Employment Practices Liability: Wage and Hour Suits Spike

Posted on May 15, 2012 by Axis E&O

Employment Practices Liability: Wage & Hour Suits SpikeIn 2011, according to data from Seyfarth Shaw, a defense law firm out of Chicago, wage and hour complaints filed in the U.S. federal courts spiked from 6,081 in 2010 to 7,006 in 2011. Workers are suing their employers at record numbers for allegedly not paying proper wages.

Basically, employees who believe they were not paid wages owed to them can file a civil lawsuit in federal court, or they can file a complaint with the U.S. Department of Labor or the state, depending on the nature of the allegations. Most wage and hour complaints are over unpaid overtime and misclassification of workers as independent contractors instead of employees, which means employers do not have to pay unemployment insurance, payroll taxes, or workers compensation, according to experts. And, according to defense attorneys, many of these wage and hour violations are unintentional.

What’s more, Richard Alfred, chair of Seyfarth Shaw’s National Wage & Hour Litigation Practice Group, said wage and hour lawsuits have increased dramatically since the economic downturn, partly because plaintiffs have received huge settlements from companies “caught in the cross-hairs.” “These massive lawsuits create enormous risks for virtually all employers in the country as they struggle to apply the antiquated federal Fair Labor Standards Act (enacted in 1938) and similar state laws,” Alfred said.

Furthermore, if a court rules in the plaintiff’s favor, it usually doubles the amount of employees’ unpaid minimum wages and unpaid overtime at time and a half, said John Stephen, an attorney with Porter Wright law firm in Dayton. “Even an innocent or inadvertent mistake by an employer can result in a very expensive lawsuit due to the doubling of damages and having to pay the other side’s attorneys’ fees,” Stephen said.

Employment Practices Liability Insurance (EPLI) is available to businesses to protect them in the event of suits involving allegations of wrongful termination, breach of contract, disciplinary issues, sexual harassment, failure to promote, and more. However, a typical EPLI policy contains exclusions for wage and hour cases. Yet, increasingly an EPLI may include an extension for some defense cost protection for these kinds of claims, often on a sub-limited basis. This is very important because defense costs can add up quickly. Additionally, with some EPLI policies that do not contain this coverage extension, you can request it be included.

At Axis Insurance Services, we can review the specifics of Employment Practices insurance, what is included, and how coverage can be enhanced. Please call us at (877) 787-5258.

 

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Congress Debates Cyber Security Measures as Data Exposures Rise

Posted on May 8, 2012 by Axis E&O

Congress Debates Cyber Security Measures as Data Exposures Rise

At the end of April, the House of Representatives passed the Cyber Intelligence Sharing and Protection Act in an effort to improve the security of the nation’s computer networks. The House bill facilitates the swapping of threat data between private companies and the National Security Agency and other government departments. This measure is at odds with a Senate bill that would concentrate cyber security efforts in the Department of Homeland Security and would require companies to bolster security for critical infrastructure, such as electrical and water systems. The White House prefers the Senate bill. Both bills have their opponents, including businesses that see the steps involved to improve security as burdensome, and the ACLU, which is concerned over the sharing of private and sensitive information with the government.

Regardless of where you stand on the proposed measures, as a business owner, cyber security is a growing issue across all industries. Cyber attacks threaten the economy at large and the privacy of individual data. What’s more, it’s costly to American businesses.

U.S. companies in 2011 were estimated to spend more than $130 billion as a result of data breaches, according to the Ponemon Institute, a cyber security research organization. This is more than triple what companies spent combating breaches in 2006. Each data breach results in companies losing about 3.7% of their customers, on average, according to the Ponemon Institute.

What’s more, companies may have to beef up their systems and staff to find and solve the problem, which increases expenditures. These same companies have to then let customers know if their information has been compromised, and they have to spend even more to prevent the breach from happening again.

At Axis Insurance Services, we’re beginning to see more companies realize the need for taking further measures to mitigate exposures to data breaches. We’re also seeing a significant uptick in businesses realizing the need for Cyber Liability or Privacy coverage, and we’re expecting to see an increase in demand for securing these policies for our clients.

