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Monthly Archives

March 2014


By Your Employee Matters | No Comments

The Americans With Disabilities Act (ADA) defines service animals as dogs that are individually trained to do work or perform tasks for people with disabilities. Examples include guiding the blind, alerting the deaf, pulling a wheelchair, alerting and protecting a person who’s having a seizure, reminding a mentally ill person to take prescribed medications, calming someone with Post Traumatic Stress Disorder (PTSD) during an anxiety attack, or performing other duties. Service animals are working animals, not pets – and the task a dog has been trained to provide must be directly related to the person’s disability. Dogs whose sole function is to provide therapy through comfort or emotional support do not qualify as service animals under the ADA.

The California Department of Fair Employment and Housing has compiled a helpful Service Animals Laws Comparison Chart that should be of interest to all employers. Although the chart compares how the ADA and Air Carrier Access Act (ACAA) match up with California state laws, the federal information alone is helpful.

For more information on the difference between ADA support animals and companion animals, go to http://www.ada.gov/service_animals_2010.htm or http://www.iaadp.org/iaadp-ada-training-requirements.html.

To learn more, go to http://www.ada.gov/qasrvc.htm  or visit the Job Accommodation Network page \http://askjan.org/media/servanim.html .

For more information on the contents of this newsletter, please contact your attorney or Employer Advisors Network, Inc., a resource for employment law attorneys, insurance agencies, and their clients (e-mail: info@employeradvisorsnetwork.com or www.employeradvisorsnetwork.com).


By Your Employee Matters | No Comments

The case of In re: Beth V. New York State Office of Children & Family Services (OCFS)  involved a decision by the New York State Workers Compensation Board that settlement proceeds from an employment lawsuit against OCFS should offset any Comp payments based on the same set of facts. What’s significant about this case was how the employer mishandled an allegation of sexual harassment. To make a long story short, Beth, an OCFS youth division aide, was working in the kitchen, where M, a male resident, was assigned under a facility work program. One day, Beth confiscated a notebook that M had brought with him to the kitchen, apparently because he had told her he was writing suggestive notes about her and had made crude, sexually explicit gestures. She gave the notebook to the youth division aide on duty. When M discovered this, he threw a fit.

After the incident, Beth told various supervisors and fellow employees that she felt unsafe, uncomfortable, and feared physical and sexual harm from M. A few days later, while she was logging out from work, he accosted her from behind, choked, punched, and raped her at knifepoint. M then forced her to turn over her keys to her Jeep and abducted her from the camp. When he stopped to make a call at a pay phone, Beth escaped and reported the crime to the police. She filed a lawsuit against OCFS and eventually settled for $646,000, of which she ended up with $430,000 – the amount that the Workers Comp carrier claimed it had a right to offset.

I can tell you that from my years of trial experience that if OCFS were a private employer, the punitive damages would have been in the millions. The bottom line: Take all claims of sexual harassment seriously! During my career, I represented three women in Beth’s position – and all of these cases were ugly. In two of them, a decent investigation and follow-up by the employer could have prevented the horrible outcome.


By Your Employee Matters | No Comments

Last October, while conducting a webinar on Creating an Injury Prevention and Management Program That Works, I asked the attendees three questions:

  1. Do you conduct pre-hire fit for duty exams? More than two in three attendees either didn’t spend the time or money on these exams, weren’t aware that they were available, or didn’t know how to conduct them. For nine straight years I trained Workers Comp brokers on how to help clients reduce their claims by doing these exams. The bottom line: You don’t want to hire a future Comp claim. For more information, read more the report: Creating an Injury Prevention and Management Program that Works.
  2. Have you ever calculated the total cost of your Workers Comp claims?  Only one in three attendees have done so. For every dollar paid in claims, there’s at least another dollar of bottom-line impact in reduced productivity, lost customer satisfaction, the cost of replacing an employee, etc. Bear in mind that insurance companies have little incentive in preventing or managing Comp claims, especially when the interest rate on your modifier is in the double digits. In fact, it’s the most expensive money your company will ever borrow
  3. Do you have a formal return-to-work program? Once again, less than half of the attendees did so, even though these plans make eminent sense. The program should acknowledge concerns and fears by both employee and supervisors. Many Comp claims take on a life of their own because managers ignore injured employees as “damaged goods,” rather than trying to nurture them back to work – and then wonder why some of them malinger on claims.

