Thursday, May 28, 2009

"Do I need Employment Practices Liability Insurance for my business?"

The current economic downturn and its resulting job losses have spurred the fears of employers. As jobless numbers increase so does litigation against employers by disgruntled former employees seeking redress for issues, both justified and unjustified, relating to their terminations. Therefore it does beg the question by most employers “Do I need Employment Practices Liability Insurance?”

First, as always, a little education; Employment Practice Liability Insurance (EPLI) is available to employers to help defend and respond to claims by employees for acts related to their employment. Typical (but not all) types of claims an employer would see coverage respond to would be:
  • Wrongful dismissal, discharge or termination of employment
  • Violation of employment discrimination laws (including harassment)
  • Breach of a written or oral employment contract or implied employment contract
  • Sexual or workplace harassment of any kind
  • Wrongful demotion
  • Negligent employee evaluation
  • Wrongful deprivation of a career opportunity

Other key aspects of an EPLI policy are:

  • Defense cost coverage for claims seeking non-monetary relief
  • Third Party Liability
  • Independent Contractor coverage
  • Claims involving arbitration, regulatory and administrative proceedings, EEOC & Department of Labor investigations

At this point some may ask whether or not their current liability insurance provides coverage for these exposures. The answer is an emphatic NO! Most Commercial General Liability polices and Workers Compensation policies have very specific wording excluding coverage for these types of claims in their policy language. For the most part the case law has upheld these exclusions with few exceptions.

Before we would look for EPLI coverage, I encourage clients to undergo some honest self evaluation regarding their own organization’s culture as it relates to employees. A thorough examination of their Human Resources (HR) procedures is not only necessary from an insurance underwriting position; it is also a good risk management process to undergo on a regular basis. Consistent evaluation can help identify potential problems before they develop and allow for corrections to be made. As a starting point I would ask “Do you have an Employee Handbook?” Whether you have 1 or 1000 employees, a handbook is probably the single most important tool an employer should have in their HR toolbox. A handbook represents the best avenue for communicating policies to and setting the HR tenor of the organization for employees. The development and update of an Employee Handbook will help to get an organization on the right path to EPLI loss control and is also required by most insurance companies as a condition of coverage. Again, the handbook is just a good jumping off point, a full assessment of all HR functions and activities should be done. There are many HR assistance organizations that can be utilized to aid any sized organization in this process.

Once the self evaluation is completed you can discuss the availability and make up of EPLI coverage for your organization. Be prepared, for depending on the make up of your organization (i.e. structure, size, industry, etc), the cost of EPLI coverage can run the gambit of relatively inexpensive to pricey. For example most Not-for-Profit organizations can have EPLI added on to their Directors and Officers Liability coverage for little or no additional premium. However for most For-Profit businesses it is a stand alone policy which can be expensive. As with most insurance, you get what you pay for, and, thus you can affect the pricing with the coverage options you choose. Also, there is no standardization of coverage forms as with most other insurance policies, so it is important to examine specimen coverage forms carefully to denote differences in coverage.

So to answer this week’s question, I say from a Risk Management standpoint, in good economic times or bad, having solid and consistent HR procedures will help mitigate your chances of a claim. However, it is not a total barrier and it would be nice to know you have the EPLI coverage to pull out of your tool box if needed. Think of the HR procedures as your belt and the EPLI coverage as your suspenders; it will be very unlikely you’ll get caught with your proverbial pants down!

Thursday, May 7, 2009

"Should I buy the insurance when I rent a car?"

This is a question we are frequently asked by our Personal Auto clients. The answer is not always an easy one, especially for anyone insured on an automobile policy here in New York State (now there's a surprise).

One important fact applicable to a person who is covered under a Personal Auto Policy (PAP) in New York is that by law there is automatic coverage for loss to a rental vehicle included in their policy per state law. It includes any amounts, including the loss of use of the rental vehicle, the renter is liable for damage to the rented vehicle and regardless if the vehicle is rented in or out of NYS as long as it is in the covered territory of the United States, its territories and possessions, and Canada.

Now getting back to the question, our answer is .... Yes! We encourage our clients to purchase the insurance from the rental company, also known as the Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW)

I can hear you know "Jamie why should I buy the CDW/LDW at anywhere from $8 to $20 a day if I already have coverage!" My simple answer is "The Headache" factor. How much of a headache do you want to have in the event you do have a loss with a rental car? I suspect your answer is going to NONE! Well I can not promise you none, however if you buy the CDW/LDW I can promise you a lot less hassle and that translates to a smaller headache.

Let's examine a hypothetical claim scenario. Please keep in mind this scenario assumes both drivers have a New York State Personal Auto Policy. If you are insured in another state or you are renting the vehicle for business you will need to check your specific coverage related to rental cars.

Jane and her family just enjoyed a wonderful yet long day at the Magic Kingdom. They survived the cramped monorail ride back to the TTC and subsequent tram ride out to Minnie 23 only to find one of the other fine patrons of the "Happiest place on Earth" has backed into their rental van with his rental. The whole front end is smashed in and it is not drivable.

Jane puts a calming hand on her husband's shoulder to contain his outrage; then digs her contract out of the glove box to locate the 800 number she is supposed to call if something like this happens. Stuart on the other end answers and listens carefully to Jane's tale of woe. When Jane finishes, Stuart happily reminds her that she (over the objections of her husband) wisely purchased the CDW/LDW and thus they will be showing up shortly with a truck to pick up her damaged vehicle. They will also be there with a replacement vehicle (of similar or larger size as typically stipulated in the CDW/LDW contract) so she can be on her way to the hotel. As Jane ends the phone conversation with Stuart, she notices Phil, the other driver, is on the phone with his rental company and his conversation is steering in a significantly different direction.

You see Phil did not listen to his wife and thus did not buy the CDW/LDW from his rental company, after all he already has a PAP. Phil is informed his rental company will be showing up with a truck to take the damaged vehicle, but he will likely have to get a cab back to the hotel and come to the rental company to settle the damages and to fill out another contract for a new vehicle. Phil hangs up and calls his insurance company to inform them of the accident. They let him know they will need to have an adjuster go out an look at the car and negotiate with rental company for the damages. The next day Phil has to take a cab to the rental company, which means he is not with his family(who also had to take a cab) at EPCOT. He is told when he gets there that they already have an estimate for the damage and they want payment. Phil calls his insurance company to tell them the situation. Phil's insurer insists they want their adjuster to see the estimate and the vehicle. He spends the next several hours on the phone with the insurer and the rental company trying to get the matter settled. He then has to arrange another vehicle and unfortunately they do not have any min-vans left, just compacts. Phil dutifully drives the compact to EPCOT to pick up his family. While they are trying to figure out how they are going to fit all the stuff and everyone else in the car, Phil looks up and spies Jane and her family walking to their new mini-van after a fun filled day TOGETHER at EPCOT.

So who do you want to be...
... Jane or Phil?
Pick your headache.