There are different types of policies available which can be designed to cover a business’  response costs, including legal fees, notification, credit monitoring, IT forensics, and call center operation. Other coverages that may or may not be triggered after the response phase include Broad Network Security and Privacy Liability, which defends the insured if a claim or lawsuit is brought against them. Defense coverage is available as a result of regulatory action, including payment of fines and penalties. Also available is first-party coverage to protect a company that suffers some type of attack or loss of information for data recovery or recreation. A significant asset for companies, the data, if lost or corrupted or the server fails, can be a substantial cost for a business. A policy can be designed to respond and pay for the data to be recovered or recreated. The other component is business interruption, which covers loss of income associated with a company’s network going down.

We can discuss the various type of cyber policies and enhancements available and what makes sense for your company. Give us a call at (877) 787-5258.

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Cyber Risk Insurance: It’s All in the Details

Posted on April 24, 2012 by Axis E&O

Cyber Risk Insurance: It’s All in the DetailsThere’s a lot of talk about the need for cyber liability insurance as result of the proliferation of data breaches across all industries. In fact, in our blog, we’re continuously reminding our clients about the need for risk management and cyber insurance protection. But one thing must be noted…cyber insurance should be tailored specifically to the customer and the industry you serve.

For example, if you’re in the healthcare, e-commerce, or professional services industries (legal, accounting, insurance), your customers’ privacy is high on the list of your issues. Do you provide services to others for compensation? Then your technology E&O exposure needs to also be addressed. Also, some Cyber policies do not offer regulatory coverage, putting a client in a highly regulated industry in a very vulnerable position.

Another area to look at when reviewing cyber insurance is the defense coverage option. Do you choose duty to defend or duty to pay? This will depend on the size of your company, and its ability and desire to manage the litigation process. In addition, it’s critical to look at the cyber policy language describing your obligations and that of the insurance company in the event you both don’t agree on whether to settle a claim.

Reviewing whether there are proper sub-limits in each of the individual coverage parts of a cyber policy is also crucial. Notification expenses and PR expenses to minimize reputational damage include sub-limits, and need to adequately reflect your risk exposure. What’s more, depending on the policy, there may also be coverage available for costs of credit monitor­ing offered to breach victims.

These are just some of the issues that need to be addressed and tailored when securing a Cyber Risk insurance policy. At Axis Insurance Services, LLC, our cyber security insurance specialists can work with you to reduce your upfront exposure, develop effective new processes and procedures to minimize your risks, and help protect you against financial loss with a tailored policy. Give us a call at (877) 787-5258.

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Devices Help Advance Medicine, Yet Distract Medical Professionals

Posted on April 17, 2012 by Axis E&O

Devices Help Advance Medicine, Yet Distract Medical ProfessionalsA recent New York Times article discussed how the use of devices – computers, smartphones, etc. – in hospitals and doctor offices is not only providing immediate access to patient data, drug information, etc., but may also be contributing to medical errors. The doctors and nurses may be putting too much focus on the equipment and not enough on the patient.

And sometimes these devices, unfortunately, are not being used for professional reasons. The article cites several examples, including a nurse checking airfares during surgery. What’s more, a poll shows that half of technicians running bypass machines had admitted texting during a procedure.

This has ignited a serious conversation at hospitals and medical schools about the problem of “distracted doctoring.” As a result, some hospitals have begun limiting the use of devices in critical settings, while schools have started reminding medical students to focus on patients instead of gadgets.

Dr. Peter J. Papadakos, an anesthesiologist and director of critical care at the University of Rochester Medical Center in upstate New York, is cited in the article as seeing nurses, doctors and other staff members glued to their phones, computers and iPads. “You justify carrying devices around the hospital to do medical records,” he said. “But you can surf the Internet or do Facebook, and sometimes, for whatever reason, Facebook is more tempting.”

He goes on to say: “My gut feeling is lives are in danger”. In fact, Dr. Papadakos published an article on “electronic distraction” in Anesthesiology News. “We’re not educating people about the problem, and it’s getting worse.”

