I always find it interesting that when I read band riders often the band has paragraph upon paragraph for food they want or do not want and sometimes nothing about indemnification or insurance.
I can surely understand them asking for their favorite beer (I do not drink beer) or vodka (my favorite is Tito’s) or asking not to have brown M&M’s (is that her clothes or is she really naked??) or having the cheese in slices or cubes (depends if you are snacking or putting it on a sandwich). But no insurance or indemnification?
If something goes wrong, the beer, vodka or cheese is not going to protect the band if they get sued for something that is not their responsibility. While the food is “used” every night (or is it), the indemnification by the promoter may not be used but it is surely needed.
Some bands think that if the promoter has insurance then they are protected. Not true. Some bands think it will never happen to us. It does. Some bands think what can they get from us? Seriously? How about your brand, your equipment or your income. Some bands think, “Why would our fans that love us, sue us”. Think of the attorney who says “they have money, they are rock stars, they are rich, and it will not hurt them” …and now that fan thinks they may have hit the lottery.
Not too long ago a band got sued by fan that got a scratch when her arm got pinched in the barricade. The band sent her off to the hospital, took care of her medical bills and she got to hang with band for the rest of that night and the next two days (yes multiple shows same venue). Boom! A few months later the lawsuit came in. Yes she won money. I am sure she still loves the band and I am sure the money helps. By the way, they were my client, and I had them covered with their own insurance but you guessed it no indemnification from the promoter. So the cost of the claim went on their policy. By the way they like sliced Gouda and all M&M colors are welcome.
So the next time you are thinking about food or drink and how much fun they can have with the rider, spend a little time on insurance and indemnification. It may mean the difference between picking your cheese or having to rely on government cheese or worse giving up the dream.
Guess what happens when insurance companies lose money? You know the answer, they increase premiums. Workers Compensation carriers are going into their 4th consecutive unprofitable year. The average insurer is spending $1.25 for every dollar of premium received. Expect substantial premium increases in California Workers Compensation ahead.
Potential negative underwriting and pricing actions are concerning enough by themselves. But they are only half of the picture. Just as important is the Experience Modification Factor, which can dramatically increase the actual premium paid. When carrier loss ratios are in the unprofitable range, it is obvious that many employers will also have poor loss histories as compared to their premiums paid. This will push their modifier higher. That modifier sticks with you for several years, penalizing you for your prior losses.
This is an example of what a change of Experience Modifier and Underwriter pricing can have on your policy, even if the base rate is not changed.
What factors are driving the poor results?
-Average costs of an indemnity claim have risen 35% from 2003 ($61,664 vs. $45,642)
-Average Medical costs have increased 63% since 2003 ($42,613 vs. $26,108)
What can you do?
1. Actively work to prevent injury and illness in your workforce with a joint safety/wellness program. Obesity, smoking and diabetes dramatically increase the costs of work comp claims.
2. Demand consistent, aggressive claims management practices. If there is an open claim you should know why, and what steps are being taken to close it.
What is an Injury & Illness Prevention Program (IIPP)?
An Injury & Illness Prevention Program is a mandated Safety program that requires all companies with employees to have and use an IIPP. In 1991 California mandated these programs and the data shows that five years after this requirement became law, California had a net decrease in injuries and illnesses of 19 percent.
According to a recent OSHA White Paper, “Injury & Illness Prevention Programs” published in January 2012, “an injury & illness prevention program is a proactive process to help employers find and fix workplace hazards before workers are hurt. In fact, not only do these programs work to reduce workplace injuries, if they are created and maintained properly, they can “transform[sic] workplace culture that can lead to higher productivity and quality, reduced turnover, reduced costs, and greater employee satisfaction.”
There are really four basic elements to a successful IIPP.
- Finding the hazards that can cause injury or illness
- Creating a plan for reducing or eliminating the risk/hazard
- Engaging and Training management and the workforce
- Continuing evaluation of the program and correction where needed
Do We Need One?
Definitely. It is the law and you can be fined if you don’t have one.
Does it Work?
One study done by Stanford University several years ago found that for every $1 of direct costs from injuries or illness the indirect costs can range from $1.1 for severe injuries to $4.5 for the least severe injuries. According to OSHA, the introduction of the IIPP throughout the country has made the working conditions in the U.S. much safer and can lead to significant improvement in the health and safety of the individual company’s workforce as well as a reduction in workers comp claims. When deployed properly and refined regularly, your plan will reduce both direct and indirect costs from injuries or illness in the workplace.
Is It Expensive to Create One?
No. There are vendors who will create an IIPP for you or you can call CalOSHA and they will give you the template or go online at www.esafetymanual.com. In addition to the Template you will find a number of safety manuals that are industry specific.
