Category: Insurance

Employment Practices Liability Insurance – Protection from Litigious Employees

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The area of employees’ rights has been a bubbling caldron since the passage of Title VII of the Civil Rights Act of 1964. This federal law prohibits intentional employment discrimination by employers who are engaged in interstate commerce. It also prohibits practices that have the effect of discriminating against individuals.

As new workplace laws have been enacted, the possibility of employers finding themselves on the business end of a lawsuit has increased, especially when it comes to issues regarding discrimination.  It isn’t just about ensuring that all employees have the same rights and opportunities to job access, job security, working conditions and advancement, it also means creating a workplace in compliance with federal guidelines for the employment of disabled and mature workers. According to statistics compiled by the Equal Employment Opportunity Commission, from 1992 to 2004, the total number of individual charges of discrimination increased from 72,302 to 79,432 per year. These figures included filings for all types of discrimination.

Of course, it stands to reason that the more personnel policies employers have in place, the fewer the lawsuits filed against them, especially if these policies are outlined in a handbook provided to new employees. Even with the most careful interpretation of the law, however, there can still be instances when an employee can allege discrimination. That’s when an employer will be thankful and reassured they have Employment Practices Liability Insurance (EPLI).

How important is this type of coverage? The answer to that question lies in an examination of the workplace itself. The changing ethnic and racial composition of the workforce mirrors the changing demographics of America itself. Despite the fact that the U.S. workforce on average has a higher educational level than anytime in its history, some problems evolving in the workplace have discrimination at their root. Cultural differences have become an area ripe for discrimination lawsuits. Add to that sexual harassment, age discrimination and bias against the abilities of handicapped workers and employers can find themselves swimming in a sea of legal proceedings.

The focus on workplace litigation has steadily increased as workers have been awarded large damages in lawsuits against companies; human rights organizations have become more vigilant in reporting the actions of multinational companies; and the greater availability of information has provided more awareness of discriminatory activities that might have gone unnoticed in the past. Even the press closely examines the practices of large corporations in this post-Enron society. With all of these preventative measures in place, an employer needs the protection of Employment Practices Liability Insurance for those times when the best laid plans for a non-discriminatory workplace go awry.

Uncovering Common Misconceptions About Flood Insurance Coverage

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According to the National Flood Insurance Program (NFIP), flooding is this country’s most prevalent natural disaster. In the years between 1995 and 2004, flood losses in the U.S. averaged $867 million annually. There are about 4.7 million citizens who have taken advantage of the government’s flood insurance protection, however large numbers of at-risk Americans still refuse to find coverage.  After hurricane Katrina last summer, when nearly 80% of New Orleans was underwater, it is surprising that people would not seek such coverage, since their homeowner’s policies do not insure them against floods.

Part of the problem stems from the innate sense that if it’s offered by the federal government, applying for it must be: a) tied up in red tape, and b) too complicated due to all the exclusions. Both of these statements, however, are not true. Let’s examine some of the commonly held beliefs about flood insurance:

 

  • You can’t buy flood insurance if you are in a high-risk area.  Flood insurance is available to all homeowners and businesses in any community that participates in the NFIP. You can check to see if your community participates by visiting http://www.fema.gov/fema/csb.shtm. The only issue which would prevent you from obtaining flood insurance is if you reside in a Coastal Barrier Resource System location, or a location that is designated as an Otherwise Protected Area. Land that falls under these two categories are undeveloped areas along coastlines. The flood insurance program doesn’t provide coverage in these areas to discourage settlement where there is an extreme risk not only for flooding, but potential loss of life.
  • You can only get flood insurance if you are a homeowner.  Condominium/co-op owners, apartment dwellers, and commercial/non-residential building owners can purchase NFIP coverage. There is a maximum of $250,000 worth of coverage on a one-family residential building. The maximum per-unit coverage limit on a residential condominium/co-op association building is also $250,000. Contents coverage for any residential building is limited to $100,000. Commercial/non-residential structures can be insured for a maximum of $500,000. You can also insure the contents of commercial buildings up to $500,000.
  • You have to wait 30 days for flood insurance protection to take effect. Usually there is a 30-day waiting period from the time a policy is purchased until you are covered. However, there are some exceptions. There is no waiting period if you already have a flood insurance policy, but need more coverage to increase, extend or renew a loan, such as a second mortgage, home equity loan, or refinance. Coverage is effective immediately, as long as you pay the premium at or prior to loan closing. There is a one-day waiting period when additional coverage is requested because of a map revision. This applies when the NFIP revises the map so that a non-Special Flood Hazard Area becomes a Special Flood Hazard Area. Coverage must be purchased within 13 months following the map revision to be applicable for the reduced waiting period.
  • You can get Federal Disaster Assistance even if you don’t have your own flood insurance policy.  The Federal Disaster Program will only provide coverage to uninsured individuals or businesses if the affected area is declared a federal disaster area, which occurs less than 50% of the time.  Statistics show the awards average about $4000 dollars and most are made in the form of a Small Business Administration Loan, which must be paid back with interest.  Furthermore, the award recipient must carry flood insurance for the duration of the loan.