I encourage you to watch the webinar or read this report, and then follow up with us if you have any questions.


By Your Employee Matters | No Comments

I recently read George Gilder’s Knowledge and Power, a powerful and profound book. Gilder’s bottom line:” Knowledge is power today. Knowledge is wealth today.”

The book uses the word “entropy” a lot. Gilder defines entropy as “a measure of surprise, disorder, randomness, noise, disequilibrium, and complexity.” Its economic fruits include creativity and profit. Its opposites are predictability, order, low complexity, determinism, equilibrium, etc. Gilder wants a low-entropy government that provides a foundation for high- entropy entrepreneurs to create, innovate, and grow the economy.

I see a dual role for HR in a knowledge economy. One role is to provide the low-entropy stability that supports a creative, innovative workforce by ensuring that a business hires the right people, stays in compliance, has the right insurance, etc. HR also has an opportunity to be creative and innovative in a high-entropy environment that works not just on the system, but in it. As Gilder states, “economic conditions can change overnight when power is dispersed and the surprises of human creativity are released.”

What knowledge – which is far more than just information – is your HR department providing to management? What have they discerned and communicated about company hiring approaches, productivity, retention, and motivation?

Gilder’s insight reminds me of Orbiting the Giant Hairball by the late Gordon Mackenzie, creative director at Hallmark, a man widely known for his high-entropy approach. McKenzie describes an organization’s policies and procedures as the giant hairball, arguing that people need vision, mission, values, and goals to provide a low-entropy stabilizing foundation that allows them to orbit the handball, while unleashing their creativity.

This is another way of saying that a business needs both “administrative HR” (low entropy and stabilizing) and “strategic HR” (high entropy and creative).

To help you unleash the strategic potential of your business, I encourage you to read and absorb the lessons of Gilder’s book.

How can personal liability affect your company bottom line?

By Business Protection Bulletin | No Comments

Personal automobile liability, homeowners’ liability coverage, watercraft, aviation, and umbrella liability are designed to cover all the risks associated with day-to-day hazards. But, many times, entrepreneurs are not as vigilant with personal risk management as they are with their business’.

So ask yourself: do you want your partner’s 17 year-old son randomly choosing your next partner as the result of a DUI accident?

Once the underlying limits run out, the partnership share, the stock ownership, the thrift plans, become vulnerable to seizure. Yes, your new partner might be a bit angry with your old partner. Of course we advocate safe sober driving, but any claim can exceed the statutory limits of liability and create an unpleasant internal operations problem for your company. Cover the real risks properly.

Enterprise risk management uncovers this sort of hazard. Business continuation planning recommends surveying personal risk management among the owners and partners of any closely held company.

Just as you protect your company assets and income against casualty and property losses, protect your partnership too. Review the personal lines limits of liability partners carry. Require at least several million dollars of umbrella coverage.

Okay, you’re asking why so high.

Do you want your business to thrive for many years? Do you know how long it takes to get through the court system for a major liability case? If the injured party doesn’t settle, the business assets and partnership could be at risk for four years.

And if the case would settle for a million dollars today, claims inflation might make the payout three times that in four years. It is not entirely predictable. But it is predictable that your policy limit will not rise as the result of inflation. You must take action to increase that limit.

Stay ahead of the liability curve and protect your business structure with proper personal risk management risk assessment, planning, and program implementation.

How do environmental concerns expose your Directors and Officers coverage?

By Business Protection Bulletin | No Comments

Directors and Officers (D&O) coverage protects company and individual assets from claims regarding the management professionalism of the upper levels of companies.

The leading cause of D&O claims and payouts concerns financial reporting. The books don’t have to be cooked necessarily, as they just need to be inaccurate to provoke a claim.