Results of an IIPP?
Results vary based on implementation and usage. Most small businesses create the plan, because they have to, and then put it on a shelf. That really is a shame. An IIPP can be the road map to creating a safety culture and awareness that improves productivity, morale, certainty around claims handling and bringing injured workers back effectively.
This is a program that every business, whether small or large, can benefit from. It takes a little time and commitment, but well worth the savings in hard dollars as well as the indirect costs.
Unfortunately, this area of liability is just getting worse. With the economy still struggling and employment still down, claims have seen significant increases. In 2010, the U.S. Equal Employment Opportunity Commission (EEOC) reported 99,922 charges filed for harassment, and harassment charge receipts filed and resolved were $319.4 million.
As litigation and damage awards continue to rise, it is predicted that employment liability will only become more complex. Employers must limit their exposure by focusing on:
- Desirable Human Resource policies and procedures
- Employment Practices Liability (EPL) Insurance Coverage
EPL insurance works hand-in-hand with your internal employment practices to provide the necessary resources to defend your company against a suit or to pay a claim. However, managing your exposure can save you time (administratively defending a suit can be arduous) and money (deductibles, increased premiums, and payments excess of your limits). The three most common employment-related lawsuits today are:
- Wrongful termination - the discharge of an employee for invalid reasons
- Discrimination - the denial of equal treatment of workers who are members of a protected class
- Sexual Harassment - when a worker is subject to unwelcome sexual advances, obscene or offensive remarks, or the failure to stop such behavior
There are ways an organization can help prevent claims from happening by being proactive as it relates to process and procedure within the company. The first thing an organization must do is conduct an HR audit to review:
- Employee Handbook
- Recruitment and hiring practices
- Disciplinary and termination practices
- Performance review requirements
- Promotion and demotion procedures
- Workplace rules
- Training and supervision of employee
The behavior of your employees and management is critical to preventing claims. As a result, training is a must! What seems obvious to you may not be the case for an employee. It is your responsibility to point out what is appropriate and what is not. In fact, in California AB 1825 makes it a requirement for companies with 50 or more employees to provide 2 hours of Sexual Harassment Training for all managers/supervisors every two years. There is no question that an investment of time and resources up front will help any organization down the road manage their Employment Practices Exposure. Not only will it help defend a claim because of proper policies and procedures, but may prevent the claim from happening at all, and wouldn’t that be nice!
Overview of the Preventive Care Mandate
PPACA requires group health plans to provide a range of specific preventive services at no cost to the plan participant. The no-cost feature will apply to in-network services; however, the Rule will allow cost-sharing for out of network preventive care services. The Rule also allows a plan to offer other preventive care services not required under HCR and to have cost-sharing requirements for those other services. Finally, if a service is de-listed, plans can delete the service or charge co-pays, etc.
Mandatory Services. Plans must provide a specific set of preventive care services. Generally, these services include:
- Evidence-based preventive services: The U.S. Preventive Services Task Force, an independent panel of scientific experts, rates preventive services based on the strength of the scientific evidence documenting their benefits. Preventive services with a “grade” of A or B, like breast and colon cancer screenings, screening for vitamin deficiencies during pregnancy, screenings for diabetes, high cholesterol and high blood pressure, and tobacco cessation counseling will be covered under these rules.
- Routine vaccines: Health plans must cover a set of standard vaccines recommended by the Advisory Committee on Immunization Practices ranging from routine childhood immunizations to periodic tetanus shots for adults.
- Prevention for children: Health plans will cover preventive care for children recommended under the Bright Futures guidelines, developed by the Health Resources and Services Administration with the American Academy of Pediatrics. These guidelines provide pediatricians and other health care professionals with recommendations on the services they should provide to children from birth to age 21 to keep them healthy and improve their chances of becoming healthy adults. The types of services that will be covered include regular pediatrician visits, vision and hearing screening, developmental assessments, immunizations, and screening and counseling to address obesity and help children maintain a healthy weight.
- Prevention for women: Health plans will cover preventive care provided to women under both the Task Force recommendations and the HSRA guidelines published on August 1, 2011 in conjunction with the Amendment.
Dear TASER, thank you for saving my life.
Every day around the world it plays out in some minor variation; A drugged out, aggressive idiot decides to resist arrest. Perhaps he uses his fists or even a weapon such as a knife or club to help our tough guy assault the cops. He advances on the cops despite repeated warnings to stop or drop his weapon.
Fifteen years ago, you would have had a dead criminal on your hands. Today, the police use a TASER electronic control device to subdue the crook and bring the situation to a quick and safe conclusion. Instead of lawsuits, these bums should be sending Thank You notes to the officers for not using their clubs or perhaps even a firearm.