 

To learn more about the terms of flood insurance coverage, log on to http://www.floodsmart.gov/floodsmart/pages/faq_policy.jsp.

Source: FEMA Publication F-216 (08/04) and www.floodsmart.gov

Falling Asleep at the Wheel: Tips for Avoiding Driver Fatigue

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There are many dangers that can contribute to car accidents, but driver fatigue is by far one of the largest.  Falling asleep behind the wheel is a serious problem, causing more than 100,000 accidents per year, according to the National Highway Traffic Safety Administration. For most of these fatigue-based crashes, the culprit is monotony on the road. Interstates and high-speed or long, rural highways, for example, are the most frequent areas where drivers fall asleep. Studies done by the NHTSA have proven that driving with fatigue is equally if not more dangerous than driving intoxicated, with very similar results: impaired reflexes, blurred vision, inability to stay focused, etc.  The NHTSA has estimated that drivers falling asleep at the wheel cost about $12.5 billion annually in insurance claims and medical costs.

There are several common-sense tips for staying awake, especially when driving long distances, or at night.

 

  • Make sure you’re well rested, beginning your trip only after having at least seven to eight hours of sleep.
  • Avoid driving alone on long-distance trips. Passengers can both share in the driving and providing conversation, which can help you stay awake.
  • Be an active driver. Avoiding prolonged use of cruise control. Using it in moderation will help you stay more alert.
  • Allow yourself ample time to reach your destination so you can take advisably frequent breaks. Try to stop about every two hours, or every 100 miles. Make a point of getting out of the car and walking at least a short distance.
  • Driving for long periods at night makes fatigue much more likely. By avoiding traveling during these hours, you escape the glaring dashboard and road lights. That alone will help decrease your risk of highway hypnosis.
  • Finally, if you’re losing the battle against fatigue, stop and sleep at a motel or well-guarded rest stop.

 

Vulnerable Homeowners Negligent About Flood Insurance

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Quite a bit of attention is being paid lately to floods and the devastation they leave behind. In the wake of Katrina, more and more questions have been raised about what kind of preventative measures would have lessened the catastrophic effects of such an event.  How well equipped are individual homeowners to handle financial consequences on their own, as opposed to relying solely on agencies like FEMA to provide them with economic assistance? Are Americans taking advantage of the nation’s flood insurance program?

That’s what FEMA wanted to know. The agency worked through the American Institutes for Research (AIR) to commission a study. AIR is a not-for-profit organization that conducts research on social issues and provides technical assistance in the fields of health, education, and workforce productivity. AIR coordinated the study, which was conducted by the Institute for Civil Justice and the Infrastructure, Safety and Environment division of the RAND Corporation. It was intended to be part of an overall evaluation of the flood insurance program.

In the course of their work, the researchers discovered that most homeowners buy flood insurance only because it is required. Only 20% of homeowners living in the areas most vulnerable to floods buy federal flood insurance when they are not required to do so. The study went on to reveal that just 1% of Americans living outside designated flood zones buy federal flood insurance even though the possibility of being victimized by flood is a real threat.

Only 50% to 60% of the 3.6 million single-family homes in the most highly affected areas are legally required to buy federal flood insurance. The remaining homeowners in these areas and the nearly 76 million single-family homes outside these areas are not required to buy flood insurance.

The study put the greatest emphasis on exploring the demographics of flood insurance purchasers. About 63% of homeowners living in areas subject to coastal flooding purchase flood insurance. Approximately 35% of homeowners living in areas that are only affected by river flooding buy flood insurance. The researchers surmised that the disparity might be the result of a perception of having less risk or that coverage available for basements is limited, and basements are prevalent in inland areas subject to river flooding. The report recommended that this aversion to flood insurance by those living in inland areas be studied, to search for an explanation or possible causes.

