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.
Wednesday, March 28, 2007
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.
Wednesday, August 09, 2006
Disaster Planning: Ready for Implementation
Tropical Storm Chris was a reminder that a disaster can strike anytime, in any area. Perhaps you’ve already taken the time to sit down with employees to go over the steps they should take if a storm or other disaster occurs. The last thing to cover is how to implement the plan.
The following checklist is based on recommendations contained in ACT’s reports and is designed to assist agencies in updating their current disaster plans:
When a Foreseeable Disaster is Imminent
FedEx a tape of the latest database to the company system’s data center.
Consider e-mail and automatic call outs to customers with emergency contact information.
Staff should complete processing of all work that is outstanding, especially for Matters relating to a disaster.
Make sure all needed lists are updated in paper form as well as exported to a laptop and portable storage device. Tight security is imperative.
Make sure all employees know their assignments and have made clear how they can be reached in emergency.
If possible, load your company system application onto a laptop along with your latest data file for instant access. Take all security precautions to protect your data.
If you utilize an online data backup service, upload to them if possible.
Wrap and label all employee work to be done to protect it.
Take reasonable steps to protect all equipment.
Redirect your phone numbers before the disaster.
Disconnect all electrical equipment from the wall.
If destruction of file server is imminent, consider taking the server with you if you know how to disconnect it and handle it safely.
Shut off water and gas lines.
Have needed provisions on hand, including enough cash for a few weeks.
Needed Provisions
Fans, extension cords, batteries, flashlights, battery-powered lamps and radios and low heat, low-energy lighting available to use with your generator.
Sufficient bottled water to handle employees’ and customers’ needs for two weeks.
Canned or dry food goods that do not require refrigeration or cooking, as well as beverages and snacks for employees and customers.
Can openers, paper/plastic utensils, plates and cups, trash bags, bleach, paper towels and cleaning supplies, and hand wipes.
First aid supplies and blankets.
Matches, barbeque grill, fuel for grill.
Customers’ and Employees’ Special Needs in Disaster Aftermath
Be aware there will be significant emotional and psychological effects after major events.
Provide drinks and food.
Staff should caucus each day to adjust response as necessary.
Supplier Issues
Understand in advance each of your supplier's CAT plans, the local presence they will have and how they will permit you to contact them efficiently.
Seek draft authority or methods to provide customers with emergency funds immediately.
The following checklist is based on recommendations contained in ACT’s reports and is designed to assist agencies in updating their current disaster plans:
When a Foreseeable Disaster is Imminent
FedEx a tape of the latest database to the company system’s data center.
Consider e-mail and automatic call outs to customers with emergency contact information.
Staff should complete processing of all work that is outstanding, especially for Matters relating to a disaster.
Make sure all needed lists are updated in paper form as well as exported to a laptop and portable storage device. Tight security is imperative.
Make sure all employees know their assignments and have made clear how they can be reached in emergency.
If possible, load your company system application onto a laptop along with your latest data file for instant access. Take all security precautions to protect your data.
If you utilize an online data backup service, upload to them if possible.
Wrap and label all employee work to be done to protect it.
Take reasonable steps to protect all equipment.
Redirect your phone numbers before the disaster.
Disconnect all electrical equipment from the wall.
If destruction of file server is imminent, consider taking the server with you if you know how to disconnect it and handle it safely.
Shut off water and gas lines.
Have needed provisions on hand, including enough cash for a few weeks.
Needed Provisions
Fans, extension cords, batteries, flashlights, battery-powered lamps and radios and low heat, low-energy lighting available to use with your generator.
Sufficient bottled water to handle employees’ and customers’ needs for two weeks.
Canned or dry food goods that do not require refrigeration or cooking, as well as beverages and snacks for employees and customers.
Can openers, paper/plastic utensils, plates and cups, trash bags, bleach, paper towels and cleaning supplies, and hand wipes.
First aid supplies and blankets.
Matches, barbeque grill, fuel for grill.
Customers’ and Employees’ Special Needs in Disaster Aftermath
Be aware there will be significant emotional and psychological effects after major events.
Provide drinks and food.
Staff should caucus each day to adjust response as necessary.
Supplier Issues
Understand in advance each of your supplier's CAT plans, the local presence they will have and how they will permit you to contact them efficiently.
Seek draft authority or methods to provide customers with emergency funds immediately.
