak havoc on an already complex and chaotic area of contractual indemnity and additional insured law. While the new ISO endorsements ostensibly are meant to address the insurance industry’s perception that courts have been extending additional insured coverage beyond the drafting intent behind that coverage, the new ISO endorsements also may result in increased litigation-and restricted coverage to additional insureds and indemnitors.
It is common among contracting parties to assess the liability risk of contractual activities and seek the allocation of the economic risk of such liability in advance. Such allocation is most frequently done through a combination of
indemnity provisions and insurance procurement requirements. Subject to certain anti-indemnity statutes and wording requirements, most states allow parties to fully shift liability risk by allowing one party to agree to indemnify another party rather than rely upon the application of common law liability allocation rules. Indemnitors often are more willing to take on such indemnity obligations because the indemnitor relies upon its contractual liability coverage for those “insured contracts.”
However, because even the most well-written indemnification provisions are only as good as the assets that the indemnitor has available to satisfy its obligations, indemnitees frequently require that they also be made additional insureds on the indemnitor’s liability policy. But this indemnity/insurance approach to contractual risk transfer is subject to a maze of statutory restrictions and has generated an enormous amount of widely varying, and frequently irreconcilable, court decisions. Indemnitors, indemnitees, insurers, and the courts have all struggled with the intent behind, and the enforceability of, indemnity provisions. Such a task is made even more difficult where parties have economic incentives to modify their intent and to create ambiguities where none would otherwise exist when large losses occur. Some
courts have been similarly guilty in engaging in result-driven interpretations of indemnity provisions to maximize financial compensation for a victim, despite the parties’ clear mutual contracting intent. These complex interpretation problems have not been limited to contractual indemnity provisions. Contracting parties and their respective insurers also have struggled with the rights of, and scope of
coverage for, additional insureds. As might be expected, the additional insured generally wants to transfer as much of its liability as possible onto the additional
insured carrier and avoid implicating its own coverage. At the same time, the insurer generally wants to construe the additional insured’s coverage
rights as narrowly as possible and to offset its obligations by seeking contribution from the additional insured’s own insurance program.
Outside of construction-related contracts and subject to wording requirements, the majority of states allow parties to broadly shift liability prior to a loss through
indemnity provisions. Further, most courts have construed additional- insured coverage broadly to
encompass not just vicarious or joint negligence, but the additional insured’s sole negligence as well. In response to this majority trend and significant insurance industry exposure, ISO introduced several
new additional insured endorsements and a new “insured contract” definition earlier last year.
Specifically, ISO introduced ten revised additional insured endorsements: CG 2007 01 96 (Engineers, Architects, or Surveyors), CG 20 10 10 01 (Owners,
Lessees,or Contractors as Scheduled),
CG 20 15 11 88 (Vendors), CG 2026 11 85 (Designated Persons or Organizations) CG 20 33 1001 (Automatic Status When Required in Contracts for Owners, Lessees, and Contractors),
CG 203403 97 (Automatic Status When Required in Contracts for Equipment Lessors), and CG 2037 1001 (Completed Operations). Finally, -ISO introduced a new form, CG 242606 04, which seeks to amend the standard ISO-CGL’s “insured contract” definition.
Additional insureds should be wary of the use of the new ISO additional insured endorsements, particularly where their risk management programs rely heavily upon their contractors or vendors being fully responsible for the entire risk associated with a project. Further, additional insureds can expect insurers to become increasingly aggressive in trying to characterize losses as arising from the additional insured’s sole negligence, potentially pitting insureds against each other while an underlying claim is pending. Finally, indemnitors who frequently enter into broad form indemnity agreements must make sure those indemnity obligations remain “insured contracts.”
These new endorsements should cause warning bells to sound for named insureds, additional insureds, indemnitors, and indemnitees alike. While ISO’s intent to limit the insurance industry’s exposures through these endorsements is clear, it is less clear whether these new endorsements will clarify these complex issues or, rather, simply result in more coverage disputes.
New Bankruptcy Act
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was signed into law on April 20, 2005. It largely deals with consumer debt, but several provisions affect employee benefits and executive compensation. The act improves protection from creditors for employee contributions to plans and for interest in retirement and education savings plans. It extends the avoidance period for fraudulent pre-petition transfers from one year to two. The act allows bankruptcy courts to throw out plan changes made within 180 days of the bankruptcy petition. It also significantly limits payments to plan insiders after a bankruptcy petition.