The study also looked at purchasing habits along geographic breakdowns. In the South, 75% of homeowners who carry flood insurance also have contents coverage. Only 16% of homeowners with flood insurance in the Midwest and 49% in the Northeast have contents coverage.

Clearly homeowners everywhere need to reassess their exposure to flooding.  If you have questions about obtaining flood insurance for your property, please give us a call.

Traffic Violation Cameras and Your Auto Insurance Premium

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With the sudden presence of traffic violation cameras (red light, speeding, aggressive driving) in states across the country, many Americans feel that their privacy is violated.  Others believe that this is a government ploy for fundraising, or to replace the local police department.  Many people are curious as to the effect a red light camera violation will have on their insurance premium.

Since initiating the program a few short years ago, participating cities have seen very promising results from their investments.  Many have seen a 40% decrease in violations since starting the program.  Fines can be anywhere from $35 to $200, depending on the city in which the violation was issued and the speed over the legal limit at the time of the photograph.

If you are found in violation, the cameras take a picture of your car, with a motion-triggered shutter, which captures an image of you in your vehicle in addition to a zoomed-in image of your license plate.  Some cameras even take a few seconds of video.  Once the data is analyzed, you are issued a ticket through mail.

Some drivers have contested that if the vehicle owner is not the driver at the time of the violation, they should not have to pay the fine.  Most cities allow residents to appeal the citation in this situation.  Other states, however, hold the vehicle owner responsible regardless of who was driving.

There have been a few reports that suggested the cameras increase traffic accidents.  This is both true and false.  As the lights change from green to yellow, drivers begin to panic.  To avoid receiving a traffic violation, they are inclined to stop much more suddenly, which could cause minor rear-end collisions, and fender-benders.  However, more serious side-impact and head-on collisions caused by drivers speeding through red lights have significantly decreased.  As these crashes were much more hazardous, and resulted in far more injuries, the cameras are still viewed as a positive implementation.

Since violations are usually issued as a civil penalty, in most cases they do not result in changes to your insurance premium or points on your license, except in extreme cases.  Driving safely, however, will always result in better insurance rates.

When Should You Get Car Insurance for Your Teen?

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As soon as they start learning to drive, whether they are starting with a learner’s permit or going straight to the license, you should inform your insurance company to have them added to your policy.  This is usually much more cost-effective than placing them on their own policy, especially if you are a safe driver with a clean record.  They will also be eligible for more coverage under your policy.

Statistics show that teens are more prone to accidents than those in other age groups, so starting out with the right amount of coverage is extremely important.

When your child goes to college, unless they are taking a car with them, you will probably want to switch them to “occasional drivers” under your policy.  Some other considerations:

 

  • You may qualify for a multi-policy discount if your child’s car is covered under your policy.
  • You may also qualify for a discount during the time your child is away at college.
  • Encourage your child to earn good grades, and take a driver training course.  Some insurers discount due to good grades, and for completion of training courses.
  • Serve as a good role model; your child will learn by example, so it is important to demonstrate good driving habits early on (i.e. not talking on the phone, using seatbelt, not drinking and driving.)

 

The Number of Uninsured Drivers Continues to Rise

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Here’s a sobering statistic you might not be aware of: nationwide, when a person is injured in a car accident, the odds are about one in seven that the driver that caused the crash is uninsured. According to a recent Insurance Research Council (IRC) study, the estimated percentage of uninsured drivers rose from 12.7% in 1999 to 14.6% in 2004. The IRC studied data provided by eleven insurance carriers, which represents approximately 58% of the private passenger auto insurance market in the United States.

Uninsured Motorists, 2006 Edition looks at trends in the percentage of uninsured drivers by state from 1999 to 2004. In 2004, the five states with the highest uninsured driver estimates were Mississippi with 26%, Alabama with 25%, California with 25%, New Mexico with 24%, and Arizona with 22%. The five states with the lowest uninsured driver estimates were Maine with 4%, Vermont with 6%, Massachusetts with 6%, New York with 7%, and Nebraska with 8%.

The researchers estimated the number of uninsured drivers by using a ratio of insurance claims made by persons who were injured by uninsured drivers to claims made by persons who were injured by insured drivers. The study also includes recent statistics broken down by state on the frequency of claims made by uninsured motorists, the frequency of claims of bodily injury, and the ratio of uninsured motorists to bodily injury claim frequencies.

Given these statistics, it’s a good idea for people to protect themselves in case they are in an accident with someone with either no coverage or not enough coverage. That’s why the insurance industry developed Uninsured Motorist Insurance and Underinsured Motorist Insurance. Requirements for carrying this coverage differ from state to state. However, in general, states that are considered “no fault” auto insurance states mandate both types of coverage.

