|
INDEX
|
|
 |
|
- OSHA is providing information on avoiding hazards resulting from cleanup following natural disasters. The information is available on the website at: www.osha.gov/OshDoc/hurricaneRecovery.html. Although the site discusses hurricane cleanup, the information sheets are applicable to any type of cleanup after a disaster. Some of the information items include: downed electrical wires, fungi, falls, chainsaws, tree trimming, heat, and flood hazards.
- Outsourcing can be a way to save on cost. It can also be a way to avoid liability expense, especially when the activity involves high claim exposure. There is still some risk, however. The key is to make sure a strong indemnity agreement is in place and that the company performing the work has adequate insurance. At least as important is making sure that the company does quality work.
Return to Index
| When the insurer says "no," or even, "maybe" |
Many insureds are shocked when, after sending a claim to their liability insurer, a "reservation of rights" letter comes back. Such a letter means the insurer is defending, but may stop defending, or even ask for money back if it later determines that there is no coverage. In extreme cases, the letter the insured receives may be a claim denial.
In most jurisdictions, an insurer has a duty to defend if even one of the complaints has a chance of being covered under the policy. In some jurisdictions this principle goes beyond the actual complaints. One court held that the insurer's obligation is to look at what kinds of losses might be proved and to determine if any of those might be covered. If that possibility exists, said the court, a defense may be owed.
So, although the initial reaction to a reservation rights or claim denial letter may be to feel betrayed, you should keep cool. As an insured, you still have advantages and recourse.
Read the letter carefully. Look for misstatements or inaccuracies. Correcting inaccuracies may cause the insurer to reverse its position.
After factual review, analyze the adjuster's decision and the justification. The process may be illogical or seemingly senseless. Keep in mind that the adjuster may be new, poorly trained or overworked (or all three). See if the author cites references to support the conclusion, such as case law. The appropriate parts of the policy under which the denial or reservation is being made also should be cited.
After you have made your own analysis, you may object to the denial or reservation. There are several steps that may be appropriate, including:
- Consult with your insurance professional (this one is always a step),
- Retain legal counsel,
- Request separate counsel provided by the insurer, and/or
- Send a written response.
Some things you should not do without further consultation or investigation after receiving a reservation or denial include:
- Sign any waivers or agreements with the insurer,
- Succumb to any verbal pressure from the insurer's representative or the claimant,
- Wait any significant time to respond,
- Make any payments on your own or attempt to settle the claim before the matter is cleared up with the insurer.
Once you have determined your response and course of action, draft your reply. First, correct any inaccuracies or errors. You may ask for a written request for clarification or explanation of the adjuster's rationale. You may demand separate counsel or refute some or all of the adjuster's argument. If your case is based on legal or insurance principles, you should have some help from your insurance professional and/or counsel.
Remember that a reservation of rights letter or claim denial is not necessarily the end of the line. You almost always have some options.
Return to Index
| Are your umbrellas well insured? |
If you think umbrella insurance is to cover the thing that keeps rain off your head, it's time to learn more about what is the most important part of your liability protection. When properly constructed, umbrella insurance is the cornerstone of a sound liability insurance program.
An umbrella liability policy is supposed to provide protection when all of your other liability policies that cover bodily injury and property damage liability (i.e., auto, commercial general, employer's) run out of limits. A true "umbrella" goes further; it provides some coverage none of the "underlying" policies provide. It also "drops down" to cover losses if the limits of the underlying policies have been depleted by claims.
Most commercial liability policies today are written for a $1 million basic limit. So, umbrella policies usually start at that point and go up. For example, your company may have a $1 million per occurrence general liability policy, an auto liability policy with the same limit per accident and an employers' liability policy (part of workers compensation) that covers the same amount per injury or disease. The umbrella policy would go over all these and provide $1 million, $3 million or some other amount (depending on your protection requirements) above the other policies.
Because a true umbrella policy is broad and provides the "drop down" feature, it is arguably the most important part of your liability protection plan. In fact, some entities skip the primary policies altogether and go straight to the "umbrella" although such program is likely to be called "excess" insurance. For example, municipal liability packages combine a wide variety of liability protection that may start after the first $100,000 to $1,000,000 (depending on amount selected) has been paid by the insured.
Unlike primary policies, umbrellas are not "standard." Although many share common characteristics, each is somewhat unique. In recent years, many umbrella underwriters have made their policies increasingly restrictive, in some cases actually narrower than the underlying forms. Determining how one policy stacks up against another is a very important part of the insurance placement process.
Tailoring an umbrella policy to the underlying coverages also is somewhat of an art. So is negotiating the best deal. Your insurance professional's help is critical in helping assure that this important part of your insurance program is structured to provide the best possible protection to your organization.
Return to Index
| Owners and contractors protective insurance |
If your company is facing a construction project in the near future, you may want to learn about owners and contractors protective insurance or "OCP." OCP covers liability claims arising out of a construction project. Usually, the general contractor buys it for the protection of the project owner. It covers only project-related losses.