Relatively new accounting standards require real property values to properly reflect environmental impacts and potential clean-up costs. For example your company purchases a piece of land for $50 knowing it is environmentally impacted with an anticipated clean-up cost of $950. The book value of the property is $50 because that is what you paid, and it is the net value including clean-up. Now let’s assume new regulations require an additional $49 of remediation. You must either write down the value by $49, or if the property is held for sale, you can optionally write down only actual costs reflected in the sales price.

Of course, as with most future conditions, how do we predict what costs will be when we remediate the site?

Unfortunately, directors and officers must make management decisions in real time while arm-chair stakeholder quarterbacks get to review results with the power of hindsight. Will the Chief Financial Officer (CFO) decide a conservative cost structure and reduce the value of the stock? Or, will he choose a more optimistic scenario and not reveal the full extent of the environmental impact thus falsely inflating values?

The answer is: in today’s regulatory and transparent business environment, adequate D&O limits are a requirement of good management. Also, the CFO should consider environmental impairment insurance.

In the spirit of insurance and great risk management, the CFO can swap a premium (known expense) for a future potential claim (unknown loss). Thus transferring the loss on the asset, to an expense. The asset value remains unchanged.

These valuation rules are very complex and you should consult with a CPA about your specific situation.

If the market value of my real estate is low, should I still pay for replacement cost?

By Business Protection Bulletin | No Comments

There exist many ways to calculate the value of your real property. When it comes to an insurance value, several stakeholders have some skin in the game.

The lender wants a value greater than the financed amount even though the insurance company is under no obligation to pay an amount greater than replacement cost. So what happens in a down real estate market when the best business decision might be to buy a low priced replacement building rather than face the relatively high cost of rebuilding the old one?

If a decent replacement is on the market, the business could buy, move and reopen sooner and suffer lower collateral losses, like lost sales.

So here’s the problem. If you claim the loss with the intention of buying a building with the proceeds rather than fixing the old one, the insurance company is only obligated to reimburse the “actual cash value” of the building.

Actual cash value (ACV) is the replacement cost less depreciation. With older buildings and other add-on coverage, the difference can be significant. And ACV valuation may work for you; don’t discard it out of hand.

The add-on coverage defrays costs associated with upgrading due to building codes, replacing obsolete building materials, extra demolition required by the authorities, or upgrading life, fire and access codes.

So under replacement cost valuation, the insurance company pays for your old building to be replaced with the modern, up to code version. Depending on the age difference, these costs can be significant.

With an ACV claim, the insurance company cuts you a check for that amount less what the lender got. The advantage, in down real estate markets, is if you can buy a reasonable, usable replacement location for the cash proceeds and the same loan amount, you end up with a different location and the land from the first location. You may need to demolish the balance of the building though.

Back to the lender: unless you negotiated an agreed value to a total loss, the insurance company does not look at the financed amount as relevant to the claim. Some specialty coverage can be bought to cover that shortfall, but it is not yet standard.

We suggest thinking about the contingencies and planning for them in advance. Is it more important to reopen and save the sales, or is it wiser to build an inventory stored elsewhere? How about your suppliers? Can you replace them quickly in event of a fire at their facility? A good crisis plan is common sense for risk management. Then, your selection of economic valuations of your building will be appropriate.

How Do Umbrella Policies Extend and Broaden Underlying Policies?

By Business Protection Bulletin | No Comments

What do umbrella policies do?

Insurance professionals can’t help themselves. We rely on wonk-ish diatribes to describe umbrella policies because they are technical in nature.

So let’s try to simplify.

Most companies buy insurance because they are required by law. Workers’ compensation and automobile liability allow companies to hire employees and use public highways. If they own property, their lender requires insurance. If the company leases space, the landlord requires premises liability.

But the real reason to buy insurance: trade a known loss (premiums) for unknown losses (claims). Your company can budget for the acceptable level of known loss which protects against normal, everyday losses associated with entrepreneurship.

