Subprime Liability Claims Could Reach $4B

Fitch Ratings reported that subprime mortgage-related liability litigation would reach between $3 billion and $4 billion in directors and officers' (D&O) and errors and omissions (E&O) losses. However, if credit woes continue to spread into sectors indirectly linked to the subprime mortgage market, loss claims could rise significantly and lead to a hike in the number of bankruptcies. Subprime investments, according to Fitch, will continue to decline in value throughout the year. The ratings agency stated, "Further, highly illiquid, volatile market conditions have spread somewhat to other asset classes, which could impact insurers' broader investment portfolio performance."

CyberRisk in the News

Two articles in today's business news stood out to me.

• TJX paid over $24 Million to MasterCard for a massive breach that exposed millions of payment card holders to hackers. This is on top of the $40.9 Million they paid to Visa.
• At least 8.3 Million records were breached in the 1st quarter of 2008.

39 states and DC have laws now requiring organizations to notify consumers of a data breach that jeopardizes their personal or financial data. That notification in itself can be very expensive; however, in many states businesses have to go further and pay for a years' worth of credit monitoring.

Several insurance companies have relatively inexpensive coverages to this growing risk. Today, many business and non-profit organizations keep financial and personal data on their employees, their customers, and their members. Don't become a Headline! Call your independent insurance agent.

Smaller Firms and Unions Face Data Theft Risks

Hackers try new targets as big companies tighten security.

Identity theft and data security breach incidents are on the rise, but many companies and unions are not prepared to deal with this risk. Small and mid size companies are the most vulnerable. Bigger companies have gotten the message and stepped up their security efforts. Now data thieves are working their way down the food chain.

The FTC estimates as many as 9 million Americans have their identities stolen each year. A 2007 FTC report estimates that identity thieves steal $48 Billion from businesses and $5 Billion from consumers annually.

Insurance companies are finally writing policies to cover this exposure. Contact your Independent agent today.

Long Term Care Facts From Unum

• 57% of LTCI Claimants are under 65
• The average age is 54
• More that 15% under 45
• Nearly 2/3rds of claims are paid to ages 55-65
• The leading causes of claims under 65 are cancer, trauma,stroke or neurolical disease
• More than 70 % of claimants received care at home.

Theft of Personal Data More Than Triples This Year

Theft of sensitive data from companies, government agencies, colleges and hospital more than tripled in 2007 to more than 162 Million in 2007. People's names, birth dates, account and Social Security numbers are highly coveted. The amount of such information generated as they convert from paper into digital records is swelling.

U.S. Supreme Court opens Floodgates to Retirement Plan Participants Lawsuits

Participants in 401(k) and other retirement plans can file lawsuits claiming their individual accounts were mishandled, the U.S. Supreme Court ruled in a decision that bolsters the legal rights of 70 million people.

The justices today unanimously allowed a suit by a man who says he lost almost $100,000 because his employer didn't make investment changes he requested. The court rejected business contentions that participants can sue only to enforce the rights of the entire plan, not to recover losses incurred by a single account.

The ruling affects participants in so-called defined- contribution retirement programs -- a category that includes 401(k), employee stock ownership and profit-sharing plans. Those accounts hold $3.3 trillion in assets.

In the case before the justices, James LaRue says he tried to change the investments in his 401(k) plan in time to avoid the brunt of the 2001-02 stock market plunge. LaRue claims his employer, Dallas-based management-consulting firm DeWolff Boberg & Associates, didn't follow his instructions, costing him almost $100,000.

The 4th U.S. Circuit Court of Appeals in Richmond, Virginia, barred the suit, saying it wasn't allowed under the 1974 Employee Retirement Income Security Act, known as ERISA.
The Supreme Court today rejected that reasoning, saying Congress intended to provide broader protection to participants in retirement plans.

"Whether a fiduciary breach diminishes plan assets payable to all participants, or only to persons tied to particular individual accounts, it creates the kinds of harms that concerned the draftsmen'' of ERISA, Justice John Paul Stevens wrote for the court.

DeWolff Boberg argued that ERISA entitles LaRue to a court order directing the plan to change his investments but not to recoup the money he says he lost.

LaRue's legal team, backed by the Bush administration, said that approach would leave participants in defined-contribution plans with no recourse in the event their accounts are mishandled by the fiduciaries who administer the plan.

