E&O Issues Cause Insurance Agents to Move to Specialization

Posted on February 7, 2012 by admin

E&O Issues Facing Insurance Agents As the Move Into Specialization Grows, On-line Data Capturing Increases

Many insurance agencies are making the move from generalists to specialists, targeting specific markets and industries to provide insurance and risk management strategies, in addition to employee benefits, HR consulting, and financial planning. They’re offering turnkey professional services to industries they cater to, such as, for example, hospitality, food processing, energy, technology, municipalities, and others.

With a specialized focus and claims of expertise come additional exposures for insurance agencies and brokers. In stating that you are an expert in a specific class of business, then you’ll be held to the standards that are expected from an expert in a court of law. If a customer has a loss and it’s not covered and they have read that you are an expert in their sector, you could be looking at an E&O claim if there are gaps in coverage.

What’s more, with the proliferation of internet marketing and the gathering of consumer data on-line, E&O carriers are requesting that agencies have specific security and encryption requirements set up to capture information in their call to actions and requests for quote forms. Without these requirements, third-party breach of personal data coverage, depending on the carrier, could be excluded from an agency’s E&O policy.

These are just two examples of the types of issues facing insurance agencies today when it comes to E&O. And just as you advise your customers about assessing their exposures and looking at the risks they could face when it comes to providing professional services, you obviously should do the same for your own firm.

Axis Insurance can design a competitive program that addresses many of the risks that traditional E&O programs just don’t provide, including: Surplus Lines Business, MGA, MGU, Captive Management, Insolvency Coverage, Innocent Insured Coverage, Independent Contractors, Contingent BI/PD (Bodily Injury/Property Damage), Adverse Loss History (Insurance Claims), HIPAA Compliance, and Placement through RPG, PPO, MET, and other non-standard markets. Call us to discuss your E&O program. Our number is: (877) 787-5258.

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E&O Insurance Critical for Management Consultants and Consultancy Firms

Posted on January 17, 2012 by admin

No one is immune to suits alleging negligence during the performance of their work, including management consultants. This only stands to reason, as the majority of the work management consultants provide falls under the auspices of “professional consultation”. When something goes wrong, errors and omissions claims are what comprise most of the suits brought against the consultant or consultancy firm.

Just take a look at a case in point from a well-known insurance company that provided Errors & Omissions coverage, also known as Professional Liability, to a management consultancy firm with annual revenues of $50 million: The owner of a auto parts distributor hired the firm to help the company with staffing, budgets, and executive decision making. The consulting firm implemented a reorganization strategy that redefined management roles and delegation, initiated spending controls, and used a new staffing model to address the organization’s needs. However, after 18 months during the reorganization, the client alleged that the spending control solution and staffing model had a negative impact on its bottom line when the expense of hiring and training new employees was taken into account. The client sued the management consultant for negligence in rendering a flawed solution to its problem, seeking compensatory damages including, but not limited to, lost profits. The case was settled for $150,000, with defense costs exceeding $75,000.

Some triggers that could cause a client to sue a management consultant firm may involve:

  • Improper documentation
  • Improper fact verification
  • Missed deadlines
  • Misrepresentation of facts
  • Breach of nondisclosure
  • Loss of data, improper procedures or negligent handling of data
  • Failure to prevent electronic theft of records and confidential information
  • Employee theft and sale of client’s trade secrets
  • Deliberate dissemination of false information
  • Violations of state and federal law, such as violation of right to privacy

As a management consultant, making sure that you’re protected against a loss is key. That protection comes in the form of E&O Insurance, which will provide you with coverage against claims relating to an error or omission that may have occurred while you performed services and that subsequently resulted in a lawsuit. Even if you feel that your advice is not responsible for your client’s loss, you still have to hire lawyers and take time out from work to fight your case. E&O will pay those defense costs for a covered loss.

Axis Insurance Services is the E&O expert, providing a diverse group of management consultants with insurance solutions. Give us call at (877) 787-5258 to find out how we can help you protect yourself and your business.

