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- Paperless file systems sound great. In practice, they often leave much to be desired. Insurance records are a good example. Contrary to what many believe, paper records (on non-acidic paper) last longer than most of today's electronic media. Electronic records sometimes are suspect because of the greater possibility of record manipulation. Old policies may be crucial to claim coverage and may be the only acceptable proof in some cases.
- Legal terminology got you down? Need to look up some words in that insurance policy or lawsuit? Here are two good, free sources: http://dictionary.lp.findlaw.com (good for looking up specific words) and http://www.duhaime.org/diction.htm (arranged alphabetically - good for browsing).
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Credit card and identity theft has become a crucial personal risk management issue. It can also pose a threat to your company, especially if employees carry company credit cards or corporate identity that could be used fraudulently. Even business cards could aid a criminal in misrepresentation or disguise. The consequences to your company could include financial loss and damage to reputation.
Horror stories abound about fraud committed using stolen identities. One attorney had a wallet stolen. Within a week, the thief ordered an expensive monthly cell phone package, applied for a VISA credit card, had a credit line approved to buy a computer, received a PIN number from the state motor vehicle department to change driving record information online, and more.
The attorney soon learned how to stop the thieves cold. Here are some simple steps from his lessons learned that you should encourage employees to take.
- Place the contents of your wallet on a photocopy machine. Copy both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel.
- Keep the photocopy in a safe place. Preferably it should be somewhere where you can have quick access so that you can report a loss promptly.
- As everyone always advises, cancel your credit cards immediately. The key is having the toll-free numbers and your card numbers handy so you know whom to call. Keep those where you can find them easily. Often they are on the backs of the credit cards.
- File a police report immediately in the jurisdiction where it was stolen. This proves to credit providers you were diligent and is a first step toward an investigation (if there is one).
- Call the three national credit reporting organizations immediately to place a fraud alert on your name and social security account number.
- Call the Social Security Administration and advise them to be on the lookout for fraudulent use of your social security number.
The attorney whose wallet was stolen had never thought of the last two steps. He was advised by a bank that an application for credit was made over the Internet in his name. That sparked the calls to the credit agencies. A credit reporting alert means any company that checks your credit will know that your information was stolen. They will have to contact you by phone to authorize new credit.
By the time the attorney was advised to report, almost two weeks after the theft, the damage had been done. The credit reporting agencies showed records of the credit checks initiated by the thieves' purchases. But, none of the agencies knew about the theft until the victim placed the alert. Since then, no additional damage has been done. Someone turned in the attorney's wallet (after the report) and he recovered it. Reporting to the credit agencies apparently stopped the thieves in their tracks.
Here are the numbers for reporting lost credit cards and I.D.:
Equifax:
Experian (formerly TRW):
Trans Union:
Soc. Sec. Admin. (fraud line): |
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1-800-525-6285
1-888-397-3742
1-800-680-7289
1-800-269-0271 |
Experian's credit fraud center on the internet contains additional tips. Visit it at: http://www.experian.com/consumer/cac/25_FraudCenterWelcomeGoBack.jsp
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| Age discrimination - teach your managers well |
In Mathis v Phillips Chevrolet, Inc., 2001 U.S. App LEXIS 21879 (7th Cir October 15, 2001) the Seventh Circuit Court of Appeals held that failure to train employees about age discrimination can be "willful" violation of the Age Discrimination in Employment Act (ADEA). A willful violation may result in what the ADEA calls "liquidated damages." These are a form of punitive damage and double any monetary damage award.
The plaintiff, Mathis, applied for a sales job with the auto dealer. He was 59 years old at the time and had years of auto sales experience. The job application asked for information about military service. By answering truthfully, the plaintiff showed that he was well over 40 years old. He was never hired or even interviewed, but seven younger applicants were.
The plaintiff sued for age and race discrimination. During the trial, the person responsible for hiring at the dealership testified that he was not aware that basing employment decisions on age was illegal. Another manager admitted a preference for younger sales people.
The trial jury found against the race discrimination claim, but awarded monetary and liquidated damages for age discrimination. The dealership appealed, arguing that the violation was not willful in that it had printed on its employment application that the ADEA prohibits discrimination because of age. The defendant also argued that the actions of its employee/managers should not result in liquidated damages to the company.
The appeals court held that liquidated damages applied "if an employer knew or showed reckless disregard for the matter of whether its conduct, or the conduct of its employees, was prohibited by the ADEA." The court went on to determine that by leaving managers ignorant of even the basic aspects of discrimination laws, the company subjected itself to a finding of reckless indifference by the jury, justifying the doubling of the damage award.
The court also said that printing the notice about discrimination on the application and then making no effort to train managers showed that the defendant knew about the law but was indifferent about following it.
This case shows how crucial it can be for employers to:
- Train managers and employees about employment discrimination law
- Adopt policies not only to uphold the law but to prevent violations of it, and
- Post conspicuously the employer's zero-tolerance policy on discrimination, harassment and other unlawful employment practices
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| Don't let a little pollution destroy a property deal |
Your organization can be responsible for environmental contamination on property you own or occupy, on sites formerly used by the company, or even at disposal sites. Once contamination is discovered, your company may be obligated to remediate. Often the cost of remediation can be approximated but not predicted accurately in advance.