Wednesday, July 12, 2006
U.S. SUPREME COURT EXPANDS TITLE VII’S ANTI-RETALIATION PROVISION
Burlington N. & S. F. R. Co. v. White, 2006 WL 1698953 (U.S. June 22, 2006)
Facts of Burlington N. & S. F. R. Co. v. White
Marvin Brown (“Brown”), a manager for Burlington Northern & Santa Fe Railway Company (“Burlington”), hired Sheila White (“White”) in June 1997 to work as a “track laborer.” White was the only woman working in the Maintenance of Way department. White’s primary responsibility was operating a forklift; however, she also performed some of the track laborer tasks.
In September of 1997, White reported to Burlington officials that Bill Joiner (“Joiner”), her immediate supervisor, had repeatedly told her that women should not be working in the Maintenance of Way department and also made insulting and inappropriate remarks to her in front of other colleagues. After Burlington conducted an internal investigation, Joiner was suspended for 10 days and required to attend a sexual-harassment training. Brown then reassigned White to standard track laborer tasks and completely removed her from forklift duty.
White filed a complaint with the Equal Employment Opportunity Commission (“EEOC”) claiming her reassignment amounted to gender-discrimination and retaliation for her complaint against Joiner. In December, White filed another complaint with the EEOC claiming that Brown had placed her under surveillance, constantly monitoring her daily activities.
A few days after filing the December complaint, White and her supervisor, Percy Sharkey (“Sharkey”) had a disagreement. Sharkey claimed to Brown that White had been insubordinate. Brown suspended White without pay causing White to prompt internal grievance procedures, which eventually led Burlington to conclude White had not been insubordinate. White was reinstated, with 37 days backpay for the time she was suspended. She then filed another EEOC charge for retaliation, based on the suspension.
A jury found in White’s favor awarding her $43,500 in damages for her claims of unlawful retaliation. Burlington appealed arguing White did not suffer any harm from these acts of retaliation since she received backpay. The Sixth Circuit heard the matter en banc and affirmed the District Court’s judgment for White. The U.S. Supreme Court granted certiorari to resolve a deviation in the Circuit Courts as to whether Title VII’s anti-retaliation provision forbids only those employer actions and resulting harms that are related to employment in the workplace.
The Ruling
The Supreme Court held that the anti-retaliation provision of Title VII extends beyond workplace related or employment related retaliatory acts and harm. This conclusion was based on several factors. First the court found the language in the anti-retaliation provision of Title VII does not include limiting words such as “hire,” “discharge,” “compensation, terms, conditions, or privileges” as the other provisions in the Act include.
Second the Court found that an employer can retaliate against an employee with actions not directly related to employment and can cause harm outside the workplace: such as in Rochon v. Gonzales, 438 F.3d, at 1213, where the FBI refused to investigate death threats from a federal prisoner made against the agent and his family. Last, the Court agreed with the EEOC manuals stating that a broad interpretation of the anti-retaliation provision is intended to provide exceptionally broad protection to employees who protest discriminatory employment practices.
The Court limited the scope of the Title VII provision, saying it does not protect an individual from all retaliation, but only retaliation that produces injury or harm. They also adopted a rule saying a plaintiff must show that a reasonable employee would have found the challenged action materially adverse.
Ultimately the court affirmed, finding in favor of White and saying that suspension without pay could act as a deterrent to filing a complaint, which is against the primary objective of the Title VII
Analysis
Title VII has always prohibited employers from retaliating against an employee for making a legitimate claim of discrimination. The Burlington decision makes it crystal clear that the protections are even more broad than many employers believed including that employers should not suspend reporters of wrongdoing without pay, even when their claim is being investigated, and that employers should make certain that the pay and job functions of such employees remain the same or nearly the same.
The Burlington decision may place some employers between a “rock and a hard place.” In Burlington the Court had the privilege of Burlington’s internal investigation where it was determined that the harassment did occur, and the actions of the Burlington supervisors gave every appearance of being retaliatory. Unfortunately, not all complaints of retaliation are so “cut and dried.”
A concern is what to do when an investigation is non-conclusive, finding no evidence to prove or disprove the accusation. In the past, a “best practice” was to separate the accuser and the accused to avoid a claim of retaliation.
After Burlington, many employers must now choose to keep accuser and accused together, increasing the likelihood of more issues arising, especially if the accused manages the accuser, or transfer one of the parties to a different, but like position. Simply transferring an employee to a different position no longer appears to be an option.
