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A new California law requires companies to notify customers if personal data is stolen (by hackers for example) or acquired by someone unauthorized. The types of data covered include name, social security number, driver's license number, credit card number and passwords. The law allows people to sue if they are not notified, but does not impose fines. The federal government and other states are also working on legislation to prevent identity theft, but California's law is the first. Backers of the federal approach say national standards are necessary because of the multi-state and international nature of electronic commerce.
In a "hard" market (insurance expensive and limited) it is especially important to prepare carefully for policy renewals. You should begin well in advance (90-120 days) to gather information that you know your insurers will want to see. You can start by preparing applications which tell you what an underwriter will require. Your insurance professional can provide standard application forms or checklists.
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| Holiday parties and liquor liability |
Many states have enacted legislation called Dram Shop Liability. These laws hold those who serve alcohol to an intoxicated or under age customer responsible for damage or injury. Injured parties (e.g., victims of the drunk driver) may bring suit against the alcohol server in such cases. Under some laws and circumstances, criminal charges also may apply.
The laws were intended originally to apply primarily to taverns and other commercial places serving alcohol. However, social hosts also have some exposure. For example, the California Court of Appeals has applied the Business and Professions Code section applicable to alcohol servers to the sponsor of a company party who served alcohol to an employee who was a minor. There was no charge for the liquor. But, the dram shop law applied regardless.
Social hosts usually will have coverage under their general liability policy provided that they do not sell liquor. Those selling or manufacturing alcoholic beverages need special liquor liability coverage. Some may fall in between. An example might be an organization that sponsors a fund raiser and arranges for liquor sales as an additional way of raising money for the cause.
If you or your company are planning holiday parties, you might want to give some thought to loss control and liability insurance. If you serve alcohol at a function, a professional bartender may be in order. Most are trained to recognize signs of pending intoxication and tactfully restrict consumption. Arranging transportation in advance for those who may need help getting home is also wise. Appropriate liability insurance coverage is a must.
When in doubt about the type of coverage needed, it is best to have the circumstances analyzed by an insurance professional and/or legal counsel who can advise as to potential exposures. In some cases "special event" coverage may be available that will cover both liquor liability and other liability exposures specific to the event.
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Companies must use care in classifying employees as exempt or non-exempt, especially if part of the intent is to avoid payment of overtime. Several firms that failed to follow proper Department of Labor guidelines have paid a price.
The Fair Labor Standards Act has requirements regarding payment of overtime. Unless specifically exempted, employees must receive overtime pay for time worked in excess of forty hours in any one "workweek." The Act specifically exempts certain occupations such as fisherman, farm workers and commissioned sales people. White collar workers employed in "a bona fide executive, administrative or professional capacity" also are exempt. Some businesses classify individuals as managers and attempt to avoid the overtime requirement.
One coffee chain classified store managers and assistant managers as exempt. Many worked 50 or more hours each week. As "exempt" employees, they were not eligible for overtime. Another company in the package delivery business classified its part time manager/supervisors as exempt. Both companies recently settled class action lawsuits with their employee groups over these practices. Each company will pay approximately $18 million in their respective settlement.
Here are some guidelines to follow with respect to "exempt" employees and overtime
- If an employee does not meet one of the FLSA exemptions, they must be paid overtime. The law, not the nominal classification determines employee status.
- Classifications should be based on job duties not job title or job description.
- Non-exempt employees must be paid at one and one-half times the regular pay rate for all hours worked in a week over 40.
- Non-exempt employees must be paid for all time worked, including "off-the-clock" time such as work done at home, some travel time and on-call time.
- Break time is deductible time only if the break lasts at least 30 minutes and employees are not expected to perform job duties like answering telephones during breaks.
For more information about the Fair Labor Standards Act and for useful links to other labor information, visit the DOL website at www.dol.gov/elaws/flsa.htm.
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| Is the pollution exclusion absolute? Absolutely not |
The pollution exclusion in the standard commercial general liability policy is intended to apply to environmental type damages, including cleanup. At least that's the interpretation of a number of courts. Some insurers might have you believe otherwise.
Insurers have attempted to deny claims for injuries caused by paint fumes, asbestos-caused injuries and damage from mold by over-expansive interpretation of the pollution exclusion. The definition of pollutants includes smoke, vapors, fumes, irritants and similar descriptions. Some insurers have contended that mold, dust, paint, lead, asbestos and other substances meet the definition and should be excluded.
However the courts have held that when ensuing loss occurs from a covered peril in a property policy, for example, the damage is covered even if it involves a "pollutant." In one case, a property owner suffered mold damage to property as a result of water damage occurring when a fire was extinguished. The insurer denied coverage based on the mold exclusion, but the court determined the cause of the loss to be the water damage - which was covered.
Some other examples of pollutants that courts have found to be covered under the CGL include:
- Paint "fumes" when injury results from "tools of the trade" (paint in the case of a painting contractor - Belt Painting Corp v. TIG Insurance Co.)
- Asbestos where injuries involved the inhaling of asbestos fibers (Continental Casualty v. Rapid -American Corp.)
- Carbon monoxide when resulting in injury to an apartment building worker (Richardson v. National Mutual Ins. Co.)