LaRue no longer works at DeWolff Boberg. In 2006, he closed his 401(k) account and withdrew the $119,000 balance.

Offered by employers, 401(k) plans let workers put a percentage of their paychecks into a tax-deferred investment account.

The case is LaRue v. DeWolff Boberg, 06-856.

ERISA Claim

U.S. Department of Labor Sues Advisers to Pension Plan

Co-advisers of a Michigan pension plan were sued by the U.S. Department of Labor for alleged violations of their fiduciary duties under the Employee Retirement Income Security Act (ERISA) in connection with the sale of real estate held by an employee pension plan.

The Department of Labor alleged in its complaint filed in the U.S. District Court for the Eastern District of Michigan on December 28, 2007 (Case No. 2:07-CV15519), that Fifth Third Bank and Carrie Milestone Advisors, LLC violated their fiduciary obligations to their client, Operating Engineers Local 324 Pension in Troy, Michigan, by abruptly selling investment property held by the plan when they informed the plan they would be managing this real estate asset as a long-term investment. The complaint states that the advisors' fiduciary violations caused the plan to sell a $28-million property for $4.5 million.

The Department of Labor asked the Court to prevent the defendants from acting as ERISA fiduciaries in the future and to order compensation to the plan for its losses.

Eleventh Hour Authorization of TRIA

After much wrangling in the Senate and the House, just shy of the December 31, 2007 expiration date, Congress enacted legislation (H.R. 2761) and the President signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2007 on December 26, 2007 extending the widely relied upon Terrorism Risk Insurance Act of 2002 (TRIA) until 2014. TRIA was enacted in 2002 to respond to the disruption in the insurance market created after the 9/11 terrorist attacks. TRIA requires commercial property and casualty insurers to offer clients insurance coverage for damages caused by terrorist attacks. In return, the federal government provides a backstop for the insurance industry against truly catastrophic aggregate terrorism losses that exceed $100 million. Since its inception in 2002, TRIA coverage has been widely accepted and used by many as a primary means of terrorism insurance.
This reauthorization significantly changed the definition of an "Act of Terrorism" removing the previous limitation that only acts of terrorism committed "on behalf of any foreign person or foreign interest" are covered under TRIA. Many insureds complained that TRIA's limitation in applying only to acts of terrorism committed on behalf of foreign persons or interests left insureds vulnerable to losses from "homegrown" terrorists such as those that masterminded the Oklahoma City bombings and the 2005 London bombings. With this limitation removed, TRIA now includes coverage for acts of terrorism committed by any "individual or individuals acting as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States government by coercion."
The revision of the definition did not, however, amend the requirement that only damages within the U.S. or outside of the U.S. to an air carrier, vessel or U.S. mission are covered under TRIA. This limitation may create an incongruous situation for those Sellers of SAFETY Act approved technologies that rely on TRIA to satisfy their SAFETY Act insurance requirement and deploy their technologies outside the U.S. For instance, under the SAFETY Act's definition of an Act of Terrorism, the Department of Homeland Security has concluded that the SAFETY Act applies extra-territorially and that Acts of Terrorism may be certified that occur on foreign soil "if it causes harm to a person, property, or an entity in the United States." Because TRIA's definition is narrower, a Seller could find that its SAFETY Act coverage protects it from an Act of Terrorism abroad but its insurance does not apply.
For certified Acts of Terrorism, the Reauthorization Act of 2007 maintains the annual liability cap of $100 billion for the U.S. and insurers meaning that neither the U.S. nor insurers are responsible for paying losses that exceed $100 billion in the aggregate unless Congress acts otherwise with respect to these losses. The Act has always contemplated pro rata payment to insureds when the aggregate losses exceed $100 billion and now requires insurers to "provide clear and conspicuous disclosure to the policyholder" of this annual liability cap in policies issued after the Reauthorization Act of 2007. In addition, instead of leaving the pro rata determinations to the Secretary of the Treasury, the Act now requires the Secretary to issue final regulations within 240 days for determining the pro rata share to be paid by insurers when the aggregate insured loss exceeds $100 billion.
While many had pushed for coverage of losses from terrorist acts involving nuclear, biological, chemical, or radioactive materials, this reauthorization does not require insurers to offer such coverage. The Government Accountability Office has been tasked to study and issue a report in the next year on the availability of terrorism insurance specifically for acts of terrorism using nuclear, biological, chemical, or radioactive materials.
TRIA was intended to provide a temporary mechanism, expiring at the end of 2005, to allow the marketplace to adapt after the economic dislocations caused by the 9/11 attacks. While the market for terrorism insurance has improved since 2002 when TRIA was first enacted, clearly this reauthorization until 2014 reflects the fact that doubts remain as to the capacity of the private sector to insure against large-scale terrorism risk in the U.S. With this reauthorization, insureds can breathe easier that they are covered for certain catastrophic terrorist losses, at least until 2014.