Wednesday, November 09, 2005
Easy To Be Hard
A great line from the musical "Hair." For fiduciaries and plan administrators the words "easy" or "free," should sound loud warning bells. Over two years ago, we warned against pension and fiduciary plan consultants wearing multiple hats, and this year there came subsequent and similar warnings by the SEC and the Department of Labor about consultants and conflicts of interest. ( see articles posted at www.mclaughlin-online.com) Yet, despite the warnings, plan administrators and fiduciaries continue to fall prey to "consultants" who offer to make their job easy by offering "one stop shopping."
Now we are even seeing a few insurance carriers trying to sell coverage directly to plans. Don't fall into that trap! Would you buy Enron stock direct from Ken Lay? As a pension fund trustee or administrator are you comfortable reading a fiduciary insurance policy and understanding the coverage it affords and more importantly, exclusion language contained in multiple endorsements. I can assure you your Fund's lawyer is not and will say so. Lawyers are good at raising questions but cannot give you an interpretation of how a policy will respond. An insurance company will give the interpretation, "the policy speaks for itself." An experienced Independent Insurance Agent specializing in Fund coverages can help you walk through this minefield of "whereas and wherefors" and if he/she is wrong carries E&O coverage to back up their work. Next time a "consultant" offers to sell your plan insurance ask for a copy of their insurance errors and omissions policy and state insurance license. You may be in for a surprise.
Most insurance companies cannot sell fiduciary coverages directly to Plans without violating their agreements with their agents. Besides they have only one incentive and that is to get your business. They have no incentive to "canvass the marketplace" or "explain the coverages or exclusions."
Plan trustees take their fiduciary responsibilities very seriously as they should. Be careful, even when someone you trust offers to get you insurance for "free" or "commission free." A fundamental tenant of risk management is "don't risk a lot for a little." Obtaining insurance coverage for your plan or yourself without a licensed, insured, expert independent agent is violating that tenant.
Independent Insurance Agents add value and protection to Plans. Don't let someone try to convince you otherwise by giving you a "free toaster." If you do, you may end up "burnt toast."
Now we are even seeing a few insurance carriers trying to sell coverage directly to plans. Don't fall into that trap! Would you buy Enron stock direct from Ken Lay? As a pension fund trustee or administrator are you comfortable reading a fiduciary insurance policy and understanding the coverage it affords and more importantly, exclusion language contained in multiple endorsements. I can assure you your Fund's lawyer is not and will say so. Lawyers are good at raising questions but cannot give you an interpretation of how a policy will respond. An insurance company will give the interpretation, "the policy speaks for itself." An experienced Independent Insurance Agent specializing in Fund coverages can help you walk through this minefield of "whereas and wherefors" and if he/she is wrong carries E&O coverage to back up their work. Next time a "consultant" offers to sell your plan insurance ask for a copy of their insurance errors and omissions policy and state insurance license. You may be in for a surprise.
Most insurance companies cannot sell fiduciary coverages directly to Plans without violating their agreements with their agents. Besides they have only one incentive and that is to get your business. They have no incentive to "canvass the marketplace" or "explain the coverages or exclusions."
Plan trustees take their fiduciary responsibilities very seriously as they should. Be careful, even when someone you trust offers to get you insurance for "free" or "commission free." A fundamental tenant of risk management is "don't risk a lot for a little." Obtaining insurance coverage for your plan or yourself without a licensed, insured, expert independent agent is violating that tenant.
Independent Insurance Agents add value and protection to Plans. Don't let someone try to convince you otherwise by giving you a "free toaster." If you do, you may end up "burnt toast."
Revision to DeMinimus Standard for LM-30's
FORM LM-30 ADVISORY - DE MINIMIS EXEMPTION INCREASED
The Form LM-30 (Union Officer and Emolovee Report) informs filers that they “do not have to report any sporadic or occasional gifts, gratuities, or loans of insubstantial value, given under circumstances and terms unrelated to the [filer’s] status in a labor organization.” (Form LM-30 Instructions, General Instructions.) This test has been referred to as a “de minimis exemption.” If the test is satisfied, the filer need not report the gift or gratuity on Form LM-30. If the test is not satisfied, the gift or gratuity must be reported on Form LM-30.
Guidance previously issued by the Office of Labor-Management Standards (OLMS) on “de minimis” situations included examples of an employer picking up a lunch tab or an employer giving a union officer a Christmas gift of nominal value. A car was given as an example of a gift that would require a report. In March 2005, in order to provide more guidance on this issue, OLMS revised its LMRDA Interpretative Manual to quantify as “de minimis” an item with a value of $25 or less.