Thus, contamination can become a major obstacle to the sale or purchase of property. The remediation cost may be unknowable in advance and neither buyer nor seller wants to take unlimited responsibility. If the contamination and cleanup are major, the property may be "upside down" - worth less than is owed on it when the clean up cost is added. The discovery of contamination during pre-sale inspection can be a deal killer.
There is a way to get another party to take that risk, however. Insurers that underwrite pollution coverage have come up with a concept called "cost cap" AKA pollution remediation stop loss insurance. This coverage allows the purchaser to fund expected clean up costs and transfer the unknowable costs (above the known costs) to an insurance company. Cost cap helps take the uncertainty out of the deal. It may make the sale and purchase economically feasible to both buyer and seller. Either party can purchase the coverage.
Cost cap can be used in conjunction with other types of pollution legal liability coverage. Some environmental engineering firms even participate with insurers or insurance brokers/agents in accepting some of the risk. Because of their expertise, such firms may be able to effect the clean up at a lower cost than the buyer or seller could manage. Before passing up an otherwise good deal because of site contamination, a buyer or a seller might find a way to make it work with this specialty coverage.
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| OSHA's new rules task company executives |
OSHA's new rules (for 2002), while simplifying record keeping according to OSHA, put a greater burden on corporate executives. The records require certification by a company official. Delegating or cursorily glancing over the reports may be hazardous to the executive's well being.
The rules now require employers to review the information on the form 300 injury and illness log before it is summarized on the new 300A form. A company executive must certify the summary. Although OSHA's plans to enforce this provision are not yet known, certifying an inaccurate log could be a criminal offense.
Thus it is well worth the certifying executive's time to find out exactly how the logs are prepared and summarized. Companies will want to make sure that workers responsible for completing the entries are well trained and know exactly what they are doing.
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Some estimates put the cost of white collar crime in America at several hundred billion dollars annually. These are only estimates not valid statistics. Because so many crimes go unreported, no one knows the true size of the problem. There are several reasons why companies do not report crime losses to their insurers, including:
- Fear of negative publicity
- Concern about effect on internal morale
- Prohibitive investigation costs when all factors (lost time etc.) are considered
- Possible repercussions such as defamation suits
- Belief that the culprits may never be identified
Balancing these are good reasons why it may be important to properly investigate and submit a claim.
- General knowledge of the loss can affect morale if nothing is done
- The problem (loss) may be deeper and more widespread than realized resulting in greater and ongoing losses
- Failure to report the claim timely may prejudice insurance coverage later
- If the insured knows who committed the crime, coverage is cancelled immediately for that individual
What should your organization do if it uncovers a known or suspected crime loss? Most authorities would advise the following steps.
- Carefully read the claim notice requirements of your company's crime policy or bond
- Assign an appropriate, confidential person (outside or inside the organization) to investigate the matter and coordinate the claim
- Work closely with legal counsel and your insurance professional to preserve rights and avoid unnecessary liability
- Develop a strategy (this may include allowing evidence to develop - e.g., leaving the suspects in a position to self-incriminate)
- Document the investigation with notes and tape or video recordings as appropriate
- Gather evidence to support a claim, especially identifying the amount of loss
- Report the loss in a timely manner to the insurer or bonding company with advice from legal and insurance advisors
Discovering a crime loss can be jarring to an organization and can have an enormous impact on operations. Few events cause the level of consternation or consume as much energy as a crime scandal. Staff continuously scrutinizes management's response to the incident. Effective handling of the event is critical.
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| Manage the business succession risk |
Business succession plans provide a means to continue the organization after loss of a key person. Like drafting a will, business succession planning is something most people would prefer to put off or avoid. For the benefit of the survivors, the business and any legacy a business owner may wish to claim, a business succession plan is a must. For small and medium businesses, it is even more crucial than for larger enterprises.
Medium sized and smaller organizations have less depth of resources to draw upon. They depend on the talents and vision of a few, sometimes only one person. Loss of one or more key individuals can be crippling, if not fatal to the smaller company. Loss can come from many sources: death, disability, defection or displacement are some of those causes.
A good business succession plan involves several components.
- A written control plan, including provisions for assumption of authority
- Risk controls such as prohibitions against key executives traveling together or pursuing unnecessarily risky activities (piloting own aircraft)
- Insurance coverage (to protect the company) against key person loss or disability, including death or kidnap/ransom, and to replace temporary revenue losses
- Survivor ownership controls including buy/sell agreements or estate plans for sole proprietorships
- A program for grooming successors at all key levels within the entity (not just the CEO) who can take charge when needed
- External resources such as legal, financial, executive search and insurance advisors who can help in the planning process and who will play a key role if the plan must be enacted
Some consulting firms specialize in succession planning for the smaller business. The Institute of Management Consultants lists 95 members who practice this specialty. You can find a listing at http://www.imcusa.org/advresultsnew.acgi. Here is a website that provides links to a number of books, articles and other resources on the subject: http://www.tcm.com/trdev/dutchsp.htm.
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