Uninsured Motorist insurance protects you when the other driver has no coverage. In order for your Uninsured Motorist coverage to help, the uninsured driver must be the person responsible for causing the accident. The types of coverage provided under this policy include:

 

  • Uninsured Property Damage: Covers you when the insured vehicle sustains property damage, but the at-fault driver has no insurance.
  • Uninsured Motorist Bodily Injury: Covers you, the insured members of your household and your passengers for bodily/personal injuries, damages or death caused by an uninsured at-fault driver. If you get into an accident in which the at-fault driver has no insurance, your policy will pay your medical expenses, up to the stated limits of your policy.
  • Underinsured Motorist insurance protects you when you are in an accident with a driver who does not have enough liability coverage. Again, this coverage only helps if the underinsured driver caused the accident. The types of coverage provided under this policy include:
  • Underinsured Motorist Property Damage: Covers you when the insured vehicle sustains property damage, but the at-fault driver is covered by a policy with a liability limit insufficient to cover all the damages.
  • Underinsured Motorist Bodily Injury: Covers you, the insured members of your household and your passengers for injuries, damages or death caused by an at-fault driver whose insurance is insufficient to cover the entire expense. If you have an accident with a driver whose policy limits are too low to pay all your damages, your policy will pay the difference up to the stated limits of your policy.

 

If you haven’t reviewed your insurance coverage recently, talk to your insurance agent to review any gaps in your coverage. You may be putting yourself and your family in greater risk than you realize.

Premium Damage Control for Workers’ Compensation Insurance

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When you obtain workers’ comp for your business your initial premium rates are based on your company’s payroll and the average cost of insurance in your particular industry.  This premium rating will continue until your business becomes eligible for an experience rating.  An experience rating will take into account the amount of claims filed in order to determine your loss ratio compared with your industry average.  In general, an employer will need to be insured for at least two consecutive policy years to become eligible for experience rating.  Simply put, if your company follows safety prevention and files fewer claims than expected the amount of your premium will be positively affected.

Businesses can reduce their workers’ compensation costs in other ways.  One method is to split payroll for an employee who performs two different tasks, each one governed by a different risk classification.   Separate payroll records must be kept and duties specifically identified.  If an employee splits time equally between office work and a higher risk job duty, you could potentially decrease this employee’s risk factor by 50 percent for as much as half the workday. 

The same can be said for classifying workers correctly.  Misclassification is a common oversight leading to higher worker’s comp premiums.  The National Council of Compensation Insurance (NCCI) provides more than 700 job classifications in a publication called the Scopes Manual.  Most states use this manual as the basis for their classification schedules.  Since workers’ compensation premiums are directly impacted by your reported job classifications, it is well worth your time to verify both your company and employees are classified correctly.  Keeping track of changes in job duties throughout the year is also important. If an employee is promoted to a less risky position, your premiums will be lowered accordingly.

Since your workers’ compensation premiums are based on payroll you may be able to reduce your payroll totals by deducting overtime pay.  Some states will allow you to make this conversion for purposes of calculating your payroll.  Again it is important to keep detailed records to produce accurate payroll data. 

Approximately thirty-one states allow employers to reduce their premiums by paying a deductible that is generally between $100 and $5,000.  Your state insurance department or insurance broker can inform you if this is an option for your business.

It is also important to maintain an excellent safety record.  Utilize proper equipment and clothing to prevent accidents and injuries.  Be sure to train employees well in safety practices and procedures.  Create a safety manual for all employees.  And always follow the Occupational Health and Safety Administration guidelines related to your business.

Since many states have different regulations that govern workers’ compensation it is important to consult expert advice in this area.  An experienced agent that understands your business can work as your advocate with an insurance company, guide you through the classification process, and lead you to credits that lower your premium.

Is Your Workers’ Compensation Plan a Pork Barrel for Would-be Scammers?

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Scamming “the man” can be a favorite pastime among some employees, and one of the best places to run a con is through your workers’ compensation plan.  If you aren’t vigilant, a good scam artist can perpetuate the fraud for a very long time.

The most common garden-variety type of workers’ comp fraud is the phony workplace injury that’s discovered later, when the employee is accidentally caught doing heavy lifting or seen working for another employer while collecting benefits.  Fraudulent claims can also occur when an employee complains of unseen ailments or extends the length of a legitimate claim because he doesn’t want to go back to work.