How many injuries have been prevented and how many lives have been saved by using these devices instead of 9mm's? As of today, more than 85,000 people have been saved from potential death or serious injury using TASER® devices.
Honestly though, it's not the bad guys I am worried about. My focus is the improved officer and citizen safety and the resulting financial savings that comes out of the use of less-lethal weapons by our police forces. Every time an officer engages in a physical confrontation there is a very real chance of serious injury or death to either the suspect, the officer or to both.
The cost to a city when an officer is injured is multi-faceted.
Every time a cop is injured there is a hole in the protection provided to his or her city. The police resources are spread even more thin than they were before the officer was injured. Add to that the cost of the Workers' Compensation claim which includes the medical costs and indemnification for the lost wages. Don't think the costs are passed off to the magical insurance genie. The municipalities almost certainly retain virtually all of the financial obligation for the claims. What it means in sum is that the city is down an officer, while at the same time incurring medical bills and wages for the officer. The proper use of TASER devices can significantly reduce the need for our officers to engage suspects physically.
From a risk management standpoint, the increased utilization of TASER units and other less-lethal weapons to neutralize suspects is a huge win for our communities. Fewer injuries and associated workers compensation claims along with less days off due to injury adds up to better protection and reduced cost to the taxpayers.
WANT PROOF? ----TASER Risk Managment
When was the last time you thought about Business Disaster Planning? For most people the thought only comes to mind when something has taken place that hits close to home. There are many disasters that can strike at any time: earthquakes, floods, hurricanes, fires! And let's not forget cyber-attacks, employee violence, pandemics. Any of these disasters can be dangerous and harmful, but what is even more dangerous is not having a plan in place when the unexpected happens. Something to consider:
- According to the Insurance Institute, more than 25% of all businesses that close down following a disaster never open their doors again.
- According to a recent Touche Ross study, the survival rate for companies who have experienced a disaster and who do not have a disaster recovery plan is less than 10%!
- International Data Corp. estimates that companies lose an average of $84,000 for every hour of downtime.
Without proper planning you leave your company vulnerable to legal and financial problems. A disaster could force you to close operations for a period of time, which could impact your vendors/suppliers, clients and employees. But more importantly, your company may be forced to close its doors indefinitely.
An effective business disaster plan is one that is reviewed and updated regularly and is not just sitting on the top of your office bookshelf. Over the years we have witnessed many devastating disasters and on any given day we too could experience the same devastation. Now is the time to evaluate your disaster plan and plan for the worst because tomorrow does not have a free preview. Here are some questions to consider when evaluating your plan:
- How will you communicate with your employees, clients, vendors in the case of a disaster?
- Are your records kept electronically? Is your data backed up and will you be able to access it?
- How will your employees get to work? Is there a backup location?
- If you have to remain on-site during a disaster, do you have first aid and emergency supplies to last for a week?
- If cell phones and land lines are down, how will you communicate?
- Do you have all your insurance policy information available?
These are just a hand full of questions to consider. Creating a disaster recovery plan is an extensive process that must be reviewed and updated on a regular basis. With proper proactive planning you can keep your business prepared to face any disaster lurking around the corner. After all... "you can't plan for a crisis when you are having one" - Steve Gray.
"Loss Sensitive" is a catch-all phrase for insurance programs where the final cost is at least partially determined by the losses incurred during the policy term. My goal in this short article is to make it easy to understand the four basic types of loss sensitive programs. Think of them as a gradual progression from a standard guaranteed cost insurance program. With each step, you are increasing the potential for savings based upon controlling your firm’s claims. On the other side of the coin, you are also taking on more financial risk if your claim results are poor. Risk and Reward—We all know the correlation.
Dividend Plans allow for a partial premium refund if losses are below a certain level. With a dividend plan, the insured will never pay more than standard premium but still has the possibility of a return premium. The problem is that dividends are not guaranteed. They must be declared by the Insurance Company’s Board of Directors.
Retrospective Rating Plan is a contractual arrangement between the insured and insurance company. The insurance company keeps a portion of the premium for expenses. The final cost is the sum of expenses and incurred losses… subject to a pre-determined minimum and maximum. The advantage is that return premiums are contractually guaranteed. The downside is that the insured may pay more than standard premium if overall losses are excessive.
Large Deductibles really bring the client into the game with the carrier. The client is responsible for reimbursing the carrier up to a certain amount for each claim, and the carrier pays the remainder of the claim, up to their policy limit. Deductible amounts range from $100,000 to $1,000,000 per claim, with $250,000 being the most common. In order to protect the client from a catastrophic claim year, there should be an aggregate stop loss in place which caps the annual deductibles payable.