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Insurance at the Forefront as Cyber Crimes Go On: SEC Requires Disclosure of Relevant Coverage

Posted on January 10, 2012 by admin

SEC Requires Disclosure of Relevant Coverage

At Axis Insurance Services, we’ve been focusing on Cyber crime and the need for Cyber Liability insurance. There’s a compelling reason for this: Sony, who experienced a data breach in 2011 had over 100 million customer accounts compromised and is projecting a loss that could run about $200 million. Unfortunately, Sony didn’t carry a Cyber insurance policy. Yet Sony is not alone.

According to research group Advisen, only about one-third of companies that they surveyed have purchased a Cyber Risk policy. To make matters worse, according to the Ponemon Institute, which conducts independent research on privacy, data protection and information security policy, the average cost of a data breach hit $7.2 million last year and cost companies $214 per compromised data record. This figure represents only the data breach. If a company’s intellectual property is stolen, just imagine what it could do to an organization.

Why do companies go without insurance? Many don’t want to talk about cyber attacks, according to a cybersecurity expert Robert Ackerman of Allegis Capital. They feel it will ruin their reputation. Some have chosen to self-insure, while others don’t realize they aren’t insured until it’s too late. A Commercial General Liability doesn’t cover cyber losses unless specifically endorsed. 

But this is changing as attacks are becoming more sophisticated and costly – and widely publicized. Just take a look at the most recent incident that came to light, which allegedly involved Chinese hackers of the U.S. Chamber of Commerce. According to reports, the hackers got their hands on everything stored on the Chamber’s systems including data on the business lobbying group’s 3 million members.

What’s more, due to new Security and Exchange Commission (SEC) requirements in October, companies are required to disclose “material” cyber attacks and their costs to shareholders. The guidance specifically requires companies to disclose a “description of relevant insurance coverage.”

Cyber insurance covers the cost of lost business, notification costs, credit-monitoring services, public relations, and legal and investigation expenses related to data security breaches. The policy may also cover class-action suits, regulatory investigations, civil fines, and extortion demands. Each company, depending on its exposure, has different needs, therefore a policy can be tailored in terms of coverage, amounts, deductibles, etc.

Give us a call at (877) 787-5258 to discuss your specific Cyber exposure. Remember, virtually all businesses that collect data are exposed to data breaches and can be targets of cyber crime.

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M&A Objection Suits Increasingly Hitting Directors & Officers

Posted on January 3, 2012 by admin

The number of merger objection lawsuits filed in the U.S. rose from 18 to 2003 to 334 in 2010, even as the number of M&A transactions decreased during the recession, according to research firm Advisen. This upward trend is underscored in an article, “Securities Class Action Lawsuits in State Court”, by Lewis & Clark Law School Professor Jennifer Johnson, who examined a database of class actions filed in state court between 1996 and 2010. Her analysis shows that the number of state court class action lawsuit filings involving M&A transactions has been “skyrocketing” and now even outnumber federal securities class action lawsuit filings.

In M&A objection lawsuits, shareholders allege that the directors and officers of a company were not looking out for their best interest when they agreed to the terms and conditions of a transaction. And while lawsuits as a result of M&A activity are more common for public companies, private companies and their directors and officers are not immune. Minority shareholders, who are often employees, typically claim that shareholders/board members of the private entity pursued a deal that benefited them at the expense of minority shareholders. Sometimes a suit can also involve a partner who claims to have been damaged because of a merger, and sues for breach of contract or tortuous interference.

Why are directors so vulnerable to these types of suits?

When a company becomes involved in an actual or proposed merger or acquisition, its directors have to make the decision to approve or reject the transaction, which will likely disappoint some constituents who can—and frequently do—sue the directors for alleged wrongdoing in connection with the transaction. A lot of money is at stake, and particularly during a recession where more deals are being done at “depressed prices relative to pre-recession valuations and shareholders are sometimes dissatisfied with the outcome,” according to the Advisen report. In addition, some feel that with fewer securities class action lawsuits being filed, lawyers representing shareholders in merger objection cases are after the attorney fee awards that often accompany decisions in the plaintiffs’ favor, which amount to around $500,000 per case, on average, according to the report.