Between March and October 2005, because of a grace period, Form LM-30 reporting increased dramatically compared to historical practice. Based on a review of these reports, and considering comments from union officers and employees that the de minimis threshold was too low, OLMS has concluded that setting the reporting threshold at $25 places an unnecessary reporting burden on union officials without a corresponding benefit to union members or the public. As an interim measure, pending issuance of a final rule establishing revised Form LM-30 reporting obligations, OLMS has determined that gifts, gratuities or loans with a value of $250 or less received by a union officer or employee will be considered insubstantial for the purposes of Form LM-30 reporting. However, if the aggregate value of multiple gifts or loans from a single employer to a single union officer or employee exceeds $250 in a fiscal year, the transaction will no longer be treated as “de minimis,” and the aggregate value of the transactions will be reportable. Gifts or loans from multiple employees of one employer should be treated as originating from a single employer when calculating whether the $250 threshold has been exceeded.
Although offers of numerous small gratuities would appear to be outside the de minimis exemption because they are not provided on an “infrequent or sporadic” basis, the Department will not seek to enforce the reporting requirement, so long as the aggregate value of these gratuities does not exceed $250 per union officer or employee. For example, a union officer or employee who receives coffee, provided by an employer, at bi-weekly meetings over the course of a year would not be required to report this gratuity on a Form LM-30.
In a Notice of Proposed Rulemaking, published in the Federal Register on August 29, 2005, concerning the Form LM-30, the Department has sought comment on this standard and the dollar threshold. (70 Fed. Reg. 51166, 51175.) The comment period has been extended to January 26, 2006. (70 Fed. Reg. 61,400.) The Department encourages comments from all members of the public on all aspects of this rulemaking.
Last Updated: 11/07/05
The Form LM-30 (Union Officer and Emolovee Report) informs filers that they “do not have to report any sporadic or occasional gifts, gratuities, or loans of insubstantial value, given under circumstances and terms unrelated to the [filer’s] status in a labor organization.” (Form LM-30 Instructions, General Instructions.) This test has been referred to as a “de minimis exemption.” If the test is satisfied, the filer need not report the gift or gratuity on Form LM-30. If the test is not satisfied, the gift or gratuity must be reported on Form LM-30.
Guidance previously issued by the Office of Labor-Management Standards (OLMS) on “de minimis” situations included examples of an employer picking up a lunch tab or an employer giving a union officer a Christmas gift of nominal value. A car was given as an example of a gift that would require a report. In March 2005, in order to provide more guidance on this issue, OLMS revised its LMRDA Interpretative Manual to quantify as “de minimis” an item with a value of $25 or less.
Between March and October 2005, because of a grace period, Form LM-30 reporting increased dramatically compared to historical practice. Based on a review of these reports, and considering comments from union officers and employees that the de minimis threshold was too low, OLMS has concluded that setting the reporting threshold at $25 places an unnecessary reporting burden on union officials without a corresponding benefit to union members or the public. As an interim measure, pending issuance of a final rule establishing revised Form LM-30 reporting obligations, OLMS has determined that gifts, gratuities or loans with a value of $250 or less received by a union officer or employee will be considered insubstantial for the purposes of Form LM-30 reporting. However, if the aggregate value of multiple gifts or loans from a single employer to a single union officer or employee exceeds $250 in a fiscal year, the transaction will no longer be treated as “de minimis,” and the aggregate value of the transactions will be reportable. Gifts or loans from multiple employees of one employer should be treated as originating from a single employer when calculating whether the $250 threshold has been exceeded.
Although offers of numerous small gratuities would appear to be outside the de minimis exemption because they are not provided on an “infrequent or sporadic” basis, the Department will not seek to enforce the reporting requirement, so long as the aggregate value of these gratuities does not exceed $250 per union officer or employee. For example, a union officer or employee who receives coffee, provided by an employer, at bi-weekly meetings over the course of a year would not be required to report this gratuity on a Form LM-30.
In a Notice of Proposed Rulemaking, published in the Federal Register on August 29, 2005, concerning the Form LM-30, the Department has sought comment on this standard and the dollar threshold. (70 Fed. Reg. 51166, 51175.) The comment period has been extended to January 26, 2006. (70 Fed. Reg. 61,400.) The Department encourages comments from all members of the public on all aspects of this rulemaking.
Last Updated: 11/07/05
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