Confined Space Work Rule Upsets Small Contractors

The U.S. Occupational Safety and Health Administration extended the deadline for comments on a proposed rule for construction in confined spaces from Jan. 28 to Feb. 28 following vocal opposition from utility contractors and others in the construction industry. The proposed rules were issued unexpectedly on November 28, 2007, and establishes four classifications for confined spaces - isolated hazard, controlled atmosphere, permit required, and continuous system permit required. OSHA started work on the rule in 1993 at the behest of the construction industry; previous OSHA training and education offered little guidance. Contractors have been using the general industry standard as a result, and they say that the new classification system is confusing and that it is now unclear which category to use at particular sites. The proposed rule would also put all liability on the primary contractor and imposes onerous and costly mandates for work in trenches, manholes, and other confined spaces, say utility contractors. Ted Saito of the Engineering and Utility Contractors Association says that requirements such as early warning systems, reevaluation of procedures, and additional reassessments in the event of an emergency or ventilation failure will "cause an enormous amount of record keeping for training ... that will result in financial hardship to all employers without increasing employee safety." Another provision, that a rescue team be on standby in some cases, is cost prohibitive to smaller contractors, says George Kennedy, vice president of safety at the National Utility Contractors Association.

New Media Exposures With Online Publishing

Companies, Unions, and Not-For- Profit Associations must be careful to avoid a host of legal pitfalls when publishing content, regardless of what medium they use to publish, that include: defamation, publicity/privacy rights violations, copyright infringement, and trade secret misappropriation.

SubPrime Litigation May Dent D&O Insurers

State Street Corp.'s (STT) decision to set aside $618 million to cover subprime litigation costs has increased concern that insurers offering policies covering such expenses could be hit with big claims from the credit crisis.
State Street said the reserve was needed to pay for lawsuits and possible settlements stemming from complaints about the fixed-income strategies managed by its State Street Global Advisors investment arm. The funds were hit by exposure to falling subprime mortgage markets and a lack of liquidity, the company explained.
State Street has insurance covering legal costs and expects to get some of the money back from claiming on the policy, Ronald Logue, chief executive of State Street, told analysts and investors during a conference call Thursday. The value of that coverage wasn't included in the reserve for accounting reasons, he added.
Logue was likely referring to directors and officers insurance. These D&O policies protect executives and members of a company's board from liability in the event of a lawsuit against them claiming wrongdoing in connection with their firm's business. The coverage usually pays for the cost of defending lawsuits, after a deductible, and also a portion of any settlement. Errors and omissions policies offer similar professional liability coverage.
Chubb Corp. (CB) and American International Group Inc. (AIG) are the biggest D&O insurers. Ace Ltd. (ACE), XL Capital Ltd. (XL), Travelers Cos. Inc. (TRV) and Hartford Financial Services Group Inc. (HIG) also offer coverage.
Some D&O insurers suffered earlier this decade after the collapse of Enron and WorldCom sparked a flurry of class-action lawsuits against companies and investment banks. But tort reform then made it more difficult to start such litigation, and the number of cases dwindled.
Almost 500 federal securities class-action lawsuits were filed in 2001, making that year by far the most active since 1995, according to Stanford Law School, which tracks such litigation. That dropped to 118 suits in 2006, the lowest in a decade.
The declines appeared on course until the middle of 2007, when litigation activity jumped as the subprime credit crisis hit: 100 companies were sued in the second half of last year. That reversed a trend of eight consecutive quarters with below average litigation, Stanford said in a study released Thursday.
The financial-services sector was hardest hit, with 47 companies sued in 2007, up from 11 in 2006, Stanford said. More than half of those suits are related to subprime market disclosure issues, the law school noted.
That could bode poorly for D&O insurers such as Chubb and AIG, but it's too early to tell how much their earnings could be dented, according to one industry analyst.
"People are starting to worry about it. But it's too early to say that we've got a problem," Paul Newsome, a managing director and insurance analyst at Sandler O'Neill & Partners, said. "If the market continues to fall and if we have more prolonged problems, we will have a lot more lawsuits and it will compound itself."
AIG spokesman Chris Winans said the company is monitoring the development of such claims, but said that, at the moment, it doesn't see any "unusual activity." A Chubb spokesman declined to comment.
It's tough to tell which D&O insurers might be exposed because companies in the business don't usually disclose which industries or specific businesses they've sold coverage to, Newsome added.
Similar concerns emerged in 2006 after the stock-option backdating scandal shook the technology industry. But claims didn't end up being very large, partly because the share prices of the companies involved didn't fall much.
"What saved the industry was the fact that stock prices didn't fall, so there weren't any losses to be recouped," Newsome said.
The subprime mortgage crisis has taken a much heftier toll on share prices though. Bank and brokerage shares have lost roughly a fifth of their value in the past year. Shares of some mortgage lenders have slumped by more than half and others have filed for bankruptcy, leaving shareholders with nothing.
Still, Newsome said the impact may not take a big bite out of the D&O businesses of insurers such as Chubb and AIG. That's because there's still a long-term, broader trend of falling securities class-action litigation. Financial-services companies may make lots of D&O claims, but overall D&O losses may remain in check, Newsome said.
"There may be losses, but results may be so good overall in the D&O business that this might not show up on the radar much," Newsome said.
-By Alistair Barr; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
01-03-08 1951ET
Copyright (c) 2008 Dow Jones & Company, Inc.- - 07 51 PM EST 01-03-08