Although it’s difficult to quantify the impact that distracted doctoring has on patient care, there have been cases where the negative consequences are fairly clear. For example, a patient was left partly paralyzed after surgery. According to the lawyer representing the patient, the neurosurgeon was distracted during the operation, using a wireless headset to talk on his cell phone. Records showed he was talking to family and business associations. The case was settled before a lawsuit was filed.

Devices have a great capacity to reduce risk,” Dr. Charles G. Prober, senior associate dean for medical education at Stanford Medical School, said. “But the last thing we want to see, and what is happening in some cases now, is the computer coming between the patient and his doctor.”

Axis Insurance Services, LLC works with physicians and surgeons all over the Northeast, helping them protect themselves and their practice against risk. Give us a call at (877) 787-5258.

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Stemming Medical Malpractice Suits

Posted on April 10, 2012 by Axis E&O

Depending on the specialty, anywhere from 75 percent to 99 percent of practicing doctors will over the course of a lifetime be threatened with a lawsuit. In fact, medical health providers in the U.S. are estimated to pay as much $7 billion this year for malpractice liability.

Most medical malpractice claims are based on medical errors that have resulted in patient injury or death. They may involve:

  • Allegations that the medical professional offered a standard of care lower than the patient could reasonably expect to find elsewhere
  • A physician prescribing a medication or medical device without fully reading the instructions or prescribing the wrong amount which results in injury
  • A situation where a medical professional fails to obtain a patients “informed consent” in relation to a procedure or treatment, which can be construed as a form of negligence

Obviously, reducing medical errors will lessen the risk of medical malpractice litigation. What can you do to help stem the threat of a lawsuit?

  • Most importantly, have open and honest communication with your patients. This lets them know how you will provide care for them and facilitates patients by providing needed information regarding their health conditions.
  • Be sure you have written documentation of your involvement and thought process regarding the patient’s care. Written documentation also supports your findings, recommendations, orders, and plans concerning patient care.
  • Assure that your written documentation is legible so that all members of the health care team can read it. According to a recent survey, the incidence of legible handwriting by physicians in patient’s charts varies from as low as 13% to as high as 80%. Illegible orders are routinely noted to be a source of medication errors. Improving legibility of orders and other medical documentation can reduce medication errors and medical errors, which reduces the risk of being sued.
  • Don’t limit your written documentation to time spent with a patient during examinations. When a patient calls in with a concern or question, be sure you document it in the patient’s chart. Provide dates and times for all written medical documentation.

Axis Insurance Services, LLC works with physicians and surgeons all over the Northeast, helping them protect themselves and their practice against risk. We are thoroughly experienced in finding protection plans that fit your individual practice. Give us a call at (877) 787-5258.

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Cyber Liability: Resolving Attacks Immediately Saves Money

Posted on March 20, 2012 by Axis E&O

When Sony experienced a data breach in 2011, at last count there were 100 million customer accounts that were compromised. The company is anticipating that the breach will cost it $200 million, and as of December, there were 58 class-action lawsuits in the pipeline. What’s more, Sony was heavily criticized for not responding quickly enough, taking too long to advise customers that their personal data was compromised.

Delay in responding to such attacks cost companies money and goodwill. According to a study by Ponemon Institute, if not resolved quickly, cyber attacks can get costly. In fact, results show a positive relationship between the time to contain an attack and the organizational cost. The 2011 study, which includes interviews with 50 companies, shows that the average time to resolve a cyber attack is 18 days, with an average cost to participating organizations of $415,748 over this 18-day period. This represents a 67% increase from 2010’s estimated average cost of $247,744, which was compiled for a 14-day period.

These findings are further underscored by a study released by Symantec (owner of Norton Security), indicating that the cost of a breach like Sony suffered can rise dramatically depending on the speed. A slow response results in an average cost per record of $141.00 while a fast response results in a cost of $106.00 per record.