Directors & Officers insurance is designed to protect the company, directors and officers, and key executives against the potential consequences of alleged wrongdoings, such as financial mismanagement, misappropriation of funds, negligence, and contract breach. It provides the much-needed protection needed against the costs of legal defense and indemnity coverage for the business, directors and officers, and employees in suits alleging internal mismanagement. Talk to the D&O experts at Axis Insurance Services about your coverage. Give us a call at (877) 787-5258.

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Director & Officers: D&O Risks In the News with MF Global’s Alleged Fraud

Posted on December 20, 2011 by admin

The bankruptcy of commodities brokerage MF Global Holdings headed by former New Jersey Governor Jon Corzine has put the spotlight on how accounting maneuvers a la Enron and Lehman Brothers can keep certain financial obligations off a company’s books, making a firm look less indebted and thus less a risk than it really was. In fact, the SEC is now investigating the accounting treatment that helped to mask MF Global’s exposure to risky foreign sovereign debt.

MF Global sought Chapter 11 bankruptcy after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade. Since then, a number of clients have had their funds frozen and an on-going investigation has yet to account for missing client funds that were mishandled by the firm. Estimates of the amount of money “missing” have ranged from $200 million to $1.6 billion.

Many are asking where was the MF Global’s board of directors and what did Corzine know? One firm, Block & Leviton, LLP in Boston, filed a lawsuit that claims that Corzine and other top officers “engaged in a scheme to deceive the market and a course of conduct that artificially inflated the company’s stock price, and operated as a fraud or deceit” with respect to its common stock buyers.

It’s been reported that MF Global has $250 million in Directors & Officers insurance coverage, and we’ll see how this all will play out. In the meantime, Jon Corzine has been MIA, with many waiting for a public explanation of what happened.

Axis provides D&O insurance to a variety of companies, including asset management firms and investment funds, public entities, non-profits, healthcare organizations, community associations, educational institutions, and many more. We can guide you through the complexities of D&O coverage based on our vast experience. Our team of experts and specialists will keep you informed of the latest industry news and what to look out for. D&O insurance provides much needed protection against the costs of legal defense and indemnity coverage for the business, directors and officers, and employees in suits alleging internal mismanagement. Call us at (877) 787-5258 to discuss your D&O needs.

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Trending Now: Workplace Discrimination Cases Continue Rise, Monetary Awards Highest in EEOC History

Posted on December 13, 2011 by admin

In October, we wrote a blog about the rise of discrimination suits in the workplace. We gave a couple of examples of lawsuits that were filed recently, and suggestions on how to help prevent these types of suits. To keep you updated on how workplace discrimination suits are continuing their upward trend, look at recent figures released by the U.S. Equal Employment Opportunity Commission (EEOC):

  • A record 99,947 discrimination charges were made in the fiscal year that ended Sept. 30, the highest number in the EEOC’s 46-year history.
  • In fiscal 2010, the EEOC received 99,922 such charges.
  • Monetary benefits for victims of workplace discrimination totaled more than $364.6 million in fiscal 2011, which is also the highest in the EEOC’s history. That compares with $319 million in monetary benefits in the previous year.

The increase in suits is due to factors that include economic conditions; increased diversity and demographic shifts in the labor force; employees’ greater awareness of the law; and improvements in the EEOC’s intake practices, consumer services, and public accessibility.

With statistics like these, be sure your firm is carrying Employment Practices Liability insurance, which provides blanket coverage against claims by employees (present, former, or potential). This policy can cover you against discrimination, wrongful termination, breach of contract, disciplinary issues, sexual harassment, failure to promote, mismanagement of benefit plans, and much more.

Axis provides businesses with affordable Employment Practices Liability policies. Just give us call at (877) 787-5258 to find out more information.

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Cyber Risk Insurance: Data Breaches in Healthcare Industry Getting Worse with Increase Use of Mobile Devices, Sloppy Data Handling

Posted on December 6, 2011 by admin

Data security in the healthcare industry is getting worse despite increased compliance with the HITECH Act and other federal regulations. Just look at the second annual benchmarking study released by the Ponemon Institute which shows that the frequency of data breaches in healthcare have increased 32% in the past year and cost the industry an estimated $6.5 billion annually.