Now the umbrella policy: you’re buying catastrophic loss coverage for imaginable claims. The multi-passenger near fatal car wreck or the nightmare products liability claim that costs millions in damages.

You’re also buying coverage for unimaginable claims. Claims not covered by your automobile, general or employer’s liability:

  • Do you promote your company through social media? Libel and slander losses are covered by personal injury liability, usually excluded in general liability policies, usually covered on umbrellas.
  • Do you send employees out of the country? The stated territories for coverage under standard general and automobile insurance is the United States and Canada. For umbrellas, it’s worldwide. Now, some umbrellas specifically expand territory language to include “anywhere” because of commercial space travel.
  • Any possible sexual harassment in your organization? Again, usually excluded by general liability, but included under umbrella coverage.

These examples of rare occurrences give a taste of the importance of umbrella liability. Your company can be blindsided by large liability claims that are not anticipated by your typical liability coverage. Broaden the territory, widen the safety net, spend a little more premium, get more peace of mind.

Trade a little more known loss, your umbrella premium, for a lot of protection against the unimaginable loss.


By Construction Insurance Bulletin | No Comments

Before taking calculus, it’s probably a good idea to define your terms. The same principle applies if your business faces a construction defect claim.

Insurance experts define a “construction defect” as a failure of a structure to perform as expected in a way that causes harm to the work itself and/or other property or work due to faulty design, workmanship, and building products or materials.

Depending on the situation, a construction defect claim might involve allegations of damage (physical injury and/or damages (monetary loss from failure to perform properly). These lawsuits often involve “completed operations” claims under the commercial general liability policies of developers and contractor or errors & omissions claims against design and other professionals. Manufacturers and others in the stream of commerce are also vulnerable to product liability claims.

Construction defect litigation often arises from business disputes –for example, a general contractor might refuse to pay a sub, alleging that its work was defective – or from a building owner’s claim that damage to his property from a hurricane or earthquake was due in part to construction that failed to meet specifications above and beyond the minimum standards required by code. A number of such suits were filed in the wake of Hurricane Sandy, which devastated several Mid-Atlantic states in October of 2012, causing up to $75 billion worth of damage.

What’s more, construction defects can remain latent for extended periods. Claims are often made after a routine inspection of a building or home (for example, by a mortgage lender) uncovers shoddy work. Depending on the state, the statute of limitations for filing a lawsuit might not expire for 10 to 15 years after completion of a project.

To learn how you can protect your business against the threat of construction defect lawsuits, just give us a call.


By Construction Insurance Bulletin | No Comments

Chances are that you’re using chlorinated polyvinyl chloride, (CPVC) – a thermoplastic material in pipes and related products—because it’s less expensive and easier to install than copper or iron piping.  Failure of CPVC components can lead to extensive water damage; and repairs can be costly and complex because these pipes and fittings are located above ceilings, behind walls, and below floors,

In case of a piping mishap, here’s what to do:

  • Identify the material. CPVC pipes and fittings are usually yellow, cream, orange, or gray.  Don’t confuse them with components made of its distant cousin polyvinyl chloride (PVC), which has different chemical properties, physical characteristics, and functions. In general, it’s not advisable to combine CPVC components with those made of PVC.
  • Preserve the failed part for forensic analysis. This involves a complex  chemical/materials evaluation that requires unique skills and specialized examination methods, using such advanced techniques as gas chromatography-mass spectrometry, and fourier transform infrared spectroscopy. To avoid contamination during analysis: 1) don’t tape labels on the damaged part; 2) handle it as little as possible; and 3)  if you can’t leave the part in its installed position, wrap it in aluminum foil before placing it in a plastic bag (the materials in these bags can leach out).
  • Never break open cracked pipes and fittings to see what’s inside. |Leave this to a forensic scientist under controlled conditions.

Because CPVC failures can have a variety of causes from raw material flaws and manufacturing defects, to improper installation and maintenance, determining which party is responsible can be difficult. However, safety proper procedures for installing and maintaining these components can go far to reduce this risk.

A word to the wise …