Commercial Lines Pricing

During 2006, commercial line carriers achieved unprecedented underwriting profits, due to low combined ratios. Those stellar underwriting results, combined with a quiet hurricane season, suggest that 2007 will be another lucrative year for the property-casualty insurance sector. In addition, reserve deficiencies from prior years are now mostly financed. For profitable lines of commercial insurance, competition is mounting and is already testing major carriers' underwriting discipline. Experts predict that between 2008 and 2012, the insurance sector will experience an interval of comparative steadiness. In 2008 and the first six months of 2009, prices are expected to drop by between 5 percent and 15 percent. If price increases do commence in 2009, as per the traditional underwriting pricing cycle, the increases will be moderate, unless big catastrophe losses occur, according to analysts.

Sub-Prime Meltdown

To date, more than $170 billion has evaporated from the balance sheets of companies around the world as the result of the meltdown of the U.S. subprime mortgage market. Commercial banks and investment banks have been the hardest hit, with write-downs by Citigroup and UBS alone accounting for more than $28 billion. Losses have been nearly evenly split between U.S. and non-U.S. companies.

Identity Theft -- Are you a victim, the source, or both?

8.3 million people or almost 4% of American adults were victims of identity theft in 2005. Not suprising is that over 56% of those did not know how the information was stolen, but what is suprising is that 16% knew the thief personally. Companies can really provide a benefit to their employees at little cost by purchasing for them identity theft coverage. It is the cheepest protection an employer can buy to keep its employees productive. An employee who has had his/her identity stolen is not thinking about work.

Almost all business keep data. If your data is stolen, hacked, or destroyed more than likely you are not covered for the losses you suffered or even greater the losses the theft caused for others. Just recently Insurance companies started offering this coverage. Consult your Independent Agent or you may be more of an Indentity Theft victim than you think.

Sub-Prime Liability

The subprime mortgage crisis may lead to a surge in professional liability claims that will spread across the United States and global economies in ways that havent been seen from one event.
With past stock-options scandals and the savings-and-loan collapses of the 1970s, the lawsuits involving directors and officers or errors and omissions covers that followed were fairly tightly focused on the companies or industries involved.

But here the losses have a ripple effect that goes out through the economy as whole, because of the way these were marketed, said Bill Boeck, senior vice president of the Financial Service Group at Lockton Cos. Inc., and a lawyer with more than 20 years of experience in professional liability litigation.