OCP is often used in place of requiring that the contractor add the owner as an additional insured on the contractor's general liability policy. Although the latter is the more common practice (in addition to a "hold harmless" agreement in favor of the owner) you can probably expect to see a greater use of OCP in the future. The reason is that additional insured endorsements are becoming increasingly restrictive and offer less protection to the additional insured.
Some of the possible advantages of OCP include:
- Insurance limits dedicated to your project only
- Protection of your own claim experience
- Broader coverage in some respects (auto, aircraft and watercraft not excluded)
- Exclusion for damage to property less restrictive
Some of the possible disadvantages are:
- Coverage is restricted to the site
- Scope of coverage is somewhat narrower (restricted to vicarious liability and to the site)
- You pay for it (although arguably you pay anyway in the contractor's overhead)
If your organization is considering a new facility, extensive remodeling, or renovations, OCP may be an alternative worth exploring.
Return to Index
| Loss control for data liability exposures |
Your company may face liability if the data it maintains on employees or customers are compromised. In a joint communiqué from the Social Security Administration and the Internal Revenue Service, companies are offered the following data protection measures.
- Limit access to data to those with a need to know
- If you use temporary workers inquire about the screening used by the agency and determine if you will use the workers for tasks that require access to sensitive data
- Conduct a software system audit to determine system capacity for access control
- Educate employees on strategies to secure data
- Create a task force to address policies and procedures on privacy and security
Through a partnership with the American Payroll Association, the IRA and SSA provide training and publications on data security. More information is available at the APA website at www.americanpayroll.org.
Return to Index
| Tenant liability for fire damage |
If your company rents property you need to be sure to understand your responsibility for any damage caused to the premises. Generally, the landlord buys property insurance for the location. If a fire or other event causes damage, the landlord can present a claim to the insurer and get the damage repaired or the property replaced.
However, if someone from your company was in any way responsible for the loss, the landlord's insurer may "subrogate" against your company for the cost to repair the damage. Depending on how your liability insurance is written, this could be a serious problem.
Standard general liability policies exclude damage to property that the named insured (your company) rents or occupies. However, a separate limit applies for "Damage to Premises Rented to You" if the loss is caused by a fire. Other causes of loss are not covered and generally the limit is low. It can be increased, but usually this is not the best way to deal with the issue and the coverage still would be limited. If you have umbrella liability insurance, the policy may respond (see related article in this newsletter). However, the policy may incorporate the same exclusions as the primary policy or limit or exclude coverage in some other way.
The best technique is to have the landlord agree in the lease to a "waiver of subrogation" or "waiver of right of recovery." Most property insurance policies allow the insured to waive its rights of recovery prior to a loss. If such a waiver is in the lease agreement, the insurer generally is precluded from subrogation.
If you are unable to negotiate such a provision, an alternative is to purchase a property insurance policy and include the landlord's interest. This is expensive and possibly inefficient. Another alternative is a "Legal Liability Coverage Form." This is a liability policy that covers property in your care, custody, or control. It has some characteristics of a property policy as well. Although the cost of this coverage is less than a regular property policy, it still duplicates coverage the property owner should be purchasing.
Tenant liability for property damage is clearly a risk best treated by a technique other than insurance. In this case the contract is key. If you have no choice, however, there are insurance policies available to address the risk.
Return to Index
| Good practices regarding workplace injury |
Smaller employers, and those with good safety practices, sometimes have so few accidents that they forget the proper procedures to follow when a worker is injured. Here are a few good practices to keep in mind that can help you fulfill your responsibilities.
- Know your legal duties. Read those documents sent by your insurer or state authorities.
- If an employee gets hurt, your first concern is always to ensure they get the proper care. This includes informing them of their benefits (see 1 above).
- Abide by the state reporting requirements in your jurisdiction (see 1 above).
- Investigate the accident, both for fulfillment of legal obligations (and obligations to the insurer) and to gather information to prevent the same event from happening again.
- Notify your insurer promptly. Send all the information you have along with the appropriate report form.
- Follow up with the employee and the insurer. If the injuries are serious, be prepared to do what you can to help the employee return to work as soon as possible.
These are only some of the most basic necessary steps when an accident occurs. There is much more to know about subjects such as proper accident investigation, medical case management, return-to-work programs and more. Your insurance professional can help.
Return to Index
| The "suspension of insurance" endorsement on auto policies |
Some companies do not use all of their vehicles year round. Others may temporarily take vehicles out of service for various reasons. If you are going to have a vehicle out of service for 30 days or more, you may be able to save some money.
There is a standard endorsement to auto liability policies known as "Suspension of Insurance Endorsement" form number CA 02 40. This endorsement stops coverage for the scheduled vehicles.
If your company self-insures the physical damage portion of the auto risk, you may be able to take advantage of this option to save premium. Remember if you obtain the endorsement, however, that you must not operate the vehicle, as there is no liability coverage while the suspension is in place.
Because of the high potential risk of vehicle operation with no liability protection, you should make absolutely sure you understand the implications if you use this technique to save money. Careful consultation with your insurance professional is a must.
Return to Index
|