Checklist
To prevent a Burlington dilemma, employers should keep in mind the following suggestions:
Develop policies and procedures protecting employees who file discrimination complaints from materially adverse actions both inside and outside of the workplace.
Train all supervisors on what can amount to adverse actions against an employee.
Follow all the policies and procedures thoroughly and investigate claims of discrimination fairly without taking any adverse action against the employee making the complaint.
Continue to pay the accuser and the accused during an investigation of a claim.
Make certain that human resources and your legal counsel approve any transfer of an employee who has made a claim of wrongdoing.
If transferring one of the parties becomes necessary, make certain that the transferred employee receives the same pay and benefits and has similar job duties and expectations as required in his or her previous position.
Continually check with all parties of an accusation to make certain that retaliation is not occurring after the matter is resolved.
Facts of Burlington N. & S. F. R. Co. v. White
Marvin Brown (“Brown”), a manager for Burlington Northern & Santa Fe Railway Company (“Burlington”), hired Sheila White (“White”) in June 1997 to work as a “track laborer.” White was the only woman working in the Maintenance of Way department. White’s primary responsibility was operating a forklift; however, she also performed some of the track laborer tasks.
In September of 1997, White reported to Burlington officials that Bill Joiner (“Joiner”), her immediate supervisor, had repeatedly told her that women should not be working in the Maintenance of Way department and also made insulting and inappropriate remarks to her in front of other colleagues. After Burlington conducted an internal investigation, Joiner was suspended for 10 days and required to attend a sexual-harassment training. Brown then reassigned White to standard track laborer tasks and completely removed her from forklift duty.
White filed a complaint with the Equal Employment Opportunity Commission (“EEOC”) claiming her reassignment amounted to gender-discrimination and retaliation for her complaint against Joiner. In December, White filed another complaint with the EEOC claiming that Brown had placed her under surveillance, constantly monitoring her daily activities.
A few days after filing the December complaint, White and her supervisor, Percy Sharkey (“Sharkey”) had a disagreement. Sharkey claimed to Brown that White had been insubordinate. Brown suspended White without pay causing White to prompt internal grievance procedures, which eventually led Burlington to conclude White had not been insubordinate. White was reinstated, with 37 days backpay for the time she was suspended. She then filed another EEOC charge for retaliation, based on the suspension.
A jury found in White’s favor awarding her $43,500 in damages for her claims of unlawful retaliation. Burlington appealed arguing White did not suffer any harm from these acts of retaliation since she received backpay. The Sixth Circuit heard the matter en banc and affirmed the District Court’s judgment for White. The U.S. Supreme Court granted certiorari to resolve a deviation in the Circuit Courts as to whether Title VII’s anti-retaliation provision forbids only those employer actions and resulting harms that are related to employment in the workplace.
The Ruling
The Supreme Court held that the anti-retaliation provision of Title VII extends beyond workplace related or employment related retaliatory acts and harm. This conclusion was based on several factors. First the court found the language in the anti-retaliation provision of Title VII does not include limiting words such as “hire,” “discharge,” “compensation, terms, conditions, or privileges” as the other provisions in the Act include.
Second the Court found that an employer can retaliate against an employee with actions not directly related to employment and can cause harm outside the workplace: such as in Rochon v. Gonzales, 438 F.3d, at 1213, where the FBI refused to investigate death threats from a federal prisoner made against the agent and his family. Last, the Court agreed with the EEOC manuals stating that a broad interpretation of the anti-retaliation provision is intended to provide exceptionally broad protection to employees who protest discriminatory employment practices.
The Court limited the scope of the Title VII provision, saying it does not protect an individual from all retaliation, but only retaliation that produces injury or harm. They also adopted a rule saying a plaintiff must show that a reasonable employee would have found the challenged action materially adverse.
Ultimately the court affirmed, finding in favor of White and saying that suspension without pay could act as a deterrent to filing a complaint, which is against the primary objective of the Title VII
Analysis
Title VII has always prohibited employers from retaliating against an employee for making a legitimate claim of discrimination. The Burlington decision makes it crystal clear that the protections are even more broad than many employers believed including that employers should not suspend reporters of wrongdoing without pay, even when their claim is being investigated, and that employers should make certain that the pay and job functions of such employees remain the same or nearly the same.
