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INDEX
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According to a report in Business Insurance, insurance industry sources are predicting that premium rates for next year will stabilize. If so, this development ends a recent trend of declining costs. Part of the reason for the leveling off is the effect of hurricanes in the southeastern United States and typhoons elsewhere. Collectively this year's storms are estimated by some sources to cost the insurance industry around $20 billion.
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Punitive damages in a headline-making California tobacco lawsuit have been cut again. Originally $3 billion, the punitive portion of the award was cut to $100 million previously. The 2nd Circuit Court of Appeals in Los Angeles has again cut the award - now at $50 million. The court opined that this was the highest level of punitive damages that could meet a US Supreme Court guideline. The Court said punitive damage awards should be a single digit multiple of compensatory damages. The compensatory damages award in the case was $5.5 million.
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The holiday season is a traditional time for company parties. Some parties include alcohol. Make sure you understand the risks involved and insurance coverage available. Generally, if liquor is sold or, even unknowingly served to minors, special conditions may apply. When in doubt, consult your insurance professional.
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| Utility interruption disaster coverage |
Catastrophic acts of nature pose challenges for recovery agencies and insurers. Overall, the insurance industry has tried to provide a source of protection even in those areas where the risk is high. Wise property owners take advantage of this protection through purchase of coverage against those perils.
However, just buying a property insurance policy that covers the perils of flood, earthquake or windstorm may not be enough. Natural disasters are so far-reaching in their destruction that serious losses can come from many causes. Not all of which are automatically insured when you buy a property insurance policy.
During the storms that hit Florida and other southeastern states this year, business owners found that some of the biggest losses can occur even if none of your property is damaged. The storms left many businesses without power for days or weeks. Losses from power outage, in some cases, greatly exceed any direct property damage from the storm.
Certain businesses cannot operate without electricity. Others require electricity to preserve their assets, such as restaurants, grocers and those dependent on refrigeration. For some, loss of power means potential damage to property, such as electronic equipment. Damage to a utility's property that results in loss to your business is not automatically covered. In fact, standard property policies specifically exclude loss resulting from interruption of utilities away from the insured premises.
There are three commonly used standard insurance endorsements for this situation. One covers damage to the insured's property resulting from damage to the property of a utility service. The loss must be from a covered cause of loss, such as windstorm. The utility must be scheduled on the policy.
Another form provides spoilage coverage for businesses for which the biggest risk is damage to perishable items. It would be used instead of the other endorsement and is designed for businesses such as restaurants, refrigeration warehouses, etc.
For those businesses for which loss of power means loss of income, there is a third endorsement. This form covers loss of income or extra expense. The extra expense must be necessary to stay in business resulting from damage to the utility from a covered cause of loss. The utility must be scheduled.
Many insurers use custom property policy and endorsement forms. Some provide contingency coverage by endorsement. Others may include the coverage in the basic policy. Remember that natural disasters are not the only source of loss due to interruption of utilities. To assure that your company is protected adequately from utility interruption, consult with your insurance professional.
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| Beware counterfeit insurers |
According to a press release from the Maine Bureau of Insurance, a fraudulent unlicensed company calling itself "Hartford Casualty Insurance" has been soliciting insurance business using a name similar to that of an established insurer. The company even went so far as to copy the real Hartford's logo to its website, which has since been shut down.
The fake company has been offering quotes on general liability, errors and omissions and legal defense liability insurance coverage. Offers were sent by e-mail and correspondence transacted by facsimile.
According to the press release, counterfeit insurers are fairly wide spread. The release said that the General Accounting Office reports that 144 phony insurers sold fake health insurance policies alone to more than 200,000 policy holders in the period from 2000 to 2002.
The Maine Bureau advises that these are the signs that should cause one to question the insurer's validity:
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Aggressive marketing and high-pressure closing (i.e., sign today!).
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Premiums 15% or more below the going rates.
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Few coverage limitations.
Your insurance professional can help you assure that the insurers you deal with are legitimate, and almost as important, financially sound. In addition, your state department of insurance can help if you encounter a suspicious offer that seems too good to be true.
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| E-mail security and privacy laws |
Numerous reports tell how e-mail is insecure. Nevertheless, people seem to insist on firing off e-messages they would never put in a letter. Frequently, sensitive information is transmitted electronically without adequate security, such as encryption.
Part of the reason for this casual approach may be a sense of trust. We tend to think that only criminals will illegally intercept messages. Many people feel fairly secure about what goes out in their physical (Postal) mailbox. Yet it is apparent that other people have potential access to a mailbox's contents. There is also the practical aspect of the need for efficient communication in business.
When obtaining and using certain information is not illegal, the psychological barriers against unauthorized use may be absent. Given the current state of privacy laws regarding electronic communication, legal protection is dubious.
The case of United States v. Councilman, 373 F3d 197 (1st Cir 2004), involved interception of e-mails and review of their contents. The company intercepting the e-mail, Interloc, acted as an internet service provider for some of its customers. Customers included book dealers for rare and out-of-print books. Interloc employees wrote a computer program to intercept messages from Amazon.com to the subscribers. Some of the employees then read these mails to get competitive intelligence.