In a briefing paper, Guy Carpenter & Co. said one "reason why the impact is likely to be greater than it appears is that investors may begin to file against companies not involved in subprime lending but which felt the disruption caused by the subprime mortgage market.

An example cited by Carpenter, Boeck and others is the fate of U.K. mortgage lender Northern Rock, which was not involved in subprime lending. It did heavily utilize short-term debt to fund its lending, however, and when that financing dried up in the subprime-sparked credit crunch, the company needed emergency funding from the Bank of England to stay afloat. But it lost 90% of its market value, said Guy Carpenter: The net result, of course, was litigation, with various institutional investors filing lawsuits against Northern Rocks directors.

Stanford Law Schools Securities Class Action Clearinghouse Web site listed 32 class-action lawsuits filed in relation to subprime-related issues. The companies involved run the gamut from direct mortgage companies and banks, home builders, Wall Street firms, Moodys Corp., the rating agency, and the parent of rating agency Standard and Poors, McGraw-Hill Cos.

You see the banks and lending institutions, not surprisingly, said Robert P. Hartwig, president of the Insurance Information Institute. And there are a number of suits against builders, who have been hard hit by this.

The Guy Carpenter brief predicted that more litigation is on the horizon for 2008.
The classes that appear to have the most exposure are alternative investment funds (e.g. hedge funds, private equity funds), real estate agents and mortgage brokers, said the brief. While hedge funds historically have not been large purchasers of insurance (10% to 15% of 8,000-plus funds), their increased interest in buying D&O and/or E&O, as well as the significant rate hardening on existing funds, seems to indicate that attitudes are changing.

Individual lawsuits are also blossoming, said Boeck, targeting bond insurers, appraisers and accounting firms that worked for companies directly or indirectly involved in subprime lending, and managers of 401(k) plans and pensions that lost money because of subprime investments.
There are various suits against people in the real estate industry -- anybody involved in funneling a borrower to a lender, he said.

As the subprime crisis continues to unfold, and the credit crunch and other related issues spread out in the economy, it is difficult for the industry to be sure how big the insurance impact will be. These kinds of professional liability claims trail well behind the breaking events that give rise to claims and litigation.

Hartwig noted that some investment banks and others had reported possible insured losses ranging into the low billions of dollars as the subprime mess began attracting attention earlier this year, but most have refrained from doing so of late. Theres a sense there that they dont have a lot of good information on which to base it, he said.

Boeck said that it could be a year to 18 months before the volume of litigation is understood, with three troublesome issues of securitized subprime mortgages resetting to higher payment rates between spring of 2008 and spring of 2009, and with a large number of foreclosures likely to follow.

At that point, well be outside of the blast zone, he said, but added that it could be late 09 or afterward before definitive answers are available.

A hardening of reinsurance pricing in 2008 seems unlikely, Carpenters brief said, except for insurers who are overweight in the affected sectors (e.g. home builders, subprime lenders).
An exception to the soft market, Boeck said, is companies affected by subprime issues.
The market is soft, and it is very competitive, he said. We frequently are able to negotiate premium reductions while getting enhancements. But for companies that are in the middle of all this, the negotiations can be brutal. If youre a lender involved in subprime and youve seen claims, perhaps even a securities suit, youre renewal can be an absolute nightmare. Weve seen that happen. These negotiations can be an absolute nightmare.

Some clients have been nonrenewed by insurers because of subprime problems. I wouldnt say its common, but it has happened, Boeck said.

At the end of the day, their decision is going to be motivated primarily or significantly by their feelings about the management of the company, Boeck said of the insurers. If they feel the managers of the company screwed up and may screw up again, then theyll walk.

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

Federal Terrorism Insurance Law Extended

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

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

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

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

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

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

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

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

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

CLAIMS NOT COVERED BY EPL POLICY

CLAIMS NOT COVERED BY EPL POLICY

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

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


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

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

No One is Immune

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


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

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

No one is immune. Including you.

Could You Financially Survive Such a Verdict

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



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



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



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

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

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

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

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

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

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

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

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

Servicemembers Civil Relief Act

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

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

Some of the SCRA’s most helpful provisions include:

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

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

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

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

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

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

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

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

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

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

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