The Burlington decision may place some employers between a “rock and a hard place.” In Burlington the Court had the privilege of Burlington’s internal investigation where it was determined that the harassment did occur, and the actions of the Burlington supervisors gave every appearance of being retaliatory. Unfortunately, not all complaints of retaliation are so “cut and dried.”
A concern is what to do when an investigation is non-conclusive, finding no evidence to prove or disprove the accusation. In the past, a “best practice” was to separate the accuser and the accused to avoid a claim of retaliation.
After Burlington, many employers must now choose to keep accuser and accused together, increasing the likelihood of more issues arising, especially if the accused manages the accuser, or transfer one of the parties to a different, but like position. Simply transferring an employee to a different position no longer appears to be an option.
Checklist
To prevent a Burlington dilemma, employers should keep in mind the following suggestions:
Develop policies and procedures protecting employees who file discrimination complaints from materially adverse actions both inside and outside of the workplace.
Train all supervisors on what can amount to adverse actions against an employee.
Follow all the policies and procedures thoroughly and investigate claims of discrimination fairly without taking any adverse action against the employee making the complaint.
Continue to pay the accuser and the accused during an investigation of a claim.
Make certain that human resources and your legal counsel approve any transfer of an employee who has made a claim of wrongdoing.
If transferring one of the parties becomes necessary, make certain that the transferred employee receives the same pay and benefits and has similar job duties and expectations as required in his or her previous position.
Continually check with all parties of an accusation to make certain that retaliation is not occurring after the matter is resolved.
Tuesday, July 11, 2006
Phishers Hooking Employers for $2 Billion Each Year
The Federal Trade Commission (FTC) estimates that thieves posing as legitimate businesses send 75-150 million fake emails daily, a practice is known as “phishing.” These scam artists are looking for financial and personal information that will allow them to steal the identity and money of their victims. Candace Heckman, “Phishing finds victims even among savvy computer users,” seattlepi.nwsource.com (May 1, 2006).
Claiming to represent a legitimate business such as a bank or the IRS, the phisher sends out emails asking the reader to follow a hyperlink to update or verify his or her personal information. If the person receiving the email clicks on the link but never submits any information, the phisher may still be able to capture important data from the victim’s computer.
The FTC claimed that in 2005, consumers lost $929 million to these cons, and businesses suffered losses of $2 billion.
Phishers are not only after the financial information of individuals; the FTC numbers reveal that they are successful in obtaining financial information from businesses as well…$2 billion in losses for 2005 alone.
Any person in charge of an organization’s financial accounts and any person in charge of employee social security numbers are possible targets.
Beware of any email requesting updated financial information. These requests will often appear to come from sites with which you do business, including your financial institutions, and will create the “look and feel” of your institution’s website by incorporating their colors, logos. and disclosure information.
The best method to stop phishing from impacting you is to never respond to emails requesting financial information about you, your organization, or your employees.
When you receive emails asking for such information, do not open the email or any attachment; instead, forward it unopened to a representative of the institution it is reputed to be from and ask if the email is legitimate.
Claiming to represent a legitimate business such as a bank or the IRS, the phisher sends out emails asking the reader to follow a hyperlink to update or verify his or her personal information. If the person receiving the email clicks on the link but never submits any information, the phisher may still be able to capture important data from the victim’s computer.
The FTC claimed that in 2005, consumers lost $929 million to these cons, and businesses suffered losses of $2 billion.
Phishers are not only after the financial information of individuals; the FTC numbers reveal that they are successful in obtaining financial information from businesses as well…$2 billion in losses for 2005 alone.
Any person in charge of an organization’s financial accounts and any person in charge of employee social security numbers are possible targets.
Beware of any email requesting updated financial information. These requests will often appear to come from sites with which you do business, including your financial institutions, and will create the “look and feel” of your institution’s website by incorporating their colors, logos. and disclosure information.
The best method to stop phishing from impacting you is to never respond to emails requesting financial information about you, your organization, or your employees.
When you receive emails asking for such information, do not open the email or any attachment; instead, forward it unopened to a representative of the institution it is reputed to be from and ask if the email is legitimate.
US Hurricanes may wipe out 20-40 Insurers
By Ed Leefeldt - NEW YORK, June 1 (Reuters) - The U.S. hurricane season kicked off Thursday with another gloomy prediction: major storms could cause $100 billion worth of property loss, and wipe out 20 to 40 insurers.