The fact that some claims involving pollutants might be covered despite a pollution exclusion should not lull insureds into a false sense of security. Most insurers today add specific exclusions for mold, asbestos and lead. Also, general liability policies will not cover remediation, clean up or most third party injury or damage resulting from a pollution incident. Nevertheless if you have a claim denied based on the pollution exclusion it is worth looking into whether there is a precedent for an exception. This is especially true if the claim occurred some time ago as fewer policies had specific exclusion endorsements.
Any organization with such exposures needs stand-alone pollution insurance of some type. Many entities may have these risks and not even know it. One continuously surprising phenomenon is how many companies will someday need pollution liability coverage and how few actually have it.
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Multi passenger vans pose a big risk to some companies. Employee car pooling helps the environment and saves money. However, clustering a sizeable number of employees in a moving vehicle in urban or suburban traffic creates a potential for catastrophic workers compensation loss. Two factors are critical to evaluating this risk exposure - the workers compensation laws and the safety of the vehicle/driver involved.
In some jurisdictions, provision of pooled transportation for employees has been held to put the traveling employee in the course and scope of employment. Certainly, when employees travel from place to place during the work day (to attend seminars for example) they are in course and scope.
Traffic risks are among the worst in our society. The number of killed and injured annually is staggering, even if declining. The forces involving vehicles in motion (severity) and the volume of traffic (frequency) create a potent risk mixture.
Passenger vans add to the severity potential of this mixture. The vehicles can carry up to 15 or 18 persons, creating a situation for potential multiple injuries. In addition, the vans have some inherent safety problems of their own, including crashworthiness, rollover tendencies and emergency handling shortcomings.
If you want to do your part for the environment by providing vans for pooling, yet still protect your employees and your company's loss experience, consider these measures:
- Make sure all vehicles are maintained properly and serviced on schedule.
- Establish inspection and pre-trip checks for all drivers
- Try to use modern equipment with the best safety features
- Make sure drivers are fit and well trained - consider medical evaluations and professional training
- Consider limiting the number of employees in any single conveyance
- Consider a policy that assures key employees with indispensable skills do not travel on the same conveyance
The Worksafe Institute of Washington has a one-hour film on van driving safety. Information is available on their website at www.vansafety.com.
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| Multi-year policy "stacking" |
According to the 9th Circuit Court of Appeals, when an occurrence takes place over multiple years, the limits of multiple liability insurance policies may be "stacked" in some cases to provide a higher coverage level than one annual "per occurrence". The case is Employers Insurance of Wasau v. Granite State Insurance Co.
The issue of limits stacking has been a controversial one. Prior case law is conflicting. Another case, FMC Corp v. Plaisted & Cos., provided a very different viewpoint. In that California appellate case, the Court found that limits could not be stacked when an occurrence takes place over multiple years. According to the decision, the insured's highest potential recovery is the highest occurrence limit for one policy period. The court argued that stacking would provide the insured with more coverage than bargained for.
In this latest case (decision issued in June 2003) the court rejects the anti-stacking position and points out that other case law supports the conclusion that policies over multiple years may be stacked if the occurrence spreads over those years. Since the 9th Circuit Court is influential, this decision may have significant consequences.
Of course insurers may endorse policies to prevent stacking. However this decision clarifies that policy limit stacking is not against public policy as many insurers have contended in the past.
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| Identity theft costs to business rising |
According to the Federal Trade Commission, businesses and financial institutions suffered losses of nearly $48 billion last year. The cost to individuals was about $5 billion. These statistics indicate the problem is much worse than previously estimated.
Since many credit cards and other types of financial transactions have protections built in for the consumer, much of the burden falls on the issuer or lender. Nevertheless, individuals spent an estimated total of 297 million hours resolving problems related to the thefts.
The most common causes of identity theft were:
- Lost or stolen personal information such as credit cards, drivers licenses or mail
- Theft during transactions such as from a credit card receipt or internet purchase
- Misuse of information by someone known to the victim
Information about prevention of identity theft is available from a number of sources on the Internet including:
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| Simple tips for protecting computer systems |
There have been so many attacks on worldwide computer systems that it is hard to keep track. The rogue's list of names such as "Melissa," "Love Bug," "Anna Kournikova," "Nimda" and "Klez" have given way to a new list of dreaded titles such as "Blaster," "Backdoor," and "So Big." The Klez bug alone is estimated to have cost $9 billion in productivity loss.
There are many sources of advice for avoiding worms, viruses, denial-of-service attacks, online intruders, hackers and the like. It is easy to get confused. Here is a collection of simple reminders:
- ALWAYS run UP-TO-DATE anti-virus software
- Have a backup schedule and stick to it
- Never open a file unless you know what it is and whom it is from
- Keep up-to-date on security patches and software updates such as found at (windowsupdate.microsoft.com)
- Use the macro virus protections in word processors and spreadsheet programs
- Close the "preview pane" in Outlook Express if that is your e-mail software
- Use "firewalls" - both software and hardware
Many of these steps are simple enough for even an inexperienced computer user. Some, such as firewall installation, may require a little research or help. Later versions of Windows have built-in firewall (software) capabilities. Other sources of software firewalls include Symantec (www.symantec.com) Black Ice Defender (www.networkice.com) and Zone Alarm (www.zonelabs.com). Some home networking devices include hardware firewalls. For corporate systems, an IT specialist should be consulted.
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