Behind the data security breaches is sloppy employee handling of data and the ever-increasing use of mobile devices in the healthcare setting. Forty-one percent of healthcare executive surveyed attributed data breaches related to protected health information (PHI) to employee mistakes, while half of the respondents said their organization does nothing to protect the information contained on mobile devices. In all, 80% of healthcare organizations use mobile devices that collect, store, and/or transmit some form of PHI.

Third-party mistakes, including those by business associates, account for 46% of data breaches reported in the study. According to 49% of respondents, lost or stolen computing or data devices are the reason for healthcare data breach incidents.

What’s more, respondents of the study reported that the average economic impact of a data breach was $2.2 million, up 10% from last year. In addition, most believe their organization has suffered from time and productivity loss (81%) followed by brand or reputation diminishment (78%) and loss of patient goodwill (75%). The potential result is patient churn; the average lifetime value of one lost patient (customer) is $113,400, an increase from $107,580 in last year’s study.

Employees are the group most likely to detect the data breach, according to 51% of participants. However, more than one-third (35%) of respondents say that data breaches were discovered by patient complaints. Once a breach is discovered, 83% of hospitals say that it takes in excess of one to two months to notify affected patients. Twenty-nine percent of respondents say their data breaches led to cases of identity theft, a 26% increase from last year.

According to Dr. Larry Ponemon, chairman and founder, Ponemon Institute, “Healthcare data breaches are an epidemic. These problems are a direct result of our national economy. Healthcare organizations – especially not-for-profit hospitals and small clinics – have thin margins, are trimming staff and resources and are lacking sufficient security and privacy budgets needed to adequately protect patients. I don’t see this getting better anytime soon.”

Regardless of the industry you’re in, cyber crime is a big issue. Axis can help you implement risk management techniques to mitigate losses in addition to providing you with the Cyber Risk insurance coverage you need to protect your organization should a loss occur.

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Liability Insurance: ERISA and Fiduciary Responsibility

Posted on November 22, 2011 by admin

Just as Employment Practices Liability claims are on the rise (discrimination, sexual harassment, wage-and-hour disputes), so are ERISA (Employment Retirement Income Security Act) plan lawsuits. The Seyfarth Shaw’s Workplace Class Action Litigation Report 2011 Edition found that the number of ERISA class actions rose from 8,944 in 2009 to 9,038 in 2010. Furthermore, with continued downturn economic conditions and employers looking to save money, including decreasing employee benefits, increased ERISA litigation is continuing its upward trend for 2011.

 

Examples of ERISA violations as outlined by the Department of Labor (DOL) include: failing to operate the plan prudently and for the exclusive benefit of participants; using plan assets to benefit certain related parties to the plan, including the plan administrator, the plan sponsor, and parties related to these individuals; failing to properly value plan assets at their current fair market value, or to hold plan assets in trust; failing to follow the terms of the plan (unless inconsistent with ERISA); failing to properly select and monitor service providers; and taking any adverse action against an individual for exercising his or her rights under the plan (e.g., being fired, fined, or otherwise being discriminated against).

 

It’s the fiduciary’s responsibility to follow the standards set by ERISA, including carrying out their duties prudently, acting solely in the interest of plan participants and beneficiaries, paying only reasonable plan expenses, and other key issues.

 

What can you do to protect yourself as a fiduciary?

 

First, be sure you have Fiduciary Liability Insurance, which will pay the plan or insured fiduciaries for liabilities incurred as a result of a breach of fiduciary duties under ERISA, including the cost of defending claims. Then be sure you have some key procedures in place, including but not limited to:

 

1. Establish and maintain a robust fiduciary investment review process.

2. Continuously monitor plan investments – at least annually.

3. Replace funds that don’t meet investment criteria.

4. Document reviews of investment vehicles, including associated or hidden fees. The documentation should address key questions or discussions and decisions made.

5. Solicit and consider the advice of independent third-party investment experts. Be sure

to always consider the nature of any advice, and whether any conflicts of interest exist.

6. Review the reasonableness of fees and expenses, including any fees that are shared among the plan’s various providers under revenue-sharing arrangements.

7. Adopt best practices that involve more aggressively negotiating and monitoring service provider fees.

 

Talk to us at Axis Insurance Services about Fiduciary Liability Insurance.