With a booming coastal population and high-priced real estate, "this is not far down the road," said John Williams, an author of the report at A.M. Best Co., a leading rating agency for insurers.
For 3 to 7 percent of insurers exposed to the catastrophe, that could spell disaster, Williams said. Likely to fail are thinly capitalized property casualty carriers that are low-rated at Best, along with some firms not rated at all.
"This will take a bigger bite out of the industry than the 1906 San Francisco earthquake," Williams said.
Insurance costs from last year's major catastrophes, or "megacats" -- Hurricanes Katrina, Rita and Wilma -- have already reached $58 billion, with some claims still in court. In addition, federal aid to rebuild areas such as New Orleans, which was flooded by Katrina, will top $100 billion, Best said.
With population expansion in vulnerable areas and soaring real estate values, catastrophe losses are likely to double every 10 years, according to hurricane modelers. In Florida, which has seen five major hurricanes in the past two years, four insurers have already failed, according to Best.
When insurers are no longer around to answer the phone, the burden falls to the state, which sets up a claims fund and forces solvent insurers to pay the costs. But settlements are slow, particularly after a catastrophe like Katrina has damaged the infrastructure, Williams said.
Insurers are also running from areas where storm damage is likely to be the worst. American International Group Inc. (AIG.N:), the world's largest insurer, is declining to write new property policies in areas of the Gulf Coast, while Allstate Corp. (ALL.N:), the U.S.'s second-largest home insurer, is limiting exposure in areas as far north as New York.
While no one knows where hurricanes will hit this year or in the future, they are almost certain to arrive, fueled by warmer than usual water temperatures and new wind patterns in the Atlantic, forecasters said.
Professor Mark Saunders, head of the British-based Tropical Storm Risk Venture, which plots storms, is expecting two major storms to hit U.S. coastal areas during the hurricane season, which runs for six months through November.
These megacats won't be confined to the Gulf Coast, which has seen the worst of the recent storms. "The specter of a hurricane hitting a major Northeast population center is hardly the stuff of Hollywood fantasy," warned Wendy Baker, president of Lloyd's America, a unit of the insurance syndicate, in a speech on Thursday.
Six of the 10 costliest storms in U.S. history have occurred within the 14 months of the 2004-2005 hurricane season. While 2006 isn't expected to suffer the megacats of 2005, it will be part of a pattern that has seen the most devastating pattern of hurricanes since 1900, said Saunders.
On Wednesday William Gray and his Colorado State University forecasting team repeated their prediction that the 2006 season would produce nine hurricanes, five of which would be major storms with winds over 110 miles her hour.
The National Oceanic and Atmospheric Administration expects eight to 10 hurricanes, with four to six of them major. Saunders' group is the lowest, looking for about eight hurricanes, more than three of them severe. © Reuters 2006. All Rights Reserved.
With a booming coastal population and high-priced real estate, "this is not far down the road," said John Williams, an author of the report at A.M. Best Co., a leading rating agency for insurers.
For 3 to 7 percent of insurers exposed to the catastrophe, that could spell disaster, Williams said. Likely to fail are thinly capitalized property casualty carriers that are low-rated at Best, along with some firms not rated at all.
"This will take a bigger bite out of the industry than the 1906 San Francisco earthquake," Williams said.
Insurance costs from last year's major catastrophes, or "megacats" -- Hurricanes Katrina, Rita and Wilma -- have already reached $58 billion, with some claims still in court. In addition, federal aid to rebuild areas such as New Orleans, which was flooded by Katrina, will top $100 billion, Best said.
With population expansion in vulnerable areas and soaring real estate values, catastrophe losses are likely to double every 10 years, according to hurricane modelers. In Florida, which has seen five major hurricanes in the past two years, four insurers have already failed, according to Best.
When insurers are no longer around to answer the phone, the burden falls to the state, which sets up a claims fund and forces solvent insurers to pay the costs. But settlements are slow, particularly after a catastrophe like Katrina has damaged the infrastructure, Williams said.
Insurers are also running from areas where storm damage is likely to be the worst. American International Group Inc. (AIG.N:), the world's largest insurer, is declining to write new property policies in areas of the Gulf Coast, while Allstate Corp. (ALL.N:), the U.S.'s second-largest home insurer, is limiting exposure in areas as far north as New York.