Usually there will be a requirement that the client provide some sort of collateral such as a Letter of Credit or a Cash Account to ensure that there is money available to pay their share of the losses. With longer tail business, such as Workers Compensation, this can result in a substantial amount of capital being taken out of circulation for many years.
Initial premiums for large deductible programs are significantly lower than Guaranteed Cost or Retro programs. If you can control your claims to a level that is less than expected by the underwriters, you will reduce the cost of your overall program. If you exceed those levels, you will pay more.
Self-insurance differs from large deductible programs primarily based on the amount of administrative duties handled by the client. With self insurance the client takes much more responsibility for handling of claims and loss control. This can either be handled by internal employees or outsourced. The carrier will generally charge less for the insurance, since the client is providing much of the service. Self insurance is only appropriate for larger, sophisticated organizations with the ability to competently handle the complex issues associated with administering their risk management program, as well as the financial risk of self financing the majority of their loss picture.
Conclusion
The decision to utilize a loss sensitive program should not be undertaken lightly. There are potential rewards, but there are very real risks. Your broker should help you understand what your best, average, and worst claim scenario looks. Only with that information can you make an intelligent decision for your company.
It starts with inclusion of “Entity Coverage” provided by the D & O Policy. Originally the d & o policy only provided two covers: (A) for the D’s & O’s (their personal assets) for non-Indemnifiable claims; and (B) for Corporate Reimbursement of Indemnifiable claims against the D’s & O’s. There was no coverage available for the Entity itself if it was named in a suit.
In the mid 1990’s, AIG (now Chartis) was the first carrier to offer coverage for the “Entity” in addition to covers (A) and (B) as described above. Other carriers soon followed. Then there was a period where the availability of “Entity” coverage was very limited. The limited supply was mainly driven by claims paid by carriers under this new insuring agreement.
A major effect of adding “Entity” coverage is the dilution of the available dollars protecting the personal assets of corporate D’s & O’s and the business entity for reimbursement obligations. Said differently, the limits of the policy are no longer dedicated solely for the benefit of the Directors and Officers and indemnification funding obligation on the part of the business owed to the D’ &O’s. (Of course, procurement of greater limits of coverage will assist in dealing with this issue to a great degree.)
Another major consequence associated with adding “Entity” coverage within a D & O policy is directly related to the issue of bankruptcy. Basically the presence of “Entity” coverage could lead a bankruptcy court to foreclose the director’s and officer’s ability to access policy proceeds leaving them to foot the bill on their own. This would be a problem for me! How about you? The matter became very visible when it received a lot of hype in the few years after the collapse of Enron.
Nevertheless case law suggests (at least in most jurisdictions I believe) that this issue should not be a major concern if handled properly by your insurance advisor.
There are two ways to handle protecting the policy’s availability to the D’s and O’s (today) for the situation of bankruptcy. The first is an “Order of Payments” provision in the policy that specifies that the directors and officers have the first right to policy proceeds. It is understood or at least believed that the bankruptcy courts will enforce these provisions and allow the D’s & O’s access to policy proceeds. Because of this type of priority provision in the Enron bankruptcy proceeding the bankruptcy court lifted the automatic stay, to the extent it applied, to allow Enron’s D’s & O’s to have access to the D & O policy proceeds for the purpose of paying their defense costs in litigation against them.
Another method to protect the D’s and O’s is to procure Excess Side A Only Directors and Officers Liability Insurance coverage. These policies are designed to cover only the liabilities of the Directors and Officers and should include drop down provisions to cover the D’s and O’s if the primary policy covering both them and the entity is not available to do so. Because these policies do not insure the entity itself, they are unlikely to be considered assets of the bankruptcy estate.
I hope this explanation helps.
If you really want to lock down the risk to protecting your personal assets as a Director or Officer of any business, you do both!
In today’s business climate of corporate transparency and accountability, an organization’s officers and directors face a myriad of employment-related exposures. Sarbanes-Oxley regulatory mandates and shareholder activism mean directors are more frequently at risk, translating to rising claims and escalating settlement costs.
In the wake of unprecedented corporate scandals in recent years, clearly the trend of corporate accountability applies to large corporations. But privately held companies, including nonprofits, are not exempt from litigation arising out of the management decisions of their boards. They, too, are at risk.
Making sure the nonprofit board that you serve on carries the proper directors and officers insurance needs to be a critical factor in your decision to serve on that board. It is important to understand that your personal assets on the line should you be accused of negligent acts. That being said, it is time for directors and officers to take steps to protect themselves and not rely solely on the coverage that is provided to them. A suitable solution to protect your assets is a personal directors and officers insurance policy. Regardless of if you sit on one board or many this policy would act in as an additional layer of protection and provide coverage for you personally once the D&O limits of the nonprofit are exhausted.