Now these numbers are averages and every situation is different. But it does show that the time it takes to respond to an attack definitely impacts the expense involved. Part of the issue in having a slow response is that companies don’t want to show their vulnerability. Yet 2011 showed us that the exposure is very real and continues to grow. So there is no reason to wait to announce that a breach has occurred, and to do everything to resolve it immediately, including notifying consumers individually. You’ll save money and your reputation – as transparency is what the consumer expects.

Cyber Liability insurance helps in not only saving companies money but also with reputational management. And although the issue of cyber attacks is all over the news and on the government’s radar, only one-third of companies surveyed by research group Advisen carry this coverage. It is, however, expected that this will significantly increase now with the new SEC requirements and the tidal wave of press this issue has garnered over the last couple of years.

If you would like to talk to us about your Cyber Liability exposure and how we can help protect your firm from the significant loss such a risk poses, give us a call at  (877) 787-5258. We can provide you with the insurance you need.

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Fiduciary Insurance: Bankrupt Kodak’s Hit with Lawsuit

Posted on March 13, 2012 by Axis E&O

In January, an Eastman/Kodak employee filed a lawsuit against Kodak’s board members and other fiduciaries claiming that they breached their duties in handling the company’s retirement plan as it was heading towards bankruptcy. As reported in Reuters in January, the suit alleges that board members and directors of both the Kodak Employee Savings and Investment Plan and the Kodak Employee Stock Ownership Plan continued to sell shares to its workers (including the employee who is suing) and invest in these plans ahead of the bankruptcy.

The suit seeks class-action status, and specifically states: “Their fiduciary duties notwithstanding, defendants failed to protect the plans’ participants’ retirement savings from being imprudently invested in company stock, and as a result, the plans, and ultimately their participants, suffered losses. A prudent fiduciary facing similar circumstances would not have stood idly by as the plans lost tens of millions of dollars.”

Furthermore, the complaint stipulates that the board members and other defenders were in breach of their fiduciary duties under the Employee Retirement Income Security Act (ERISA) because they continued to purchase Kodak stock even as the company’s share price, and revenues, plummeted. (Kodak’s stock has lost 99% of its value since 1999, according to the complaint.)

Kodak’s troubles illustrate how Fiduciary insurance is key in an organization’s risk management strategy. Whether the suit has merit (Kodak claims it doesn’t) or not, it will need to be vigorously defended. And if class-action status is granted, the costs to defend such a suit will only escalate. To recap, Fiduciary insurance protect fiduciaries of a pension and benefit plan covered by ERISA from claims that they breached their fiduciary obligations to the plan. For example, coverage would apply if a person in a fiduciary role allegedly provided bad advice to the plan, or made managerial or administrative mistakes, or failed to make prudent investment choices, or failed to calculate the plan benefits correctly.

Axis Insurance provides Fiduciary Insurance in addition to Directors & Officers Liability coverage to protect against alleged internal management and other exposures. Our number is: (877) 787-5258.

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Risk Management: Insurance Websites and Agency E&O Issues

Posted on March 6, 2012 by Axis E&O

An increased digital presence and expansion of on-line services by insurance agents has generated some new concerns and potential exposures to be examined. We touched upon this briefly in our blog last month when talking about how agents are increasingly specializing and getting into niche markets. Here we want to take a more in-depth look on how Internet marketing and social media marketing, while definitely helping to expand an agency’s reach beyond the communities it serves, also necessitates effective risk management protocols to protect against E&O claims.

These protocols include:

  • Protecting your customers’ and potential customers’ information when distributed electronically
  • Ensuring that you are not making claims in the content on your website, blogs, social media posts, etc. that could cause you potential problems in the future; expectations that you cannot meet, for example
  • Reviewing your content to make sure it’s accurate and includes any qualifying statements (such as “we will help you find the right coverage”) and disclaimers (“may include but is not limited to”; or “exclusions do apply”)
  • When using someone else’s content, getting permission and crediting them within the content; be sure they are a reputable source
  • Including a privacy statement on your website about the confidentiality of customer data
  • Making sure a disclaimer is on your website in a prominent location and having your attorney review the disclaimer
  • If there are interactive features that collect identifiable information, making sure you’re in compliance with all state and federal privacy and data breach notification regulations

Additionally, many carriers are requiring that the site is SSL certified – where the connection between the browser and the web server is encrypted – in order for Cyber Liability insurance to be included as part of the E&O coverage.