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Error & Omission: Preventing E&O Claims Against Your Law Practice

Posted on November 15, 2011 by admin

In recent years, more than 35,000 legal malpractice claims have been filed annually against lawyers with malpractice insurance, a number that doesn’t reflect complaints against the uninsured. Most lawsuits are as a result of an attorney’s failure to communicate with a client. Other reasons include failure to meet deadlines, failure to timely file an appeal, billing issues, failure to properly structure, and settlement agreements.

 

In addition to the need for a specifically tailored Errors & Omissions or Professionally Liability policy, stringent risk-mitigation procedures need to be in place. Go back and look at your procedures and be sure that the following is being done in your practice:

 

  • Communicate with your clients and send them reports in writing. Whether in letter format or via email, provide your client with significant procedural and substantive events in the case. Also, outline any significant issue and strategy decision.
  • Memorialize transmission of pleadings and discovery. Memorialize the transmission of pleadings, orders, discovery items, depositions, etc. that you send to your client. This can help avoid problems as to whether the jury believes you when you testify that the client was sent certain documents or was advised of certain issues.
  • Provide itemized bills. In hourly cases, itemize your bills in as much detail as feasibly possible. This helps to serve as a diary of meetings, telephone conversations, pleadings prepared, and issues researched. In contingent cases in which no itemized bills are prepared, transmittal letters and reports to the client are even more important.
  • Document. Take the time to document — even brief reports are better than none. If the client has instructed you not to report or not to send certain items, put that instruction in writing in a letter to the client.
  • Advise client of applicable statute of limitations. The failure to file an action within the applicable statute of limitations is the second most common form of legal malpractice next to the failure to properly communicate with a client. If a potential client discusses claims with you, immediately determine the applicable statute of limitations. If you accept the representation, immediately calendar the dates on your personal calendar and through the firm’s calendaring system, if applicable. If you don’t accept the representation, then notify the client in writing that you won’t be representing the client, but inform him/her of the applicable statute of limitations and that the claim must be filed within the specified time.
  • Tender claims to insurance companies, when applicable. If a client is sued, it is arguably within the attorney’s standard of care to tender coverage to the insurance carriers under which there is potential coverage.
  • Analyze and recommend settlement, when applicable. It is within an attorney’s standard of care to advise a client on settlement options. If the client is interested in settlement, you should pursue that alternative.

 

 

Axis Insurance provides E&O insurance for attorneys. We have E&O brokers on staff who are licensed throughout the country. We work with numerous, well-respected carriers who can custom tailor a plan to fit your practice.

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Error & Omission: Covering Risks, Increased Exposures with Medical Billing E&O Insurance

Posted on November 8, 2011 by admin

The U.S. Federal government has placed increased attention on controlling the rising costs of healthcare, with medical providers of all types coming under additional scrutiny regarding billing practices. Medicare, for example, is checking medical billing more frequently and finding errors that have resulted in fines for fraudulent payouts. These errors may be intentional or completely accidental.

Improper payments may be overpayments or underpayments. Overpayments can occur when health care providers submit claims that don’t meet Medicare’s coding or medical necessity policies. Underpayments can occur when health care providers submit claims for a simple procedure but the medical record reveals that a more complicated procedure was actually performed.

As you know, in a system as complex as our medical billing system errors are bound to be made. Sometimes they’re honest errors that occur when someone accidentally inputs the wrong code. The individual inputting the codes checks a variety of sources within the patient’s medical record to assign correct codes and service levels for the procedures performed and supplies used to treat the patient as well as properly identify the physician’s diagnoses. The codes vary slightly depending on the complication level of the procedure, and determine the claim amounts. There are times when higher amounts are billed in error for lesser procedures. Just one honest mistake in the code can reclassify the level of complication and therefore the charged amount.

Having proper Medical Billing Errors & Omissions coverage is essential to protect a firm from the common risks involved with the payment process at every level. This can include clerical errors on filings, failure to file claims, clerical errors on patient records, unauthorized disclosure of confidential information, malicious use of info and/or funds by employees, and more.

The E&O experts at Axis Insurance Services can help you with your insurance protection needs, tailored to your specific needs.

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