A case was brought under the Federal Wiretap Act against Councilman (the employee who directed the interception). In a 2-1 decision from the First Circuit Court, Councilman was found not in violation of the Wiretap Act because the e-mail messages were in "temporary storage" at the time of their interception.
When the Wiretap Act was amended in 1986 to include electronic communications, the legislation created a distinction between communications "in transit" and those "in storage." Items in storage have less protection. In this case, the determination was that reading the information in the messages while "in storage" did not violate the Act.
Privacy advocates are alarmed. Two bills, HR 4956 and HR 4977 have been introduced to address this issue and improve privacy. Both are in the Judiciary Committee at the time of this writing. These bills or others may improve the security picture by criminalizing interception and use of e-mail for purposes not intended by the sender. Until that happens, however, even the limited protection of criminal repercussions is missing. This situation should give e-mail senders pause for thought.
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| A tale of two states - worker fatalities head in different directions |
Minnesota and Texas recently reported their 2003 results for occupational injuries and deaths. In the most serious category, fatalities, results diverged. Although there were other differences as well, there also were common trends.
Minnesota reported that 2003 fatal work injuries declined by more than 11% from the 2002 totals. These latest results were below the five-year average in the state for 1998 through 2002. The Texas Workers Compensation Commission reports that fatalities in that state rose 17% in 2003 from the prior year. Nationally, the trend was almost flat with fatalities increasing by less than ½ of 1% last year.
Transportation injuries were the leading cause of occupational fatalities in both states, counting for the same percentage of total deaths in each (42%). However in Texas, the number of deaths from this cause represented an increase of 28% from prior year transportation deaths. Meanwhile in Minnesota, transportation fatalities dropped almost 32% from 2002.
Demographics played a similar role in both states, particularly with regard to gender. In Texas, 92% of fatal injuries occurred to men. In Minnesota the figure was 91%. However, for Texas men, transportation was the leading cause of workplace death (41%). For Texas women, the leading cause of death was workplace violence and assault (49%). Nationally, the leading cause of death for women was transportation, but women were still far more likely to die as a result of workplace violence than men.
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| "Mobile equipment" vs. "autos" |
Certain categories of vehicles qualify as "mobile equipment" rather than automobiles. The distinction is important when it comes time to pay liability insurance premiums. Mobile equipment can cost far less to insure for liability. Sometimes there may be no cost.
The following general categories define mobile equipment:
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Vehicles designed for use off public roads (e.g., bulldozers, farm machinery, forklifts)
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Vehicles used on your or adjacent to your premises
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Vehicles on crawler treads
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Vehicles with mounted equipment (e.g., cranes, shovels, diggers, drills, graders etc.)
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Vehicles (not self-propelled) used to provide mobility to other types of equipment (cherry pickers, compressors, welding equipment)
Standard general liability policies and auto liability policies are designed to "dovetail" with each other. They use similar definitions and coordinate exclusions and coverage so that one avoids duplicating the other's coverage but picks up where the other's exclusions leave off, when possible.
The commercial general liability policy covers mobile equipment for liability. However there is no additional premium for individual units. That is not the case for the auto policy where each vehicle has its own premium. Therefore, for liability coverage, usually the insured saves money by using the general liability policy rather than the auto policy. In fact, including mobile equipment under an auto policy means one has misclassified the equipment and will pay more premium unnecessarily.
That is also true for physical damage coverage (damage to the equipment itself). If a piece of equipment winds up being considered an auto, the coverage rate is likely to be between two and seven times higher than the cost for equivalent coverage under what is called a "contractors equipment floater." Making sure you classify equipment appropriately saves premium dollars.
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| Sources of coverage for employment practices liability |
Employment practices liability (EPL) is a rapid growth area for claims. The cost of defense is high. Because of the high cost of defense, most organizations probably need this coverage. But, premium costs can be relatively high and since the coverage is comparatively new, many organizations are uninsured for the exposure. There are several ways to get protection, however, some less costly (and often narrower) than others. Some of these are:
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Standard directors and officers insurance. Unless there is an "insured versus insured" exclusion, D&O policies do not specifically exclude employment-related claims. However only directors and officers are covered, not managers and supervisors or the company itself.
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Specifically endorsed D&O insurance. Some D&O insurers may offer an EPL endorsement that picks up coverage for the company and for other supervisors and employees in addition to coverage for Directors and Officers.
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Package policies. Some insurers offer so-called "executive protection" or "management liability" package policies that may include an employment practices component.
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Stand-alone policies. An employment practices liability policy specifically covers these claims.
As listed here, options 1-4 are progressively more expensive and generally provide progressively broader coverage. While option 1, standard D&O policies are basically free (provided the insurer has not insisted on an exclusion), the coverage is the weakest and often inadequate. An additional drawback to this approach is that employment claims may dilute the limits of coverage available to defend directors and officers from other claims. The same is true for most endorsed forms. Package policies can be of either type - a single limit for all coverages or separate limits for each.
The broadest coverage is in stand-alone EPL policies. The limits can be tailored to the risk. Depending upon the circumstances any of these options may be appropriate for your company. Your insurance professional can help you decide which option is best.
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