No matter what form it takes, everyone in the company feels the effects of workers’ comp fraud.  Other employees may have to put in more hours to compensate for the lost productivity, or an employer may have to decrease the percentage of annual raises because of higher workers’ comp premiums.

How can you evaluate the potential for workers’ comp fraud at your company? These are some signals that will alert you to a possible scam in the making:

  • If an employee has an accident shortly after arriving on Monday morning, this can be a sign of a scheme because the injury may have resulted from weekend activities.
  • If an injured worker refuses treatment from a doctor or physical therapist, it could be cause for concern.  Their reluctance to receive treatment could be an attempt to keep a phony injury from being discovered.
  • If a disgruntled employee or one who knows they are about to be laid off files a workers’ comp claim, it may be a ruse to get even with the employer.

Of course, while it is important to be alert to possible fraudulent claims, it is far more important to prevent them from happening in the first place.  According to theCoalition Against Insurance Fraud, there are several things you can do to combat workers’ comp fraud in your company:

  • Verify references and background information carefully.
  • Publicize your workers’ comp policy to all new and current employees, and provide them with updates at least once each year.
  • Spread the word that money paid for fraudulent claims comes out of the employer’s pocket, and can directly impact salary increases for employees.
  • Educate supervisors on workers’ comp issues, including how injuries decrease productivity and how costs affect the bottom line.
  • Display fraud awareness posters and the National Insurance Crime Bureau’s fraud hotline number.
  • Work with your insurer to implement a safety-management program that can eliminate possible safety problems.
  • Be aware of workers’ comp fraud indicators when a claim is made.
  • If you suspect a fraudulent claim and have evidence or witnesses to back up your suspicion, contact your insurer’s special investigations unit immediately.
  • Pay attention to employee complaints and concerns about their working conditions.  The strongest predictor of fraud is a chronically disgruntled work force.

Show No Disparity When Dealing with an Aging Workforce

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When employers think diversity, most think in terms of sociological factors such race or religion. But there is another type of diversity that’s becoming increasingly more prevalent in today’s workforce and that is age diversity. As Baby Boomers continue to work well past normal retirement age, the phenomenon will become more widespread.

Having the wisdom and experience of a graying workforce population comes with a price. Under the ADEA, it is unlawful to discriminate against a person because of age with regard to any term, condition, or privilege of employment, including, but not limited to, hiring, firing, promotion, layoff, compensation, benefits, job assignments, and training.

This aging law was given a new lease on life with a recent Supreme Court decision. In the landmark case of Smith et al. v. City of Jackson, Mississippi, No. 03-1160, a divided Court, by 5-to-3, held that the ADEA authorizes disparate impact claims. The doctrine of disparate impact means that even where an employer is not motivated by discriminatory intent, Title VII prohibits an employer from using a seemingly neutral employment practice that has an unjustified adverse impact on members of a protected class. Of course, employees 40 and older are a protected class. The real Pandora’s Box that was opened by this decision actually lies in the nature of the disparate impact suit itself because unlike disparate treatment claims, disparate impact claims don’t require proof of discriminatory intent. Their emphasis is on whether or not a company’s policies and practices adversely affect a protected group. The claimants must have substantive proof that the disparate impact exists; they cannot just allege that there is the possibility that there may be a disparate impact resulting from the policy or practice. The downside here is that even though there may have been no discriminatory intent on the employer’s part, the fact that the disparate impact exists makes that employer legally liable.

What should employers be doing as a result of this heightened employment practices liability? The first response should be to review benefits, compensation and employment policies and practices to determine if there is any disparate impact on older workers. You will also need to perform a statistical analysis to prove the inaccuracies in the data of any potential claimant. A current statistical analysis will also evaluate whether there is the potential for disparate impact on older workers from a particular workplace policy or procedure in the future.

The next step you need to take is to talk to your agent about Employment Practices Liability Insurance (EPLI). Most comprehensive general liability policies exclude employment-related claims. Although a directors and officer’s policy may offer some form of protection, it won’t cover the business entity itself. Other forms of insurance, such as fiduciary liability coverage, usually want cover these types of claims either.

What an EPLI policy does is provide coverage for the cost of defending against and/or settling various types of claims, including discrimination, sexual harassment and wrongful termination. The majority of EPLI policies require the insurer to defend an employer against covered claims. The insurance company usually has the right to select the defense counsel. EPLI insurers typically have pre-approved, panel counsel hired to defend their clients. The cost of defense lessens the amount for settlement, so having an EPLI policy will actually encourage out of court settlements.