Axis Insurance is a leading provider of E&O coverage for insurance agents and brokers, including providing programs for MGAs and MGUs. Give us a call at (877) 787-5258 to discuss your specific E&O needs.

 

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FMLA Case Brings Employment Practices Liability to the Front

Posted on February 21, 2012 by admin

A pregnant worker in Atlanta was fired for requesting a leave of absence prior to her eligibility date, and the U.S. Department of Labor under the Family Medical Leave Act (FMLA) ruled in her favor due to what they considered mitigating circumstances.

This brings up the question of whether an employer has been given sufficient notice of a request for leave of absence and what is the extent to which you, as an employer, must grant a leave of absence under FMLA rules and standards.

The U.S. Department of Labor currently has specific guidelines for enacting the Family Medical Leave Act. Eligible employees are entitled to:

>   Twelve workweeks of leave in a 12-month period for:

  • the birth of a child and to care for the newborn child within one year of birth;
  • the placement with the employee of a child for adoption or foster care and to care for the newly placed child within one year of placement;
  • care of the employee’s spouse, child, or parent who has a serious health condition;
  • a serious health condition that makes the employee unable to perform the essential functions of his or her job;
  • any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty;” or

> Twenty-six workweeks of leave during a single 12-month period to care for a covered service member with a serious injury or illness who is the spouse, son, daughter, parent, or next of kin to the employee (military caregiver leave).

Lawsuits involving unfair business practices have become a common occurrence, as we previously discussed in prior blogs. Knowing the laws and any stipulations pertaining to the current practices in place are crucial in order to avoid litigation of this type.

While many businesses may come under scrutiny for their interpretation of these laws and their unwillingness to grant pregnant employees a leave of absence, based on whether or not they qualify based on hours served, it’s important to ensure that as an employer you’re not in violation of the FMLA standards. And while employees who become pregnant should, in most circumstances, be held to the same standards as workers who are not pregnant, there are instances that may prevent them from performing certain duties. Therefore it is a good idea to have a specialist on hand to determine whether or not they meet eligibility requirements.

At Axis Insurance, we can review with you the types of exposures you may be up against as an employer, no matter what the size of your firm. We also offer Employment Practices Liability insurance to protect against the types of losses of which you can find yourself a target. Just give us a call at: 877.787-5258.

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Family Run Businesses Also Need D&O Insurance

Posted on February 14, 2012 by admin

You may think you’re a family owned business, and don’t require Directors & Officers (D&O) Liability insurance, but that’s not the case. Directors, officers, and executives at family run businesses have similar exposures that public and other private firms do in addition to some unique risks.

For example, you may make decisions, implement strategies that are questioned by another family member, or years later when another generation takes over, those shareholders may question decisions made in the past that they felt were not in the best interest of everyone. You, your company and directors of your company can also face claims from employees, competitors, suppliers, and clients.

What’s more, many family businesses are also not that vigilant about having board meetings or don’t give much thought into who is sitting on that board. Other family members, friends, themselves and/or their management sit on their boards. But it’s essential to identify and select outsiders to sit on your board, as they can help to manage the company’s business’ affairs, subject to any limits imposed in the company’s articles of organization, by-laws, operating agreement or shareholders’ agreement (formation documents). A board with outside members or non-family members can help mitigate bad decisions that result in D&O claims.

We’re all human – regardless of whether we have a company run by family members or not, and lawsuits abound every day: everything from breach of duty to unfair business practices. Directors and officers walk on a tightrope, making decisions involving complex transactions and based upon diverse and sometimes unclear information. Despite the best business judgment, qualifications and experience, directors and officers are still personally exposed to litigation that may allege a failure to perform their management role. Which is why D&O insurance is a must.

At Axis Insurance Services we can provide you with further insight into your D&O needs and the coverage that is available. Just give us a call at: (877) 787-5258.

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