While no one knows where hurricanes will hit this year or in the future, they are almost certain to arrive, fueled by warmer than usual water temperatures and new wind patterns in the Atlantic, forecasters said.
Professor Mark Saunders, head of the British-based Tropical Storm Risk Venture, which plots storms, is expecting two major storms to hit U.S. coastal areas during the hurricane season, which runs for six months through November.
These megacats won't be confined to the Gulf Coast, which has seen the worst of the recent storms. "The specter of a hurricane hitting a major Northeast population center is hardly the stuff of Hollywood fantasy," warned Wendy Baker, president of Lloyd's America, a unit of the insurance syndicate, in a speech on Thursday.
Six of the 10 costliest storms in U.S. history have occurred within the 14 months of the 2004-2005 hurricane season. While 2006 isn't expected to suffer the megacats of 2005, it will be part of a pattern that has seen the most devastating pattern of hurricanes since 1900, said Saunders.
On Wednesday William Gray and his Colorado State University forecasting team repeated their prediction that the 2006 season would produce nine hurricanes, five of which would be major storms with winds over 110 miles her hour.
The National Oceanic and Atmospheric Administration expects eight to 10 hurricanes, with four to six of them major. Saunders' group is the lowest, looking for about eight hurricanes, more than three of them severe. © Reuters 2006. All Rights Reserved.
Monday, July 10, 2006
Workplace bullies may be next on Insurer's Watchlist
From the playground to the classroom to the office -- bullies can be found in all walks of life, but new anti-harassment legislation in some states could put an end to bullying in the workplace that can be costly for employers.
"We define bullying as strictly repeated health harming mistreatment," Dr. Gary Namie of the Workplace Bullying and Trauma Institute, an advocacy group that supports anti-bullying legislation, told Ortega-Wells of the Insurance Journal. Namie and his organization have supported anti-bullying legislation, or the "Healthy Workplace Bill," since the first bill was introduced in California in 2003. He says bullying in the workplace "undermines legitimate business interests."
While bullying is not currently a protected category under harassment law, Johan Lubbe, a partner at Jackson Lewis LLP law firm, says bullying is likely the next "evolutionary" step in harassment law. He advises businesses to understand what workplace bullying conduct is and to develop preventative strategies that prohibit such conduct in the work environment.
Coverage for bullying claims may already exist under some employment practices liability policies, according to Gregg Draddy, assistant vice president of employment practices liability at The Hartford. Draddy says "there are issues around bullying/harassment that are covered, whether it's under other workplace harassment, infliction of emotional distress, or other areas that are covered under wrongful acts under EPLI policies."
Robert Cap, associate product manager for EPLI and nonprofit D&O, at Shand Morahan, a part of the Markel Corp. Group, argues that the problem in coverage for workplace bullying "is that if the allegation was simply one of workplace bullying, it's hard to do that negligently -- it's really an intentional act."
That's precisely why anti-bullying legislation is needed, says WBTI's Namie.
Source: The Insurance Journal
"We define bullying as strictly repeated health harming mistreatment," Dr. Gary Namie of the Workplace Bullying and Trauma Institute, an advocacy group that supports anti-bullying legislation, told Ortega-Wells of the Insurance Journal. Namie and his organization have supported anti-bullying legislation, or the "Healthy Workplace Bill," since the first bill was introduced in California in 2003. He says bullying in the workplace "undermines legitimate business interests."
While bullying is not currently a protected category under harassment law, Johan Lubbe, a partner at Jackson Lewis LLP law firm, says bullying is likely the next "evolutionary" step in harassment law. He advises businesses to understand what workplace bullying conduct is and to develop preventative strategies that prohibit such conduct in the work environment.
Coverage for bullying claims may already exist under some employment practices liability policies, according to Gregg Draddy, assistant vice president of employment practices liability at The Hartford. Draddy says "there are issues around bullying/harassment that are covered, whether it's under other workplace harassment, infliction of emotional distress, or other areas that are covered under wrongful acts under EPLI policies."
Robert Cap, associate product manager for EPLI and nonprofit D&O, at Shand Morahan, a part of the Markel Corp. Group, argues that the problem in coverage for workplace bullying "is that if the allegation was simply one of workplace bullying, it's hard to do that negligently -- it's really an intentional act."
That's precisely why anti-bullying legislation is needed, says WBTI's Namie.
Source: The Insurance Journal
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